<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 1996
REGISTRATION NO. 333-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BENEDEK COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 6719 36-4076007
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
STEWART SQUARE, SUITE 210
308 WEST STATE STREET
ROCKFORD, ILLINOIS 61101
(815) 987-5350
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
A. RICHARD BENEDEK
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BENEDEK COMMUNICATIONS CORPORATION
STEWART SQUARE, SUITE 210
308 WEST STATE STREET
ROCKFORD, ILLINOIS 61101
(815) 987-5350
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
PAUL S. GOODMAN, ESQ.
SHACK & SIEGEL, P.C.
530 FIFTH AVENUE
NEW YORK, NEW YORK 10036
(212) 782-0700
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
15.0% Exchangeable Redeemable Senior
Preferred Stock due 2007....................... $60,000,000 100.0% $60,000,000 $20,689.80
- ------------------------------------------------------------------------------------------------------------------------------
15.0% Exchange Debentures due 2007(2)............. -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated pursuant to Rule 457(f).
(2) No separate consideration will be received for the exchange debentures.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 13, 1996
PROSPECTUS
BENEDEK COMMUNICATIONS CORPORATION
OFFER TO EXCHANGE ITS SHARES OF
15.0% EXCHANGEABLE REDEEMABLE SENIOR PREFERRED STOCK DUE 2007, WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING SHARES OF
15.0% EXCHANGEABLE REDEEMABLE SENIOR PREFERRED STOCK DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1996, UNLESS EXTENDED
------------------------
Benedek Communications Corporation, a Delaware corporation (the 'Company'),
hereby offers to exchange shares of its 15.0% Exchangeable Redeemable Senior
Preferred Stock due 2007 (the 'Exchange Securities') which have been registered
under the Securities Act of 1933, as amended (the 'Securities Act'), pursuant to
a Registration Statement of which this Prospectus is a part, for an equal number
of outstanding shares of its 15.0% Exchangeable Redeemable Senior Preferred
Stock due 2007 (the 'Existing Exchangeable Preferred Stock'), of which 600,000
shares are outstanding on the date hereof, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal (which together constitute the 'Exchange Offer'). The Exchange
Securities and Existing Exchangeable Preferred Stock are collectively
hereinafter referred to as the 'Exchangeable Preferred Stock.' The terms of the
Exchange Securities are identical in all material respects to those of the
Existing Exchangeable Preferred Stock except (i) for certain transfer
restrictions and registration rights relating to the Existing Exchangeable
Preferred Stock and (ii) that, if by December 31, 1996, neither an Exchange
Offer with respect to the Existing Exchangeable Preferred Stock has been
consummated nor a Shelf Registration Statement (as defined) with respect to such
Existing Exchangeable Preferred Stock has been declared effective, additional
cash dividends will accrue on each share of Existing Exchangeable Preferred
Stock from and including January 1, 1997 until but excluding the earlier of the
date of consummation of the Exchange Offer and the effective date of the Shelf
Registration Statement at a rate of 0.50% per annum. The Exchange Securities
will be issued pursuant to, and entitled to the benefits of, the Certificate of
Designation for the Exchangeable Preferred Stock.
Dividends on the Exchange Securities will accrue from the date of the last
payment (or deemed payment) of dividends on the Existing Exchangeable Preferred
Stock or, if no such payment has been made (or deemed to have been made), from
the date of original issuance of the Existing Exchangeable Preferred Stock, and
will be payable quarterly commencing , 1996, at a rate per
annum of 15.0% of the then effective liquidation preference per share. Dividends
may be paid, at the Company's option, on any dividend payment date occurring on
or prior to July 1, 2001, either in cash or by adding such dividends to the then
effective liquidation preference of the Exchange Securities. The initial
liquidation preference per share of the Exchange Securities will be the
liquidation preference per share of the Existing Exchangeable Preferred Stock on
the date of exchange therefor. The Exchangeable Preferred Stock is immediately
redeemable at the Company's option, in whole or in part at the redemption price
of 115.000% of the then effective liquidation preference prior to July 1, 2000,
and thereafter, at the redemption prices set forth herein, plus, without
duplication, accrued and unpaid dividends to the date of redemption. The Company
is required, subject to certain conditions, to redeem all of the Exchangeable
Preferred Stock outstanding on July 1, 2007, at a redemption price equal to
100.000% of the then effective liquidation preference thereof, plus, without
duplication, accrued and unpaid dividends to the date of redemption.
Subject to certain conditions, the Exchangeable Preferred Stock is
exchangeable in whole, but not in part, at the option of the Company, for the
Company's 15.0% Exchange Debentures due 2007. Interest on the Exchange
Debentures will be payable at a rate of 15.0% per annum and will accrue from the
date of issuance thereof. Interest on the Exchange Debentures will be payable
semi-annually in cash or, at the option of the Company, on or prior to July 1,
2001 in additional Exchange Debentures, in arrears on each January 1 and July 1,
commencing on the first such date after the issuance of the Exchange Debentures.
(Cover continued on next page)
------------------------
Prior to the Exchange Offer, there has been no public market for the
Existing Exchangeable Preferred Stock. If a market for the Exchange Securities
should develop, such Exchange Securities could trade at a discount from the then
effective liquidation preference per share. The Company currently does not
intend to list the Exchange Securities on any securities exchange or to seek
approval for quotation through any automated quotation system and no active
public market for the Exchange Securities is currently anticipated. There can be
no assurance that an active public market for the Exchange Securities will
develop.
The Exchange Offer is not conditioned upon any minimum number of shares of
Existing Exchangeable Preferred Stock being tendered for exchange pursuant to
the Exchange Offer.
SEE 'RISK FACTORS' ON PAGE 26 FOR A DISCUSSION OF CERTAIN FACTORS WHICH
HOLDERS OF SHARES OF EXISTING EXCHANGEABLE PREFERRED STOCK SHOULD CONSIDER IN
CONNECTION WITH THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1996.
<PAGE>
<PAGE>
(Cover continued from previous page)
The Exchange Debentures mature on July 1, 2007, and are immediately redeemable,
at the option of the Company, in whole or in part, at the redemption price of
115.000% of the then effective principal amount thereof prior to July 1, 2000,
and thereafter, at the redemption prices set forth herein, plus accrued and
unpaid interest to the date of redemption.
1.48 Contingent Warrants (as defined), each to acquire one share of Class A
Common Stock of the Company, trade together with each share of Exchangeable
Preferred Stock. The Contingent Warrants will become exercisable only in the
event the Exchangeable Preferred Stock or Exchange Debentures, as the case may
be, are not redeemed on or prior to the Contingent Warrant Release Date (as
defined), which can be no later than July 1, 2000. The Contingent Warrants are
exercisable for approximately 10% of the Common Stock of the Company on a
fully-diluted basis, including the Initial Warrants (as defined). The Contingent
Warrants, if released on the Contingent Warrant Release Date, will not trade
separately from the Exchangeable Preferred Stock or the Exchange Debentures, as
the case may be, until such date. The exercise price of each Warrant is $0.01
per share, subject to adjustment under certain circumstances.
The Company will accept for exchange any and all shares of Existing
Exchangeable Preferred Stock validly tendered and not withdrawn prior to the
Expiration Date. The term 'Expiration Date' shall mean 5:00 p.m., New York City
time, on , 1996, unless the Company shall, in its sole discretion,
have extended the period of time for which the Exchange Offer is open, in which
event the 'Expiration Date' shall mean the latest time and date at which the
Exchange Offer, as so extended by the Company, shall expire. The Exchange Offer
may be extended, terminated or amended as provided herein. Notwithstanding the
foregoing, the Expiration Date shall not be later than 5:00 p.m., New York City
time, on the date 60 days from the date of this Prospectus. The Exchange Offer
is subject to certain customary conditions. See 'The Exchange Offer.'
The Exchange Securities are being offered hereunder in order to satisfy
certain obligations of the Company contained in the Exchange and Registration
Rights Agreement dated June 5, 1996 (the 'Registration Agreement'), among the
Company and Goldman, Sachs & Co. and BT Securities Corporation, as the placement
agents (the 'Placement Agents'), with respect to the initial sale of the
Existing Exchangeable Preferred Stock. Based on interpretations by the staff of
the Securities and Exchange Commission (the 'SEC') in letters issued to third
parties, Exchange Securities issued pursuant to the Exchange Offer in exchange
for Existing Exchangeable Preferred Stock may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder which is an
'affiliate' of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Securities are
acquired in the ordinary course of such holder's business, such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Securities and such holder is not engaged in and does not
intend to engage in a distribution of such Exchange Securities. Each
broker-dealer that receives Exchange Securities for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of shares of Exchange Securities received in exchange for shares of
Existing Exchangeable Preferred Stock where such shares of Existing Exchangeable
Preferred Stock were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 90 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
'Plan of Distribution.'
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of
shares of Existing Exchangeable Preferred Stock pursuant to the Exchange Offer
may be withdrawn at any time prior to the Expiration Date for the Exchange
Offer. In the event the Company terminates the Exchange Offer and does not
accept for exchange any shares of Existing Exchangeable Preferred Stock with
respect to the Exchange Offer, the Company will promptly return such shares of
Existing Exchangeable Preferred Stock to the holders thereof. See 'The Exchange
Offer.'
2
<PAGE>
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the SEC a Registration Statement (which term
shall include any amendment thereto) on Form S-4 under the Securities Act, with
respect to the Exchange Securities offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain items of which are omitted in accordance with the
rules and regulations of the SEC. For further information with respect to the
Company and the Exchange Securities, reference is made to the Registration
Statement, including the exhibits and schedules to such Registration Statement,
copies of which may be obtained as noted below. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the SEC. Each such
statement is qualified in its entirety by such reference.
The Registration Statement and the exhibits and schedules to such
Registration Statement filed by the Company with the SEC, may be inspected and
copied at the Public Reference Section of the SEC at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the SEC located at Seven World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or part of such materials can be obtained from the
Public Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates.
Following consummation of the Exchange Offer, the Company will be subject
to the informational reporting requirements of the Securities Exchange Act of
1934, as amended (the 'Exchange Act'), during the current fiscal year by reason
of the public offering and the issuance of the Exchange Securities. In
accordance with the Exchange Act, the Company will file with the SEC the reports
and other information required to be filed under the Exchange Act. The Company
anticipates, however, that it will not be subject to the reporting requirements
of the Exchange Act in future fiscal years; however, the Certificate of
Designation governing the Exchange Securities provides that the Company must
continue to file with the SEC copies of the annual reports and other
information, documents and reports specified in Sections 13 and 15(d) of the
Exchange Act so long as the Exchange Securities are outstanding.
3
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
The Stations
- --------------------------------------------------------------------------------
[GRAPHIC REPRESENTATION OF THE STATIONS GOES HERE]
4
<PAGE>
<PAGE>
CERTAIN DEFINITIONS
As used in the Prospectus, unless the context otherwise requires:
Company refers to Benedek Communications Corporation, a Delaware
corporation which is the sole stockholder of Benedek Broadcasting;
Benedek Broadcasting refers to Benedek Broadcasting Corporation, a Delaware
corporation, and its subsidiaries (BLC);
LLC refers to Benedek Broadcasting Company, L.L.C., a Delaware limited
liability company, owned 99% by Benedek Broadcasting and 1% by A. Richard
Benedek, formed in connection with the issuance of Benedek Broadcasting's
outstanding 11 7/8% Senior Secured Notes due 2005 (the 'Senior Secured Notes')
to hold all of the licenses and authorizations issued by the Federal
Communications Commission (the 'FCC') for the operation of the Benedek Stations
which was merged with BLC upon the consummation of the Transactions;
BLC refers to Benedek License Corporation, a Delaware corporation which was
merged with the LLC upon the consummation of the Transactions as a result of
which it became a wholly-owned subsidiary of Benedek Broadcasting, and which
holds all of the licenses and authorizations issued by the FCC for the operation
of all the Stations;
Benedek Stations refers to the nine network-affiliated television stations
owned by Benedek Broadcasting prior to consummation of the Transactions;
Stauffer refers to Stauffer Communications, Inc.;
Stauffer Agreement refers to the Assets Purchase and Sale Agreement, as
amended, among the Company, Stauffer and Morris Communications Corporation
pursuant to which the Company acquired substantially all of the broadcast
television assets of Stauffer.
Stauffer Stations refers to the five network-affiliated television stations
(and four satellite stations) owned by Stauffer prior to the consummation of the
Transactions and acquired by Benedek Broadcasting;
Brissette refers to Brissette Broadcasting Corporation and its wholly-owned
subsidiaries;
Brissette Agreement refers to the Stock Purchase Agreement, as amended,
among the Company, Mr. Paul Brissette, General Electric Capital Corporation
('GECC') and Brissette, pursuant to which the Company acquired all of the
capital stock of Brissette.
Brissette Stations refers to the eight network-affiliated television
stations owned by Brissette prior to the consummation of the Transactions and
acquired by Benedek Broadcasting;
Acquired Stations refers collectively to the Stauffer Stations and the
Brissette Stations; and
Stations refers collectively to the Benedek Stations and the Acquired
Stations.
As further described under 'The Acquisitions,' Benedek Broadcasting
acquired substantially all of the television broadcast assets of Stauffer and
all of the capital stock of Brissette (the 'Acquisitions'). The Company,
together with Benedek Broadcasting, implemented a financing plan (the 'Financing
Plan,' and together with the Acquisitions and certain other events, the
'Transactions') in order to finance the Acquisitions and to pay fees and
expenses related thereto. The Financing Plan consisted of the offer and sale by
the Company of the Units, of which the Existing Exchangeable Preferred Stock was
a part, borrowings by Benedek Broadcasting under the Credit Agreement, the offer
and sale by the Company of its Senior Subordinated Discount Notes and the
issuance by the Company of its Seller Junior Discount Preferred Stock. Issue
Date refers to June 5, 1996, the date on which the sale of the Units was
consummated.
Credit Agreement refers to the credit agreement, dated as of June 6, 1996,
among Benedek Broadcasting, as borrower, the Company, the Lenders referred to
therein, Canadian Imperial Bank of Commerce, New York Agency ('CIBC'), as
administrative agent and collateral agent, Pearl Street L.P. ('Pearl Street'),
as arranging agent, and Goldman, Sachs & Co., as syndication agent, pursuant to
which Benedek Broadcasting borrowed $128.0 million in term loans (the 'Term Loan
Facilities') and may borrow up to $15.0 million in revolving credit loans (the
'Revolving Credit Facility');
Seller Junior Discount Preferred Stock refers to the preferred stock issued
by the Company to GECC and Mr. Paul Brissette, the sellers of the Brissette
Stations;
Senior Secured Notes refers to the 11 7/8% Senior Secured Notes due 2005 of
Benedek Broadcasting.
5
<PAGE>
<PAGE>
Senior Subordinated Discount Notes refers to the 13 1/4% Senior
Subordinated Discount Notes due 2006 issued by the Company;
Units refers to the Units issued by the Company on the Issue Date, each
consisting of ten shares of Existing Exchangeable Preferred Stock, ten Initial
Warrants and 14.8 Contingent Warrants, which ceased to exist upon consummation
of the Exchange Offer;
Initial Warrants refers to 600,000 warrants, each to purchase one share of
Class A Common Stock of the Company;
Contingent Warrants refers to 888,000 warrants, each to purchase one share
of Class A Common Stock of the Company;
Warrants refers to the Initial Warrants and the Contingent Warrants;
Warrant Shares refers to the shares of the Company's Class A Common Stock
issuable upon exercise of the Warrants;
Operating cash flow refers to operating income before financial income
(expense) as derived from statements of operations plus depreciation and
amortization, amortization of program broadcast rights and non-cash compensation
less cash payments for program broadcast rights;
Operating cash flow margin refers to operating cash flow divided by net
revenues;
Broadcast cash flow refers to operating income before financial income
(expense) as derived from statements of operations plus depreciation and
amortization, amortization of program broadcast rights, corporate expenses and
non-cash compensation less cash payments for program broadcast rights; and
Broadcast cash flow margin refers to broadcast cash flow divided by net
revenues.
Operating cash flow and broadcast cash flow data have been included herein
because such data is used by certain investors to measure a company's ability to
service debt. Operating cash flow and broadcast cash flow do not purport to
represent cash provided by operating activities as reflected in the Consolidated
Financial Statements of Benedek Broadcasting, the Financial Statements of
Stauffer or the Consolidated Financial Statements of Brissette, are not measures
of financial performance under generally accepted accounting principles ('GAAP')
and should not be considered in isolation or as substitutes for measures of
performance prepared in accordance with GAAP.
MARKET AND INDUSTRY DATA
As used in the Prospectus:
designated market area ('DMA') or market area is defined as a specific
geographic market designated by A.C. Nielsen Company ('Nielsen') for the sale of
national 'spot' and local advertising time sales;
market rank means the ranking of the DMA among all markets, measured by the
number of television households in each DMA, as listed in the February 1996
Nielsen Station Index reports;
number of commercial stations in market represents the number of television
broadcasting stations in the market, excluding public, low power and national
cable stations;
station rank in market is a station's rank in the market among all
commercial stations in a station's market, measured by such station's average
share during the February, May, July and November ratings periods, Sunday
through Saturday, 6:00 a.m. to 2:00 a.m., unless another measurement period is
referenced;
a station's rating represents the number of households actually viewing the
station as a percentage of the total potential audience in the DMA, measured by
such station's average ratings during the February, May, July and November
ratings periods, Sunday through Saturday, 6:00 a.m. to 2:00 a.m., unless another
measurement period is referenced;
a station's share represents the percentage of households actually viewing
television which are viewing that station, measured by such station's average
Nielsen shares during the February, May, July and November ratings periods,
Sunday through Saturday, 6:00 a.m. to 2:00 a.m., unless another measurement
period is referenced; and
cable penetration means the percentage of all television households in a
DMA subscribing to cable television service, according to the February 1996
Nielsen Station Index reports.
All rank, rating and share information set forth in the Prospectus refers
to the calendar year 1995 unless otherwise specified. See 'Business -- Rating
Service Data.'
6
<PAGE>
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
included elsewhere in this Prospectus. As used herein, unless the context
otherwise requires, the 'Company' means Benedek Communications Corporation and
its subsidiaries (including Benedek Broadcasting Corporation) after giving
effect to the Transactions, which were completed on June 6, 1996. Certain
capitalized terms used in the Offering Circular are defined herein under the
caption 'Description of the Notes -- Certain Definitions.'
THE COMPANY
The Company owns 22 network-affiliated television stations in the United
States. The Stations are diverse in geographic location and network affiliation,
serve small to medium-sized markets and, in the aggregate, reach communities in
24 states. Twelve of the Stations are affiliated with CBS, six are affiliated
with ABC, and four are affiliated with NBC. On a pro forma basis giving effect
to the Transactions, the Company would have had net revenues, broadcast cash
flow and operating cash flow of $121.3 million, $52.7 million and $50.8 million,
respectively, for the fiscal year ended December 31, 1995.
The Company believes that the Acquired Stations have been underperforming
in terms of their overall revenue potential and can be operated more efficiently
under Company management, thereby offering the Company an attractive opportunity
to improve broadcast cash flow. The Company believes that such improvement can
be achieved by expanding the Acquired Stations' share of market revenues and by
increasing viewership levels through an increased emphasis on local news and
informational programming and cost-effective purchasing of competitive
syndicated and first run programming.
The Company believes that the broadcast cash flow margins of the Stauffer
Stations of 19.7%, 29.5% and 23.1% during 1993, 1994 and 1995, respectively, can
be substantially improved in the near-term. In comparison, the broadcast cash
flow margins for the Benedek Stations for the same periods were 40.5%, 44.4% and
42.3%, respectively. The Company further believes that although the Brissette
Stations have operated at attractive margins, the previous ownership of the
Brissette Stations operated with a focus on managing costs, not on maximizing
revenues and broadcast cash flow growth. This strategy typically resulted in the
Brissette Stations capturing a smaller share of advertising revenue in their
respective markets than their audience share in these markets. The compound
annual growth rate of net revenues and broadcast cash flow of the Benedek
Stations (excluding the station in Dothan, Alabama acquired by Benedek
Broadcasting in 1995) for the five-year period from 1991 through 1995 was 7.8%
and 9.0%, respectively, as compared to 4.0% and 3.6%, respectively, for the
Brissette Stations during the same period.
The Stations are located in markets ranked in size from 83 to 201 out of
the 211 markets surveyed by Nielsen. The Company believes that broadcast
television stations in small to medium-sized markets offer an opportunity to
generate attractive and stable operating cash flow due to limited competition
for viewers from other over-the-air broadcasters, from other media soliciting
advertising expenditures and from other broadcasters purchasing syndicated
programming. The Company targets small and medium-sized markets that have stable
employment and population and a diverse base of employers. The markets targeted
by the Company generally have population centers that share common community
interests and are receptive to local programming. Each of the Stations is
affiliated with one of the national television networks, which provides an
established audience and reputation for national news, sports and entertainment
programming. With the established audiences provided by network affiliations,
management seeks to implement its strategy to enhance non-network ratings and
revenues while controlling costs.
The Company believes that the television industry is in a period of
consolidation as a result of which a relatively small number of station
operators will emerge as the leading television station group owners in the
United States. Recent telecommunications legislation that eliminates
restrictions on the number of television stations that any individual or entity
may own so long as the aggregate audience reach does not exceed 35% of all
United States households is likely to accelerate this trend. The Company's
growth strategy, of which the acquisition of the Stauffer Stations and Brissette
Stations is a part, is to become one of the leading group owners of small to
medium-sized market television stations in the United States. The Company
believes that this expansion will create economies of scale which will (i)
improve its ability to negotiate more favorable arrangements with program
suppliers, national sales representation firms, equipment vendors and television
networks, (ii) enable it to develop program consortiums for regional news and
sports programming and (iii) enhance its ability to attract and retain strong
management and on-air talent.
7
<PAGE>
<PAGE>
The following table sets forth certain information for each of the Stations
and the markets they serve:
<TABLE>
<CAPTION>
NUMBER OF
COMMERCIAL STATION
MARKET CALL NETWORK STATIONS IN RANK IN CABLE
MARKET AREA RANK LETTERS CHANNEL(C) AFFILIATION MARKET MARKET PENETRATION
- ------------------------------------------- ------ ---------- ------------ ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BENEDEK STATIONS
Youngstown, Ohio 95 WYTV 33 ABC 3 3 72.3%
Duluth, Minnesota and 134 KDLH-TV 3 CBS 3 2 52.7%
Superior, Wisconsin
Rockford, Illinois 136 WIFR-TV 23 CBS 4 1 68.4%
Quincy, Illinois and Hannibal, Missouri 158 KHQA-TV 7 CBS 2 1 60.6%
Dothan, Alabama 172 WTVY-TV 4 CBS 3 1 65.8%
Panama City, Florida 159 WTVY-TV 4 CBS 4 3 68.3%
Bowling Green, Kentucky 181 WBKO-TV 13 ABC 2 1 56.7%
Meridian, Mississippi 182 WTOK-TV 11 ABC 3 1 52.4%
Parkersburg, West Virginia 184 WTAP-TV 15 NBC 1 1 76.4%
Harrisonburg, Virginia 201 WHSV-TV 3 ABC 1 1 67.3%
STAUFFER STATIONS
Santa Barbara, Santa Maria and 115 KCOY-TV 12 CBS 4 3 85.7%
San Luis Obispo, California
Topeka, Kansas 140 WIBW-TV 13 CBS 3 1 73.1%
Columbia and Jefferson City, Missouri 146 KMIZ(TV) 17 ABC 3 3 59.7%
Casper and Riverton, Wyoming 192 KGWC-TV 14 CBS 3 2(e) 68.9%(e)
192 KGWL-TV(a) 5 CBS (d) (e) (e)
192 KGWR-TV(a) 13 CBS (d) (e) (e)
Cheyenne, Wyoming, Scottsbluff, 193 KGWN-TV 5 CBS 4 1(f) 73.0%(f)
Nebraska and Sterling, Colorado 193 KSTF-TV(b) 10 CBS (d) (f) (f)
193 KTVS-TV(b) 3 CBS (d) (f) (f)
BRISSETTE STATIONS
Madison, Wisconsin 83 WMTV(TV) 15 NBC 4 2 61.5%
Springfield and Holyoke, Massachusetts 102 WWLP(TV) 22 NBC 2 1 81.8%
Lansing, Michigan 106 WILX-TV 10 NBC 4 2 65.1%
Peoria and Bloomington, Illinois 109 WHOI(TV) 19 ABC 4 3 71.3%
Wausau and Rhinelander, Wisconsin 131 WSAW-TV 7 CBS 3 1 50.6%
Wheeling, West Virginia and 138 WTRF-TV 7 CBS 2 2 76.4%
Steubenville, Ohio
Wichita Falls, Texas and 139 KAUZ-TV 6 CBS 4 3 68.8%
Lawton, Oklahoma
Odessa and Midland, Texas 149 KOSA-TV 7 CBS 4 2 73.5%
</TABLE>
- ------------
(a) Satellite station of KGWC-TV.
(b) Satellite station of KGWN-TV.
(c) Channels 2 through 13 are broadcast over the very high frequency (VHF) band
of the broadcast spectrum and channels 14 through 69 are broadcast over the
ultra-high frequency (UHF) band of the broadcast spectrum.
(d) Satellite stations are not considered distinct stations in this market for
Nielsen purposes.
(e) Station Rank and Cable Penetration information for KGWC-TV includes data for
satellite stations KGWL-TV, Lander, Wyoming and KGWR-TV, Rock Springs,
Wyoming, as reported by Nielsen.
(f) Station Rank and Cable Penetration information for KGWN-TV includes data for
satellite stations KSTF-TV, Scottsbluff, Nebraska and KTVS-TV, Sterling,
Colorado, as reported by Nielsen.
8
<PAGE>
<PAGE>
STRATEGY
The Company's senior management team, led by A. Richard Benedek, Chairman
and Chief Executive Officer, and K. James Yager, President and Chief Operating
Officer, has extensive experience in acquiring and improving the operations of
television stations. Management's primary operating strategy is to maximize each
Station's advertising revenue through local news, information and
community-oriented programming that has broad audience appeal and value-added
sales potential, while maintaining strict cost controls. Key elements of
management's strategy include:
LOCAL NEWS LEADERSHIP AND LOCAL PROGRAMMING. The Company concentrates
its programming resources on local news and informational programming that
distinguish its Stations in their respective markets. Management of the
Company believes that strong, well-differentiated local news programming
attracts high viewership levels, particularly of demographic groups that
are appealing to both local and national advertisers, thereby allowing the
Company to maximize advertising rates. Six of the nine Benedek Stations are
the number one ranked news stations in their respective markets, whereas
only four of the 13 Acquired Stations are the number one ranked news
stations in their respective markets. The Company believes that the
Acquired Stations will benefit from the Company's focus on local news and
community-oriented programming.
SYNDICATED PROGRAMMING. The Company selectively purchases first run
and off-network syndicated programming designed to reach specific
demographic groups attractive to advertisers. The Company seeks to acquire
programs that are available on a cost effective basis for limited licensing
periods, allow scheduling flexibility, complement each Station's overall
programming mix and counter competitive programming. As a result of the
limited competition from other broadcasters purchasing syndicated
programming in the small and medium-sized markets served by the Company,
program expense as a percentage of net revenues for the Stations was 4.3%
and 4.1% in 1994 and 1995, respectively, as compared to approximately 9.1%
for all network-affiliated stations in 1994. In addition, the Company
believes that the programming mix of the Acquired Stations can be improved
on a cost effective basis.
LOCAL SALES EMPHASIS. Management's sales strategy focuses on
increasing the sale of local advertising by attracting new advertisers to
television and increasing the amount of advertising dollars being spent by
existing local advertisers. Management emphasizes local sales by operating
professional local sales departments, utilizing extensive sales training
programs, producing commercials for local clients, producing news and
informational programming with local advertising appeal and sponsoring or
co-promoting local events and activities that give local advertisers unique
value-added community identity.
FINANCIAL PLANNING AND CONTROLS. Management emphasizes strict control
of the Company's programming and operating costs as an important factor in
increasing broadcast cash flow. The Company continually seeks to identify
and implement cost savings opportunities. Furthermore, the Company
maintains a detailed budgeting process and reviews performance relative to
budget monthly with respect to both revenues and expenses, thereby enabling
management to react promptly to changes in market conditions.
FUTURE ACQUISITIONS AND OPPORTUNITIES. The Company intends to pursue
additional acquisitions of broadcast television stations, primarily of
network-affiliated stations in small to medium-sized markets where the
Company believes it can successfully implement its operating strategy and
where such stations can be acquired on financially acceptable terms.
Additionally, a rule making proceeding is currently pending before the FCC
regarding possible relaxation of the local television duopoly rules. If
these rules are implemented, the Company intends to explore opportunities
to enter into local marketing agreements with other stations in markets
where it currently operates as well as in other markets.
9
<PAGE>
<PAGE>
THE ACQUISITIONS
The Acquisitions are a central part of the Company's strategy to become one
of the leading television station group owners of small to medium-sized market
television stations in the United States. The Acquisitions are consistent with
the Company's strategy to acquire network-affiliated television stations in
markets with a limited number of media competitors for local advertising
revenues.
The Company has identified approximately $4.998 million of increases to
operating cash flow which it would have realized in 1995 on a pro forma basis
giving effect to the Transactions. See 'Pro Forma Financial Statements.' Of this
amount, the Company would have realized an increase in pro forma net revenues of
$0.446 million to reflect (i) increased network compensation under new
affiliation agreements for certain of the Stations and (ii) increased revenues
from a national sales representative firm for certain of the Acquired Stations.
In addition the Company would have realized $4.552 million of pro forma cost
savings at the Stations comprised of (i) the net effect of the elimination of
substantially all of the corporate expenses of Brissette, offset in part by the
addition of certain corporate management by the Company and related costs
($1.983 million on a net basis), (ii) the effect of reduced commission rates
payable to national sales representative firms under new agreements negotiated
by the Company ($0.284 million), (iii) elimination of redundant operating
expenses, including the elimination of certain positions at the Acquired
Stations ($1.345 million), (iv) adjustments to certain employee benefits and
compensation practices at the Acquired Stations ($0.355 million), (v)
implementation at the Acquired Stations of operating strategies currently
utilized at the Benedek Stations ($0.545 million) and (vi) the implementation of
the Company's historical program purchase practices ($0.040 million).
THE STAUFFER ACQUISITION. On June 6, 1996, the Company acquired
substantially all of the broadcast television assets (including working capital
of approximately $1.6 million) of Stauffer consisting of five principal
broadcast television stations and four satellite broadcast television stations
for a purchase price of $54.5 million. The principal stations acquired by the
Company were KCOY-TV, Santa Maria, California; WIBW-TV, Topeka, Kansas;
KMIZ(TV), Columbia, Missouri; KGWC-TV, Casper, Wyoming; and KGWN-TV, Cheyenne,
Wyoming. KGWC-TV operates two satellite stations, KGWL-TV, Lander, Wyoming, and
KGWR-TV, Rock Springs, Wyoming, both of which rebroadcast the programming of
KGWC-TV. KGWN-TV operates two satellite stations, KSTF-TV, Scottsbluff, Nebraska
and KTVS-TV, Sterling, Colorado, both of which rebroadcast the programming of
KGWN-TV. All of the Stauffer Stations are affiliated with CBS, except for
KMIZ(TV), Columbia, Missouri, which is affiliated with ABC. For the year ended
December 31, 1995, the Stauffer Stations had net revenues of $17.3 million,
broadcast cash flow of $4.0 million and broadcast cash flow margin of 23.1%.
THE BRISSETTE ACQUISITION. On June 6, 1996, the Company acquired all of the
capital stock of Brissette for $270.0 million in cash and preferred stock. All
of the outstanding indebtedness of Brissette was paid in full by the sellers at
the closing. Pursuant to the Brissette Agreement, at the closing Brissette was
required to have working capital of at least $8.8 million and any amount in
excess thereof was paid to the sellers. By acquiring all of the capital stock of
Brissette, the Company acquired eight network-affiliated television stations
including WMTV(TV), the NBC affiliate serving Madison, Wisconsin; WWLP(TV), the
NBC affiliate serving Springfield, Massachusetts; WILX-TV, the NBC affiliate
serving Lansing, Michigan; WHOI(TV), the ABC affiliate serving Peoria, Illinois;
WSAW-TV, the CBS affiliate serving Wausau, Wisconsin; WTRF-TV, the CBS affiliate
serving Wheeling, West Virginia and Steubenville, Ohio; KAUZ-TV, the CBS
affiliate serving Wichita Falls, Texas; and KOSA-TV, the CBS affiliate serving
Odessa, Texas. For the year ended December 31, 1995, Brissette had net revenues
of $51.3 million, broadcast cash flow of $23.9 million and broadcast cash flow
margin of 46.5%.
Of the $270.0 million paid for the capital stock of Brissette, $225.0
million was paid in cash and $45.0 million was paid by the issuance to GECC and
Mr. Paul Brissette of the Seller Junior Discount Preferred Stock of the Company.
See 'The Financing Plan.'
10
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<PAGE>
THE FINANCING PLAN
The Company, together with its subsidiary Benedek Broadcasting, implemented
the Financing Plan in order to finance the Acquisitions and to pay fees and
expenses related thereto. The Financing Plan consisted of (i) the offer and sale
by the Company of the Units to generate gross proceeds of $60.0 million, (ii)
the offer and sale by the Company of the Senior Subordinated Discount Notes to
generate gross proceeds of $90.2 million, (iii) Benedek Broadcasting borrowing
$128.0 million pursuant to the Term Loan Facilities of the Credit Agreement and
(iv) the Company issuing an aggregate of $45.0 million initial liquidation
preference of Seller Junior Discount Preferred Stock to GECC and Mr. Paul
Brissette.
The following table sets forth the sources and uses for the Financing Plan
on a pro forma basis as of March 31, 1996:
<TABLE>
<CAPTION>
(DOLLARS
IN THOUSANDS)
<S> <C>
SOURCES:
Benedek Broadcasting
Cash.................................................................... $ 7,322
Deposit(a).............................................................. 5,000
Credit Agreement
Revolving Credit Facility(b)....................................... --
Term Loan Facilities............................................... 128,000
The Company
The Senior Subordinated Discount Notes.................................. 90,178
The Units(c)............................................................ 60,000
Seller Junior Discount Preferred Stock.................................. 45,000
--------
$335,500
--------
--------
USES:
Stauffer Acquisition.................................................... $ 54,500
Brissette Acquisition................................................... 270,000
Fees and Expenses....................................................... 11,000
--------
$335,500
--------
--------
</TABLE>
- ------------
(a) Pursuant to the Stauffer Agreement, Benedek Broadcasting had made a $5.0
million down payment which had been deposited in escrow pending consummation
of the Stauffer Acquisition.
(b) Benedek Broadcasting has available to it $15.0 million under the Revolving
Credit Facility.
(c) Each Unit consisted of ten shares of Existing Exchangeable Preferred Stock,
ten Initial Warrants and 14.8 Contingent Warrants, each Warrant to purchase
one share of Class A Common Stock of the Company.
11
<PAGE>
<PAGE>
POST-TRANSACTIONS CORPORATE STRUCTURE(A)
[FLOW-CHART REPRESENTING CORPORATE STRUCTURE GOES HERE]
- ------------
(a) Concurrently with the consummation of the Transactions, Brissette and all of
its subsidiaries were merged with and into Benedek Broadcasting with the
result that the operating assets of all of the Stations (other than the FCC
licenses and authorizations) are owned directly by Benedek Broadcasting.
(b) The obligations of Benedek Broadcasting in respect of the Senior Secured
Notes, the Term Loan Facilities and the Revolving Credit Facility are
guaranteed by the Company and, except in the case of the Revolving Credit
Facility, by BLC. Although the Credit Agreement does not limit the ability
of Benedek Broadcasting to pay dividends or make other payments to the
Company, the Senior Secured Note Indenture does contain such limitations.
However, after giving effect to the Transactions (assuming the contribution
to the common equity of Benedek Broadcasting of approximately $188.5 million
net proceeds of the sale of the Senior Subordinated Discount Notes, the
Units and the Seller Junior Discount Preferred Stock), as of March 31, 1996,
Benedek Broadcasting could have distributed approximately $188.5 million to
the Company under such limitations.
12
<PAGE>
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
SECURITIES OFFERED..................... Up to 600,000 shares of 15.0% Exchangeable Preferred Stock due 2007. The
terms of the Exchange Securities and Existing Exchangeable Preferred
Stock are identical in all material respects, except for certain
transfer restrictions and registration rights relating to the Existing
Exchangeable Preferred Stock and except for certain dividend provisions
relating to the Existing Exchangeable Preferred Stock described below
under ' -- Terms of Exchange Securities.'
THE EXCHANGE OFFER..................... The Exchange Securities are being offered in exchange for an equal
number of shares of Existing Exchangeable Preferred Stock. The issuance
of the Exchange Securities is intended to satisfy obligations of the
Company contained in the Registration Agreement.
EXPIRATION DATE; WITHDRAWAL OF
TENDER............................... The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1996, or such later date and time to which it is
extended by the Company. Notwithstanding the foregoing, the Expiration
Date shall not be later than 5:00 p.m., New York City time, on the date
60 days from the date of this Prospectus. The tender of shares of
Existing Exchangeable Preferred Stock pursuant to the Exchange Offer may
be withdrawn at any time prior to the Expiration Date. Any shares of
Existing Exchangeable Preferred Stock not accepted for exchange for any
reason will be returned without expense to the tendering holder thereof
as promptly as practicable after the expiration or termination of the
Exchange Offer.
CERTAIN CONDITIONS TO THE EXCHANGE
OFFER................................ The Exchange Offer is subject to certain customary conditions, which may
be waived by the Company. See 'The Exchange Offer -- Certain Conditions
to the Exchange Offer.'
PROCEDURES FOR TENDERING EXISTING
EXCHANGEABLE PREFERRED STOCK......... Each holder of Existing Exchangeable Preferred Stock wishing to accept
the Exchange Offer must complete, sign and date the Letter of
Transmittal or a facsimile thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise deliver such Letter
of Transmittal, or such facsimile, together with such Existing
Exchangeable Preferred Stock and any other required documentation, to
the Exchange Agent (as defined) at the address set forth herein. By
executing the Letter of Transmittal, each holder will represent to the
Company that, among other things, (i) the holder is not an 'affiliate'
of the Company within the meaning of Rule 405 under the Securities Act,
(ii) the Exchange Securities acquired pursuant to the Exchange Offer are
being acquired in the ordinary course of the holder's business, (iii)
such holder has no arrangement or understanding with any person to
participate in a distribution of such Exchange Securities and (iv) such
holder is not engaged in and does not intend to engage in a distribution
of such Exchange Securities. See 'The Exchange Offer -- Exchange Offer
Procedures.' Pursuant to the Registration Agreement, the Company is
required to file a registration statement for a continuous offering
pursuant to Rule 415 under the Securities Act (a 'Shelf Registration
Statement') in respect of Existing Exchangeable Preferred Stock held by
any holder which indicates in a Letter of Transmittal that it cannot
make such representations to the Company and that it wishes to have its
Existing Exchangeable Preferred Stock registered under the Securities
Act.
</TABLE>
13
<PAGE>
<PAGE>
<TABLE>
<S> <C>
USE OF PROCEEDS........................ There will be no proceeds to the Company from the exchange of Existing
Exchangeable Preferred Stock for Exchange Securities pursuant to the
Exchange Offer. The gross proceeds received by the Company from the sale
of the Units, of which the Existing Exchangeable Preferred Stock was a
part, together with the gross proceeds from the sale of the Senior
Subordinated Discount Notes and advances under the Credit Agreement,
were used to finance the Acquisitions and to pay fees and expenses in
connection with the Transactions. See 'The Acquisitions' and 'The
Financing Plan.'
EXCHANGE AGENT......................... IBJ Schroder Bank & Trust Company is serving as the Exchange Agent in
connection with the Exchange Offer.
FEDERAL INCOME TAX CONSEQUENCES........ The exchange of Existing Exchangeable Preferred Stock for Exchange
Securities pursuant to the Exchange Offer will not be a taxable event
for Federal income tax purposes. See 'Certain Federal Income Tax
Consequences -- Exchange Offer.'
</TABLE>
TERMS OF THE EXCHANGE SECURITIES
The terms of the Exchange Securities are identical in all material respects
to the Existing Exchangeable Preferred Stock, except (i) for certain transfer
restrictions and registration rights relating to the Existing Exchangeable
Preferred Stock and (ii) that, if by December 31, 1996 neither the Exchange
Offer has been consummated nor a Shelf Registrations Statement has been declared
effective, additional cash dividends will accrue on each share of Existing
Exchangeable Preferred Stock from and including January 1, 1997, until but
excluding the earlier of the date of consummation of the Exchange Offer and the
effective date of a Shelf Registration Statement at a rate of 0.50% per annum.
See 'Description of Exchangeable Preferred Stock and Exchange Debentures.'
THE EXCHANGE SECURITIES
<TABLE>
<S> <C>
EXCHANGEABLE PREFERRED STOCK:
SECURITIES OFFERED................ 600,000 shares of 15.0% Exchangeable Preferred Stock due 2007 of the
Company.
DIVIDENDS......................... At the rate of 15.0% per annum of the then effective liquidation
preference per share, and, when declared, payable quarterly beginning
July 1, 1996 and accruing from the Issue Date. The Company, at its
option, may pay dividends on any dividend payment date occurring on or
before July 1, 2001 either in cash or by adding such dividends to the
then effective liquidation preference of the Exchangeable Preferred
Stock.
LIQUIDATION PREFERENCE............ Initially equal to the liquidation preference per share of Existing
Exchangeable Preferred Stock at the date of exchange, plus, without
duplication, accrued and unpaid dividends to the date of exchange.
SPECIAL OPTIONAL REDEMPTION....... The Exchangeable Preferred Stock is immediately redeemable at the option
of the Company, in whole or in part, at the redemption price of 115.000%
of the then effective liquidation preference thereof prior to July 1,
2000, and thereafter at the redemption prices set forth herein, plus,
without duplication, accrued and unpaid dividends to the date of
redemption.
MANDATORY REDEMPTION.............. The Company is required, subject to certain conditions, to redeem the
Exchangeable Preferred Stock outstanding on July 1, 2007 at a redemption
price equal to 100% of the then effective liquidation preference
thereof, plus, without duplication, accrued and unpaid dividends to the
date of redemption.
</TABLE>
14
<PAGE>
<PAGE>
<TABLE>
<S> <C>
RANKING........................... The Exchangeable Preferred Stock will, with respect to dividend rights
and rights on liquidation, winding up and dissolution, rank senior to
all Junior Stock (as defined), including the Seller Junior Discount
Preferred Stock, pari passu with all future Parity Stock (as defined)
and junior to all future Senior Stock (as defined). See 'Risk
Factors -- Ranking of Exchangeable Preferred Stock and Subordination of
Exchange Debentures' and 'Description of Exchangeable Preferred Stock
and Exchange Debentures -- Exchangeable Preferred Stock -- Ranking.'
CHANGE OF CONTROL................. In the event of a Change of Control (as defined), holders of
Exchangeable Preferred Stock will have the right to require the Company
to redeem their Exchangeable Preferred Stock, in whole or in part, at a
price equal to 101% of the then effective liquidation preference
thereof, plus all accrued and unpaid dividends to the date of purchase.
There can be no assurance that the Company will have sufficient funds or
be allowed under contractual limitations to purchase all of the
Exchangeable Preferred Stock in the event of a Change of Control or that
the Company would be able to obtain financing for such purpose on
favorable terms, if at all. See 'Risk Factors -- Control by Sole
Stockholder; Change of Control Could Result in Default' and 'Description
of Exchangeable Preferred Stock and Exchange Debentures -- Exchangeable
Preferred Stock -- Change of Control.'
VOTING RIGHTS..................... The Exchangeable Preferred Stock will be non-voting, except as otherwise
required by law and except in certain circumstances described herein,
including (i) amending certain rights of the holders of Exchangeable
Preferred Stock and (ii) the issuance of any class of equity securities
that ranks on a parity with or senior to the Exchangeable Preferred
Stock. In addition, if the Company (i) fails to pay dividends in respect
of four or more quarters in the aggregate, (ii) fails to make a
mandatory redemption or a Change of Control Offer or (iii) fails to
comply with certain covenants or make certain payments on its
Indebtedness, then holders of two-thirds of the outstanding shares of
Exchangeable Preferred Stock, voting as a class, will be entitled to
elect the greater of two directors and that number of directors
constituting 25% of the Company's board of directors.
RESTRICTIVE COVENANTS............. The Certificate of Designation for the Exchangeable Preferred Stock
contains certain covenants that, among other things, limit (i) the
issuance of additional indebtedness by the Company and its subsidiaries,
(ii) the payment of dividends on, and redemption of, certain capital
stock of the Company and its subsidiaries and the redemption of certain
subordinated obligations of the Company, (iii) investments in certain
affiliates, (iv) sales of assets and subsidiary stock, (v) transactions
with affiliates and (vi) consolidations, mergers and transfers of all or
substantially all the Company's assets. See 'Description of Exchangeable
Preferred Stock and Exchange Debentures -- Exchangeable Preferred
Stock -- Certain Covenants.'
EXCHANGE FEATURE.................. The Exchangeable Preferred Stock is exchangeable into the Exchange
Debentures, at the Company's option, subject to certain conditions, in
whole but not in part, on any scheduled dividend payment date (the
'Exchange Date'). See 'Description of Exchangeable Preferred Stock and
Exchange Debentures -- Exchangeable Preferred Stock -- Exchange' and
' -- Exchange Debentures.'
</TABLE>
15
<PAGE>
<PAGE>
<TABLE>
<S> <C>
EXCHANGE DEBENTURES:
ISSUE............................. 15.0% Exchange Debentures due 2007, issuable in exchange for the
Exchangeable Preferred Stock in an initial aggregate principal amount
equal to the then effective liquidation preference of Exchangeable
Preferred Stock.
MATURITY.......................... July 1, 2007.
INTEREST.......................... The Exchange Debentures will bear interest at the rate of 15.0% per
annum. Interest will accrue from the Exchange Date and be payable
semiannually in cash (or, at the option of the Company, on or prior to
July 1, 2001, in additional Exchange Debentures) in arrears on each July
1 and January 1, commencing with the first such date after the Exchange
Date.
SPECIAL OPTIONAL REDEMPTION....... The Exchange Debentures are immediately redeemable at the option of the
Company, in whole or in part, at the redemption price of 115.000% of the
aggregate principal amount thereof prior to July 1, 2000, and thereafter
at the redemption prices set forth herein, plus accrued and unpaid
interest through the redemption date.
RANKING........................... The Exchange Debentures will be unsecured obligations of the Company,
subordinate to all existing and future senior debt and senior
subordinated debt of the Company, including the obligations of the
Company under its guarantee of the Credit Agreement and the Senior
Secured Notes and its obligations with respect to the Senior
Subordinated Discount Notes. The Exchange Debentures will in all
respects rank pari passu with all other subordinated debt of the Company
and senior to all capital stock of the Company, including the Seller
Junior Discount Preferred Stock. See 'Risk Factors -- Ranking of
Exchangeable Preferred Stock and Subordination of Exchange Debentures'
and 'Description of Exchangeable Preferred Stock and Exchange
Debentures -- Exchange Debentures -- Ranking.'
CHANGE OF CONTROL................. In the event of a Change of Control, the holders of the Exchange
Debentures will have the right to require the Company to purchase their
Exchange Debentures at a price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
purchase. There can be no assurance that the Company will have
sufficient funds or be allowed under contractual limitations to purchase
all of the Exchange Debentures in the event of a Change of Control or
that the Company would be able to obtain financing for such purpose on
favorable terms, if at all. See 'Risk Factors -- Control by Sole
Stockholder; Change of Control Could Result in Default' and 'Description
of Exchangeable Preferred Stock and Exchange Debentures -- Exchange
Debentures -- Change of Control.'
RESTRICTIVE COVENANTS............. The indenture pursuant to which the Exchange Debentures will be issued
(the 'Exchange Indenture') will contain certain covenants that, among
other things, limit (i) the issuance of additional indebtedness by the
Company and its subsidiaries, (ii) the creation of certain liens on the
assets of the Company and its subsidiaries, (iii) the Company from
entering into certain sale and leaseback transactions, (iv) the payment
of dividends on, and redemption of, certain capital stock of the Company
and its subsidiaries and the redemption of certain subordinated
obligations of the Company, (v) investments in certain affiliates, (vi)
sales of assets and subsidiary stock, (vii) transactions with affiliates
and (viii) consolidations, mergers and transfers of all or substantially
all of the Company's assets. See 'Description of
</TABLE>
16
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Exchangeable Preferred Stock and Exchange Debentures -- Exchange
Debentures -- Certain Covenants.'
WARRANTS:
CONTINGENT WARRANTS............... 888,000 Contingent Warrants, each Warrant to acquire one share of Class
A Common Stock. The Contingent Warrants are exercisable for
approximately 10.0% of the common stock of the Company on a
fully-diluted basis, including the Initial Warrants.
EXPIRATION DATE................... The Warrants expire on July 1, 2007 (the 'Expiration Date'). The Company
will give notice of expiration not less than 90 nor more than 120 days
prior to the Expiration Date to the registered holders of the then
outstanding Warrants. Even if the Company does not give such notice, the
Warrants will still terminate and become void on the Expiration Date.
SEPARABILITY...................... The Contingent Warrants, if released on the Contingent Warrant Release
Date, will not trade separately from the Exchangeable Preferred Stock or
the Exchange Debentures, as the case may be, until such date.
CONTINGENT WARRANT RELEASE DATE... The 'Contingent Warrant Release Date' shall mean July 1, 2000; provided,
however, that if on June 30, 1999, the ratio (which shall be calculated
on a pro forma basis in the same manner as is 'Cash Flow Leverage Ratio'
in the Certification of Designation) of (i) the sum of the aggregate
amount outstanding of all Debt (net of cash and cash equivalents) of the
Company and the Restricted Subsidiaries (as defined) and the aggregate
liquidation preference of the Exchangeable Preferred Stock, in each case
as of June 30, 1999 to (ii) Operating Cash Flow (as defined in the
Certificate of Designation) for the four fiscal quarters ending on June
30, 1999, exceeds 8.0 to 1.0, then the Contingent Warrant Release Date
will be August 16, 1999.
EXERCISE.......................... Each Warrant will entitle the holder thereof to purchase one share of
Class A Common Stock of the Company at an exercise price of $0.01 per
share. The Contingent Warrants will become exercisable only in the event
the Exchangeable Preferred Stock or the Exchange Debentures, as the case
may be, are not redeemed on or prior to the Contingent Warrant Release
Date. The number of shares of Class A Common Stock for which, and the
price per share at which, a Warrant is exercisable are subject to
adjustment upon the occurrence of certain events as provided in the
Warrant Agreement (as defined).
REGISTRATION RIGHTS............... Holders of the Contingent Warrants are entitled to two demand
registration rights after the Contingent Warrants become exercisable. In
addition, holders of the Warrants will be entitled to include their
Warrant Shares (as defined), subject to certain limitations, in
registration statements filed by the Company with respect to a public
offering of its common stock.
REGISTRATION REQUIREMENTS.............. The Company has agreed to use its best efforts to consummate the
Exchange Offer by December 1, 1996. In the event that applicable
interpretations of the staff of the SEC do not permit the Company to
effect the Exchange Offer, or if for any other reason the Exchange Offer
is not consummated by December 31, 1996, and under certain other
specified circumstances, the Company will use its best efforts to cause
to become effective a Shelf Registration Statement with respect to the
resale of the Existing Exchangeable Preferred Stock and to keep the
Shelf Registration Statement effective until three years after the date
of the original issuance of the Existing Exchangeable Preferred Stock.
If the Company does not comply
</TABLE>
17
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<PAGE>
<TABLE>
<S> <C>
with its obligations with respect to the Exchange Offer or the Shelf
Registration Statement, additional cash dividends will accrue on each
share of Existing Exchangeable Preferred Stock at a rate of 0.50% per
annum until such obligations are satisfied. See 'The Exchange
Offer -- Acceptance of Existing Exchangeable Preferred Stock for
Exchange; Delivery of Exchange Securities.'
</TABLE>
RISK FACTORS
Holders of shares of Existing Exchangeable Preferred Stock should consider
carefully all of the information set forth in this Prospectus and, in
particular, the information set forth under 'Risk Factors' commencing on page
26.
OTHER INFORMATION
The Company was incorporated under the laws of the State of Delaware on
April 10, 1996. Benedek Broadcasting was incorporated under the laws of the
State of Delaware on January 22, 1979. Benedek Broadcasting is a wholly-owned
subsidiary of the Company. The principal executive offices of the Company and
Benedek Broadcasting are located at 308 West State Street, Rockford, Illinois
61101. The telephone number at the executive offices is 815-987-5350.
SUMMARY PRO FORMA FINANCIAL DATA
The following tables present summary pro forma financial data of the
Company for the year ended December 31, 1995 and as of and for the three months
ended March 31, 1996. The pro forma operations and financial data for the year
ended December 31, 1995 give effect to the Transactions as if the Transactions
had been consummated on January 1, 1995. The pro forma operations and financial
data as of and for the three months ended March 31, 1996 give effect to the
Transactions as if the Transactions had been consummated on January 1, 1996. The
pro forma balance sheet data gives effect to the Transactions as if they had
occurred on March 31, 1996. The pro forma financial statements do not purport to
represent what the Company's results or financial condition would actually have
been if the Transactions had occurred on the dates indicated or to project the
Company's results or financial condition for or at any future period or date.
Additionally, certain reclassification entries have been made to the audited
financial statements of Stauffer and Brissette for consistent presentation with
Benedek Broadcasting. The following financial information should be read in
conjunction with the Pro Forma Financial Statements, Consolidated Financial
Statements of Benedek Broadcasting, the Financial Statements of Stauffer and the
Consolidated Financial Statements of Brissette included elsewhere in this
Prospectus.
18
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------
BENEDEK HISTORICAL ADJUSTMENTS THE COMPANY
BROADCASTING --------------------- FOR PRO
AS ADJUSTED(A) STAUFFER BRISSETTE TRANSACTIONS FORMA
--------------- -------- --------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................................. $ 51,972 $ 17,317 $ 51,326 $ 250(f) $ 121,345
132(g)
284(h)
64(i)
Operating expenses:
Station operating expenses................ 30,139 13,534 27,515 (2,245)(j) 68,943
Depreciation and amortization............. 5,467 2,229 6,252 13,677 (k) 27,625
--------------- -------- --------- ------------ -----------
Station operating income (loss)......... 16,366 1,554 17,559 (10,702) 24,777
Corporate expenses........................ 1,576(e) -- 2,307 (1,983)(l) 1,900
--------------- -------- --------- ------------ -----------
Operating income (loss)....................... 14,790 1,554 15,252 (8,719) 22,877
Financial expense, net:
Interest expense, net:
Cash interest, net...................... (15,779) -- (20,837) 9,401 (m) (27,215)
Other interest.......................... (620) -- (549) (12,602)(m) (13,771)
--------------- -------- --------- ------------ -----------
Total interest, net................... (16,399) -- (21,386) (3,201) (40,986)
Other, net................................ -- -- (354) 354 (n) --
Provision for income taxes.................... -- -- (147) 147 (o) --
--------------- -------- --------- ------------ -----------
Net income (loss) from continuing
operations.................................. (1,609) 1,554 (6,635) (11,419) (18,109)
--------------- -------- --------- ------------ -----------
Exchangeable Preferred Stock dividends........ -- -- -- (9,519)(p) (9,519)
Seller Junior Discount Preferred Stock
dividends................................... -- -- -- (3,672)(q) (3,672)
--------------- -------- --------- ------------ -----------
Net income (loss) from continuing operations
available to common stockholders............ $ (1,609) $ 1,554 $ (6,635) $(24,610) $ (31,300)
--------------- -------- --------- ------------ -----------
--------------- -------- --------- ------------ -----------
Ratio of earnings to fixed charges(b)......... -- --
Ratio of earnings to fixed charges plus
preferred stock dividends(c)................ -- --
CERTAIN FINANCIAL DATA:
Broadcast cash flow........................... $ 21,863 $ 4,000 $ 23,856 $ 3,015 $ 52,734
Broadcast cash flow margin.................... 42.1% 23.1% 46.5% 43.5%
Operating cash flow........................... $ 20,287 $ 4,000 $ 21,549 $ 4,998 $ 50,834
Operating cash flow margin.................... 39.0% 23.1% 42.0% 41.9%
Amortization of program broadcast rights...... $ 2,183 $ 1,025 $ 1,684 $ (39)(r) $ 4,853
Payments for program broadcast rights......... 2,153 808 1,639 (79)(r) 4,521
Capital expenditures.......................... 2,126 406 2,748 -- 5,280
Cash payments for Federal income taxes........ -- --
CERTAIN RATIOS:
Operating cash flow to cash interest
expense, net................................ 1.29x 1.87x
Operating cash flow to total interest
expense, net................................ 1.24x 1.24x
Operating cash flow less capital expenditures
to cash interest expense, net............... 1.15x 1.67x
Operating cash flow less capital expenditures
to total interest expense, net.............. 1.11x 1.11x
Net Senior Debt to operating cash flow(d)..... 6.2x 5.2x
Net debt to operating cash flow(d)............ 6.2x 6.9x
Net debt plus Exchangeable Preferred Stock to
operating cash flow......................... 6.2x 8.8x
</TABLE>
19
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
-----------------------------------------------------------------------
ADJUSTMENTS THE COMPANY
BENEDEK FOR PRO
BROADCASTING STAUFFER BRISSETTE TRANSACTIONS FORMA
--------------- -------- --------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................................. $ 11,683 $ 3,965 $ 11,970 $ 34 (h) $ 27,652
Operating expenses:
Station operating expenses................ 7,549 3,516 7,107 (520)(j) 17,652
Depreciation and amortization............. 1,360 575 1,513 3,616 (k) 7,064
--------------- -------- --------- ------------ -----------
Station operating income (loss)......... 2,774 (126) 3,350 (3,062) 2,936
Corporate expenses........................ 496 -- 762 (762)(l) 496
--------------- -------- --------- ------------ -----------
Operating income (loss)....................... 2,278 (126) 2,588 (2,300) 2,440
Financial expense, net:
Interest expense, net:
Cash interest, net...................... (3,920) -- (4,893) 1,994 (m) (6,819)
Other interest.......................... (101) -- (137) (3,107)(m) (3,345)
--------------- -------- --------- ------------ -----------
Total interest, net................... (4,021) -- (5,030) (1,113) (10,164)
Other, net................................ -- -- (109) 109 (n) --
Provision for income taxes.................... -- -- (103) 103 (o) --
--------------- -------- --------- ------------ -----------
Net income (loss) from continuing
operations.................................. (1,743) (126) (2,654) (3,201) (7,724)
--------------- -------- --------- ------------ -----------
Exchangeable Preferred Stock dividends........ -- -- -- (2,250)(p) (2,250)
Seller Junior Discount Preferred Stock
dividends................................... -- -- -- (891)(q) (891)
--------------- -------- --------- ------------ -----------
Net income (loss) from continuing operations
available to common stockholders............ $ (1,743) $ (126) $ (2,654) $ (6,342) $ (10,865)
--------------- -------- --------- ------------ -----------
--------------- -------- --------- ------------ -----------
Ratio of earnings to fixed charges(b)......... -- --
Ratio of earnings to fixed charges plus
preferred stock dividends(c)................ -- --
CERTAIN FINANCIAL DATA:
Broadcast cash flow........................... $ 4,209 $ 584 $ 4,834 $ 554 $ 10,181
Broadcast cash flow margin.................... 36.0% 14.7% 40.4% 36.8%
Operating cash flow........................... $ 3,713 $ 584 $ 4,072 $ 1,316 $ 9,685
Operating cash flow margin.................... 31.8% 14.7% 34.0% 35.0%
Amortization of program broadcast rights...... $ 597 $ 314 $ 483 $ 1,394
Payments for program broadcast rights......... 522 179 512 1,213
Capital expenditures.......................... 655 43 405 1,103
Cash payments for Federal income taxes........ -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------------------------------
BENEDEK BROADCASTING THE COMPANY
BENEDEK BROADCASTING PRO FORMA(T) PRO FORMA
----------------------- -------------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA(S):
Total assets.................................. $ 107,933 $440,271 $ 440,271
Working capital............................... 11,146 7,860 7,860
Total debt(u)................................. 135,681 263,681 353,859
Exchangeable Preferred Stock.................. -- -- 51,000
Seller Junior Discount Preferred Stock........ -- -- 45,000
Stockholder's equity (deficit)................ (38,305) 153,939 (32,239)
</TABLE>
20
<PAGE>
<PAGE>
(a) Concurrently with the consummation of the Transactions, Benedek
Broadcasting became a wholly-owned subsidiary of the Company. The
operations and financial data of 'Benedek Broadcasting as Adjusted' for the
year ended December 31, 1995 are derived from the pro forma consolidated
financial statements of Benedek Broadcasting adjusted to give pro forma
effect to the acquisition on March 31,1995 of WTVY-TV, serving Dothan,
Alabama and Panama City, Florida (the 'Dothan Station') and the issuance of
the Senior Secured Notes is as if both such events had occurred on January
1, 1995. Capital expenditures do not include assets acquired in connection
with the acquisition of the Dothan Station.
(b) For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of net income (loss) before income taxes and extraordinary
item plus fixed charges (excluding capitalized interest). Fixed charges
consist of interest on all debt (including capitalized interest),
amortization of debt discount and deferred loan costs and the portion of
rental expense that is representative of the interest component of rental
expense (deemed to be one-third of rental expense which management believes
is a reasonable approximation of the interest component). For 'Benedek
Broadcasting As Adjusted,' for the year ended December 31, 1995, earnings
were insufficient to cover fixed charges by $1.6 million. The net income
(loss) for 'Benedek Broadcasting As Adjusted' includes certain non-cash
charges as follows: non-cash interest of $0.6 million and depreciation and
amortization of $5.5 million. For 'The Company Pro Forma,' for the year
ended December 31, 1995, earnings were insufficient to cover fixed charges
by $18.1 million. The net income (loss) for 'The Company Pro Forma'
includes certain non-cash charges as follows: non-cash interest of $13.8
million and depreciation and amortization of $27.6 million. For Benedek
Broadcasting for the three months ended March 31, 1996, earnings were
insufficient to cover fixed charges by $1.7 million. The net income (loss)
for Benedek Broadcasting includes certain non-cash charges as follows: non-
cash interest of $0.1 million and depreciation and amortization of $1.4
million. For the 'The Company Pro Forma' for the three months ended March
31, 1996, earnings were insufficient to cover fixed charges by $7.7
million. The net income (loss) for 'The Company Pro Forma' includes certain
non-cash charges as follows: non-cash interest of $3.3 million and
depreciation and amortization of $7.1 million.
(c) For the purpose of calculating the ratio of earnings to fixed charges plus
preferred stock dividends, earnings consist of net (loss) before income
taxes and extraordinary item. For 'The Company Pro Forma,' for the year
ended December 31, 1995, earnings were insufficient to cover preferred
stock dividends by $31.3 million. The net income (loss) for 'The Company
Pro Forma' includes certain non-cash charges as follows: non-cash interest
of $13.8 million and depreciation and amortization of $27.6 million. For
the 'The Company Pro Forma,' for the three months ended March 31, 1996,
earnings were insufficient to cover fixed charges and preferred stock
dividends by $10.9 million. The net income (loss) for 'The Company Pro
Forma' includes certain non-cash charges as follows: non-cash interest of
$3.3 million and depreciation and amortization of $7.1 million.
(d) Net Senior Debt and net debt are defined as Senior Debt or total debt (as
defined in footnote (u)), as the case may be, less cash and cash
equivalents. These ratios are not the same as the Cash Flow Leverage Ratios
as defined in the Senior Secured Note or Exchange Indentures, or in the
Certificate of Designation for the Exchangeable Preferred Stock, and in
particular, such Cash Flow Leverage Ratios do not credit cash against the
outstanding debt amount.
(e) Includes $0.1 million in one-time expenses incurred in connection with
potential acquisitions which were not entered into by Benedek Broadcasting.
(f) The adjustment reflects the annualized effect of increased network
compensation resulting from new affiliation agreements effective July 1,
1995 for the CBS-affiliated Benedek Stations. In connection with such new
affiliation agreements, CBS paid the Company a bonus payment of $5.0
million which is required under GAAP to be recognized as revenue at the
rate of $500,000 per year over the ten-year term of the affiliation
agreements, of which $250,000 was recognized in Benedek Broadcasting's
statement of operations for 1995.
(g) The adjustment reflects the annualized effect of increased revenues from
the national sales representative firm for the Brissette Stations resulting
from the amortization of a $700,000 signing bonus which is required under
GAAP to be recognized as revenue at the rate of $140,000 per year over a
period of five years, of which $8,000 was recognized in Brissette's
statement of operations for 1995.
(h) The adjustment reflects the annualized effect of reduced commission rates
payable to national sales representative firms under new agreements
negotiated by the Company.
(i) The adjustment reflects the annualized effect of new network compensation
arrangements that took effect at various times in 1995 at certain of the
Acquired Stations.
(j) The adjustment reflects cost savings resulting from the following:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
(i) Elimination of redundant operating expenses, consisting of the
elimination of certain positions at the Acquired Stations.......... $1,345 $309
(ii) Adjustments to certain employee benefits and compensation practices
at the Acquired Stations........................................... 355 116
(iii) Implementation at the Acquired Stations of operating strategies
currently utilized at the Benedek Stations......................... 545 95
------------ -----
$2,245 $520
------------ -----
------------ -----
</TABLE>
21
<PAGE>
<PAGE>
The pro forma cost savings as allocated among departments are summarized in
the table below:
<TABLE>
<CAPTION>
THREE MONTHS THIRTEEN WEEKS PERIOD
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
YEAR ENDED DECEMBER 31, 1995 1996 1996 1996
----------------------------- ------------ -------------- ---------
STAUFFER BRISSETTE TOTAL STAUFFER BRISSETTE TOTAL
-------- --------- ------ ------------ -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Selling expenses.................. $ 94 $ 83 $ 177 $ 24 $ 13 $ 37
Programming and technical......... 528 531 1,059 122 133 255
Advertising and promotions........ 69 180 249 17 45 62
General and administrative........ 522 238 760 130 36 166
-------- --------- ------ ----- ----- ---------
Total......................... $1,213 $ 1,032 $2,245 $293 $227 $ 520
-------- --------- ------ ----- ----- ---------
-------- --------- ------ ----- ----- ---------
</TABLE>
(k) The adjustment reflects primarily the additional depreciation and
amortization expense resulting from the allocation of the purchase price
for the Acquired Stations to the assets acquired, including an increase in
property and equipment and intangible assets to their estimated fair market
value and the recording of goodwill associated with each of the
Acquisitions.
(l) The adjustment reflects the net annualized cost savings resulting from the
acquisition of the Acquired Stations by the Company, including (i) the
elimination of substantially all of the corporate expenses of Brissette and
(ii) the addition of certain corporate management personnel by the Company
and related costs.
(m) Interest expense has been adjusted to reflect the net effect of the change
in outstanding debt and deferred financing costs described in Notes (a) and
(d) to the Pro Forma Balance Sheet as if it had occurred on January 1, 1995
for the year ended December 31, 1995 and January 1, 1996 for the three
months ended March 31, 1996. The following table details the calculation of
the adjustment:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
-------------------------------------- -------------------------------------
CASH OTHER INTEREST TOTAL CASH OTHER INTEREST TOTAL
-------- -------------- -------- -------- -------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Notes at a rate of 13.25%........ $ -- $(12,344) $(12,344) $ -- $ (2,987) $(2,987)
Term Loan Facilities at an
assumed blended rate of 8.73%.. (11,039) -- (11,039) (2,793) -- (2,793)
Interest on existing Brissette
notes.......................... 20,837 -- 20,837 4,893 -- 4,893
Reduction in interest income..... (397) -- (397) (106) -- (106)
Increase in amortization of
deferred financing costs....... -- (807) (807) -- (257) (257)
Reduction of amortization on
deferred financing costs on
Brissette debt................. -- 549 549 -- 137 137
-------- -------------- -------- -------- -------------- -------
Net adjustment............... $ 9,401 $(12,602) $ (3,201) $ 1,994 $ (3,107) $(1,113)
-------- -------------- -------- -------- -------------- -------
-------- -------------- -------- -------- -------------- -------
</TABLE>
The actual interest rate with respect to the Term Loan Facilities may be
higher or lower than the rate set forth above. A change of 0.125% in the
interest rate on borrowings under the Term Loan Facilities would change pro
forma interest expense by approximately $160,000 for the year ended December
31, 1995 and by approximately $40,000 for the three months ended March 31,
1996.
(n) The adjustment reflects the elimination of certain legal and investment
advisory fees paid by Brissette in connection with the sale to Benedek
Broadcasting.
(o) The adjustment reflects the elimination of income tax expense. The Company
is not expected to have income tax expense on a pro forma basis.
(p) The adjustment reflects the dividends paid on the Exchangeable Preferred
Stock at a rate of 15.0% per annum paid quarterly for an effective rate of
15.9% annually.
(q) The adjustment reflects the dividends paid on the Seller Junior Discount
Preferred Stock at an assumed rate of 7.92% per annum paid quarterly for an
effective rate of 8.16% annually.
(r) The adjustment reflects a reduction in program payments and the related
amortization to be consistent with Benedek Broadcasting's historical
program purchase practices.
(s) The adjustments reflect the combined effect of the acquisition of the
Stauffer Stations ($54.5 million purchase price) and Brissette ($270.0
million purchase price), using the purchase method of accounting, and the
Financing Plan, all as if the Transactions had occurred on March 31, 1996.
The pro forma financial data reflects the utilization at closing of $7.3
million cash on hand and the application of a $5.0 million deposit. The
Financing Plan includes (i) borrowings by Benedek Broadcasting of $128.0
million under the Term Loan Facilities, (ii) the sale by the Company of the
Senior Subordinated Discount Notes for gross proceeds of $90.2 million,
(iii) the sale by the Company for $60.0 million of the Units consisting of
Exchangeable Preferred Stock, Initial Warrants to purchase 7.5% of the
fully diluted Common Stock of the Company (with an assumed initial
allocated value of $9.0 million) and Contingent Warrants to purchase 10.0%
of the fully diluted Common Stock of the Company and (iv) the issuance by
the Company of the Seller Junior Discount Preferred Stock with an initial
liquidation preference of $45.0 million.
(t) Concurrently with the consummation of the Transactions, Benedek
Broadcasting became a wholly-owned subsidiary of the Company. The pro forma
balance sheet reflects the contribution of the proceeds from the sale of
the Existing Exchangeable Preferred Stock of $51.0 million, the Seller
Junior Discount Preferred Stock of $45.0 million and the Senior
Subordinated Discount Notes of $90.2 million, as additional paid-in
capital.
(u) Total debt is defined as notes payable and capital leases payable
(including the current portion thereof).
22
<PAGE>
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following tables present summary historical financial data of (i)
Benedek Broadcasting (prior to the Transactions), (ii) Stauffer and (iii)
Brissette. The following financial information should be read in conjunction
with the Consolidated Financial Statements of Benedek Broadcasting, the
Financial Statements of Stauffer and the Consolidated Financial Statements of
Brissette included elsewhere in this Prospectus.
BENEDEK BROADCASTING (PRIOR TO THE TRANSACTIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(a)................. $33,608 $36,311 $38,352 $44,221 $ 50,329 $ 10,150 $ 11,683
Operating expenses:
Station operating
expenses.................. 20,309 21,511 22,805 24,810 29,049 6,308 7,549
Depreciation and
amortization.............. 5,871 4,428 3,721 3,403 5,041 856 1,360
------- ------- ------- ------- -------- -------- --------
Station operating
income................ 7,428 10,372 11,826 16,008 16,239 2,986 2,774
Corporate expenses.......... 887 1,288 1,249 1,309 1,576 343 496
Special bonus, officer-
stockholder............... -- -- 1,400 -- -- -- --
------- ------- ------- ------- -------- -------- --------
Operating income................ 6,541 9,084 9,177 14,699 14,663 2,643 2,278
------- ------- ------- ------- -------- -------- --------
Interest expense, net(b):
Cash interest, net.......... (9,856) (6,605) (8,194) (7,740) (14,763) (2,274) (3,920)
Other interest.............. (3,923) (7,774) (6,161) (4,905) (712) (753) (101)
------- ------- ------- ------- -------- -------- --------
Total interest, net..... (13,779) (14,379) (14,355) (12,645) (15,475) (3,027) (4,021)
------- ------- ------- ------- -------- -------- --------
Extraordinary item(c)........... -- -- -- -- 6,864 6,864 --
Net income (loss)(d)............ (8,143) (5,605) (5,034) 2,044 6,052 6,480 (1,743)
Ratio of earnings to fixed
charges(e).................... -- -- -- 1.2x -- -- --
CERTAIN FINANCIAL DATA:
Broadcast cash flow............. $13,531 $14,728 $15,546 $19,627 $ 21,310 $ 3,924 $ 4,209
Broadcast cash flow margin...... 40.3% 40.6% 40.5% 44.4% 42.3% 38.7% 36.0%
Operating cash flow............. $12,644 $13,440 $14,297 $18,318 $ 19,734 $ 3,581 $ 3,713
Operating cash flow margin...... 37.6% 37.0% 37.3% 41.4% 39.2% 35.3% 31.8
Amortization of program
broadcast rights.............. $ 2,131 $ 1,996 $ 2,179 $ 2,104 $ 2,162 $ 511 $ 597
Payments for program broadcast
rights........................ 1,899 2,068 2,180 1,888 2,132 429 522
Capital expenditures............ 1,581 1,458 1,278 1,161 2,008 552 655
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------ MARCH 31,
1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.................... $ 76,111 $ 77,049 $ 72,818 $ 73,621 $114,453 $107,933
Working capital (deficit)....... 1,997 (71) 3,684 1,611 13,665 11,146
Total debt(e)................... 107,350 109,439 112,874 107,607 135,767 135,681
Stockholder's equity
(deficit)..................... (35,296) (41,004) (44,660) (42,615) (36,563) (38,306)
</TABLE>
23
<PAGE>
<PAGE>
(a) Net revenues reflect deductions from gross revenues for agency and national
sales representative commissions.
(b) Cash interest, net includes cash interest paid and normal adjustments to
accrued interest. Other interest includes accrued interest with respect to
warrants to purchase Benedek Broadcasting's common stock, accrued interest
with respect to the contingent equity value of Benedek Broadcasting and
long-term deferred interest, accrued interest added to long-term debt
balances, deferred loan amortization and accretion of discounts.
(c) Benedek Broadcasting recorded an extraordinary gain from the early
extinguishment of debt comprised of a gain of $11.1 million reduced by
losses of $2.7 million of prepayment premiums and contingent payments and
$1.5 million of unamortized debt discount and deferred loan costs.
(d) Benedek Broadcasting had historically elected to be taxed as an S
Corporation for Federal and state income tax purposes. Accordingly, the
sole stockholder of Benedek Broadcasting has been responsible for the
payment of income taxes on Benedek Broadcasting's taxable income. Net
income (loss) does not include a pro forma adjustment for income taxes due
to the availability of net operating loss carryforwards and a valuation
allowance. Benedek Broadcasting's election to be taxed as an S Corporation
terminated automatically upon the consummation of the Transactions.
(e) For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of net income (loss) before income taxes and extraordinary
item plus fixed charges (excluding capitalized interest). Fixed charges
consist of interest on all debt (including capitalized interest),
amortization of debt discount and deferred loan costs and the portion of
rental expense that is representative of the interest component of rental
expense (deemed to be one-third of rental expense which management believes
is a reasonable approximation of the interest component). For each of the
four years ended December 31, 1991, 1992, 1993 and 1995, earnings were
insufficient to cover fixed charges by $8.1 million, $5.6 million, $5.0
million and $0.8 million, respectively. For the year ended December 31,
1994 the ratio of earnings to fixed charges was 1.2 to 1.0. For the three
months ended March 31, 1995 and 1996, earnings were insufficient to cover
fixed charges by $0.4 million and $1.7 million, respectively. Benedek
Broadcasting's net income (loss) includes certain non-cash charges as
follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Non-cash interest........................... $ 3,923 $ 7,774 $ 6,161 $4,905 $ 712 $ 753 $ 101
Depreciation and amortization............... 5,871 4,428 3,721 3,403 5,041 856 1,360
Provision for loss on note receivable....... 905 310 -- -- -- -- --
Special bonus, officer-stockholder.......... -- -- 1,400 -- -- -- --
------- ------- ------- ------ ------ ------ ------
$10,699 $12,512 $11,282 $8,308 $5,753 $1,609 $1,461
------- ------- ------- ------ ------ ------ ------
------- ------- ------- ------ ------ ------ ------
</TABLE>
(f) Total debt is defined as notes payable and capital leases payable (including
the current portion thereof), net of discount.
24
<PAGE>
<PAGE>
STAUFFER(A)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues............................................... $16,661 $19,081 $17,317 $ 4,097 $ 3,965
Operating expenses:
Station operating expenses............................. 13,327 13,422 13,534 3,223 3,516
Depreciation and amortization.......................... 2,264 2,304 2,229 554 575
------- ------- ------- ------- -------
Station operating income........................... 1,070 3,355 1,554 320 (126)
Corporate expenses..................................... -- -- -- -- --
------- ------- ------- ------- -------
Operating income (loss).................................... $ 1,070 $ 3,355 $ 1,554 $ 320 $ (126)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
CERTAIN FINANCIAL DATA:
Broadcast cash flow........................................ $ 3,285 $ 5,623 $ 4,000 $ 882 $ 584
Broadcast cash flow margin................................. 19.7% 29.5% 23.1% 21.6% 14.7%
Operating cash flow........................................ $ 3,285 $ 5,623 $ 4,000 $ 882 $ 584
Operating cash flow margin................................. 19.7% 29.5% 23.1% 21.6% 14.7%
Amortization of program broadcast rights................... $ 1,277 $ 1,045 $ 1,025 $ 234 $ 314
Payments for program broadcast rights...................... 1,326 1,081 808 226 179
Capital expenditures....................................... 1,182 934 406 233 43
</TABLE>
- ------------
(a) Reclassification entries have been made to the financial statements for
consistent presentation with Benedek Broadcasting.
BRISSETTE(A)
<TABLE>
<CAPTION>
THIRTEEN WEEKS
ENDED
YEAR ENDED DECEMBER 31, ----------------------
--------------------------------------------------- MARCH 26, MARCH 31,
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues......................... $43,817 $46,414 $44,404 $49,530 $51,326 $11,602 $11,970
Operating expenses:
Station operating expenses....... 23,470 23,791 23,511 25,667 27,515 6,383 7,107
Depreciation and amortization.... 13,334 12,881 8,116 6,551 6,252 1,432 1,513
------- ------- ------- ------- ------- --------- ---------
Station operating income..... 7,013 9,742 12,777 17,312 17,559 3,787 3,350
Management fee paid to
affiliate(b)................... 2,650 4,365 -- -- -- -- --
Corporate expenses............... 2,204 1,655 1,487 1,895 2,307 687 762
------- ------- ------- ------- ------- --------- ---------
Operating income..................... $ 2,159 $ 3,722 $11,290 $15,417 $15,252 $ 3,100 $ 2,588
------- ------- ------- ------- ------- --------- ---------
------- ------- ------- ------- ------- --------- ---------
CERTAIN FINANCIAL DATA:
Broadcast cash flow.................. $20,688 $22,613 $20,927 $24,065 $23,856 $ 5,220 $ 4,834
Broadcast cash flow margin........... 47.2% 48.7% 47.1% 48.6% 46.5% 45.0% 40.4%
Operating cash flow(b)............... $18,484 $20,958 $19,440 $22,170 $21,549 $ 4,533 $ 4,072
Operating cash flow margin(b)........ 42.2% 45.1% 43.8% 44.8% 42.0% 39.1% 34.0%
Amortization of program broadcast
rights............................. $ 2,709 $ 1,987 $ 1,743 $ 1,757 $ 1,684 $ 400 $ 483
Payments for program broadcast
rights............................. 2,368 1,997 1,709 1,555 1,639 399 512
Capital expenditures................. 2,466 1,280 2,217 1,559 2,748 327 405
</TABLE>
- ------------
(a) Reclassification entries have been made to the financial statements for
consistent presentation with Benedek Broadcasting.
(b) Brissette paid management fees to an affiliated company for expenses
relating to payroll, rent and other corporate expenses. Operating cash flow
and operating cash flow margin are calculated prior to any reduction for
such management fees.
25
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RISK FACTORS
Holders of shares of Existing Exchangeable Preferred Stock should consider
carefully all of the information set forth in this Prospectus and, in
particular, should evaluate the following risks before tendering their Existing
Exchangeable Preferred Stock in the Exchange Offer, although the risk factors
(other than the first risk factor) are generally applicable to the Existing
Exchangeable Preferred Stock as well as the Exchange Securities.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of shares of Existing Exchangeable Preferred Stock who do not
exchange their Existing Exchangeable Preferred Stock for Exchange Securities
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Existing Exchangeable Preferred Stock as set forth in the
legend thereon as a consequence of the issuance of the Existing Exchangeable
Preferred Stock pursuant to the exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. In general, the Existing Exchangeable Preferred Stock may not
be offered or sold, unless registered under the Securities Act, except pursuant
to an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Existing Exchangeable Preferred Stock under the Securities
Act. Based on interpretations by the staff of the SEC in letters issued to third
parties, Exchange Securities issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred by any holder thereof (other
than any such holder which is an 'affiliate' of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act provided that such
Exchange Securities are acquired in the ordinary course of such holder's
business, such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Securities and such holder is
not engaged in and does not intend to engage in a distribution of such Exchange
Securities. However, to comply with the securities laws of certain
jurisdictions, if applicable, the Exchange Securities may not be offered or sold
unless they have been registered or qualified for sale in such jurisdictions or
an exemption from registration or qualification is available and is complied
with.
LEVERAGED FINANCIAL POSITION
After giving effect to the Transactions, the Company had substantial
indebtedness. Prior to the consummation of the Transactions, Benedek
Broadcasting's total indebtedness was $135.7 million, of which $135.0 million
consisted of the Senior Secured Notes. In connection with the Transactions, the
Company incurred substantial additional indebtedness under the Credit Agreement
and in connection with the issuance of the Senior Subordinated Discount Notes.
As of March 31, 1996, on a pro forma basis after giving effect to the
Transactions, the Company would have had outstanding total indebtedness of
approximately $353.9 million, redeemable Exchangeable Preferred Stock with an
initial liquidation preference of approximately $60.0 million and redeemable
Seller Junior Discount Preferred Stock with an initial liquidation preference of
$45.0 million. The certificates of designation with respect to the Exchangeable
Preferred Stock and the Seller Junior Discount Preferred Stock (the
'Certificates of Designation') the Exchange Indenture, the Senior Subordinated
Discount Note Indenture and the Credit Agreement limit the incurrence of
additional indebtedness and the issuance of redeemable preferred stock by the
Company and its subsidiaries. In addition, the Senior Secured Note Indenture (as
defined) limits the incurrence of additional indebtedness by Benedek
Broadcasting. However, all these limitations are subject to a number of
important qualifications.
The Company's high degree of leverage will have important consequences to
holders of the Exchangeable Preferred Stock, including the following: (i) the
ability of the Company to obtain additional financing for working capital,
capital expenditures, debt service requirements or other purposes may be
impaired; (ii) a substantial portion of the Company's operating cash flow will
be required to be dedicated to the payment of the Company's interest expense and
principal repayment obligations; (iii) the Company may be more highly leveraged
than companies with which it competes, which may place it at a competitive
disadvantage; and (iv) the Company may be more vulnerable in the
26
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<PAGE>
event of a downturn in its business. See 'Management's Discussion and Analysis
of Financial Condition and Results of Operations.'
ABILITY TO SERVICE DEBT AND PREFERRED STOCK DIVIDENDS
The ability of the Company to make scheduled payments or to refinance its
obligations with respect to its indebtedness and redeemable preferred stock
depends on its financial and operating performance, which, in turn, is subject
to prevailing economic conditions and to financial, business and other factors
beyond its control. There can be no assurance that its operating results will be
sufficient for payment of its indebtedness or the redemption of preferred stock
in the future.
For the year ended December 31, 1995 and the three months ended March 31,
1996, on a pro forma basis after giving effect to the Transactions, the
Company's earnings would have been insufficient to cover fixed charges by $18.1
million and $7.7 million, respectively, and earnings would have been
insufficient to cover fixed charges and preferred stock dividends by $31.3
million and $10.9 million, respectively. If non-cash charges to income for
depreciation and amortization and non-cash interest were excluded, the Company's
pro forma earnings from continuing operations for 1995 and the three months
ended March 31, 1996 would have been sufficient to cover its pro forma fixed
charges for such year.
In order to repay the Senior Subordinated Discount Notes and the Senior
Secured Notes at maturity, the Company will need to refinance all or a portion
of the Senior Subordinated Discount Notes and Benedek Broadcasting or the
Company will need to refinance all or a portion of the Senior Secured Notes. The
Company's ability to refinance the Senior Subordinated Discount Notes and the
Company's and Benedek Broadcasting's ability to refinance the Senior Secured
Notes will depend upon Benedek Broadcasting's operating performance, as well as
prevailing economic and market conditions, levels of interest rates, refinancing
costs and other factors, many of which are beyond the Company's control. There
can be no assurance that the Company or Benedek Broadcasting will be able to
refinance the Senior Subordinated Discount Notes or the Senior Secured Notes, as
the case may be, or otherwise raise funds in a timely manner or that the
proceeds therefrom will be sufficient to effect such refinancing.
The Senior Subordinated Discount Notes do not bear interest until May 15,
2001, and the Company will not be obligated to pay cash interest on the Senior
Subordinated Discount Notes until November 15, 2001. In addition, for all
dividend payment dates with respect to the Exchangeable Preferred Stock and
interest payment dates with respect to the Exchange Debentures through and
including July 1, 2001, the Company may, at its option, pay dividends by adding
the amount thereof to the then effective liquidation preference of the
Exchangeable Preferred Stock and pay interest on the Exchange Debentures by
issuing additional Exchange Debentures. For all dividend payment dates with
respect to the Seller Junior Discount Preferred Stock prior to October 1, 2001,
the Company will pay such dividends by adding the amount thereof to the then
effective liquidation preference of the Seller Junior Discount Preferred Stock.
In order for the Company to meet its debt service obligations and pay required
dividends after May 15, 2001 with respect to the Senior Subordinated Discount
Notes, after July 1, 2001 with respect to the Exchangeable Preferred Stock or
Exchange Debentures, as the case may be, and from and after October 1, 2001 with
respect to the Seller Junior Discount Preferred Stock, the Company will need to
substantially increase broadcast cash flow at the Stations. However, there can
be no assurance that the Company's broadcast cash flow will improve or improve
in a sufficient degree to enable the Company to meet such obligations. The
Credit Agreement restricts the Company's ability to sell assets and use the
proceeds therefrom, and the Senior Secured Note Indenture restricts the ability
of Benedek Broadcasting to sell assets and use the proceeds therefrom. In the
absence of such improvement, the Company could face liquidity problems and might
be required to reduce its capital expenditures and overhead expenses or dispose
of material assets or operations to meet its debt and preferred stock service
and other obligations. There can be no assurance as to the ability of the
Company to consummate such sales or the proceeds which the Company could realize
therefrom or that such proceeds would be adequate to meet the obligations then
due.
If the Company or Benedek Broadcasting is unable to generate sufficient
cash flow or otherwise obtain funds necessary to make required payments on its
indebtedness or, if the Company or Benedek
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<PAGE>
<PAGE>
Broadcasting otherwise fails to comply with the various covenants in such
indebtedness (including covenants in the Credit Agreement), it would be in
default under the terms thereof, which would permit the holders of such
indebtedness to accelerate the maturity of such indebtedness and could cause
defaults under other indebtedness of the Company or Benedek Broadcasting or
result in a bankruptcy of the Company or Benedek Broadcasting. Such defaults or
any bankruptcy of the Company or Benedek Broadcasting resulting therefrom would
have a material adverse effect on the value of the Exchangeable Preferred Stock.
RANKING OF EXCHANGEABLE PREFERRED STOCK AND SUBORDINATION OF EXCHANGE DEBENTURES
The Exchangeable Preferred Stock ranks junior in right of payment to all
existing and future liabilities and obligations (whether or not for borrowed
money) of the Company, pari passu with each other class of capital stock or
series of preferred stock issued by the Company after the Transactions that
specifically provides that such series will rank on a parity with the
Exchangeable Preferred Stock and senior in right of payment to the Seller Junior
Discount Preferred Stock and all common stock and to each other class of capital
stock or series of preferred stock issued by the Company after the Transactions
that specifically provides that such series will rank junior to the Exchangeable
Preferred Stock. The holders of the Exchangeable Preferred Stock will have
limited voting rights. See 'Description of the Exchangeable Preferred Stock and
Exchange Debentures -- Exchangeable Preferred Stock -- Ranking; -- Voting
Rights.'
The Exchange Debentures will be unsecured obligations of the Company and
will be subordinated in right of payment to all existing and future senior debt
and senior subordinated debt of the Company, including the obligations of the
Company under its guarantees of the Credit Agreement and the Senior Secured
Notes and with respect to the Senior Subordinated Discount Notes. As of March
31, 1996, on a pro forma basis, after giving effect to the Transactions, the
aggregate principal amount of such Senior Debt would have been approximately
$353.9 million. In the event of bankruptcy, liquidation or reorganization of the
Company, the assets of the Company will be available to pay obligations on the
Exchange Debentures only after all such Senior Debt of the Company has been paid
in full, and there may not be sufficient assets remaining to pay amounts due on
the Exchange Debentures then outstanding. Additional indebtedness, including
Senior Debt, may be incurred by the Company from time to time, subject to the
terms of the Exchange Indenture. In addition, the Exchange Debentures will be
structurally subordinated to any liabilities or obligations of the Company's
subsidiaries, including Benedek Broadcasting. As of March 31, 1996, on a pro
forma basis, after giving effect to the Transactions, the aggregate liabilities
of the Company's subsidiaries were $286.3 million. See 'Description of the
Exchangeable Preferred Stock and Exchange Debentures -- Exchange
Debentures -- Ranking.'
HOLDING COMPANY STRUCTURE
The Company is a holding company that will derive all of its operating
income and cash flow from its sole subsidiary, Benedek Broadcasting, the common
stock of which, together with all other assets of the Company has been pledged
to secure the Company's senior guarantee of all indebtedness of Benedek
Broadcasting outstanding under the Credit Agreement and in respect of the Senior
Secured Notes. As a holding company, the Company's ability to pay its
obligations, including its ability to pay cash dividends on the Exchangeable
Preferred Stock and to redeem Exchangeable Preferred Stock, whether upon the
mandatory redemption date of July 1, 2007, upon a Change of Control or
otherwise, will be dependent primarily upon receiving dividends and other
payments or advances from Benedek Broadcasting. Benedek Broadcasting is a
separate and distinct legal entity and has no obligation, contingent or
otherwise, to pay any amounts to the Company or to make funds available to the
Company for debt service or any other obligation.
Under Delaware law the Company is permitted to pay dividends on its capital
stock, including the Exchangeable Preferred Stock, only out of its surplus or,
in the event that it has no surplus, out of its net profits for the year in
which a dividend is declared or for the immediately preceding fiscal year.
Surplus is defined as the excess of a company's total liabilities plus the par
value of its outstanding capital stock. In order to pay dividends in cash, the
Company must have surplus or net profits equal to
28
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<PAGE>
the full amount of the cash dividend at the time such dividend is declared. In
determining the Company's ability to pay dividends, Delaware law permits the
board of directors of the Company to revalue the Company's assets and
liabilities from time to time to their fair market values in order to create
surplus. The Company cannot predict what the value of its assets or the amount
of its liabilities will be in the future and, accordingly, there can be no
assurance that the Company will be able to pay cash dividends on the
Exchangeable Preferred Stock.
Although the Credit Agreement does not limit the ability of Benedek
Broadcasting to pay dividends or make other payments to the Company, the Senior
Secured Note Indenture does contain such limitations. However, after giving
effect to the Transactions (assuming the contribution to the common equity of
Benedek Broadcasting of net cash proceeds of approximately $188.5 million from
the sale of the Units, the Senior Subordinated Discount Notes and the Seller
Junior Discount Preferred Stock), as of March 31, 1996, Benedek Broadcasting
could have distributed approximately $188.5 million to the Company under such
limitations.
TAX CONSEQUENCES OF DISTRIBUTIONS WITH RESPECT TO THE EXCHANGEABLE PREFERRED
STOCK AND EXCHANGE OF EXCHANGE DEBENTURES
It is anticipated that the redemption price of the Exchangeable Preferred
Stock will substantially exceed its issue price (i.e., the portion of the
purchase price of a Unit that is initially allocated to the Exchangeable
Preferred Stock). As a result, a holder will be required to treat such excess
(the 'Discount Amount') as a series of constructive distributions on the
Exchangeable Preferred Stock occurring over the term of such stock. The Company
believes that for tax purposes it is likely that the Exchangeable Preferred
Stock will be deemed to be redeemed as of June 30, 2000 whether or not actually
redeemed. As a result, the Discount Amount as well as any contractual redemption
premium payable on June 30, 2000 will be treated as a series of constructive
distributions on the Exchangeable Preferred Stock over the period commencing on
the issue date thereof and ending on June 30, 2000. To the extent of the
Company's current and accumulated earnings and profits (as calculated for
Federal income tax purposes), the amount of each such constructive distribution
will be includable in a holder's income as ordinary dividend income at the time
such distribution is deemed to occur, notwithstanding that the cash attributable
to such income will not be received by the holder until a subsequent period.
In the event that the Contingent Warrants are issued on the Contingent
Warrant Release Date, such issuance will constitute a taxable distribution to
holders of Exchangeable Preferred Stock (or Exchange Debentures) in an amount
equal to the fair market value of such Contingent Warrants on the Contingent
Warrant Release Date.
Distributions on the Exchangeable Preferred Stock (including any
constructive distributions described above, any payment of accrued dividends and
any distribution of Contingent Warrants) will be taxable for Federal income tax
purposes as ordinary dividend income (and eligible for the dividends-received
deduction for certain U.S. corporate holders) only to the extent paid out of
current or accumulated earnings and profits of the Company as determined for
Federal income tax purposes. To the extent that the amount of such distributions
exceeds the current or accumulated earnings and profits of the Company, such
excess will reduce the holder's basis in the stock with respect to which the
distribution is made (to the extent thereof), with any remaining excess treated
as gain from the sale or exchange of such stock. The Company does not currently
have any accumulated earnings and profits and there can be no assurance
regarding the amount of current or accumulated earnings and profits of the
Company in the future. As a result, there can be no assurance that the
dividends-received deduction will apply to distributions on the Exchangeable
Preferred Stock.
The Company may, at its option and under certain circumstances, exchange
Exchange Debentures for the Exchangeable Preferred Stock. Any such exchange will
be a taxable event to holders of the Exchangeable Preferred Stock. Furthermore,
the Exchange Debentures will be treated as having been issued with original
issue discount ('OID') for Federal income tax purposes. Holders of Exchange
Debentures will be required to include such OID (as ordinary income) in income
over the life of the Exchange Debentures, in advance of the receipt of the cash
attributable to such income.
29
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SENSITIVITY TO GENERAL ECONOMIC CONDITIONS
The Company's operating results are sensitive to general economic
conditions in the United States. Additionally, because the Company relies on
sales of advertising time for substantially all of its revenues, the Company's
operating results are and will be sensitive to local and regional economic
conditions in each of the markets in which the Stations operate. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and 'Business -- Competition.'
COMPETITION WITHIN THE TELEVISION INDUSTRY; ADVANCED TELEVISION
The television broadcast industry faces competition for market share and
advertising revenues from a variety of alternative media, including cable
television, 'wireless' cable systems, direct broadcast satellite systems,
telephone company video systems, radio, newspapers, computer on-line services,
periodicals and other entertainment and advertising media.
The ability of television broadcast stations to generate advertising
revenues depends to a significant degree upon audience ratings. Technological
innovation and the resulting proliferation of programming alternatives, such as
independent broadcast stations, cable television and other multi-channel
competitors, pay-per-view and VCRs, have fractionalized television viewing
audiences and subjected television broadcast stations to new types of
competition. During the past decade, cable television and independent stations
have captured an increasing market share while overall viewership of network
television has declined.
Advances in technology may increase competition for household audiences and
advertising revenues. Video compression techniques, now in use with direct
broadcast satellites and in development for cable and 'wireless' cable, are
expected to permit greater numbers of channels to be carried within existing
bandwidths. These compression techniques, as well as other technological
developments, are applicable to all video delivery systems, including
over-the-air broadcasting, and have the potential to provide vastly expanded
programming to highly-targeted audiences. Reduction in the cost of creating
additional channel capacity may lower entry barriers for new channels and
encourage the development of increasingly specialized 'niche' programming. This
ability to reach highly-targeted audiences may alter the competitive dynamics
for advertising expenditures.
The FCC currently is determining whether and how to assign licenses to
permit television broadcasters to provide digital advanced television ('ATV')
services. ATV refers to improvements in image definition and sound quality
(commonly known as high-definition television), as well as flexibility to
provide additional-spectrum based services. The FCC has tentatively decided to
issue a second channel to each television broadcaster to permit it to provide
ATV over a transition period. At the end of the transition period, each
broadcaster would be required to return to the FCC one of these two channels.
This transition will permit broadcasters to provide higher quality services to
their viewers and may permit broadcasters to compete more effectively with other
digital video systems. However, constructing and operating a second television
channel will require a substantial capital outlay for all of the Stations. The
Company is unable to predict the effect that technological changes will have on
the broadcast television industry or the future results of the Company's
operations. See 'Business -- Competition.'
In addition, certain leaders in Congress and the Administration have
proposed legislation that would require broadcasters to (i) bid at auction for
ATV channels, potentially against other non-broadcast applicants, (ii) return
their analog channels on an expedited basis by 2005 to permit the old channels
to be reauctioned to new licensees and/or (iii) pay a fee for use of the second
channel, starting either immediately or after 2005. These proposals, if enacted
could affect the Company. First, auctions for ATV channels could substantially
increase the Company's up-front costs of converting to ATV and would raise the
possibility that the Company could be subject to additional competition in its
markets if it, or another licensee, is out-bid by a newcomer. Second, an
expedited transition period could require the Company to end analog transmission
before all its viewers (particularly those in the small and medium-sized markets
which the Company serves) have purchased ATV-compatible reception equipment.
30
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REGULATION BY FCC
The broadcasting industry is subject to significant regulation by the FCC
pursuant to the Communications Act of 1934, as amended (the 'Communications
Act'). FCC approval is required for the issuance, renewal and transfer of
station operating licenses. The Company's business is dependent upon the
retention and renewal of television broadcasting licenses from the FCC. While in
the vast majority of cases such licenses are renewed by the FCC, there can be no
assurance that the Company's licenses will be renewed upon their expiration. All
of the Stations are presently operating under five-year licenses expiring on
various dates from 1996 to 1999. Currently, WTAP-TV, Parkersburg, West Virginia,
WHSV-TV, Harrisonburg, Virginia, and WTRF-TV, Wheeling, West Virginia and
Steubenville, Ohio, have pending applications for license renewal. Pursuant to
recent legislation, the term of each of these licenses will be extended to eight
years upon ordinary course renewal. The United States Congress and the FCC
currently have under consideration and may in the future adopt new laws,
regulations and policies regarding a wide variety of matters (including
technological changes) which could, directly or indirectly, affect the
operations and ownership of the Stations. See 'Business -- Federal Regulation of
Television Broadcasting.'
The FCC granted the Company's application to acquire the Stauffer Stations
on April 8, 1996 and its application to acquire the Brissette Stations on May
23, 1996. In approving the Brissette acquisition, the FCC granted six-month
waivers of the 'duopoly' rule that prevents a licensee from having an interest
in two stations that have a certain degree of overlap in their transmission
signals. The six-month waivers granted by the FCC pertain to the transmission
signal overlap of (i) WIFR-TV, the Benedek Station serving Rockford, Illinois,
and WMTV(TV), the Brissette Station serving Madison, Wisconsin; (ii) WYTV, the
Benedek Station serving Youngstown, Ohio, and WTRF-TV, the Brissette Station
serving Wheeling, West Virginia and Steubenville, Ohio; and (iii) WTAP-TV, the
Benedek Station serving Parkersburg, West Virginia, and WTRF-TV. These waivers
permit the Company to hold the Stations in question for a six-month period after
closing before divesting one of the two Stations that do not comply with the
duopoly rule in each instance. The FCC has a pending proceeding, which it has
committed to complete during 1996, that may result in the liberalization of the
duopoly rule to permit the Company to continue to own all the Stations it
currently owns as well as all of those it has received FCC consent to acquire.
There can be no assurance that the FCC will act to liberalize the rule or that
it will do so in time to avoid the Company's being required to divest certain
Stations in order to eliminate any signal overlap.
DEPENDENCE ON NETWORK AFFILIATION
Each of the Stations is affiliated with either ABC, CBS or NBC. Viewership
levels for each of the Stations are materially dependent upon programming
provided by the Station's affiliated network. There can be no assurance that
such programming will achieve or maintain satisfactory viewership levels in the
future.
Each of the Benedek Stations' network affiliation agreements currently runs
for a period of five to 10 years. WYTV, WBKO-TV, WTOK-TV and WHSV-TV, all of
which are ABC affiliates, each have a five-year affiliation agreement which
expires in 1999. KDLH-TV, WIFR-TV, KHQA-TV and WTVY-TV, all of which are CBS
affiliates, each have a ten-year affiliation agreement which expires in 2005 and
is automatically renewed for successive five-year terms, subject to either
party's right to terminate the agreement at the end of any term upon six months'
advance notice. WTAP-TV, an NBC affiliate, currently operates under a five-year
affiliation agreement which expires in 2000 and is automatically renewed for
successive terms, subject to either party's right to terminate the agreement at
the end of any term upon 12 months' advance notice.
Each of the Stauffer Stations' network affiliation agreements currently
runs for a period of five to 10 years. KMIZ(TV), an ABC affiliate, operates
under an affiliation agreement which expires in 2000 and is automatically
renewed for successive terms, subject to either party's right to terminate the
agreement at the end of its term upon 180 days' advance notice. All of the other
Stauffer Stations are CBS affiliates operating under affiliation agreements
which expire in 2005 and which automatically renew for successive terms, subject
to either party's right to terminate the agreement at the end of its term upon
six months' advance notice.
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Each of the Brissette Stations' network affiliation agreements currently
runs for a period of 10 to 11 years. WMTV(TV), WWLP(TV) and WILX-TV, all of
which are NBC affiliates, each has an affiliation agreement which expires in
2006 and is automatically renewed for successive five-year terms, subject to
either party's right to terminate the agreement at the end of any term upon six
months' advance notice. Each of the Brissette CBS affiliates, WSAW-TV, WTRF-TV,
KAUZ-TV and KOSA-TV, are operating under affiliation agreements which expire in
2005 and which automatically renew for successive 10-year terms, subject to
either party's right to terminate the agreement upon six months' advance notice.
WHOI(TV), an ABC affiliate, currently operates under an affiliation agreement
which expires in 2005 and which does not provide for renewals.
Although the Company expects to be able to renew these affiliation
agreements, no assurance can be given that such renewals will be obtained. The
non-renewal or termination of one or more of the network affiliation agreements
would likely have a material adverse effect on the Company's results of
operations. See 'Business -- Network Affiliation of the Stations.'
DEPENDENCE ON MANAGEMENT
Certain of the executive officers of the Company, including A. Richard
Benedek and K. James Yager, are especially important to the direction and
management of the Company. The loss of the services of such persons could have a
material adverse effect on the business and operations of the Company, and there
can be no assurance that the Company would be able to find replacements for such
persons with equivalent business experience.
CONTROL BY SOLE STOCKHOLDER; CHANGE OF CONTROL COULD RESULT IN DEFAULT
A. Richard Benedek owns all of the outstanding common stock of the Company.
Consequently, Mr. Benedek has the power to control the business and affairs of
the Company by virtue of his power to elect all of the Company's directors and
his voting power with respect to actions requiring stockholder approval. See
'Stock Ownership.' The Communications Act and FCC rules require the prior
consent of the FCC to any change of control of the Company.
A Change of Control (as defined in various debt instruments and
certificates of designation) could require the Company and Benedek Broadcasting
to refinance substantial amounts of their indebtedness and preferred stock,
including the Senior Subordinated Discount Notes, the Senior Secured Notes, the
Term Loan Facilities and the Exchangeable Preferred Stock. The Company's failure
to refinance such indebtedness and preferred stock when required would result in
a default under the Senior Subordinated Discount Note Indenture, the Senior
Secured Note Indenture and the Credit Agreement. In the event of a Change of
Control, there can be no assurance that the Company would have sufficient assets
to satisfy all of its obligations. In addition, the Credit Agreement and the
Senior Secured Note Indenture both contain provisions that may prohibit the
Company from repurchasing the Exchangeable Preferred Stock or Exchange
Debentures, as the case may be, upon a Change of Control. See 'Description of
Indebtedness -- Credit Agreement' and ' -- Senior Secured Notes.'
RISKS ASSOCIATED WITH INTEGRATION OF THE ACQUIRED STATIONS
The Company's strategic plans with respect to the Acquired Stations include
increasing net revenue and broadcast cash flow and controlling operating
expenses. Although the Company believes these strategies are reasonable, there
can be no assurance that it will be able to implement its plans without delay or
that, when implemented, its efforts will result in the increased broadcast cash
flow or other benefits currently anticipated by the Company. In addition, there
can be no assurance that the Company will not encounter unanticipated problems
or liabilities in connection with the Acquired Stations. The integration of the
Acquired Stations into the Company will require substantial attention from the
Company's senior management, which may limit the amount of time available to be
devoted to the Company's existing operations.
32
<PAGE>
<PAGE>
TERMINATION OF S CORPORATION STATUS; POTENTIAL CORPORATE TAX LIABILITY
Historically, Benedek Broadcasting had elected to be treated as an S
Corporation for Federal and state income tax purposes. Upon consummation of the
Transactions, Benedek Broadcasting no longer met the requirements for S
Corporation status and, therefore, the Company and Benedek Broadcasting will be
liable for Federal and state taxes on their income from and after the
consummation of the Transactions. As a result, Benedek Broadcasting no longer
has available to it certain suspended losses which would otherwise have been
available to it as an S Corporation.
For so long as the S election was in effect, Benedek Broadcasting was
generally not responsible for Federal income taxes and income taxes of any state
or locality for which a valid S election had been made. A. Richard Benedek, as
the sole stockholder of Benedek Broadcasting prior to the consummation of the
Transactions, is responsible for the payment of income taxes on Benedek
Broadcasting's taxable income prior to the consummation of the Transactions, and
the Senior Subordinated Discount Note Indenture and the Senior Secured Note
Indenture permit payments to Mr. Benedek of certain amounts in respect thereof.
While the Company believes that Benedek Broadcasting had met until consummation
of the Transactions, the requirements for S Corporation status, there can be no
assurance that such position, if challenged, would be upheld. If such status
were challenged and not upheld, the Company would be liable for corporate taxes
on its income at the effective Federal and state corporate tax rates for any
year in which its S Corporation status was denied plus interest and perhaps
penalties. Mr. Benedek has agreed to repay to the Company any payments of Tax
Amounts (as defined) made by Benedek Broadcasting for any year for which Benedek
Broadcasting's S Corporation status is ultimately determined to have been
invalid. See 'Description of the Exchangeable Preferred Stock and Exchange
Debentures -- Exchangeable Preferred Stock -- Certain Covenants -- Limitation on
Restricted Payments' and ' -- Exchange Debentures -- Certain
Covenants -- Limitation on Restricted Payments.' There can be no assurance,
however, that funds for such repayment would be available or sufficient to
reimburse the Company for all income taxes due.
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGEABLE PREFERRED STOCK
The Exchange Securities are being offered to the holders of shares of
Existing Exchangeable Preferred Stock. The Existing Exchangeable Preferred Stock
was issued as part of the Units in June 1996 to a small number of institutional
investors and is eligible for trading in the Private Offerings, Resale and
Trading through Automatic Linkages (PORTAL) Market.
The Company does not intend to apply for a listing of the Exchange
Securities on a securities exchange. There is currently no established market
for the Exchange Securities and there can be no assurance as to the liquidity of
markets that may develop for the Exchange Securities, the ability of the holders
of the Exchange Securities to sell their Exchange Securities or the price at
which such holders would be able to sell their Exchange Securities. If such
markets were to exist, the Exchange Securities could trade at prices that may be
lower than the initial market values thereof depending on many factors,
including prevailing interest rates and the markets for similar securities.
The liquidity of, and trading market for, the Exchange Securities also may
be adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
33
<PAGE>
<PAGE>
THE ACQUISITIONS
The Acquisitions are a central part of the Company's strategy to become one
of the leading television station group owners of small to medium-sized market
television stations in the United States. The Company believes that this
expansion will create economies of scale which will (i) improve its ability to
negotiate more favorable arrangements with program suppliers, national sales
representation firms, equipment vendors and television networks, (ii) enable it
to develop program consortiums for regional news and sports programming and
(iii) enhance its ability to attract and retain strong management and on-air
talent. The Acquisitions are consistent with the Company's strategy to acquire
network-affiliated television stations in markets with a limited number of media
competitors for local advertising revenues.
THE STAUFFER ACQUISITION. On June 6, 1996, the Company acquired
substantially all of the broadcast television assets (including working capital)
of Stauffer consisting of five principal broadcast television stations and four
satellite broadcast television stations for a purchase price of $54.5 million.
The Company also assumed certain liabilities and obligations of Stauffer
incurred in the ordinary course of business, excluding, among other things, any
indebtedness for borrowed money. Pursuant to the Stauffer Agreement, at closing
Stauffer was required to have working capital of at least $1.6 million. To the
extent the working capital of Stauffer exceeded $1.6 million (including therein
accounts receivable of Stauffer only to the extent actually collected), the
Company is obligated to remit such excess to Stauffer over the 90-day period
immediately after the closing.
The principal stations acquired by the Company were KCOY-TV, Santa Maria,
California; WIBW-TV, Topeka, Kansas; KMIZ(TV), Columbia, Missouri; KGWC-TV,
Casper, Wyoming; and KGWN-TV, Cheyenne, Wyoming. KGWC-TV operates two satellite
stations, KGWL-TV, Lander, Wyoming, and KGWR-TV, Rock Springs, Wyoming, both of
which rebroadcast the programming of KGWC-TV. KGWN-TV operates two satellite
stations, KSTF-TV, Scottsbluff, Nebraska and KTVS-TV, Sterling, Colorado, both
of which rebroadcast the programming of KGWN-TV. All of the Stauffer Stations
are affiliated with CBS, except for KMIZ(TV), Columbia, Missouri, which is
affiliated with ABC. For the year ended December 31, 1995, the Stauffer Stations
had net revenues of $17.3 million, broadcast cash flow of $4.0 million and
broadcast cash flow margin of 23.1%.
THE BRISSETTE ACQUISITION. On June 6, 1996, the Company acquired all of the
capital stock of Brissette for $270.0 million in cash and preferred stock. All
of the outstanding indebtedness of Brissette was paid in full by the sellers at
the closing. Pursuant to the Brissette Agreement, at the closing Brissette was
required to have working capital of at least $8.8 million and any amount in
excess thereof will be paid to the sellers. By acquiring all of the capital
stock of Brissette, the Company acquired eight network-affiliated television
stations including WMTV(TV), the NBC affiliate serving Madison, Wisconsin;
WWLP(TV), the NBC affiliate serving Springfield, Massachusetts; WILX-TV, the NBC
affiliate serving Lansing, Michigan; WHOI(TV), the ABC affiliate serving Peoria,
Illinois; WSAW-TV, the CBS affiliate serving Wausau, Wisconsin; WTRF-TV, the CBS
affiliate serving Wheeling, West Virginia and Steubenville, Ohio; KAUZ-TV, the
CBS affiliate serving Wichita Falls, Texas; and KOSA-TV, the CBS affiliate
serving Odessa, Texas. For the year ended December 31, 1995, Brissette had net
revenues of $51.3 million, broadcast cash flow of $23.9 million and broadcast
cash flow margin of 46.5%.
Of the $270.0 million paid for the capital stock of Brissette, $225.0
million was paid in cash and the balance was paid by the issuance to GECC and
Mr. Paul Brissette of the Seller Junior Discount Preferred Stock. See 'The
Financing Plan.'
For a description of the Acquired Stations see 'Business -- The
Stations -- Stauffer' and ' -- Brissette.'
34
<PAGE>
<PAGE>
THE FINANCING PLAN
The Company, together with its subsidiary Benedek Broadcasting, implemented
the Financing Plan in order to finance the Acquisitions and to pay fees and
expenses related thereto. The Financing Plan consisted of (i) the offer and sale
by the Company of the Units to generate gross proceeds of $60.0 million, (ii)
the offer and sale by the Company of the Senior Subordinated Discount Notes to
generate gross proceeds of $90.2 million, (iii) Benedek Broadcasting borrowing
$128.0 million pursuant to the Term Loan Facilities of the Credit Agreement and
(iv) the Company issuing an aggregate of $45.0 million initial liquidation
preference of Seller Junior Discount Preferred Stock to GECC and Mr. Paul
Brissette.
The following table sets forth the sources and uses for the Financing Plan
on a pro forma basis as of March 31, 1996:
<TABLE>
<CAPTION>
(DOLLARS
IN THOUSANDS)
<S> <C>
SOURCES:
Benedek Broadcasting
Cash.................................................................... $ 7,322
Deposit(a).............................................................. 5,000
Credit Agreement
Revolving Credit Facility(b)....................................... --
Term Loan Facilities............................................... 128,000
The Company
The Senior Subordinated Discount Notes.................................. 90,178
The Units(c)............................................................ 60,000
Seller Junior Discount Preferred Stock.................................. 45,000
--------------
$335,500
--------------
--------------
USES:
Stauffer Acquisition.................................................... $ 54,500
Brissette Acquisition................................................... 270,000
Fees and Expenses....................................................... 11,000
--------------
$335,500
--------------
--------------
</TABLE>
- ------------
(a) Pursuant to the Stauffer Agreement, Benedek Broadcasting had made a $5.0
million down payment which had been deposited in escrow pending
consummation of the Stauffer Acquisition.
(b) Benedek Broadcasting has available to it $15.0 million under the Revolving
Credit Facility.
(c) Each Unit consisted of ten shares of Existing Exchangeable Preferred Stock,
ten Initial Warrants and 14.8 Contingent Warrants, each Warrant to purchase
one share of Class A Common Stock of the Company.
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The
gross proceeds received by the Company from the sale of the Units, of which the
Existing Exchangeable Preferred Stock was a part, together with the gross
proceeds from the sale of the Senior Subordinated Discount Notes and advances
under the Credit Agreement, were used to finance the Acquisitions and to pay
fees and expenses in connection with the Transactions.
35
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth at March 31, 1996, the historical
capitalization of Benedek Broadcasting and the pro forma capitalization of
Benedek Broadcasting and the Company after giving effect to the Transactions.
This table should be read in conjunction with the Unaudited Consolidated
Financial Statements of Benedek Broadcasting, the Financial Statement of the
Company and the Pro Forma Financial Statements included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1996
-----------------------------------------
BENEDEK BENEDEK
BROADCASTING BROADCASTING THE COMPANY
HISTORICAL PRO FORMA PRO FORMA
------------ ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents.............................................. $ 7,381 $ 940 $ 940
------------ ------------ -----------
------------ ------------ -----------
Current maturities:
Credit Agreement:
Revolving Credit Facility(a)................................. $ -- $ -- $ --
Term Loan Facilities......................................... -- 6,000 6,000
Capital leases payable............................................ 304 304 304
Program broadcast rights payable.................................. 1,754 4,069 4,069
------------ ------------ -----------
Total current indebtedness................................... 2,058 10,373 10,373
------------ ------------ -----------
Long-term obligations:
11 7/8% Senior Secured Notes due 2005............................. 135,000 135,000 135,000
Credit Agreement:
Revolving Credit Facility(a)................................. -- -- --
Term Loan Facilities......................................... -- 122,000 122,000
Capital leases payable............................................ 377 377 377
13 1/4% Senior Subordinated Discount Notes due 2006............... -- -- 90,178
------------ ------------ -----------
135,377 257,377 347,555
Program broadcast rights payable.................................. 479 2,289 2,289
------------ ------------ -----------
Total long-term obligations.................................. 135,856 259,666 349,844
------------ ------------ -----------
Redeemable preferred stock:
Exchangeable Preferred Stock(b)................................... -- -- 51,000
Seller Junior Discount Preferred Stock............................ -- -- 45,000
------------ ------------ -----------
Total preferred stock........................................ -- -- 96,000
------------ ------------ -----------
Stockholder's equity (deficit):
Common Stock...................................................... 1,047 1,047 1,047
Additional paid-in capital (b)(c)(d).............................. 2,758 154,373 (31,805)
Accumulated equity (deficit)(d)................................... (40,629) -- --
------------ ------------ -----------
(36,824) 155,420 (30,758)
Less treasury stock............................................... 1,481 1,481 1,481
------------ ------------ -----------
Total stockholder's equity (deficit)......................... (38,305) 153,939 (32,239)
------------ ------------ -----------
Total capitalization.................................... $ 99,609 $423,978 $ 423,978
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
- ------------
(a) Benedek Broadcasting has available to it $15.0 million under the Revolving
Credit Facility.
(b) Existing Exchangeable Preferred Stock with an initial liquidation preference
of $60.0 million was issued by the Company as part of the Units. Each Unit
consisted of ten shares of Existing Exchangeable Preferred Stock, ten
Initial Warrants and 14.8 Contingent Warrants, each Warrant to purchase one
share of Class A Common Stock of the Company. An assumed initial value of
$9.0 million has been allocated to additional paid-in capital, representing
the portion of the Units allocated to the Warrants.
(c) Includes the allocation of the purchase price for the Warrants described in
footnote (b) above and is reduced by $2.934 million of the allocable cost
associated with the offering of the Units.
(d) The accumulated deficit has been reclassified to paid-in capital as a result
of the automatic termination upon consummation of the Transactions of
Benedek Broadcasting's election to be treated as an S Corporation for
Federal income tax purposes. In addition, the Pro Forma Balance Sheet
reflects the contribution of the proceeds from the sale of the Existing
Exchangeable Preferred Stock of $51.0 million, the Seller Junior Discount
Preferred Stock of $45.0 million and the Senior Subordinated Discount Notes
of $90.2 million to Benedek Broadcasting as additional paid-in capital.
36
<PAGE>
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements (the 'Pro Forma
Financial Statements') are based on the Consolidated Financial Statements of
Benedek Broadcasting, the Financial Statements of Stauffer and the Consolidated
Financial Statements of Brissette, all of which are included elsewhere in this
Prospectus, adjusted to give pro forma effect to the Acquistions, the Financing
Plan, the acquisition in 1995 of the Dothan Station, the issuance in 1995 of the
Senior Secured Notes and certain contractual arrangements which have been
entered into since January 1, 1995 (collectively, for purposes of the Pro Forma
Financial Statements, the 'Transactions').
The unaudited Pro Forma Statements of Operations for the year ended
December 31, 1995 are derived from the audited consolidated statement of
operations of Benedek Broadcasting for the year ended December 31, 1995, the
audited statement of operations of Dothan Holdings II Inc. (the former owners of
the Dothan Station) for the three months ended March 31, 1995, the audited
statement of operations of Stauffer for the year ended December 31, 1995 and the
audited statement of operations of Brissette for the year ended December 31,
1995, all of which, other than the audited statements of Dothan Holdings II
Inc., are included elsewhere in this Prospectus, and assume that the
Transactions were consummated as of January 1, 1995. The unaudited Pro Forma
Statements of Operations for the three months ended March 31, 1996 are derived
from the unaudited consolidated statement of operations of Benedek Broadcasting
for the three months ended March 31, 1996, the unaudited statement of operations
of Stauffer for the three months ended March 31, 1996, and the unaudited
statement of operations of Brissette for the 13-week period ended March 31,
1996, all of which are included elsewhere in this Prospectus, and assume that
the Transactions were consummated as of January 1, 1996. The unaudited Pro Forma
Balance Sheet is derived from the unaudited balance sheets of Benedek
Broadcasting, Stauffer and Brissette as of March 31, 1996, included elsewhere in
this Prospectus, and assumes that the Transactions were consummated on that
date.
The Pro Forma Financial Statements do not purport to represent what the
Company's results of operations or financial condition would actually have been
if the Transactions had occurred on the dates indicated or to project the
Company's results or financial condition for or at any future period or date.
The Pro Forma Financial Statements are presented for comparative purposes only.
The pro forma adjustments, as described in the accompanying data, are based on
available information and certain assumptions that management believes are
reasonable. Additionally, certain reclassification entries have been made to the
audited financial statements of Stauffer and Brissette for consistent
presentation with Benedek Broadcasting.
The unaudited pro forma information with respect to the Acquisitions is
based on the historical financial statements of the business or assets acquired.
The Acquisitions are and will be accounted for under the purchase method of
accounting. The purchase price for the Acquisitions will be allocated to the
tangible and identifiable intangible assets and liabilities of the acquired
businesses based upon management's preliminary estimates of their fair value
with the remainder, if any, allocated to goodwill. The allocation of purchase
price for the Acquisitions is subject to revision when additional information
concerning asset and liability valuations is obtained. In the opinion of the
Company's management, the asset and liability valuations for the Acquisitions
will not be materially different from the Pro Forma Financial Statements
presented. The pro forma expenses directly attributable to the Transactions
include interest expense and changes in depreciation and amortization expenses
resulting from the allocation of the purchase cost.
37
<PAGE>
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
DOTHAN
JANUARY 1,
1995 TO ADJUSTMENTS BENEDEK HISTORICAL
BENEDEK MARCH 31, FOR DOTHAN BROADCASTING --------------------
BROADCASTING 1995 ACQUISITION AS ADJUSTED(A) STAUFFER BRISSETTE
------------- ------------- ----------- -------------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues...................... $50,329 $ 1,643 $ -- $ 51,972 $ 17,317 $ 51,326
Operating expenses:
Station operating expenses...... 29,049 1,440 (350)(f) 30,139 13,534 27,515
Depreciation and amortization... 5,041 389 37(g) 5,467 2,229 6,252
------------- ------------- ----------- -------------- -------- ---------
Station operating income
(loss)...................... 16,239 (186) 313 16,366 1,554 17,559
Corporate expenses.............. 1,576(e) 182 (182)(h) 1,576 -- 2,307
------------- ------------- ----------- -------------- -------- ---------
Operating income (loss)........... 14,663 (368) 495 14,790 1,554 15,252
------------- ------------- ----------- -------------- -------- ---------
Financial expense, net:
Interest expense, net:
Cash interest, net............ (14,763) (209) (807)(i) (15,779) -- (20,837)
Other interest................ (712) -- 92(j) (620) -- (549)
------------- ------------- ----------- -------------- -------- ---------
Total interest, net......... (15,475) (209) (715) (16,399) -- (21,386)
------------- ------------- ----------- -------------- -------- ---------
Other, net...................... -- -- -- -- -- (354)
Provision for income taxes........ -- 208 (208)(k) -- -- (147)
------------- ------------- ----------- -------------- -------- ---------
Net income (loss) from continuing
operations...................... (812) (369) (428) (1,609) 1,554 (6,635)
Exchangeable Preferred Stock
dividends....................... -- -- -- -- -- --
Seller Junior Discount Preferred
Stock dividends................. -- -- -- -- -- --
------------- ------------- ----------- -------------- -------- ---------
Net income (loss) from continuing
operations available to common
stockholders.................... $ (812) $ (369) $(428) $ (1,609) $ 1,554 $ (6,635)
------------- ------------- ----------- -------------- -------- ---------
------------- ------------- ----------- -------------- -------- ---------
Ratio of earnings to fixed
charges(b)...................... -- --
Ratio of earnings to fixed charges
plus preferred stock
dividends(c).................... -- --
CERTAIN FINANCIAL DATA:
Broadcast cash flow............... $21,310 $ 103 $ 450 $ 21,863 $ 4,000 $ 23,856
Broadcast cash flow margin........ 42.3% 6.3% 42.1% 23.1% 46.5%
Operating cash flow............... $19,734 $ (79) $ 632 $ 20,287 $ 4,000 $ 21,549
Operating cash flow margin........ 39.2% NM 39.0% 23.1% 42.0%
Amortization of program broadcast
rights.......................... $ 2,162 $ 21 $ -- $ 2,183 $ 1,025 $ 1,684
Payments for program broadcast
rights.......................... 2,132 121 (100)(l) 2,153 808 1,639
Capital expenditures.............. 2,008 118 -- 2,126 406 2,748
Cash payments for Federal income
taxes........................... -- --
CERTAIN RATIOS:
Operating cash flow to cash
interest expense, net........... 1.33x 1.29x
Operating cash flow to total
interest expense, net........... 1.27x 1.24x
Operating cash flow less capital
expenditures to cash interest
expense, net.................... 1.20x 1.15x
Operating cash flow less capital
expenditures to total interest
expense, net.................... 1.15x 1.11x
Net Senior Debt to operating cash
flow(d)......................... 6.4x 6.2x
Net debt to operating cash
flow(d)......................... 6.4x 6.2x
Net debt plus Exchangeable
Preferred Stock to operating
cash flow....................... 6.4x 6.2x
<PAGE>
<CAPTION>
THE
ADJUSTMENTS COMPANY
FOR PRO
TRANSACTIONS FORMA
------------ -------------
<S> <<C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues...................... $ 250 (m) $ 121,345
132 (n)
284 (o)
64 (p)
Operating expenses:
Station operating expenses...... (2,245)(q) 68,943
Depreciation and amortization... 13,677 (r) 27,625
------------ -------------
Station operating income
(loss)...................... (10,702) 24,777
Corporate expenses.............. (1,983)(s) 1,900
------------ -------------
Operating income (loss)........... (8,719) 22,877
------------ -------------
Financial expense, net:
Interest expense, net:
Cash interest, net............ 9,401 (t) (27,215)
Other interest................ (12,602)(t) (13,771)
------------ -------------
Total interest, net......... (3,201) (40,986)
------------ -------------
Other, net...................... 354 (u) --
Provision for income taxes........ 147 (v) --
------------ -------------
Net income (loss) from continuing
operations...................... (11,419) (18,109)
Exchangeable Preferred Stock
dividends....................... (9,519)(w) (9,519)
Seller Junior Discount Preferred
Stock dividends................. (3,672)(x) (3,672)
------------ -------------
Net income (loss) from continuing
operations available to common
stockholders.................... $(24,610) $ (31,300)
------------ -------------
------------ -------------
Ratio of earnings to fixed
charges(b)...................... --
Ratio of earnings to fixed charges
plus preferred stock
dividends(c).................... --
CERTAIN FINANCIAL DATA:
Broadcast cash flow............... $ 3,015 $ 52,734
Broadcast cash flow margin........ 43.5%
Operating cash flow............... $ 4,998 $ 50,834
Operating cash flow margin........ 41.9%
Amortization of program broadcast
rights.......................... $ (39)(y) $ 4,853
Payments for program broadcast
rights.......................... (79)(y) 4,521
Capital expenditures.............. -- 5,280
Cash payments for Federal income
taxes........................... --
CERTAIN RATIOS:
Operating cash flow to cash
interest expense, net........... 1.87x
Operating cash flow to total
interest expense, net........... 1.24x
Operating cash flow less capital
expenditures to cash interest
expense, net.................... 1.67x
Operating cash flow less capital
expenditures to total interest
expense, net.................... 1.11x
Net Senior Debt to operating cash
flow(d)......................... 5.2x
Net debt to operating cash
flow(d)......................... 6.9x
Net debt plus Exchangeable
Preferred Stock to operating
cash flow....................... 8.8x
</TABLE>
38
<PAGE>
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THE
ADJUSTMENTS COMPANY
BENEDEK FOR PRO
BROADCASTING STAUFFER BRISSETTE TRANSACTIONS FORMA
--------------- -------- --------- ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues........................... $11,683 $3,965 $11,970 $ 34 (o) $27,652
Operating expenses:
Station operating expenses........... 7,549 3,516 7,107 (520)(q) 17,652
Depreciation and amortization........ 1,360 575 1,513 3,616 (r) 7,064
--------------- -------- --------- ------------ --------
Station operating income (loss).... 2,774 (126) 3,350 (3,062) 2,936
Corporate expenses................... 496 -- 762 (762)(s) 496
--------------- -------- --------- ------------ --------
Operating income (loss)................ 2,278 (126) 2,588 (2,300) 2,440
--------------- -------- --------- ------------ --------
Financial expense, net:
Interest expense, net:
Cash interest, net................. (3,920) -- (4,893) 1,994 (t) (6,819)
Other interest..................... (101) -- (137) (3,107)(t) (3,345)
--------------- -------- --------- ------------ --------
Total interest, net.............. (4,021) -- (5,030) (1,113) (10,164)
--------------- -------- --------- ------------ --------
Other, net........................... -- -- (109) 109 (u) --
Provision for income taxes............. -- -- (103) 103 (v) --
--------------- -------- --------- ------------ --------
Net income (loss) from continuing
operations........................... (1,743) (126) (2,654) (3,201) (7,724)
Exchangeable Preferred Stock
dividends............................ -- -- -- (2,250)(w) (2,250)
Seller Junior Discount Preferred
Stock dividends...................... -- -- -- (891)(x) (891)
--------------- -------- --------- ------------ --------
Net income (loss) from continuing
operations available to common
stockholders......................... $(1,743) $ (126) $(2,654) $ (6,342) $(10,865)
--------------- -------- --------- ------------ --------
--------------- -------- --------- ------------ --------
Ratio of earnings to fixed
charges(b)........................... -- --
Ratio of earnings to fixed charges plus
preferred stock dividends(c)......... -- --
CERTAIN FINANCIAL DATA:
Broadcast cash flow.................... $ 4,209 $ 584 $ 4,834 $ 554 $10,181
Broadcast cash flow margin............. 36.0% 14.7% 40.4% 36.8%
Operating cash flow.................... $ 3,713 $ 584 $ 4,072 $ 1,316 $ 9,685
Operating cash flow margin............. 31.8% 14.7% 34.0% 35.0%
Amortization of program broadcast
rights............................... $ 597 $ 314 $ 483 $ 1,394
Payments for program broadcast
rights............................... 522 179 512 1,213
Capital expenditures................... 655 43 405 1,103
Cash payments for Federal income
taxes................................ -- -- -- --
</TABLE>
39
<PAGE>
<PAGE>
(a) Concurrently with the consummation of the Transactions, Benedek
Broadcasting became a wholly-owned subsidiary of the Company. The
operations and financial data of 'Benedek Broadcasting as Adjusted' for
the year ended December 31, 1995 are derived from the pro forma
consolidated financial statements of Benedek Broadcasting adjusted to give
pro forma effect to the acquisition on March 31, 1995 of the Dothan
Station and the issuance of the Senior Secured Notes as if both such
events had occurred on January 1, 1995. Capital expenditures do not
include assets acquired in connection with the acquisition of the Dothan
Station.
(b) For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of net income (loss) before income taxes and
extraordinary item plus fixed charges (excluding capitalized interest).
Fixed charges consist of interest on all debt (including capitalized
interest), amortization of debt discount and deferred loan costs and the
portion of rental expense that is representative of the interest component
of rental expense (deemed to be one-third of rental expense which
management believes is a reasonable approximation of the interest
component). For 'Benedek Broadcasting As Adjusted,' for the year ended
December 31, 1995, earnings were insufficient to cover fixed charges by
$1.6 million. The net income (loss) for 'Benedek Broadcasting As Adjusted'
includes certain non-cash charges as follows: non-cash interest of $0.6
million and depreciation and amortization of $5.5 million. For 'The
Company Pro Forma,' for the year ended December 31, 1995, earnings were
insufficient to cover fixed charges by $18.1 million. The net income
(loss) for 'The Company Pro Forma' includes certain non-cash charges as
follows: non-cash interest of $13.8 million and depreciation and
amortization of $27.6 million. For Benedek Broadcasting for the three
months ended March 31, 1996, earnings were insufficient to cover fixed
charges by $1.7 million. The net income (loss) for Benedek Broadcasting
includes certain non-cash charges as follows: non cash interest of $0.1
million and depreciation and amortization of $1.4 million. For the 'The
Company Pro Forma,' for the three months ended March 31, 1996, earnings
were insufficient to cover fixed charges by $7.7 million. The net income
(loss) for 'The Company Pro Forma' includes certain non-cash charges as
follows: non-cash interest of $3.3 million and depreciation and
amortization of $7.1 million.
(c) For the purpose of calculating the ratio of earnings to fixed charges plus
preferred stock dividends, earnings consist of net (loss) before income
taxes and extraordinary item. For 'The Company Pro Forma,' for the year
ended December 31, 1995, earnings were insufficient to cover preferred
stock dividends by $31.3 million. The net income (loss) for 'The Company
Pro Forma' includes certain non-cash charges as follows: non-cash interest
of $13.8 million and depreciation and amortization of $27.6 million. For
the 'The Company Pro Forma,' for the three months ended March 31, 1996,
earnings were insufficient to cover fixed charges and preferred stock
dividends by $10.9 million. The net income (loss) for 'The Company Pro
Forma' includes certain non-cash charges as follows: non-cash interest of
$3.3 million and depreciation and amortization of $7.1 million.
(d) Net Senior Debt and net debt are defined as Senior Debt or total debt, as
the case may be, less cash and cash equivalents. These ratios are not the
same as the Cash Flow Leverage Ratios as defined in the Senior Secured
Note or Exchange Indentures or in the Certificate of Designation for the
Exchangeable Preferred Stock, and in particular, such Cash Flow Leverage
Ratios do not credit cash against the outstanding debt amount.
(e) Includes $0.1 million one-time expenses incurred in connection with
potential acquisitions which were not entered into by Benedek
Broadcasting.
(f) The adjustment reflects the reduction of operating expenses of the former
owner of the Dothan Station for the three months ended March 31, 1995
based on the Company's actual expense reductions made during the nine
months ended December 31, 1995.
(g) The adjustment reflects (i) the additional depreciation and amortization
expense resulting from the allocation of the purchase price of the Dothan
Station to the property and equipment and intangible assets acquired and
(ii) a change in depreciation and amortization resulting from conforming
the estimated useful lives of the assets of the Dothan Station to those of
the Company.
(h) The adjustment reflects the elimination of the management fee paid by the
former owner of the Dothan Station to its parent company prior to the
acquisition by the Company.
(i) The adjustment reflects (i) pro forma adjustments as if the issuance of
the Senior Secured Notes had occurred on January 1, 1995 and the debt
refinanced with the net proceeds of such issuance had been discharged on
such date and (ii) the elimination of interest expense incurred by the
former owner of the Dothan Station prior to the acquisition by the
Company.
(j) The adjustment reflects the net amount required to (i) amortize deferred
financing costs incurred in connection with the issuance of the Senior
Secured Notes as if such issuance had occurred on January 1, 1995 and (ii)
eliminate the amortization in the first quarter of 1995 of the deferred
financing costs incurred by the Company in connection with the debt
refinanced with the net proceeds of the issuance of the Senior Secured
Notes.
(k) The adjustment reflects the elimination of income tax credits recorded by
the former owner of the Dothan Station prior to the acquisition by the
Company.
(l) The adjustment reflects a reduction in program payments and the related
amortization to be consistent with Benedek Broadcasting's historical
programming purchasing.
(m) The adjustment reflects the annualized effect of increased network
compensation resulting from new affiliation agreements effective July 1,
1995 for the CBS-affiliated Benedek Stations. In connection with such new
affiliation agreements, CBS paid the Company a bonus payment of $5.0
million which is required under GAAP to be recognized as revenue at the
rate of $500,000 per year over the ten-year term of the affiliation
agreements, of which $250,000 was recognized in Benedek Broadcasting's
statement of operations for 1995.
(n) The adjustment reflects the annualized effect of increased revenues from
the national sales representative firm for the Brissette Stations
resulting from the amortization of a $700,000 signing bonus which is
required under GAAP to be recognized as revenue at the rate of $140,000
per year over a period of five years, of which $8,000 was recognized in
Brissette's statement of operations for 1995.
(o) The adjustment reflects the annualized effect of reduced commission rates
payable to national sales representative firms under new agreements
negotiated by the Company.
40
<PAGE>
<PAGE>
(p) The adjustment reflects the annualized effect of new network compensation
arrangements that took effect at various times in 1995 at certain of the
Acquired Stations.
(q) The adjustment reflects cost savings resulting from the following:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
(i) Elimination of redundant operating expenses, consisting
of the elimination of certain positions at the Acquired
Stations................................................ $ 1,345 $309
(ii) Adjustments to certain employee benefits and
compensation practices at the Acquired Stations......... 355 116
(iii) Implementation at the Acquired Stations of operating
strategies currently utilized at the Benedek Stations... 545 95
------- -----
$ 2,245 $520
------- -----
------- -----
</TABLE>
The pro forma cost savings as allocated among departments are summarized in
the table below:
<TABLE>
<CAPTION>
THREE MONTHS THIRTEEN WEEKS PERIOD
ENDED ENDED ENDED
YEAR ENDED MARCH 31, MARCH 31, MARCH 31,
DECEMBER 31, 1995 1996 1996 1996
----------------------------- ------------ -------------- ---------
STAUFFER BRISSETTE TOTAL STAUFFER BRISSETTE TOTAL
-------- --------- ------ ------------ -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Selling expenses................... $ 94 $ 83 $ 177 $ 24 $ 13 $ 37
Programming and technical.......... 528 531 1,059 122 133 255
Advertising and promotions......... 69 180 249 17 45 62
General and administrative......... 522 238 760 130 36 166
-------- --------- ------ ----- ----- ---------
Total.......................... $1,213 $ 1,032 $2,245 $293 $227 $ 520
-------- --------- ------ ----- ----- ---------
-------- --------- ------ ----- ----- ---------
</TABLE>
(r) The adjustment reflects primarily the additional depreciation and
amortization expense resulting from the preliminary allocation of the
purchase price for the Acquired Stations to the assets acquired, including
an increase in property and equipment and intangible assets to their
estimated fair market value and the recording of goodwill associated with
each of the Acquisitions. See Note (c) to the Pro Forma Balance Sheet for
allocation of excess of purchase price over net book value of assets
acquired to property and equipment and intangible assets.
(s) The adjustment reflects the net annualized cost savings resulting from the
acquisition of the Acquired Stations by the Company, including (i) the
elimination of substantially all of the corporate expenses of Brissette
and (ii) the addition of certain corporate management personnel by the
Company and related costs.
(t) Interest expense has been adjusted to reflect the net effect of the change
in outstanding debt and deferred financing costs described in Notes (a)
and (d) to the Pro Forma Balance Sheet as if it had occurred on January 1,
1995 for the year ended December 31, 1995 and January 1, 1996 for the
three months ended March 31, 1996. The following table details the
calculation of the adjustment:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1995 MARCH 31, 1996
-------------------------------------- ------------------------------------
CASH OTHER INTEREST TOTAL CASH OTHER INTEREST TOTAL
-------- -------------- -------- ------- -------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Notes at a rate of 13.25%.... $ -- $(12,344) $(12,344) $ -- $ (2,987) $(2,987)
Term Loan Facilities at an
assumed blended rate of
8.73%...................... (11,039) -- (11,039) (2,793) -- (2,793)
Interest on existing
Brissette notes............ 20,837 -- 20,837 4,893 -- 4,893
Reduction in interest
income..................... (397) -- (397) (106) -- (106)
Increase in amortization of
deferred financing costs... -- (807) (807) -- (257) (257)
Reduction of amortization of
deferred financings costs
on Brissette debt.......... -- 549 549 -- 137 137
-------- -------------- -------- ------- ------- -------
Net adjustment........... $ 9,401 $(12,602) $ (3,201) $ 1,994 $ (3,107) $(1,113)
-------- -------------- -------- ------- ------- -------
-------- -------------- -------- ------- ------- -------
</TABLE>
The actual interest rate with respect to the Term Loan Facilities may be
higher or lower than the rate set forth above. A change of 0.125% in the
interest rate on borrowings under the Term Loan Facilities would change pro
forma interest expense by approximately $160,000 for the year ended
December 31, 1995 and by approximately $40,000 for the three months ended
March 31, 1996.
(u) The adjustment reflects the elimination of certain legal and investment
advisory fees paid by Brissette in connection with the sale to Benedek
Broadcasting.
(v) The adjustment reflects the elimination of income tax expense. The Company
is not expected to have income tax expense on a pro forma basis.
(w) The adjustment reflects the dividends paid on the Exchangeable Preferred
Stock at a rate of 15.0% per annum paid quarterly for an effective annual
rate of 15.9%.
(x) The adjustment reflects the dividends paid on the Seller Junior Discount
Preferred Stock at an assumed rate of 7.92% per annum paid quarterly for
an effective annual rate of 8.16%.
(y) The adjustment reflects a reduction in program payments and the related
amortization to be consistent with Benedek Broadcasting's historical
program purchase practices.
41
<PAGE>
<PAGE>
PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------- ADJUSTMENTS THE
BENEDEK FOR COMPANY
BROADCASTING STAUFFER BRISSETTE TRANSACTIONS PRO FORMA
--------------- -------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 7,381 $ 347 $ 1,534 $ (8,322)(a) $ 940
Trade receivables............................... 7,771 2,797 9,259 -- 19,827
Other receivables............................... 120 -- -- 2,252 (b) 2,372
Current portion of program broadcast rights..... 1,205 874 1,443 -- 3,522
Prepaid expenses................................ 872 128 518 -- 1,518
--------------- -------- --------- ------------ ---------
Total current assets........................ 17,349 4,146 12,754 (6,070) 28,179
--------------- -------- --------- ------------ ---------
Property and equipment.............................. 19,798 10,446 12,012 49,705 (c) 91,961
--------------- -------- --------- ------------ ---------
Intangible assets................................... 59,952 7,087 76,349 159,498 (c) 302,886
--------------- -------- --------- ------------ ---------
Other assets:
Program broadcast rights, less current
portion....................................... 541 851 1,482 -- 2,874
Deposit on Stauffer Acquisition................. 4,000 -- -- (4,000)(a) --
Deferred financing costs........................ 5,624 -- -- 8,066 (d) 13,690
Other........................................... 669 12 -- -- 681
--------------- -------- --------- ------------ ---------
Total other assets.......................... 10,834 863 1,482 4,066 17,245
--------------- -------- --------- ------------ ---------
Total....................................... $ 107,933 $ 22,542 $ 102,597 $ 207,199 $440,271
--------------- -------- --------- ------------ ---------
--------------- -------- --------- ------------ ---------
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of notes payable and leases
payable....................................... $ 304 $ -- $ 197,348 $ (197,348)(e) $ 6,304
6,000 (a)
Current maturities of program broadcast rights
payable....................................... 1,754 684 1,631 -- 4,069
Accounts payable and accrued expenses........... 3,644 760 4,906 -- 9,310
Deferred revenue................................ 500 -- 136 -- 636
--------------- -------- --------- ------------ ---------
Total current liabilities................... 6,202 1,444 204,021 (191,348) 20,319
--------------- -------- --------- ------------ ---------
Long-term obligations:
Notes and capital leases payable................ 135,377 -- -- 122,000 (a) 347,555
90,178 (a)
Program broadcast rights payable................ 479 805 1,005 -- 2,289
Deferred revenue................................ 4,180 -- 530 -- 4,710
Other noncurrent liabilities.................... -- -- 1,637 1,637
--------------- -------- --------- ------------ ---------
Total long-term liabilities................. 140,036 805 3,172 212,178 356,191
--------------- -------- --------- ------------ ---------
Redeemable preferred stock:
Exchangeable Preferred Stock...................... -- -- -- 51,000 (a) 51,000
Seller Junior Discount Preferred Stock............ -- -- -- 45,000 (a) 45,000
--------------- -------- --------- ------------ ---------
Total redeemable preferred stock............ -- -- -- 96,000 96,000
--------------- -------- --------- ------------ ---------
Stockholder's equity (deficit):
Brissette preferred stock....................... -- -- 66,500 (66,500)(e) --
Common stock.................................... 1,047 -- -- -- 1,047
Additional paid-in capital...................... 2,758 -- 35,837 (35,837)(e) (31,805)
9,000 (a)
(40,629)(a)
(2,934)(d)
Accumulated (deficit)........................... (40,629) 20,293 (206,933) 40,629 (f) --
186,640 (e)
--------------- -------- --------- ------------ ---------
(36,824) 20,293 (104,596) 90,369 (30,758)
Less treasury stock............................. 1,481 -- -- -- 1,481
--------------- -------- --------- ------------ ---------
Total stockholder's equity (deficit)........ (38,305) 20,293 (104,596) 90,369 (32,239)
--------------- -------- --------- ------------ ---------
Total....................................... $ 107,933 $ 22,542 $ 102,597 $ 207,199 $440,271
--------------- -------- --------- ------------ ---------
--------------- -------- --------- ------------ ---------
</TABLE>
42
<PAGE>
<PAGE>
(a) Reflects the Financing Plan and costs in connection therewith as follows
(in thousands):
<TABLE>
<S> <C>
Cash............................................................... $ 7,322
Deposit(1)......................................................... 5,000
Term Loan Facilities(2)............................................ 128,000
Notes.............................................................. 90,178
Exchangeable Preferred Stock....................................... 51,000
Initial Warrants(3)................................................ 9,000
Seller Junior Discount Preferred Stock(4).......................... 45,000
--------
Total.......................................................... $335,500
--------
--------
</TABLE>
(1) Pursuant to the Stauffer Agreement, the Company had made an aggregate
down payment of $5.0 million. At March 31, 1996, the amount of the down
payment was $4.0 million. The additional $1.0 million was paid in April
1996.
(2) The pro forma financial statements assume semi-annual principal payments
of $3.0 million for the year ended December 31, 1995.
(3) The Initial Warrants are for the purchase of 7.5% of the fully-diluted
Common Stock of the Company (with an assumed initial allocated value of
$9.0 million).
(4) The Seller Junior Discount Preferred Stock represents securities of the
Company issued to GECC in connection with the acquisition of the
Brissette Stations.
(b) The adjustment reflects the net pro forma increase in working capital to
be acquired from Stauffer and Brissette, as if such transactions had
occurred at December 31, 1995. The purchase agreements require certain
working capital amounts for Stauffer and Brissette at the date of closing.
See Note (c)(2) below.
(c) The Acquisitions will each be accounted for as a purchase, applying the
provisions of Accounting Principles Board Opinion 16. The purchase price
will be allocated to acquired assets and liabilities based on their
relative fair values as of the closing date, determined using valuations
and other studies which are not yet complete. The purchase price and
preliminary allocation of such cost for each Acquisition is as follows,
assuming the Acquisitions occurred on March 31, 1996 (in thousands):
<TABLE>
<CAPTION>
STAUFFER BRISSETTE TOTAL
-------- --------- --------
<S> <C> <C> <C>
Purchase price................................................... $54,500 $ 270,000 $324,500
-------- --------- --------
Book value (deficit) per historical financial statements......... 20,293 (104,596) (84,303)
Add (deduct) --
Indebtedness not assumed(1).................................. -- 197,348 197,348
Adjustment to working capital(2)............................. (935) 3,187 2,252
-------- --------- --------
Adjusted book value...................................... 19,358 95,939 115,297
-------- --------- --------
Excess of purchase price over net book value of assets
acquired....................................................... $35,142 $ 174,061 $209,203
-------- --------- --------
-------- --------- --------
Allocated to:
Property and equipment(3).................................... $11,283 $ 38,422 $ 49,705
Intangible assets(4)......................................... 23,859 135,639 159,498
-------- --------- --------
Total allocated.................................................. $35,142 $ 174,061 $209,203
-------- --------- --------
-------- --------- --------
</TABLE>
(1) The Brissette Agreement specifies that long-term debt owed by Brissette
was required to be discharged by the sellers at closing.
(2) Working capital has been adjusted to reflect that the purchase
agreements specify the level of working capital, exclusive of program
broadcast rights and assets and payables, that existed on the closing
date (Stauffer $1.6 million; Brissette $8.8 million plus a pro rata
portion of the signing bonus received from the national sales
representative firm which portion at March 31, 1996 would have equaled
$657,000).
(3) The recorded value of acquired property and equipment, based on a
preliminary allocation, will total $21.7 million and $50.4 million for
the assets of the Stauffer Stations and Brissette Stations,
respectively.
(4) The recorded value of acquired intangibles, based on a preliminary
allocation, will total $30.9 million and $220.9 million for the assets
of the Stauffer Stations and Brissette Stations, respectively.
(d) The adjustment reflects the estimated transaction costs in connection with
the Financing Plan, of which $8.066 million has been allocated to deferred
financing costs and $2.934 million has been charged to capital as the
allocable cost associated with the sale of the Senior Subordinated
Discount Notes.
(e) The adjustment reflects the elimination of (i) the long-term debt owed by
Brissette and not assumed in the acquisition and (ii) the historical
stockholder's equity of Stauffer and Brissette, as the Acquisitions will
be accounted for using the purchase method of accounting.
(f) The adjustment reflects the reclassification of the accumulated deficit to
paid-in capital, which occurred upon the consummation of the Transactions,
at which time the Company's election to be treated as an S Corporation for
tax purposes automatically terminated.
43
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
The following tables present selected financial data of (i) Benedek
Broadcasting (prior to the Transactions), (ii) Stauffer and (iii) Brissette. The
following financial information should be read in conjunction with the
Consolidated Financial Statements of Benedek Broadcasting, the Financial
Statements of Stauffer and the Consolidated Financial Statements of Brissette
included elsewhere in this Prospectus.
BENEDEK BROADCASTING (PRIOR TO THE TRANSACTIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(a)............................... $ 33,608 $ 36,311 $ 38,352 $ 44,221 $ 50,329 $10,150 $ 11,683
Operating expenses:
Station operating expenses................ 20,309 21,511 22,805 24,810 29,049 6,308 7,549
Depreciation and amortization............. 5,871 4,428 3,721 3,403 5,041 856 1,360
-------- -------- -------- -------- -------- ------- --------
Station operating income................ 7,428 10,372 11,826 16,008 16,239 2,986 2,774
Corporate expenses........................ 887 1,288 1,249 1,309 1,576 343 496
Special bonus, officer-stockholder........ -- -- 1,400 -- -- -- --
-------- -------- -------- -------- -------- ------- --------
Operating income.............................. 6,541 9,084 9,177 14,699 14,663 2,643 2,278
-------- -------- -------- -------- -------- ------- --------
Financial expenses, net:
Interest expense, net(b):
Cash interest, net........................ (9,856) (6,605) (8,194) (7,740) (14,763) (2,274) (3,920)
Other interest............................ (3,923) (7,774) (6,161) (4,905) (712) (753) (101)
-------- -------- -------- -------- -------- ------- --------
Total interest, net..................... (13,779) (14,379) (14,355) (12,645) (15,475) (3,027) (4,021)
Other, net.................................. (905) (310) 144 (10) -- -- --
-------- -------- -------- -------- -------- ------- --------
Total financial expenses, net........... (14,684) (14,689) (14,211) (12,655) (15,475) (3,027) (4,021)
-------- -------- -------- -------- -------- ------- --------
Net income (loss) before extraordinary item... (8,143) (5,605) (5,034) 2,044 (812) (384) (1,743)
Extraordinary item(c)......................... -- -- -- -- 6,864 6,864 --
-------- -------- -------- -------- -------- ------- --------
Net income (loss)(d).......................... $ (8,143) $ (5,605) $ (5,034) $ 2,044 $ 6,052 $ 6,480 $ (1,743)
-------- -------- -------- -------- -------- ------- --------
-------- -------- -------- -------- -------- ------- --------
Ratio of earnings to fixed charges(e)......... -- -- -- 1.2x -- -- --
CERTAIN FINANCIAL DATA:
Broadcast cash flow........................... $ 13,531 $ 14,728 $ 15,546 $ 19,627 $ 21,310 $ 3,924 $ 4,209
Broadcast cash flow margin.................... 40.3% 40.6% 40.5% 44.4% 42.3% 38.7% 36.0%
Operating cash flow........................... $ 12,644 $ 13,440 $ 14,297 $ 18,318 $ 19,734 $ 3,581 $ 3,713
Operating cash flow margin.................... 37.6% 37.0% 37.3% 41.4% 39.2% 35.3% 31.8%
Amortization of program broadcast rights...... $ 2,131 $ 1,996 $ 2,179 $ 2,104 $ 2,162 $ 511 $ 597
Payment for program broadcast rights.......... 1,899 2,068 2,180 1,888 2,132 429 522
Capital expenditures.......................... 1,581 1,458 1,278 1,161 2,008 552 655
Cash payments for Federal income taxes........ -- -- -- -- -- -- --
<CAPTION>
DECEMBER 31,
-------------------------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.................................. $ 76,111 $ 77,049 $ 72,818 $ 73,621 $114,453 $107,933
Working capital (deficit)..................... 1,997 (71) 3,684 1,611 13,665 11,146
Total debt(f)................................. 107,350 109,439 112,874 107,607 135,767 135,681
Stockholder's equity (deficit)................ (35,296) (41,004) (44,660) (42,615) (36,563) (38,306)
</TABLE>
- ------------
(a) Net revenues reflect deductions from gross revenues for agency and national
sales representative commissions.
(b) Cash interest, net includes cash interest paid and normal adjustments to
accrued interest. Other interest includes accrued interest with respect to
warrants to purchase Benedek Broadcasting's common stock, accrued interest
with respect to the contingent equity value of Benedek Broadcasting and
long-term deferred interest, accrued interest added to long-term debt
balances, deferred loan amortization and accretion of discounts.
(c) Benedek Broadcasting recorded an extraordinary gain from the early
extinguishment of debt comprised of a gain of $11.1 million reduced by
losses of $2.7 million of prepayment premiums and contingent payments and
$1.5 million of unamortized debt discount and deferred loan costs.
(d) Benedek Broadcasting has historically elected to be taxed as an S
Corporation for Federal and state income tax purposes. Accordingly, the
sole stockholder of Benedek Broadcasting has been responsible for the
payment of income taxes on Benedek Broadcasting's taxable income. Net
income (loss) does not include a pro forma adjustment for income taxes due
to the availability of net operating loss carryforwards and a valuation
allowance. Benedek Broadcasting's election to be taxed as an S Corporation
terminated automatically upon the consummation of the Transactions.
(e) For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of net income (loss) before income taxes and extraordinary
item plus fixed charges (excluding capitalized interest). Fixed charges
consist of interest on all debt (including capitalized interest),
amortization of debt discount and deferred loan costs and the portion of
rental expense that is representative of the interest component of rental
expense (deemed to be one-third of rental expense which management believes
is a reasonable approximation of the interest component). For each of the
four years ended December 31, 1991, 1992, 1993 and 1995, earnings were
insufficient to cover fixed charges by $8.1 million, $5.6 million, $5.0
million and $0.8 million, respectively. For the year ended December 31,
1994 the ratio of earnings to fixed charges was 1.2 to 1.0. For the
44
<PAGE>
<PAGE>
three months ended March 31, 1995 and 1996, earnings were insufficient to
cover fixed charges by $0.4 million and $1.7 million, respectively. Benedek
Broadcasting's net income (loss) includes certain non-cash charges as
follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------ ------ ------ ------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Non-cash interest................................. $ 3,923 $ 7,774 $ 6,161 $4,905 $ 712 $ 753 $ 101
Depreciation and amortization of intangibles...... 5,871 4,428 3,721 3,403 5,041 856 1,360
Provision for loss on note receivable............. 905 310 -- -- -- -- --
Special bonus, officer-stockholder................ -- -- 1,400 -- -- -- --
------- ------- ------- ------ ------ ------ ------
$10,699 $12,512 $11,282 $8,308 $5,753 $1,609 $1,461
------- ------- ------- ------ ------ ------ ------
------- ------- ------- ------ ------ ------ ------
</TABLE>
(f) Total debt is defined as notes payable and capital leases payable
(including the current portion thereof), net of discount.
STAUFFER(a)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................................. $16,661 $19,081 $17,317
Operating expenses:
Station operating expenses............................... 13,327 13,422 13,534
Depreciation and amortization............................ 2,264 2,304 2,229
------- ------- -------
Station operating income............................. 1,070 3,355 1,554
Corporate expenses....................................... -- -- --
------- ------- -------
Operating income............................................. $ 1,070 $ 3,355 $ 1,554
------- ------- -------
------- ------- -------
CERTAIN FINANCIAL DATA:
Broadcast cash flow.......................................... $ 3,285 $ 5,623 $ 4,000
Broadcast cash flow margin................................... 19.7% 29.5% 23.1%
Operating cash flow.......................................... $ 3,285 $ 5,623 $ 4,000
Operating cash flow margin................................... 19.7% 29.5% 23.1%
Amortization of program broadcast rights..................... $ 1,277 $ 1,045 $ 1,025
Payments for program broadcast rights........................ 1,326 1,081 808
Capital expenditures......................................... 1,182 934 406
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
------------------------------
1995 1996
------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................................. $ 4,097 $ 3,965
Operating expenses:
Station operating expenses............................... 3,223 3,516
Depreciation and amortization............................ 554 575
------- -------
Station operating income............................. 320 (126)
Corporate expenses....................................... -- --
------- ------
Operating income............................................. $ 320 $ (126)
------- ------
------- ------
CERTAIN FINANCIAL DATA:
Broadcast cash flow.......................................... $ 882 $ 584
Broadcast cash flow margin................................... 21.6% 14.7%
Operating cash flow.......................................... $ 882 $ 584
Operating cash flow margin................................... 21.6% 14.7%
Amortization of program broadcast rights..................... $ 234 $ 314
Payments for program broadcast rights........................ 226 179
Capital expenditures......................................... 233 43
</TABLE>
- ------------
(a) Reclassification entries have been made to the financial statements for
consistent presentation with Benedek Broadcasting.
BRISSETTE(a)
<TABLE>
<CAPTION>
THIRTEEN WEEKS
ENDED
YEAR ENDED DECEMBER 31, ----------------------
-------------------------------------------------------- MARCH 26, MARCH 31,
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- --------- ---------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $ 43,817 $ 46,414 $ 44,404 $ 49,530 $ 51,326 $11,602 $11,970
Operating expenses:
Station operating expenses........ 23,470 23,791 23,511 25,667 27,515 6,383 7,107
Depreciation and amortization..... 13,334 12,881 8,116 6,551 6,252 1,432 1,513
-------- -------- -------- -------- -------- --------- ---------
Station operating income...... 7,013 9,742 12,777 17,312 17,559 3,787 3,350
Management fee paid to
affiliate(b).................... 2,650 4,365 -- -- -- -- --
Corporate expenses................ 2,204 1,655 1,487 1,895 2,307 687 762
-------- -------- -------- -------- -------- --------- ---------
Operating income...................... $ 2,159 $ 3,722 $ 11,290 $ 15,417 $ 15,252 $ 3,100 $ 2,588
-------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- --------- ---------
CERTAIN FINANCIAL DATA:
Broadcast cash flow................... $ 20,688 $ 22,613 $ 20,927 $ 24,065 $ 23,856 $ 5,220 $ 4,834
Broadcast cash flow margin............ 47.2% 48.7% 47.1% 48.6% 46.5% 45.0% 40.4%
Operating cash flow................... $ 18,484 $ 20,958 $ 19,440 $ 22,170 $ 21,549 $ 4,533 $ 4,072
Operating cash flow margin............ 42.2% 45.1% 43.8% 44.8% 42.0% 39.1% 34.0%
Amortization of program broadcast
rights.............................. $ 2,709 $ 1,987 $ 1,743 $ 1,757 $ 1,684 $ 400 $ 483
Payments for program broadcast
rights.............................. 2,368 1,997 1,709 1,555 1,639 399 512
Capital expenditures.................. 2,466 1,280 2,217 1,559 2,748 327 405
</TABLE>
- ------------
(a) Reclassification entries have been made to the financial statements for
consistent presentation with Benedek Broadcasting.
(b) Brissette paid management fees to an affiliated company for expenses
relating to payroll, rent and other corporate expenses. Operating cash flow
and operating cash flow margin are calculated prior to any reduction for
such management fees.
45
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The operating revenues of Benedek Broadcasting are derived primarily from
the sale of advertising time and, to a lesser extent, from compensation paid by
the networks for broadcasting network programming and from barter transactions
for goods and services. Revenue depends on the ability of Benedek Broadcasting
to provide popular programming which attracts audiences in the demographic
groups targeted by advertisers, thereby allowing Benedek Broadcasting to sell
advertising time at satisfactory rates. Revenue also depends significantly on
factors such as the national and local economy and the level of local
competition.
Approximately 59.2% of the gross revenues of the Benedek Stations in 1995
was generated from local and regional advertising, which is sold primarily by a
Station's sales staff, and the remainder of the advertising revenues is
comprised primarily of national advertising, which is sold by national sales
representatives retained by Benedek Broadcasting. Benedek Broadcasting generally
pays commissions to advertising agencies on local, regional and national
advertising and to national sales representatives on national advertising. Net
revenues reflect deductions from gross revenues for commissions payable to
advertising agencies and national sales representatives.
Local/regional advertising and national advertising constitute the largest
categories of Benedek Broadcasting's operating revenues and represent
approximately 86.0% of gross revenues in each of the last three fiscal years.
Although relatively constant as a total percentage of gross revenues, the mix of
advertising revenue can vary depending on the level of political advertising
revenue. Excluding political advertising revenue, the percentage of gross
revenues attributable to local/regional advertising and national advertising of
Benedek Broadcasting in 1993, 1994 and 1995 was 88.9%, 88.8% and 87.4%,
respectively. The decrease in 1995 was the result of an increase in network
compensation of $0.8 million or 36.5%, representing 5.6% of gross revenues
(excluding political advertising revenues) in 1995 as compared to 4.8% of gross
revenues (excluding political advertising revenues) in 1994.
In 1995, Benedek Broadcasting reported net revenues of $50.3 million
compared to net revenues of $44.2 million in 1994 and $38.4 million in 1993.
Benedek Broadcasting had net income of $6.1 million (after an extraordinary gain
of $6.9 million) in 1995 and $2.0 million in 1994, compared to a loss of $5.0
million in 1993. Operating cash flow in 1995 was $19.7 million compared to $18.3
million in 1994 and $14.3 million in 1993. Benedek Broadcasting's net revenues
and operating cash flow have increased every year since 1989 with the exception
of 1991. In 1991, the television industry experienced an absolute decline in
revenues for the first time since the early 1970s when cigarette advertising on
television was prohibited by Congress. Benedek Broadcasting's revenue growth in
the last three years can be attributed to greater demand for advertising time on
the part of local and national advertisers and increases in unit rates and to
the acquisition of the Dothan Station in March 1995.
In December 1995, Benedek Broadcasting entered into new long-term
affiliation agreements with CBS effective retroactive to July 1, 1995. In
connection with such arrangements, CBS paid Benedek Broadcasting bonus payments
of $2.5 million in the fourth quarter of 1995 and $2.5 million in the first
quarter of 1996. These payments will be recognized as revenue by the Company at
the rate of $0.5 million per year over the ten-year term of the affiliation
agreements. In connection with these payments, Benedek Broadcasting also agreed
with CBS that, upon the consummation of the Acquisitions, the terms of the
affiliation agreements for the Acquired Stations which are CBS affiliates would
be extended through 2005.
Benedek Broadcasting's primary operating expenses are employee
compensation, programming and depreciation and amortization. Changes in
compensation expense result primarily from adjustments to fixed salaries based
on employee performance and inflation and, to a lesser extent, from changes in
sales commissions paid based on levels of advertising revenues. Programming
expense consists primarily of amortization of program rights. Benedek
Broadcasting purchases first run and off-network syndicated programming on an
on-going basis and has a policy of closely matching payments for and
amortization of program rights in each period. A network-affiliated station
receives approximately two-thirds of its required daily programming from the
network at no cost. Depreciation and amortization expense has generally declined
from period to period as assets acquired at the time
46
<PAGE>
<PAGE>
of the acquisition of a station are fully depreciated. However, for 1995
depreciation and amortization increased $1.3 million due to the acquisition of
the Dothan Station. Barter expense generally offsets barter revenue and reflects
the fair market value of goods and services received. Benedek Broadcasting's
operating expenses in 1993, 1994 and 1995 (excluding depreciation and
amortization and a non-cash special bonus paid to the sole stockholder of
Benedek Broadcasting in 1993) have remained fairly constant and represent
approximately 60.9% of net revenues in each such year.
On March 31, 1995, Benedek Broadcasting acquired for a cash purchase price
of $28.7 million substantially all of the assets (excluding cash and accounts
receivable) of the Dothan Station which is the CBS affiliate serving both
Dothan, Alabama and Panama City, Florida.
Benedek Broadcasting has included operating cash flow data because such
data is used by certain investors to measure a company's ability to service
debt. Operating cash flow is defined as operating income before financial income
as derived from statements of operations plus depreciation and amortization,
amortization of program broadcast rights and non-cash compensation less cash
payments for program broadcast rights. Operating cash flow is used to pay
principal and interest on long-term debt and to fund capital expenditures.
Operating cash flow does not purport to represent cash provided by operating
activities as reflected in Benedek Broadcasting's Consolidated Financial
Statements, 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.
RESULTS OF OPERATIONS
The following table sets forth certain pro forma financial and operating
data for the Company for the year ended December 31, 1995 and the three months
ended March 31, 1996 giving effect to the Transactions as if the Transactions
had been consummated at January 1, 1995 for the year ended December 31, 1995 and
January 1, 1996 for the three months ended March 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
PRO FORMA PRO FORMA
----------------- ------------------
<S> <C> <C> <C> <C>
Revenues:
Local/regional.................................................. $ 78,769 56.7% $ 17,370 54.7%
National........................................................ 42,316 30.5 9,488 29.9
Political....................................................... 1,389 1.0 887 2.8
Network......................................................... 9,689 7.0 2,499 7.9
Barter.......................................................... 4,046 2.9 759 2.4
Other........................................................... 2,661 1.9 728 2.3
-------- ----- -------- ------
Gross revenues...................................................... 138,870 100.0% 31,731 100.0%
----- ------
----- ------
Agency and national sales representative commissions............ 17,525 4,079
-------- --------
Net revenues........................................................ 121,345 27,652
-------- --------
Operating expenses:
Compensation expense and payroll taxes(a)....................... 39,198 9,941
Amortization of program broadcast rights........................ 4,853 1,394
Depreciation and amortization................................... 27,625 7,064
Barter.......................................................... 3,574 648
Other(b)........................................................ 21,318 5,669
-------- --------
96,568 24,716
-------- --------
Station operating income............................................ 24,777 2,936
Corporate expenses.............................................. 1,900 496
Operating income.................................................... 22,877 2,440
Financial (expense), net............................................ (40,986) (10,164)
-------- --------
Net income (loss) before extraordinary item......................... (18,109) (7,724)
Extraordinary item, gain on early extinguishment of debt............ 6,864 --
-------- --------
Net income (loss)................................................... $(11,245) $ (7,724)
-------- --------
-------- --------
Broadcast cash flow................................................. $ 52,734 $ 10,181
Broadcast cash flow margin.......................................... 43.5% 36.8%
Operating cash flow................................................. $ 50,834 $ 9,685
Operating cash flow margin.......................................... 41.9% 35.0%
</TABLE>
- ------------
(a) Does not include corporate overhead.
(b) Includes utilities, insurance and other general and administrative
expenses.
47
<PAGE>
<PAGE>
The following table sets forth certain historical financial and operating
data for the periods indicated:
BENEDEK BROADCASTING (PRIOR TO THE TRANSACTIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------------------- -----------------------------------
1993 1994 1995 1995 1996
--------------- --------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Local/regional........... $26,844 60.6% $29,622 58.1% $34,111 59.2% $ 6,901 59.0% $ 7,553 56.9%
National................. 12,164 27.4 13,406 26.3 15,456 26.8 3,438 29.4 3,437 25.9
Political................ 394 0.9 2,662 5.2 923 1.6 14 0.1 445 3.4
Network.................. 2,280 5.1 2,320 4.5 3,166 5.5 605 5.2 972 7.3
Barter................... 1,829 4.1 2,076 4.1 2,943 5.1 487 4.2 589 4.4
Other.................... 817 1.9 940 1.8 1,035 1.8 243 2.1 275 2.1
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross revenues............... 44,328 100.0% 51,026 100.0% 57,634 100.0% 11,688 100.0% 13,271 100.0%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Agency and national sales
representative
commissions............ 5,976 6,805 7,305 1,538 1,588
------- ------- ------- ------- -------
Net revenues................. 38,352 44,221 50,329 10,150 11,683
------- ------- ------- ------- -------
Operating expenses:
Compensation expense and
payroll taxes(a)....... 12,106 13,165 15,410 3,386 4,088
Amortization of program
broadcast rights....... 2,179 2,104 2,162 511 597
Depreciation and
amortization........... 3,721 3,403 5,041 856 1,360
Special bonus, officer-
stockholder............ 1,400 -- -- -- --
Barter................... 1,737 1,766 2,414 434 494
Other(b)................. 6,783 7,775 9,063 1,977 2,370
------- ------- ------- ------- -------
27,926 28,213 34,090 7,164 8,909
------- ------- ------- ------- -------
Station operating income..... 10,426 16,008 16,239 2,986 2,774
Corporate expenses....... 1,249 1,309 1,576 343 496
------- ------- ------- ------- -------
Operating income............. 9,177 14,699 14,663 2,643 2,278
Financial (expenses), net.... (14,211) (12,655) (15,475) (3,027) (4,021)
------- ------- ------- ------- -------
Net income (loss) before
extraordinary item......... (5,034) 2,044 (812) (384) (1,743)
Extraordinary item, gain on
early extinguishment of
debt....................... -- -- 6,864 6,864 --
------- ------- ------- ------- -------
Net income (loss)............ $(5,034) $ 2,044 $ 6,052 $ 6,480 $(1,743)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Broadcast cash flow.......... $15,546 $19,627 $21,310 $ 3,924 $ 4,209
Broadcast cash flow margin... 40.5% 44.4% 42.3% 38.7% 36.0%
Operating cash flow.......... $14,297 $18,318 $19,734 $ 3,581 $ 3,713
Operating cash flow margin... 37.3% 41.4% 39.2% 35.3% 31.8%
</TABLE>
- ------------
(a) Does not include corporate overhead or special bonus.
(b) Includes utilities, insurance and other general and administrative
expenses.
48
<PAGE>
<PAGE>
The following table contains a summary of Benedek Broadcasting's historical
operations as a percentage of net revenues and the percentage change in the
dollar amounts as compared to prior periods:
<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUES PERIOD TO PERIOD
----------------------------------------- PERCENTAGE CHANGES
----------------------------------
YEAR THREE MONTHS THREE MONTHS
ENDED ENDED MARCH FISCAL YEARS ENDED
DECEMBER 31, 31, ------------------ MARCH 31,
----------------------- -------------- 1994 VS 1995 VS 1996
1993 1994 1995 1995 1996 1993 1994 VS 1995
----- ----- ----- ----- ----- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues......................... 100.0% 100.0% 100.0% 100.0% 100.0% 15.3 % 13.8% 15.1%
----- ----- ----- ----- -----
Operating expenses:
Compensation expense and payroll
taxes.......................... 31.6 29.8 30.6 33.4 35.0 8.7 17.1 20.7
Amortization of program broadcast
rights......................... 5.7 4.8 4.3 5.0 5.1 (3.4 ) 2.8 16.8
Depreciation and amortization.... 9.7 7.7 10.0 8.4 11.6 (8.5 ) 48.2 58.9
Special bonus,
officer-stockholder............ 3.7 -- -- -- -- (100.0 ) -- --
Barter........................... 4.5 4.0 4.8 4.3 4.2 1.7 36.7 13.8
Other............................ 17.7 17.6 18.1 19.5 20.4 14.6 16.6 19.9
----- ----- ----- ----- -----
72.9 63.9 67.8 70.6 76.3 1.0 20.8 24.4
----- ----- ----- ----- -----
Station operating income............. 27.1 36.2 32.2 29.4 23.7 53.5 1.4 (7.1)
Corporate expenses............... 3.2 3.0 3.1 3.4 4.2 4.8 20.4 44.6
----- ----- ----- ----- -----
Operating income..................... 23.9 33.2 29.1 26.0 19.5 60.2 (0.3) (13.8)
Financial (expenses), net............ (37.0) (28.6) (30.7) (29.8) (34.4) (10.9 ) 22.3 32.8
----- ----- ----- ----- -----
Net income (loss).................... (13.1)% 4.6% (1.6)% (3.8)% (14.9)% -- -- --
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Broadcast cash flow.................. 40.5% 44.4% 42.3% 38.7% 36.0% 26.2 % 8.6% 7.3%
Operating cash flow.................. 37.3% 41.4% 39.2% 35.3% 31.8% 28.1 % 7.7% 3.7%
</TABLE>
The following tables set forth certain historical financial and operating
data for Stauffer and Brissette for the periods indicated:
<TABLE>
<CAPTION>
STAUFFER(a)
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------------------- ---------------------------------
1993 1994 1995 1995 1996
--------------- --------------- --------------- -------------- --------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Local/regional.............. $11,795 61.7% $11,944 53.7% $12,061 60.5% $2,826 59.7% $2,587 56.8%
National.................... 5,220 27.3 6,042 27.2 5,646 28.3 1,415 29.9 1,261 27.7
Political................... 78 0.4 2,223 10.0 87 0.4 3 0.1 140 3.1
Network..................... 1,292 6.8 1,305 5.9 1,492 7.5 337 7.1 400 8.8
Barter...................... -- -- -- -- -- --
Other....................... 730 3.8 706 3.2 652 3.3 150 3.2 163 3.6
------- ----- ------- ----- ------- ----- ------ ----- ------ -----
Gross revenues.................. 19,115 100.0% 22,220 100.0% 19,938 100.0% 4,731 100.0% 4,551 100.0%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Agency and national sales
representative
commissions............... 2,454 3,139 2,621 634 586
------- ------- ------- ------ ------
Net revenues.................... 16,661 19,081 17,317 4,097 3,965
------- ------- ------- ------ ------
Operating expenses:
Compensation expense and
payroll taxes(b).......... 7,542 7,718 7,904 1,900 2,012
Amortization of program
broadcast rights.......... 1,277 1,045 1,025 234 314
Depreciation and
amortization.............. 2,264 2,304 2,229 554 575
Barter...................... -- -- -- -- --
Other(c).................... 4,508 4,659 4,606 1,089 1,190
------- ------- ------- ------ ------
15,591 15,726 15,763 3,777 4,091
------- ------- ------- ------ ------
Station operating income
(loss)........................ 1,070 3,355 1,554 320 (126)
Corporate expenses.......... -- -- -- -- --
------- ------- ------- ------ ------
Operating Income (loss)......... $ 1,070 $ 3,355 $ 1,554 $ 320 $(126)
------- ------- ------- ------ ------
------- ------- ------- ------ ------
Broadcast cash flow............. $ 3,285 $ 5,623 $ 4,000 $ 882 $ 584
Broadcast cash flow margin...... 19.7% 29.5% 23.1% 21.6% 14.7%
Operating cash flow............. $ 3,285 $ 5,623 $ 4,000 $ 882 $ 584
Operating cash flow margin...... 19.7% 29.5% 23.1% 21.6% 14.7%
</TABLE>
- ------------
(a) Reclassification entries have been made to the financial statements for
consistent presentation with Benedek Broadcasting.
(b) Does not include corporate overhead.
(c) Includes utilities, insurance and other general and administrative
expenses.
49
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
BRISSETTE(a)
YEAR ENDED DECEMBER 31, THIRTEEN WEEKS ENDED
------------------------------------------------------- -----------------------------------
1993 1994 1995 MARCH 26, 1995 MARCH 31, 1996
--------------- --------------- --------------- --------------- ---------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Local/regional........... $28,214 54.9% $30,091 52.1% $31,575 53.5% $ 7,002 52.6% $ 7,230 52.0%
National................. 17,730 34.5 19,391 33.6 20,617 34.9 4,813 36.2 4,790 34.4
Political................ 403 0.8 3,536 6.1 379 0.6 57 0.4 302 2.2
Network.................. 3,163 6.2 3,094 5.4 4,589 7.8 1,043 7.8 1,127 8.1
Barter................... 569 1.1 686 1.2 903 1.5 139 1.0 170 1.2
Other.................... 1,273 2.5 941 1.6 990 1.7 261 2.0 290 2.1
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross revenues............... 51,352 100.0% 57,739 100.0% 59,053 100.0% 13,314 100.0% 13,909 100.0%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Agency and national sales
representative
commissions............ 6,948 8,209 7,727 1,712 1,939
------- ------- ------- ------- -------
Net revenues................. 44,404 49,530 51,326 11,602 11,970
------- ------- ------- ------- -------
Operating expenses:
Compensation expense and
payroll taxes(b)....... 13,855 15,494 16,647 3,929 4,266
Amortization of program
broadcast rights....... 1,743 1,757 1,684 400 483
Depreciation and
amortization........... 8,116 6,551 6,252 1,432 1,513
Special deferred
compensation........... 44 196 616 -- --
Barter................... 495 877 903 165 154
Other(c)................. 7,374 7,343 7,665 1,889 2,204
------- ------- ------- ------- -------
31,627 32,218 33,767 7,814 8,620
------- ------- ------- ------- -------
Station operating income..... 12,777 17,312 17,559 3,787 3,350
Corporate expenses....... 1,487 1,895 2,307 687 762
------- ------- ------- ------- -------
Operating income............. $11,290 $15,417 $15,252 $ 3,100 $ 2,588
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Broadcast cash flow.......... $20,927 $24,065 $23,856 $ 5,220 $ 4,834
Broadcast cash flow margin... 47.1% 48.6% 46.5% 45.0% 40.4%
Operating cash flow.......... $19,440 $22,170 $21,549 $ 4,533 $ 4,072
Operating cash flow margin... 43.8% 44.8% 42.0% 39.1% 34.0%
</TABLE>
- ------------
(a) Reclassification entries have been made to the financial statements for
consistent presentation with Benedek Broadcasting.
(b) Does not include corporate overhead.
(c) Includes utilities, insurance and other general and administrative
expenses.
50
<PAGE>
<PAGE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
Net revenues for the three months ended March 31, 1996 increased $1.5
million or 15.1% to $11.7 million from $10.2 million for the three months ended
March 31, 1995. Of this increase, $1.4 million was attributable to the
acquisition in March 1995 of the Dothan Station. For the eight Benedek Stations
owned by Benedek Broadcasting during the entire first quarter of both 1995 and
1996, net revenues for the three months ended March 31, 1996 increased $0.2
million or 1.5% from the three months ended March 31, 1995. For such Benedek
Stations, political advertising revenue for the three months ended March 31,
1996 increased by $0.4 million to $0.4 million. Gross revenues for such Benedek
Stations excluding political advertising revenue decreased $0.4 million or 3.1%
from the three months ended March 31, 1995.
Operating expenses for the three months ended March 31, 1996 increased $1.9
million or 25.3% to $9.4 million from $7.5 million for the three months ended
March 31, 1995. Of the increase in operating expenses, $1.4 million was
attributable to the acquisition of the Dothan Station. As a percentage of net
revenues, operating expenses increased to 80.5% from 74.0% in the three months
ended March 31, 1995, primarily as a result of an increase of $0.5 million in
depreciation and amortization expense. For the eight Benedek Stations owned by
Benedek Broadcasting during the entire first quarter of both 1995 and 1996,
operating expenses for the three months ended March 31, 1996 increased $0.5
million or 6.1% from the three months ended March 31, 1995. Operating expenses
as a percentage of net revenues for such Benedek Stations increased from 74.0%
for the three months ended March 31, 1995 to 77.3% in the three months ended
March 31, 1996.
Operating income for the three months ended March 31, 1996 decreased $0.4
million or 13.8% to $2.3 from $2.7 million for the three months ended March 31,
1995.
Financial (expenses), net for the three months ended March 31, 1996
increased $1.0 million or 32.9% to $4.0 million from $3.0 million in the three
months ended March 31, 1995 due to Benedek Broadcasting's higher debt level
following the offering of the Senior Secured Notes in March 1995.
Net loss for the three months ended March 31, 1996 was $1.7 million as
compared to net income of $6.5 million for the three months ended March 31, 1995
primarily as a result of an extraordinary gain of $6.9 million on the early
extinguishment of debt.
Operating cash flow for the three months ended March 31, 1996 increased
$0.1 million or 3.6% to $3.7 million from $3.6 million for the three months
ended March 31, 1995 primarily as a result of the acquisition of the Dothan
Station. As a percentage of net revenues, operating cash flow decreased to 31.8%
for the three months ended March 31, 1996 from 35.3% for the three months ended
March 31, 1995. For the eight Benedek Stations owned by Benedek Broadcasting
during the entire first quarter of both 1995 and 1996, operating cash flow for
the three months ended March 31, 1996 decreased $0.3 million or 7.9% to $3.3
million from $3.6 million for the three months ended March 31, 1995. As a
percentage of net revenues, operating cash flow decreased to 31.8% for the three
months ended March 31, 1996 from 35.3% for the three months ended March 31,
1995. The first quarter of each fiscal year is typically characterized by lower
operating cash flow margins than Benedek Broadcasting would realize for the full
fiscal year due to the seasonal nature of the broadcasting business.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net revenues for the year ended December 31, 1995 increased $6.1 million or
13.8% to $50.3 million from $44.2 million for the year ended December 31, 1994.
Of this increase, $5.0 million was attributable to the acquisition in March 1995
of the Dothan Station. For the eight Benedek Stations owned by Benedek
Broadcasting for all of 1994 and 1995, net revenues for the year ended December
31, 1995 increased $1.1 million or 2.4% from the year ended December 31, 1994.
For such Benedek Stations, political advertising revenue for the year ended
December 31, 1995 decreased $1.8 million or 66.7% to $0.9 million from $2.7
million for the year ended December 31, 1994. Gross revenues for such Benedek
Stations excluding political advertising revenue increased $2.7 million or 5.6%
from 1994 to 1995.
Operating expenses for the year ended December 31, 1995 increased $6.1
million or 20.8% to $35.7 million from $29.5 million for the year ended December
31, 1994. Of the increase in operating
51
<PAGE>
<PAGE>
expenses, $4.4 million was attributable to the acquisition of the Dothan
Station. As a percentage of net revenues, operating expenses increased to 70.9%
from 66.8% in the year ended December 31, 1994, primarily as a result of an
increase of $1.6 million in depreciation and amortization expense. For the eight
Benedek Stations owned by Benedek Broadcasting for all of 1994 and 1995,
operating expenses for the year ended December 31, 1995 increased $1.7 million
or 5.6% from the year ended December 31, 1994. For such Benedek Stations,
payroll expense remained relatively constant at approximately 30.0% of net
revenues. Operating expenses as a percentage of net revenues for such Benedek
Stations increased from 66.8% for fiscal 1994 to 68.9% in fiscal 1995, primarily
as a result of an increase in depreciation and amortization from 7.7% to 7.9% of
net revenues and an increase in barter transactions, primarily related to
programming and promotion, from 4.0% to 5.0% of net revenues.
Operating income for the years ended December 31, 1995 and 1994 remained
flat at $14.7 million as a result of the above factors.
Financial (expenses), net for the year ended December 31, 1995 increased
$2.8 million or 22.3% to $15.5 million from $12.7 million in the year ended
December 31, 1994 due to Benedek Broadcasting's higher debt level following the
offering of the Senior Secured Notes in March 1995.
Net income for the year ended December 31, 1995 increased to $6.1 million
from $2.0 million for the year ended December 31, 1994 primarily as a result of
a gain of $6.9 million on the early extinguishment of debt. This gain resulted
from the refinancing of Benedek Broadcasting's debt from the proceeds of the
offering of the Senior Secured Notes in March 1995.
Operating cash flow for the year ended December 31, 1995 increased $1.4
million or 7.7% to $19.7 million from $18.3 million for the year ended December
31, 1994 primarily as a result of the acquisition of the Dothan Station. As a
percentage of net revenues, operating cash flow decreased to 39.2% for the year
ended December 31, 1995 from 41.4% for the year ended December 31, 1994. For the
eight Benedek Stations owned by Benedek Broadcasting for all of 1994 and 1995,
operating cash flow for the year ended December 31, 1995 decreased $0.6 million
or 3.5% from the year ended December 31, 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net revenues for the year ended December 31, 1994 increased $5.9 million or
15.3% to $44.2 million from $38.4 million for the year ended December 31, 1993.
The growth in net revenues resulted from increases in advertising expenditures
by local/regional and national advertisers as advertisers anticipated continued
economic recovery and increases in political advertising expenditures during the
1994 election year.
Operating expenses for the year ended December 31, 1994 increased $1.7
million or 6.3% to $29.5 million from $27.8 million for the year ended December
31, 1993, excluding the special bonus. As a percentage of net revenues,
operating expenses declined to 66.8% in the year ended December 31, 1994 from
72.4% in the year ended December 31, 1993, excluding the special bonus,
primarily as a result of the greater rate of increase in net revenues than in
compensation expense. Compensation expense in the year ended December 31, 1994
increased $1.1 million or 8.7% from the year ended December 31, 1993 due to
overall salary increases and increases in commission expense resulting from
higher advertising sales. Amortization of program rights and corporate expenses
during such periods remained relatively constant.
Operating income for the year ended December 31, 1994 increased $4.1
million or 40.0% to $14.7 million from $10.6 million for the year ended December
31, 1993, excluding the special bonus. This increase resulted from the greater
rate of increase in net revenues than in compensation expense.
Financial (expenses), net for the year ended December 31, 1994 decreased
$1.6 million or 10.9% to $12.7 million from $14.2 million for the year ended
December 31, 1993 due primarily to a net reduction in the amount of non-cash
interest accrued in respect of warrants held by certain of Benedek
Broadcasting's lenders which were restructured in 1993, offset in part by $1.0
million of interest accrued in respect of a contingent payment due to another of
Benedek Broadcasting's lenders based upon the appreciation in the equity value
of certain of the Benedek Stations.
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Net income (loss) for the year ended December 31, 1994 increased to income
of $2.0 million from a loss of $5.0 million for the year ended December 31, 1993
as a result of the factors described above.
Operating cash flow for the year ended December 31, 1994 increased $4.0
million or 28.1% to $18.3 million from $14.3 million for the year ended December
31, 1993 primarily as a result of the increase in net revenues. As a percentage
of net revenues, operating cash flow increased to 41.4% for the year ended
December 31, 1994 from 37.3% for the year ended December 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities is the primary source of liquidity for
Benedek Broadcasting and were $(0.2) million for the three months ended March
31, 1996 compared to $(4.9) million for the three months ended March 31, 1995.
For the three months ended March 31, 1996 cash flows from operating activities
primarily resulted from a $4.6 million decrease in receivables, which included
$2.5 million from the bonus payment from CBS, offset by a decrease in accrued
interest of $4.0 million. For the three months ended March 31, 1995 cash flows
from operating activities primarily resulted from the refinancing of
substantially all of Benedek Broadcasting's existing long-term debt in March
1995 and the payment of $4.4 million of deferred and contingent interest and
$2.7 million of prepayment premiums. In addition, cash used by operations
included $6.9 million of non-cash gain on early extinguishment of debt.
Cash flows from operating activities were $3.3 million in 1995 compared to
$10.5 million in 1994. The 1995 cash flows from operating activities primarily
resulted from an increase in accounts payable and accrued expenses of $4.7
million and an increase in deferred revenue of $4.8 million from the bonus
payment from CBS, offset by a $4.6 million increase in accounts receivable.
Accounts receivable, accounts payable and accrued expenses increased as a result
of the acquisition of the Dothan Station and as a result of increased revenues
and operating expenses. In 1995, in connection with the refinancing of
substantially all of its existing long-term debt, Benedek Broadcasting paid $4.4
million of deferred and contingent interest and $2.7 million of prepayment
premiums. Cash flows from operating activities in 1995 includes net income plus
depreciation and amortization which totaled $11.8 million, including $6.9
million of non-cash gain on early extinguishment of debt. The 1994 cash flows
from operating activities primarily resulted from a $3.3 million increase in
contingent and deferred interest payable. Cash flows from operating activities
in 1994 includes net income plus depreciation and amortization which totaled
$7.0 million.
Cash Flows from Investing Activities were $(1.9) million for the three
months ended March 31, 1996, compared to $(26.9) million for the three months
ended March 31, 1995. For the three months ended March 31, 1996, cash flows from
investing activities primarily resulted from a $1.0 million deposit made to
acquire the Stauffer Stations and $0.6 million of capital expenditures. For the
three months ended March 31, 1995 cash flows used in investing activities
included $26.7 million paid to acquire the Dothan Stations.
Cash flows from investing activities were $31.0 million in 1995 compared to
$2.5 million in 1994. The 1995 cash flows used in investing activities primarily
resulted from $26.7 million paid to acquire the Dothan Station and a $3.0
million deposit in connection with the Stauffer Acquisition. The 1994 cash flows
used in investing activities included a $2.0 million deposit in connection with
the acquisition of the Dothan Station.
Cash Flows from Financing Activities were $(0.2) million for the three
months ended March 31, 1996 compared to $33.8 million for the three months ended
March 31, 1995. For the three months ended March 31, 1995 cash flows from
financing activities primarily resulted from the issuance in March 1995 of
$135.0 million of Benedek Broadcasting's Senior Secured Notes to refinance
existing indebtedness and finance the acquisition of the Dothan Station, offset
by $96.0 million of principal payments on existing indebtedness. The
consummation of the refinancing resulted in an extraordinary gain on the early
extinguishment of debt comprised of a gain of $11.1 million from adjusting the
carrying value of certain warrants held by Benedek Broadcasting's lenders offset
by $2.7 million of prepayment premiums and $1.5 million of unamortized debt
discount and deferred loan costs.
Cash flows from financing activities were $32.8 million in 1995 compared to
$(7.0) million in 1994. The 1995 cash flows provided by financing activities
primarily resulted from the issuance in March
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1995 of $135.0 million of Benedek Broadcasting's Senior Secured Notes to
refinance existing indebtedness and finance the acquisition of the Dothan
Station, offset by $96.0 million of principal payments on such existing
indebtedness. The consummation of the refinancing resulted in an extraordinary
gain from the early extinguishment of debt, comprised of a gain of $11.1 million
from adjusting the carrying value of certain warrants held by Benedek
Broadcasting's lenders from $19.0 million to the redemption price of $7.9
million offset by $2.7 million of prepayment premiums and $1.5 million of
unamortized debt discount and deferred loan costs.
THE FINANCING PLAN
The Company, together with its subsidiary Benedek Broadcasting, implemented
the Financing Plan in order to finance the Acquisitions and to pay fees and
expenses related thereto. The Financing Plan consisted of (i) the offer and sale
by the Company of the Units to generate gross proceeds of $60.0 million, (ii)
the offer and sale by the Company of the Senior Subordinated Discount Notes to
generate gross proceeds of $90.2 million, (iii) Benedek Broadcasting borrowing
$128.0 million pursuant to the Term Loan Facilities of the Credit Agreement and
(iv) the Company issuing an aggregate of $45.0 million initial liquidation
preference of Seller Junior Discount Preferred Stock to GECC and Mr. Paul
Brissette. Benedek Broadcasting also has available to it $15.0 million under the
Revolving Credit Facility of the Credit Agreement.
The Company believes that the Financing Plan will provide for a long-term
financing structure that will allow management to concentrate its efforts on
maximizing results of operations. The Company anticipates that operating cash
flow of Benedek Broadcasting will be sufficient to finance the operating
requirements of the Stations, debt service requirements and presently
anticipated capital expenditures. The Company anticipates that substantial
capital expenditures may be required at a number of the Acquired Stations.
The Senior Subordinated Discount Notes do not bear interest until May 15,
2001, and the Company will not be obligated to pay cash interest on the Senior
Subordinated Discount Notes until November 15, 2001. In addition, for all
dividend payment dates with respect to the Exchangeable Preferred Stock and
interest payment dates with respect to the Exchange Debentures through and
including July 1, 2001, the Company may, at its option, pay dividends by adding
the amount thereof to the then effective liquidation preference of the
Exchangeable Preferred Stock and pay interest on the Exchange Debentures by
issuing additional Exchange Debentures. For all dividend payment dates with
respect to the Seller Junior Discount Preferred Stock prior to October 1, 2001,
the Company will pay such dividends by adding the amount thereof to the then
effective liquidation preference of the Seller Junior Discount Preferred Stock.
In order for the Company to meet its debt service obligations and pay required
dividends after May 15, 2001 with respect to the Senior Subordinated Discount
Notes, after July 1, 2001 with respect to the Exchangeable Preferred Stock or
Exchangeable Debentures, as the case may be, and from and after October 1, 2001
with respect to the Seller Junior Discount Preferred Stock, the Company will
need to substantially increase broadcast cash flow at the Stations.
In order to repay the Senior Subordinated Discount Notes and the Senior
Secured Notes at maturity, the Company will need to refinance all or a portion
of such Notes. The Company's ability to refinance the Notes and the Senior
Secured Notes will depend upon the Company's operating performance, as well as
prevailing economic and market conditions, levels of interest rates, refinancing
costs and other factors, many of which are beyond the Company's control. There
can be no assurance that the Company will be able to refinance the Senior
Subordinated Discount Notes and the Senior Secured Notes or otherwise raise
funds in a timely manner or that the proceeds therefrom will be sufficient to
effect such refinancing.
The Company is a holding company that will derive all of its operating
income and cash flow from its sole subsidiary, Benedek Broadcasting, the common
stock of which, together with all other assets of the Company, have been pledged
to secure the Company's senior guarantee of all indebtedness of Benedek
Broadcasting outstanding under the Credit Agreement and in respect of the Senior
Secured Notes. As a holding company, the Company's ability to pay its
obligations, including its obligation to pay interest on and principal of the
Senior Subordinated Discount Notes, whether at maturity, upon a Change of
Control or otherwise, will be dependent primarily upon receiving dividends and
other
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payments or advances from Benedek Broadcasting. Benedek Broadcasting is a
separate and distinct legal entity and has no obligation, contingent or
otherwise, to pay any amounts to the Company or to make funds available to the
Company for debt service or any other obligation. Although the Credit Agreement
does not limit the ability of Benedek Broadcasting to pay dividends or make
other payments to the Company, the Senior Secured Note Indenture does contain
such limitations. However, after giving effect to the Transactions (assuming the
contribution to the common equity of Benedek Broadcasting of net cash proceeds
of approximately $188.5 million from the sale of the Senior Subordinated
Discount Notes, the Units and the Seller Junior Discount Preferred Stock), as of
March 31, 1996, Benedek Broadcasting could have distributed approximately $188.5
million to the Company under such limitations.
SEASONALITY
Net revenues and operating cash flow of Benedek Broadcasting are generally
higher during the fourth quarter of each year, primarily due to increased
expenditures by advertisers in anticipation of holiday season consumer spending
and an increase in viewership during this period, and, to a lesser extent,
during the second quarter of each year.
INCOME TAXES
Historically, Benedek Broadcasting had elected to be taxed as an S
Corporation. Net income (loss) does not include a pro forma adjustment for
income tax expense because the Company would not, under Statement of Financial
Accounting Standards No. 109 'Accounting For Income Taxes,' have had a tax
provision due to net operating loss carryforwards and a valuation allowance.
Benedek Broadcasting's election to be taxed as an S Corporation automatically
terminated concurrently with the consummation of the Transactions. Under the
Senior Subordinated Discount Note Indenture, the Company may distribute cash to
its stockholder to pay individual income taxes arising from taxable income of
Benedek Broadcasting for periods prior to the termination of the S election.
EMERGING ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 123, 'Accounting for Stock Based Compensation'
in October 1995, which establishes financial accounting and reporting standards
for stock based employee compensation plans, including stock purchase plans,
stock options, restricted stock, and stock appreciation rights. The Company has
elected to continue accounting for stock based compensation under Accounting
Principles Board Opinion No. 25. The disclosure requirements of SFAS No. 123
will be effective for the Company's financial statements beginning in 1996.
Management does not believe that the implementation of SFAS 123 will have a
material effect on its consolidated financial statements.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Units, of which the Existing Exchangeable Preferred Stock was a part,
were originally issued and sold on June 5, 1996. The offer and sale of the Units
was not required to be registered under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act. In connection with the
sale of the Units, the Company agreed to file with the SEC a registration
statement relating to an exchange offer pursuant to which new shares of
exchangeable redeemable senior preferred stock of the Company covered by such
registration statement and containing terms identical in all material respects
to the terms of the Existing Exchangeable Preferred Stock would be offered in
exchange for Existing Exchangeable Preferred Stock tendered at the option of the
holders thereof or, if applicable interpretations of the staff of the SEC did
not permit the Company to effect such an Exchange Offer, or, among other things,
if the Exchange Offer is not consummated, the Company agreed, at its cost, to
file a Shelf Registration Statement covering resales of Existing Exchangeable
Preferred Stock and to use all reasonable efforts to have such Shelf
Registration Statement declared effective and kept effective for a period of
three years from the effective date thereof.
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The purpose of the Exchange Offer is to fulfill certain of the Company's
obligations under the Registration Agreement. This Prospectus may not be used by
any holder of shares of Existing Exchangeable Preferred Stock or any holder of
the Exchange Securities to satisfy the registration and prospectus delivery
requirements under the Securities Act that may apply in connection with any
resale of such Existing Exchangeable Preferred Stock or Exchange Securities. See
' -- Terms of the Exchange Offer; Period for Tendering Existing Exchangeable
Preferred Stock.'
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING EXISTING EXCHANGEABLE
PREFERRED STOCK
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange shares of Existing
Exchangeable Preferred Stock which are properly tendered on or prior to the
Expiration Date and not withdrawn as permitted below. As used herein, the term
'Expiration Date' means 5:00 p.m., New York City time, on , 1996;
provided, however, that if the Company, in its sole discretion, has extended the
period of time for which the Exchange Offer is open, the term 'Expiration Date'
means the latest time and date to which the Exchange Offer is extended.
Notwithstanding the foregoing, the Expiration Date shall not be later than 5:00
p.m., New York City time, on the date 60 days from the date of this Prospectus.
As of the date of this Prospectus, 600,000 shares of Existing Exchangeable
Preferred Stock were outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1996, to all holders
of Existing Exchangeable Preferred Stock known to the Company. The Company's
obligation to accept shares of Existing Exchangeable Preferred Stock for
exchange pursuant to the Exchange Offer is subject to certain conditions as set
forth under ' -- Certain Conditions to the Exchange Offer.'
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Existing Exchangeable Preferred
Stock, by giving oral or written notice of such extension to the holders thereof
and the Exchange Agent. During any such extension, all shares of Existing
Exchangeable Preferred Stock previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any shares of
Existing Exchangeable Preferred Stock not accepted for exchange for any reason
will be returned without expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any shares of Existing Exchangeable
Preferred Stock not theretofore accepted for exchange, upon the occurrence of
any of the conditions of the Exchange Offer specified below under ' -- Certain
Conditions to the Exchange Offer.' The Company will give oral or written notice
of any extension, amendment, non-acceptance or termination to the holders of
shares of Existing Exchangeable Preferred Stock and the Exchange Agent as
promptly as practicable, such notice in the case of any extension to be issued
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
EXCHANGE OFFER PROCEDURES
The tender to the Company of shares of Existing Exchangeable Preferred
Stock by a holder thereof as set forth below and the acceptance thereof by the
Company will constitute a binding agreement between the tendering holder and the
Company upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal. Except as set forth
below, a holder who wishes to tender shares of Existing Exchangeable Preferred
Stock for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to IBJ Schroder Bank & Trust Company
(the 'Exchange Agent') at one of the addresses set forth below under 'Exchange
Agent' on or prior to the Expiration Date. In addition, either (i) certificates
for such shares of Existing Exchangeable Preferred Stock must be received by the
Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation
of a book-entry transfer (a 'Book-Entry Confirmation') of such Existing
Exchangeable Preferred Stock, if such procedure is available, into the Exchange
Agent's
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account at The Depository Trust Company (the 'Book-Entry Transfer Facility')
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date or (iii) the holder
must comply with the 'Guaranteed Delivery Procedures' below. THE METHOD OF
DELIVERY OF SHARES OF EXISTING EXCHANGEABLE PREFERRED STOCK, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR SHARES OF EXISTING EXCHANGEABLE PREFERRED STOCK SHOULD BE SENT TO
THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the shares of Existing Exchangeable
Preferred Stock surrendered for exchange pursuant thereto are tendered (i) by a
registered holder of Existing Exchangeable Preferred Stock who has not completed
the box entitled 'Special Issuance Instruction' or 'Special Delivery
Instructions' on the Letter of Transmittal or (ii) for the account of an
Eligible Institution (as defined). In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantees must be by a firm which is a member of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc. or by a commercial bank or trust company having an
office or correspondent in the United States (collectively, 'Eligible
Institutions'). If shares of Existing Exchangeable Preferred Stock are
registered in the name of a person other than a signatory of the Letter of
Transmittal, the shares of Existing Exchangeable Preferred Stock surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of shares of Existing Exchangeable Preferred Stock
tendered for exchange will be determined by the Company in its sole discretion,
which determination shall be final and binding. The Company reserves the
absolute right to reject any and all tenders of any particular shares of
Existing Exchangeable Preferred Stock not properly tendered or to not accept any
shares of particular Existing Exchangeable Preferred Stock which acceptance
might, in the judgment of the Company or its counsel, be unlawful. The Company
also reserves the absolute right to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular shares of Existing
Exchangeable Preferred Stock either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender shares of Existing Exchangeable Preferred Stock in the Exchange Offer).
The interpretation of the terms and conditions of the Exchange Offer as to any
particular shares of Existing Exchangeable Preferred Stock either before or
after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
shares of Existing Exchangeable Preferred Stock for exchange must be cured
within such reasonable period of time as the Company shall determine. Neither
the Company, the Exchange Agent nor any other person shall be under any duty to
give notification of any defect or irregularity with respect to any tender of
shares of Existing Exchangeable Preferred Stock for exchange, nor shall any of
them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of shares of Existing Exchangeable Preferred
Stock, such shares of Existing Exchangeable Preferred Stock must be endorsed or
accompanied by appropriate powers of attorney, in either case, signed exactly as
the name or names of the registered holder or holders appear(s) on the
certificates representing the Existing Exchangeable Preferred Stock.
If the Letter of Transmittal or any shares of Existing Exchangeable
Preferred Stock or powers of attorney are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate
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when signing and, unless waived by the Company, proper evidence satisfactory to
the Company of their authority to so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Securities acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the person receiving such
Exchange Securities, whether or not such person is the holder, that neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Securities and that
neither the holder nor any such other person is an 'affiliate,' as defined under
Rule 405 of the Securities Act, of the Company.
Each broker-dealer that receives Exchange Securities for its own account in
exchange for shares of Existing Exchangeable Preferred Stock where such shares
of Existing Exchangeable Preferred Stock were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities. See 'Plan of Distribution.'
ACCEPTANCE OF EXISTING EXCHANGEABLE PREFERRED STOCK FOR EXCHANGE; DELIVERY OF
EXCHANGE SECURITIES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept promptly after the Expiration Date, all shares of
Existing Exchangeable Preferred Stock properly tendered and will issue the
Exchange Securities promptly after acceptance of such shares of Existing
Exchangeable Preferred Stock. See ' -- Certain Conditions to the Exchange
Offer.' For purposes of the Exchange Offer, the Company shall be deemed to have
accepted properly tendered shares of Existing Exchangeable Preferred Stock for
exchange when, as and if the Company has given oral (promptly followed in
writing) or written notice thereof to the Exchange Agent.
For each share of Existing Exchangeable Preferred Stock accepted for
exchange, the holder thereof will receive one Exchange Security. If by December
31, 1996, neither the Exchange Offer is consummated nor a Shelf Registration
Statement is declared effective, additional cash dividends will accrue on each
share of Existing Exchangeable Preferred Stock from and including January 1,
1997, until but excluding the earlier of the date of consummation of the
Exchange Offer and the effective date of the Shelf Registration Statement at a
rate of 0.50% per annum. Holders of shares of Existing Exchangeable Preferred
Stock accepted for exchange will be deemed to have waived the right to receive
any other payments or accrued dividends on such Existing Exchangeable Preferred
Stock.
In all cases, issuance of Exchange Securities for shares of Existing
Exchangeable Preferred Stock that are accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
certificates for such shares of Existing Exchangeable Preferred Stock or a
timely Book-Entry Confirmation of such shares of Existing Exchangeable Preferred
Stock into the Exchange Agent's account at the Book-Entry Transfer Facility, a
properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered shares of Existing Exchangeable Preferred
Stock are not accepted for any reason set forth in the terms and conditions of
the Exchange Offer or if a certificate representing a greater number of shares
of Existing Exchangeable Preferred Stock than the holder desires to exchange is
submitted, such unaccepted or non-exchanged shares of Existing Exchangeable
Preferred Stock will be returned without expense to the tendering holder thereof
(or, in the case of shares of Existing Exchangeable Preferred Stock tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry transfer procedures described below, such
non-exchanged shares of Existing Exchangeable Preferred Stock will be credited
to an account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Existing Exchangeable Preferred Stock at the Book-Entry Transfer Facility
for purposes of the Exchange Offer within two business days after the date of
this Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's system may make book-entry deliver of shares of
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Existing Exchangeable Preferred Stock by causing the Book-Entry Transfer
Facility to transfer such shares of Existing Exchangeable Preferred Stock into
the Exchange Agent's account at the Book-Entry Transfer Facility in accordance
with such Book-Entry Transfer Facility's procedures for transfer. However,
although delivery of shares of Existing Exchangeable Preferred Stock may be
effected through book-entry transfer at the Book-Entry Transfer Facility, the
Letter of Transmittal or facsimile thereof with any required signature
guarantees and any other required documents must, in any case, be transmitted to
and received by the Exchange Agent at one of the addresses set forth below under
'Exchange Agent' on or prior to the Expiration Date or the guaranteed delivery
procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of shares of Existing Exchangeable Preferred Stock
desires to tender such shares of Existing Exchangeable Preferred Stock and the
shares of Existing Exchangeable Preferred Stock are not immediately available,
or time will not permit such holder's shares of Existing Exchangeable Preferred
Stock or other required documents to reach the Exchange Agent before the
Expiration Date, or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if (i) the tender is made through an
Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof) and a notice of guaranteed
delivery ('Notice of Guaranteed Delivery'), substantially in the form provided
by the Company (by telegram, telex, facsimile transmission, mail or hand
delivery), setting forth the name and address of the holder of Existing
Exchangeable Preferred Stock and the number of shares of Existing Exchangeable
Preferred Stock tendered, stating that the tender is being made thereby and
guaranteeing that within five New York Stock Exchange ('NYSE') trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered shares of Existing Exchangeable
Preferred Stock, in proper form for transfer, or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent and (iii)
the certificates for all physically tendered shares of Existing Exchangeable
Preferred Stock, in proper form for transfer, or a Book-Entry Confirmation, as
the case may be, and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within five NYSE trading days after the date
of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of shares of Existing Exchangeable Preferred Stock may be withdrawn
at any time prior to the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
'Exchange Agent.' Any such notice of withdrawal must specify the name of the
person having tendered the Existing Exchangeable Preferred Stock to be
withdrawn, identify the shares of Existing Exchangeable Preferred Stock to be
withdrawn (including the number of shares of such Existing Exchangeable
Preferred Stock) and (where certificates for Existing Exchangeable Preferred
Stock have been transmitted) specify the name in which such shares of Existing
Exchangeable Preferred Stock are registered, if different from that of the
withdrawing holder. If certificates for shares of Existing Exchangeable
Preferred Stock have been delivered or otherwise identified to the Exchange
Agent, then, prior to the release of such certificates the withdrawing holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If shares of
Existing Exchangeable Preferred Stock have been tendered pursuant to the
procedure for 'Book-Entry Transfer' described above, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn shares of Existing Exchangeable
Preferred Stock and otherwise comply with the procedures of such facility. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any shares of Existing Exchangeable Preferred
Stock so withdrawn will be deemed not to have been validly
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tendered for exchange for purposes of the Exchange Offer. Any shares of Existing
Exchangeable Preferred Stock which have been tendered for exchange but which are
not exchanged for any reason will be returned to the holder thereof without cost
to such holder (or, in the case of shares of Existing Exchangeable Preferred
Stock tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the 'Book-Entry Transfer' procedures
described above, such shares of Existing Exchangeable Preferred Stock will be
credited to an account maintained with such Book-Entry Transfer Facility for the
shares of Existing Exchangeable Preferred Stock) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn shares of Existing Exchangeable Preferred Stock may be retendered by
following one of the procedures described under ' -- Exchange Offer Procedures'
above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue Exchange Securities in
exchange for, any shares of Existing Exchangeable Preferred Stock and may
terminate or amend the Exchange Offer if at any time before the acceptance of
such shares of Existing Exchangeable Preferred Stock for exchange or the
exchange of the Exchange Securities for such shares of Existing Exchangeable
Preferred Stock any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof or (ii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of
the Existing Exchangeable Preferred Stock pursuant to the Exchange Offer;
or any statute, rule, regulation, order or injunction shall be sought,
proposed, introduced, enacted, promulgated or deemed applicable to the
Exchange Offer or any of the transactions contemplated by the Exchange
Offer by any government or governmental authority, domestic or foreign, or
any action shall have been taken, proposed or threatened, by any
government, governmental authority, agency or court, domestic or foreign,
that in the sole judgment of the Company might directly or indirectly
result in any of the consequences referred to in clauses (i) or (ii) above
or, in the sole judgment of the Company, might result in the holders of
Exchange Securities having obligations with respect to resales and
transfers of Exchange Securities which are greater than those described in
the interpretation of the SEC referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the
Exchange Offer;
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of a war, armed hostilities
or other similar internal calamity directly or indirectly involving the
United States, or, in the case of any of the foregoing existing at the time
of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
sole judgment of the Company, is or may be adverse to the Company, or the
Company shall have become aware of facts that, in the sole judgment of the
Company, have or may have adverse significance with respect to the value of
the Existing Exchangeable Preferred Stock or the Exchange Securities;
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which, in the reasonable judgment of the Company in any case, and regardless of
the circumstances (including any action by the Company) giving rise to any such
condition, makes it inadvisable to proceed with the Exchange Offer and/or with
such acceptance for exchange or with such exchange.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any shares of
Existing Exchangeable Preferred Stock tendered, and no Exchange Securities will
be issued in exchange for any such shares of Existing Exchangeable Preferred
Stock, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as the Exchange Agent
of the Exchange Offer. All executed Letters of Transmittal should be directed to
the Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or of
the Letter of Transmittal and requests for Notices of Guaranteed Delivery should
be directed to the Exchange Agent addressed as follows:
THE EXCHANGE AGENT
IBJ SCHRODER BANK & TRUST COMPANY
(212) 858-2103
<TABLE>
<S> <C>
By Mail:
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
Attention: Reorganization Operations Dept.
By Facsimile:
IBJ Schroder Bank & Trust Company
Attention: Reorganization Operations Dept.
(212) 858-2611
By Hand/Overnight Delivery:
One State Street
New York, NY 10004
Attention: Securities Transfer Window, Subcellar One
</TABLE>
DELIVERY OF DOCUMENTS TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
$ which includes fees and expenses of the Exchange Agent and accounting,
legal, printing and related fees and expenses.
TRANSFER TAXES
Holders who tender their shares of Existing Exchangeable Preferred Stock
for exchange will not be obligated to pay any transfer taxes in connection
therewith, except that holders who instruct the
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Company to register Exchange Securities in the name of, or request that shares
of Existing Exchangeable Preferred Stock not tendered or not accepted in the
Exchange Offer be returned to, a person other than the registered tendering
holder will be responsible for the payment of any applicable transfer tax
thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Existing Exchangeable Preferred Stock who do not exchange their
Existing Exchangeable Preferred Stock for Exchange Securities pursuant to the
Exchange Offer will continue to be subject to the restrictions on transfers of
such Existing Exchangeable Preferred Stock as set forth in the legend thereon as
a consequence of the issuance of the Existing Exchangeable Preferred Stock
pursuant to the exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. In general, shares of Existing Exchangeable Preferred Stock may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Existing Exchangeable Preferred Stock under the Securities
Act. Based on interpretations by the staff of the SEC in letters issued to third
parties, Exchange Securities issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred by any holder thereof (other
than any such holder which is an 'affiliate' of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act provided that such
Exchange Securities are acquired in the ordinary course of such holder's
business, such holder has no arrangement or understanding with respect to the
distribution of the Exchange Securities to be acquired pursuant to the Exchange
Offer and such holder is not engaged in and does not intend to engage in a
distribution of such Exchange Securities. If any person were to be participating
in the Exchange Offer for the purpose of distributing securities in a manner not
permitted by the interpretations of the staff of the SEC referred to above, such
person (i) could not rely on the applicable interpretations of the staff of the
SEC and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the Exchange Securities may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
an exemption from registration or qualification is available and is complied
with. The Company has agreed, pursuant to the Registration Agreement and subject
to certain specified limitations therein, to register or qualify the Exchange
Securities for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Exchange Securities reasonably requests in
writing.
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BUSINESS
The Company owns 22 network-affiliated television stations in the United
States. The Stations are diverse in geographic location and network affiliation,
serve small to medium-sized markets and, in the aggregate, reach communities in
24 states. Twelve of the Stations are affiliated with CBS, six are affiliated
with ABC and four are affiliated with NBC. On a pro forma basis giving effect to
the Transactions, the Company would have had net revenues, broadcast cash flow
and operating cash flow of $121.3 million, $52.7 million and $50.8 million,
respectively, for the fiscal year ended December 31, 1995.
The Company believes that the Acquired Stations have been underperforming
in terms of their overall revenue potential and can be operated more efficiently
under Company management, thereby offering the Company an attractive opportunity
to improve broadcast cash flow. The Company believes that such improvement can
be achieved by expanding the Acquired Stations' share of market revenues and by
increasing viewership levels through an increased emphasis on local news and
informational programming and cost-effective purchasing of competitive
syndicated and first run programming.
The Company believes that the broadcast cash flow margins of the Stauffer
Stations of 19.7%, 29.5% and 23.1% during 1993, 1994 and 1995, respectively, can
be substantially improved in the near-term. By comparison, the broadcast cash
flow margins for the Benedek Stations for the same periods were 40.5%, 44.5% and
42.3%, respectively. The Company further believes that although the Brissette
Stations have operated at attractive margins, the previous ownership of the
Brissette Stations operated with a focus on managing costs, not on maximizing
revenues and broadcast cash flow growth. This strategy typically resulted in the
Brissette Stations capturing a smaller share of advertising revenue in their
respective markets than their audience share in these markets. The compound
annual growth rate of net revenues and broadcast cash flow of the Benedek
Stations (excluding the station in Dothan, Alabama acquired by Benedek
Broadcasting in 1995) for the five-year period from 1991 through 1995 was 7.8%
and 9.0%, respectively, as compared to 4.0% and 3.6%, respectively, for the
Brissette Stations during the same period.
The Stations are located in markets ranked in size from 83 to 201 out of
the 211 markets surveyed by Nielsen. The Company believes that broadcast
television stations in small to medium-sized markets offer an opportunity to
generate attractive and stable operating cash flow due to limited competition
for viewers from other over-the-air broadcasters, from other media soliciting
advertising expenditures and from other broadcasters purchasing syndicated
programming. The Company targets small and medium-sized markets that have stable
employment and population and a diverse base of employers. The markets targeted
by the Company generally have population centers that share common community
interests and are receptive to local programming. Each of the Stations is
affiliated with one of the national television networks, which provides an
established audience and reputation for national news, sports and entertainment
programming. With the established audiences provided by network affiliations,
management seeks to implement its strategy to enhance non-network ratings and
revenues while controlling costs.
The Company believes that the television industry is in a period of
consolidation as a result of which a relatively small number of station
operators will emerge as the leading television station group owners in the
United States. Recent telecommunications legislation that eliminates
restrictions on the number of television stations that any individual or entity
may own so long as the aggregate audience reach does not exceed 35% of all
United States households is likely to accelerate this trend. The Company's
growth strategy, of which the acquisition of the Stauffer Stations and Brissette
Stations is a part, is to become one of the leading group owners of small to
medium-sized market television stations in the United States. The Company
believes that this expansion will create economies of scale which will (i)
improve its ability to negotiate more favorable arrangements with program
suppliers, national sales representation firms, equipment vendors and television
networks, (ii) enable it to develop program consortiums for regional news and
sports programming and (iii) enhance its ability to attract and retain strong
management and on-air talent.
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INDUSTRY BACKGROUND
Commercial television broadcasting began in the United States on a regular
basis in the 1940s. Currently there are a limited number of channels available
for broadcasting in any one geographic area, and the license to operate a
broadcast station is granted by the FCC. Television stations can be
distinguished by the frequency on which they broadcast. Television stations
which broadcast over the very high frequency ('VHF') band (channels 2-13) of the
spectrum generally have some competitive advantage over television stations
which broadcast over the ultra-high frequency ('UHF') band (channels 14-69) of
the spectrum because VHF channels typically cover larger geographic areas and
operate at a lower transmission cost. However, specific market characteristics
such as population densities, geographic features or other factors may determine
whether UHF stations are in fact at a competitive disadvantage.
Television station revenues are primarily derived from local, regional and
national advertising and, to a modest extent, from network compensation and
revenues from tower rentals and commercial production activities. Advertising
rates are based upon numerous factors including a program's popularity among the
viewers an advertiser wishes to attract, the number of advertisers competing for
the available time allotted to commercials, the size and demographic make-up of
the audience and the availability of alternative advertising media in the market
area. The extent of advertising expenditures, which are sensitive to broad
economic trends, has historically affected the broadcast industry.
Whether or not a station is affiliated with one of the four major networks
(ABC, CBS, NBC or Fox) may have a significant impact on the composition of the
station's programming, revenues, expenses and operations. A typical network
affiliate receives a significant portion of its daily programming from the
network. This programming, together with cash payments, is provided to the
affiliate by the network in exchange for a substantial majority of the
advertising time sold during the broadcast of network programming. The Fox
network has operating characteristics which are similar to ABC, CBS and NBC,
although the hours of network programming produced for Fox affiliates is less
than that produced by the other major networks. In addition, UPN and the Warner
Bros. Network recently have been launched as new television networks. However,
neither produce a significant amount of network programming.
Through the 1970s, network television broadcasting generally enjoyed
dominance in viewership and television advertising revenues. FCC regulation
evolved to address this dominance, with the focus on increasing competition and
diversity of programming in the television broadcasting industry. See
' -- Federal Regulation of Television Broadcasting.'
Cable television systems were first installed in significant numbers in the
late 1960s and early 1970s and were initially used to retransmit broadcast
television programming in areas with poor broadcast signal reception. According
to the 1996 Television & Cable Factbook, cable television currently passes
approximately 90% of all television households nationwide and approximately 68%
of such households are cable subscribers. Cable-originated programming has
emerged as a significant competitor for viewers of broadcast television
programming. With increased cable penetration, the cable programming share of
advertising revenues has increased. Notwithstanding increased cable viewership
and advertising, broadcast television remains the dominant distribution system
for mass market television advertising. No single cable programming network
regularly attains audience levels amounting to more than a small fraction of any
single major broadcast network. Despite the growth in alternative programming
from cable, according to Nielsen, 65% of all prime time television viewing time
during the 1994-1995 broadcast season was spent viewing ABC, CBS, NBC and Fox
programming.
Other developments have also affected television programming and delivery.
Independent stations have emerged as viable competitors for television
viewership share, particularly as the result of the availability of first run
network programming from UPN and the Warner Bros. Network. In addition, there
has been substantial growth in the number of home satellite dish receivers and
VCRs, which has further expanded the number of programming alternatives for
television audiences. Furthermore, direct broadcast services ('DBS') to homes
from satellites became available on a nationwide basis during 1994. See
' -- Competition.'
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STRATEGY
The Company's senior management team, led by A. Richard Benedek, Chairman
and Chief Executive Officer, and K. James Yager, President and Chief Operating
Officer, has extensive experience in acquiring and improving the operations of
television stations. Management's primary operating strategy is to maximize each
Station's advertising revenue through local news, information and
community-oriented programming that has broad audience appeal and value-added
sales potential, while maintaining strict cost controls. Key elements of
management's strategy include:
LOCAL NEWS LEADERSHIP AND LOCAL PROGRAMMING. Management believes that
local news and informational programming leadership contributes to higher
ratings and, therefore, increased advertising revenues. Management's
emphasis on local news and on-going community involvement allows the
Benedek Stations to maximize the advertising rates they can charge local,
regional and national accounts, not only for news, but for network and
nationally-syndicated programming which the Benedek Stations broadcast in
time periods adjacent to regularly scheduled local newscasts and local news
specials.
The Company has focused on maintaining and building each Benedek
Station's local news franchise as the key element in its strategy to build
and maintain audience loyalty. Management believes that strong,
well-differentiated local news programming attracts high viewership levels,
particularly of demographic groups that are appealing to both local and
national advertisers, thereby allowing the Company to maximize advertising
rates.
Management of the Company believes that television stations with a
prominent local identity and active community involvement can realize
additional revenues from local advertisers through the development and sale
of special promotional programming. The Benedek Stations have developed
high-quality programming which highlights community events and topics of
local interest. Locally produced programming includes 'Our Town' segments
featuring local news reports, special promotional announcements and local
advertising focused on communities within a particular market; 'Town
Meetings,' which provide a forum for members of local communities to
discuss and debate issues of local concern; 'Live Line' programs on health,
money and legal matters in which viewers call in to a panel of local
experts; and home shopping programs sold exclusively to local merchants.
The Benedek Stations also sell promotional advertising packages tied to
various local events such as youth expos, county fairs, parades, athletic
events and other local activities. These local programs have proven
successful in attracting incremental advertising revenues and are a core
element of each Benedek Station's local identity.
Six of the nine Benedek Stations are the number one ranked news
stations in their respective markets, whereas only four of the 13 Acquired
Stations are the number one ranked news stations in their respective
markets. The Company believes that the Acquired Stations will benefit from
the Company's focus on local news and community-oriented programming.
SYNDICATED PROGRAMMING. The Company selectively purchases first run
and off-network syndicated programming designed to reach specific
demographic groups attractive to advertisers. Currently, the three most
highly-rated first run syndicated programs in the United States are 'The
Oprah Winfrey Show,' 'Wheel of Fortune' and 'Jeopardy.' The Company
broadcasts 'The Oprah Winfrey Show' on six of the Benedek Stations, 'Wheel
of Fortune' on seven of the Benedek Stations and 'Jeopardy' on four of the
Benedek Stations. Additionally, the Company recently began broadcasting the
newly syndicated 'Home Improvement' on four of the Benedek Stations and
'Seinfeld' on three of the Benedek Stations. The Company broadcasts other
highly-rated first run syndicated programs on several of the Benedek
Stations including 'Live with Regis & Kathie Lee,' 'Ricki Lake' and 'Jenny
Jones.' A number of the Benedek Stations also broadcast other highly-rated
off-network syndicated programming including 'Cheers,' 'M*A*S*H' and
'Roseanne.' The Company believes that the programming mix of the Acquired
Stations can be improved on a cost effective basis. Of the 13 Acquired
Stations, one broadcasts 'The Oprah Winfrey Show,' three broadcast 'Wheel
of Fortune,' four broadcast 'Jeopardy,' four broadcast 'Home Improvement'
and two broadcast 'Seinfeld.' The Stauffer Stations also broadcast first
run and off-network syndicated programming including 'Live with Regis &
Kathie Lee,' 'Montel Williams,' 'Ricki Lake,' 'Jenny Jones' and 'Golden
Girls.' The Brissette Stations' first run and off-network syndicated
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programming includes 'Live with Regis & Kathie Lee,' 'Married . . . with
Children,' 'Roseanne' and 'Cheers.'
The Company seeks to acquire programs that are available on a cost
effective basis for limited licensing periods, allow scheduling
flexibility, complement each Station's overall programming mix and counter
competitive programming. The Company has been able to purchase syndicated
programming at attractive rates in part as a result of the limited
competition for such programming in the Company's markets. As a result of
the limited competition from other broadcasters purchasing syndicated
programming in the small and medium-sized markets served by the Company,
program expense as a percentage of net revenues for the Stations was 4.3%
and 4.1% in 1994 and 1995, respectively, as compared to approximately 9.1%
for all network-affiliated stations in 1994. In addition, the Company
believes that the programming mix of the Acquired Stations can be improved
on a cost effective basis.
LOCAL SALES EMPHASIS. Management's sales strategy focuses on
increasing the sale of local advertising by attracting new advertisers to
television and increasing the amount of advertising dollars being spent by
existing local advertisers. Management of the Company believes that its
leadership in local news and informational programming enhances its ability
to develop and attract local advertising expenditures. Management believes
that through local sales efforts it can stimulate local advertising
expenditures more readily than it can national advertising expenditures.
This enables the Company to react promptly to changes in the national and
local advertising climate and better maintain consistent operating cash
flows.
Trained and experienced sales personnel sell local advertising for the
Company in each of its markets. The Company focuses on local advertisers by
producing their commercials, producing news and informational programming
with local advertising appeal and sponsoring or co-promoting local events
and activities that give local advertisers unique value-added community
identity. Approximately 59% of Benedek Broadcasting's revenues in 1995 were
generated from local and regional advertisers. Local and regional revenues
at the Benedek Stations increased 44.5% from 1990 to 1994 compared to a
23.4% increase in the national spot television revenues of the Benedek
Stations during the same period.
FINANCIAL PLANNING AND CONTROLS. Management emphasizes strict control
of the Company's programming and operating costs as an important factor in
increasing broadcast cash flow. The Company continually seeks to identify
and implement cost savings opportunities. Furthermore, the Company
maintains a detailed budgeting process and reviews performance relative to
budget monthly with respect to both revenues and expenses, thereby enabling
management to react promptly to changes in market conditions. Management of
the Company believes that controlling costs is an essential factor in
achieving and maintaining profitability and that it can materially reduce
costs of the Stauffer Stations through its budgeting procedures. The
Company intends to continue to identify opportunities to increase operating
cash flow through its on-going strategic planning and budgeting process.
FUTURE ACQUISITIONS AND OPPORTUNITIES. The Company intends to pursue
additional acquisitions of broadcast television stations, primarily of
network-affiliated stations in small to medium-sized markets where the
Company believes it can successfully implement its operating strategy and
where such stations can be acquired on financially acceptable terms.
Additionally, a rule making proceeding is currently pending before the FCC
regarding possible relaxation of the local television duopoly rules. If
these rules are implemented, the Company intends to explore opportunities
to enter into local marketing agreements with other stations in markets
where it currently operates as well as in other markets.
NETWORK AFFILIATION OF THE STATIONS
Each of the Stations is affiliated with either ABC, CBS or NBC pursuant to
an affiliation agreement (an 'Affiliation Agreement'). Each Affiliation
Agreement provides the affiliated Station with the right to broadcast all
programs transmitted by the network with which the Station is affiliated. In
return, the network has the right to sell a substantial majority of the
advertising time during such broadcasts. In
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exchange for every hour that a Station elects to broadcast network programming,
the network pays the Station a specified fee, which varies with the time of day.
Typically, prime-time programming generates the highest hourly rates. Rates are
subject to increase or decrease by the network during the term of an Affiliation
Agreement, with provisions for advance notices and the right of termination by
the Station in the event of a reduction of rates.
Each of the Benedek Stations' network affiliation agreements currently runs
for a period of five to 10 years. WYTV, WBKO-TV, WTOK-TV and WHSV-TV, all of
which are ABC affiliates, each have a five-year affiliation agreement which
expires in 1999. KDLH-TV, WIFR-TV, KHQA-TV and WTVY-TV, all of which are CBS
affiliates, each have a ten-year affiliation agreement which expires in 2005 and
is automatically renewed for successive five-year terms, subject to either
party's right to terminate the agreement at the end of any term upon six months'
advance notice. WTAP-TV, an NBC affiliate, currently operates under a five-year
affiliation agreement which expires in 2000 and is automatically renewed for
successive terms, subject to either party's right to terminate the agreement at
the end of any term upon 12 months' advance notice.
Each of the Stauffer Stations' network affiliation agreements currently
runs for a period of five to 10 years. KMIZ(TV), an ABC affiliate, operates
under an affiliation agreement which expires in 2000 and is automatically
renewed for successive terms, subject to either party's right to terminate the
agreement at the end of its term upon 180 days' advance notice. All of the other
Stauffer Stations are CBS affiliates operating under affiliation agreements
which expire in 2005 and which automatically renew for successive terms, subject
to either party's right to terminate the agreement at the end of its term upon
six months' advance notice.
Each of the Brissette Stations' network affiliation agreements currently
runs for a period of 10 to 11 years. WMTV(TV), WWLP(TV) and WILX-TV, all of
which are NBC affiliates, each have an affiliation agreement which expires in
2006 and is automatically renewed for successive five-year terms, subject to
either party's right to terminate the agreement at the end of any term upon six
months' advance notice. Each of Brissette's CBS affiliates, WSAW-TV, WTRF-TV,
KAUZ-TV and KOSA-TV, are operating under affiliation agreements which expire in
2005 and which automatically renew for successive 10-year terms, subject to
either party's right to terminate the agreement upon six months' advance notice.
WHOI(TV), an ABC affiliate, currently operates under an affiliation agreement
which expires in 2005 and which does not provide for renewals.
In December 1995, the Company entered into new long-term affiliation
agreements with CBS effective retroactive to July 1, 1995 for three of the four
Benedek Stations that are CBS affiliates and agreed to extend the term of the
fourth CBS affiliate from 2004 to 2005. In connection with such arrangements,
CBS paid the Company bonus payments of $2.5 million in the fourth quarter of
1995 and $2.5 million in the first quarter of 1996. These payments will be
recognized as revenue by the Company at the rate of $0.5 million per year over
the ten-year period of the affiliation agreements. The Company also agreed with
CBS that, upon the consummation of the Acquisitions, the term of the affiliation
agreements of the Stauffer Stations that are CBS affiliates would be extended
from 2000 to 2005 and the term of the affiliation agreements of the Brissette
Stations that are CBS affiliates will be extended from 2004 to 2005.
In addition to its affiliation arrangements, the Company entered into
agreements with Fox to broadcast football games of the National Football
Conference ('NFC') of the National Football League and certain other Fox
programming in non-network time periods for the 1994 and 1995 broadcast seasons.
In 1995, the Company broadcast the NFC football games and other Fox programming
on KHQA-TV, WHSV-TV, WTOK-TV and WYTV. The Company believes that broadcasting
NFC football games increased its audience ratings during the times the games
were broadcast. Stauffer entered into similar agreements with Fox on behalf of
KCOY-TV and KMIZ(TV).
ADVERTISING SALES
Television station revenues are primarily derived from local, regional and
national advertising and, to a modest extent, from network compensation and
revenues from tower rentals and commercial production activities. Advertising
rates are based upon numerous factors including a program's
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popularity among the viewers an advertiser wishes to target, the number of
advertisers competing for the available time, the size and demographic
composition of a program's audience and the availability of competing or
alternative advertising media in the market area. Because broadcast television
stations rely on advertising revenue, declines in advertising budgets,
particularly in recessionary periods, adversely affect the broadcast industry
and as a result may contribute to a decrease in the revenues of broadcast
television stations. The Company seeks to manage its spot inventory efficiently
thereby maximizing advertising rates.
Local Sales. Approximately 59% of the gross revenues of the Benedek
Stations in 1995 came from local and regional advertisers. Local and regional
advertising is sold primarily by each Station's professional sales staff.
Typical local and regional advertisers include automobile dealerships,
retailers, local grocery chains, soft drink bottlers, state lotteries and
restaurants. The Company focuses on local advertisers by producing their
commercials, producing news and informational programming with local advertising
appeal and sponsoring or co-promoting local events and activities that give
local advertisers value-added community identity. The Company's management team
monitors sales plans and promotional activities and shares such information
among the Benedek Stations on a weekly basis.
National Sales. Approximately 27% of the gross revenues of the Benedek
Stations in 1995 came from national advertisers. Typical national advertisers
include automobile manufacturers, consumer goods manufacturers, communications
companies, fast food franchisors, national retailers and direct marketers.
National advertising time is sold through representative agencies retained by
Benedek Broadcasting, Stauffer and Brissette. Six of the Benedek Stations are
represented by Katz Communications, Inc. KDLH-TV retains Seltel, Inc. as its
national sales representative and WYTV and WTVY-TV retain Petry, Inc. as their
national sales representative. The Benedek Stations' national sales coordinators
actively assist their national sales representatives to induce national
advertisers to increase their national spot expenditures designated to the
Company's markets. All of the Stauffer Stations are represented by Petry, Inc.
Five of the Brissette Stations retain Harrington, Righter & Parsons, L.L.P. as
their national sales representative and the other three Brissette Stations are
represented by TeleRep, Inc.
RATING SERVICE DATA
All television stations in the United States are grouped into 211
television markets which are ranked in size according to the numbered television
households in such markets. Until recently, two national audience measuring
services, Arbitron Company ('Arbitron') and Nielsen, periodically published
reports on estimated audience for the television stations in the various
television markets throughout the country. Arbitron recently discontinued
providing such services. The audience estimates are expressed in terms of the
percentage of the total potential audience in a market viewing a particular
station (the station's 'rating') and of the percentage of households actually
viewing television (the station's 'share'). The ratings reports provide data on
the basis of total television households and selected demographic groupings in
15-minute or half-hour increments for a particular market. Nielsen calls each
specific geographic market a DMA. Arbitron called each specific geographic
market an Area of Dominant Influence ('ADI'). The geographic area covered by a
DMA generally corresponded to the geographic area covered by the corresponding
ADI. Every county in the continental United States is assigned to a DMA, and was
assigned to an ADI, of a specific television market on an exclusive basis. In
larger markets, ratings are determined by a combination of meters connected
directly to selected television sets (the results of which are reported on a
daily basis) and weekly diaries of television viewing prepared by the actual
viewers, while in smaller markets only weekly diaries are completed during four
separate four-week periods during the course of any year. These periods are
commonly known as 'sweeps periods.' All the Company's markets are measured
during these sweeps periods.
All television audience share and aggregate television audience information
contained in this Prospectus is based on data compiled from either Nielsen or
Arbitron surveys, depending on which service each of the Stations subscribed to.
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The following table sets forth certain information for each of the Stations
and the markets they serve:
<TABLE>
<CAPTION>
NUMBER OF
COMMERCIAL
STATIONS STATION
MARKET CALL NETWORK IN RANK IN STATION
MARKET AREA RANK LETTERS CHANNEL(C) AFFILIATION MARKET MARKET SHARE
- ---------------------------------------- ------ ---------- ------------ ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BENEDEK STATIONS
Youngstown, Ohio 95 WYTV 33 ABC 3 3 17%
Duluth, Minnesota and 134 KDLH-TV 3 CBS 3 2 19%
Superior, Wisconsin
Rockford, Illinois 136 WIFR-TV 23 CBS 4 1 19%
Quincy, Illinois and Hannibal, 158 KHQA-TV 7 CBS 2 1 26%
Missouri
Dothan, Alabama 172 WTVY-TV 4 CBS 3 1 29%
Panama City, Florida 159 WTVY-TV 4 CBS 4 3 12%
Bowling Green, Kentucky 181 WBKO-TV 13 ABC 2 1 36%
Meridian, Mississippi 182 WTOK-TV 11 ABC 3 1 32%
Parkersburg, West Virginia 184 WTAP-TV 15 NBC 1 1 29%
Harrisonburg, Virginia 201 WHSV-TV 3 ABC 1 1 29%
STAUFFER STATIONS
Santa Barbara, Santa Maria and 115 KCOY-TV 12 CBS 4 3 11%
San Luis Obispo, California
Topeka, Kansas 140 WIBW-TV 13 CBS 3 1 23%
Columbia and Jefferson City, 146 KMIZ(TV) 17 ABC 3 3 13%
Missouri
Casper and Riverton, Wyoming 192 KGWC-TV 14 CBS 3 2(e) 12%(e)
192 KGWL-TV(a) 5 CBS (d) (e) (e)
192 KGWR-TV(a) 13 CBS (d) (e) (e)
Cheyenne, Wyoming, Scottsbluff, 193 KGWN-TV 5 CBS 4 1(f) 20%(f)
Nebraska and Sterling, Colorado 193 KSTF-TV(b) 10 CBS (d) (f) (f)
193 KTVS-TV(b) 3 CBS (d) (f) (f)
BRISSETTE STATIONS
Madison, Wisconsin 83 WMTV(TV) 15 NBC 4 2 14%
Springfield and Holyoke, 102 WWLP(TV) 22 NBC 2 1 21%
Massachusetts
Lansing, Michigan 106 WILX-TV 10 NBC 4 2 15%
Peoria and Bloomington, Illinois 109 WHOI(TV) 19 ABC 4 3 16%
Wausau and Rhinelander, Wisconsin 131 WSAW-TV 7 CBS 3 1 26%
Wheeling, West Virginia and 138 WTRF-TV 7 CBS 2 2 20%
Steubenville, Ohio
Wichita Falls, Texas and 139 KAUZ-TV 6 CBS 4 3 14%
Lawton, Oklahoma
Odessa and Midland, Texas 149 KOSA-TV 7 CBS 4 2 15%
<CAPTION>
CABLE
MARKET AREA PENETRATION
- ---------------------------------------- -----------
<S> <C>
BENEDEK STATIONS
Youngstown, Ohio 72.3%
Duluth, Minnesota and 52.7%
Superior, Wisconsin
Rockford, Illinois 68.4%
Quincy, Illinois and Hannibal, 60.6%
Missouri
Dothan, Alabama 65.8%
Panama City, Florida 68.3%
Bowling Green, Kentucky 56.7%
Meridian, Mississippi 52.4%
Parkersburg, West Virginia 76.4%
Harrisonburg, Virginia 67.3%
STAUFFER STATIONS
Santa Barbara, Santa Maria and 85.7%
San Luis Obispo, California
Topeka, Kansas 73.1%
Columbia and Jefferson City, 59.7%
Missouri
Casper and Riverton, Wyoming 68.9%(e)
(e)
(e)
Cheyenne, Wyoming, Scottsbluff, 73.0%(f)
Nebraska and Sterling, Colorado (f)
(f)
BRISSETTE STATIONS
Madison, Wisconsin 61.5%
Springfield and Holyoke, 81.8%
Massachusetts
Lansing, Michigan 65.1%
Peoria and Bloomington, Illinois 71.3%
Wausau and Rhinelander, Wisconsin 50.6%
Wheeling, West Virginia and 76.4%
Steubenville, Ohio
Wichita Falls, Texas and 68.8%
Lawton, Oklahoma
Odessa and Midland, Texas 73.5%
</TABLE>
- ------------
(a) Satellite station of KGWC-TV.
(b) Satellite station of KGWN-TV.
(c) Channels 2 through 13 are broadcast over the very high frequency (VHF) band
of the broadcast spectrum and channels 14 through 69 are broadcast over the
ultra-high frequency (UHF) band of the broadcast spectrum.
(d) Satellite stations are not considered distinct stations in this market for
Nielsen purposes.
(e) Station Rank, Station Share and Cable Penetration information for KGWC-TV
includes data for satellite stations KGWL-TV, Lander, Wyoming and KGWR-TV,
Rock Springs, Wyoming, as reported by Nielsen.
(f) Station Rank, Station Share and Cable Penetration information for KGWN-TV
includes data for satellite stations KSTF-TV, Scottsbluff, Nebraska and
KTVS-TV, Sterling, Colorado, as reported by Nielsen.
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BENEDEK STATIONS
WYTV (ABC) YOUNGSTOWN, OHIO
Market Description. The Youngstown DMA consists of four counties, three of
which are in northeastern Ohio and one of which is in western Pennsylvania.
Youngstown is situated in northeastern Ohio along the Ohio/Pennsylvania border
within 65 miles of Cleveland, Ohio to the northwest and Pittsburgh, Pennsylvania
to the southeast. The Youngstown economy is historically based on processing of
pig iron and steel. While still part of a major steel producing area,
Youngstown's economy has diversified to include manufacturing, warehousing and
distribution companies. Some of the major employers in the area include the
Buick, Oldsmobile and Cadillac Division of General Motors Corporation, the
Packard Electric Corporation Division of General Motors Corporation, St.
Elizabeth's Medical Center, Western Reserve Care System and LTV Steel Tubular
Products Division of Republic Steel Works. This area is also the home of
Youngstown State University with approximately 16,000 students.
Station History and Characteristics. WYTV was originally licensed in 1953
to serve Youngstown, Ohio. The Youngstown market is ranked 95th in the United
States, with approximately 275,000 television households and a population of
approximately 694,000. This market has a cable penetration rate of 72.3%. WYTV
is broadcast on UHF channel 33 and is an ABC affiliate. The Company acquired
WYTV in 1983. The other local stations with which WYTV competes are also UHF
stations, one of which is an NBC affiliate and the other of which is a CBS
affiliate.
Station Performance. According to the 1995 Nielsen ratings reports, WYTV
was ranked number three in its market with a 6 rating and a 17% share of
households viewing television, as compared with a 6 rating and 19% share and a 6
rating and 19% share for the numbers one and two stations, respectively. As a
result of this relatively even market share distribution, WYTV maintains its
ability to sell advertising time at competitive rates. WYTV currently is the
number two ranked news station in this market and broadcasts three hours and 12
minutes of local news programming each weekday. WYTV's special value-added local
sales efforts in 1995 included the sale of a trip incentive package, the
publication of two four-color coupon brochures for local retailers that were
mailed to all homes in the Station's DMA, the development of vendor support for
the Station's local retail advertisers, the sale and production of four special
call-in programs, and the sponsorship of a year-long series of 30 second
announcements as well as 30 and 60 minute programs designed to create community
awareness of the role of the family in the 1990s and a season-long educational
program entitled 'Weatherschool' reaching approximately 20,000 students which,
in 1996, will include a computerized feature called Weather Net which will
provide additional sponsorship opportunities. WYTV's first run and off-network
syndicated programming includes 'Wheel of Fortune,' 'Jeopardy,' 'Roseanne,'
'Live with Regis & Kathie Lee' and 'Home Improvement.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WYTV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1991 1992 1993 1994 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenue growth over prior year.............................. 0.7% 18.1% 1.7% 19.2% 3.4%
Broadcast cash flow margin...................................... 33.0% 33.9% 32.5% 38.5% 37.8%
Station audience share.......................................... 18 16 18 18 17
Station rank in market.......................................... 3 3 3 3 3
</TABLE>
KDLH-TV (CBS) DULUTH, MINNESOTA AND SUPERIOR, WISCONSIN
Market Description. The Duluth-Superior DMA consists of 13 counties, seven
of which are in northeastern Minnesota, five of which are in northwestern
Wisconsin and one of which is in the upper peninsula of Michigan. Duluth,
Minnesota and Superior, Wisconsin are adjacent to each other and are
approximately 150 miles from Minneapolis, Minnesota. The Duluth-Superior
economy, historically based on mining and shipping, also includes the fishing,
food products, paper, education, medical, timber and tourism industries. Duluth
is one of the major United States ports from which iron ore, taconite, coal,
lumber, cement, grain, paper and chemicals are shipped. Prominent corporations
with facilities in the area include Minnesota Power, US West Communications,
Duluth, Missabe & Iron
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Range Railway Co., Louis Kemp Seafood Co., Lake Superior Paper Industries,
Potlatch Corporation, Boise Cascade, Burlington Northern Sante Fe Railway,
Georgia-Pacific Corporation, U.S. Steel, National Steel Pellet Co. and NorWest
Bank-Minnesota North. The region is also host to a number of colleges and
universities, including the University of Minnesota-Duluth ('UMD'), UMD Medical
School, College of St. Scholastica, Northland College and the University of
Wisconsin-Superior. In addition, the area's extensive forests and numerous lakes
have fostered a local tourism industry and attract thousands of tourists
annually who camp, hike, ski, fish and boat in hundreds of state and Federal
parks.
Station History and Characteristics. KDLH-TV was originally licensed in
1954 to serve the Duluth, Minnesota -- Superior, Wisconsin metropolitan area.
The Duluth-Superior market is ranked 134th in the United States, with
approximately 169,000 television households and a population of approximately
407,000. This market has a cable penetration rate of 52.7%. KDLH-TV is broadcast
on VHF channel 3 and is a CBS affiliate. The Company acquired KDLH-TV in 1985.
KDLH-TV competes with both an ABC and NBC affiliate which are also broadcast on
VHF channels.
Station Performance. According to the 1995 Nielsen ratings reports, KDLH-TV
was tied for the number two ranking in its market with a 6 rating and a 19%
share of households viewing television as compared with a 7 rating and 22% share
for the number one ranked station in the market and a 6 rating and 19% share for
the other number two station in the market. As a result of this relatively even
market share distribution, KDLH-TV maintains its ability to sell advertising
time at competitive rates. KDLH-TV currently is the number three ranked news
station in this market and broadcasts two hours and 25 minutes of local news
programming each weekday. KDLH-TV's special value-added local sales efforts in
1995 included the production and sale of live coverage of the Dyno-American
Birkebeiner cross country ski race, the introduction of a sales supportive, 16
page, four-color, glossy station magazine called 'Watch and Win Sweepstakes,'
the exclusive television sponsorship of the Duluth Bayfront Blues Fest which had
attendance of approximately 75,000, a special year-long incentive package for
local retailers and carriage of the Minnesota High School Hockey championship
games. KDLH-TV's first run and off-network syndicated programming includes
'Seinfeld,' 'Ricki Lake,' 'Jenny Jones,' 'COPS' and 'Cheers.' In January 1996,
KDLH-TV commenced broadcasting Fox Sports programming.
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
KDLH-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1991 1992 1993 1994 1995
------- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year.................. (5.5%) 8.7% 7.5% 15.5% (3.4%)
Broadcast cash flow margin.................................... 14.8% 23.1% 24.5% 30.8% 26.7%
Station audience share........................................ 23 24 23 24 19
Station rank in market........................................ 3 2 1 1 2
</TABLE>
WIFR-TV (CBS) ROCKFORD, ILLINOIS
Market Description. The Rockford DMA consists of five counties in northern
Illinois. Rockford is approximately 80 miles west of Chicago, Illinois. The
Rockford economy, historically centered on manufacturing, has recently
diversified with the growth of service-based industries such as insurance and
financial services. Nevertheless, manufacturing still represents the largest
source of private employment in Rockford, known as the 'Fastener Capital of the
World.' Prominent corporations with facilities located in the greater Rockford
area include Chrysler Corporation, Sundstrand Corporation, Ingersoll Milling
Machine Co., Barber-Colman Company, Newell Company, Elco Industries, Inc. and
Warner-Lambert Company. One of the largest employers in the service industry in
this area is Rockford Memorial Hospital. Other service industry employers in the
area include Pioneer Life Insurance Company, AMCORE Bank N.A., Aetna Life &
Casualty and Blue Cross/Blue Shield of Illinois. Additionally, United Parcel
Service completed construction of a major facility at the Rockford Airport in
late 1994, which functions as its distribution center for the entire mid-western
region of the United States.
Station History and Characteristics. WIFR-TV was licensed in 1965 to
Freeport, Illinois to serve the greater Rockford market. Rockford is the 136th
largest market in the United States, with
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approximately 164,000 television households and a population of approximately
417,000. This market has a cable penetration rate of 68.4%. WIFR-TV is broadcast
on UHF channel 23 and is a CBS affiliate. The Company acquired WIFR-TV in 1986.
There are three other licensed commercial television stations in the Rockford
market, of which two are UHF stations and one is a VHF station. Although the VHF
station's signal extends to a larger geographical area than any of the UHF
stations, including WIFR-TV, such area is outside the Rockford DMA and does not
impact audience ratings or shares within the DMA. The other three stations in
this market are affiliated with ABC, NBC and Fox.
Station Performance. According to the 1995 Nielsen ratings reports, WIFR-TV
was tied for the number one ranking in its market with a 5 rating and a 19%
share of households viewing television. WIFR-TV currently is the number one
ranked news station in this market and broadcasts three hours and fifteen
minutes of local news programming each weekday. WIFR-TV captured 30% of the
total television revenues available in its market in 1995 based upon a report by
an independent accounting firm using the most recent available data submitted by
all Rockford stations. WIFR-TV's special value-added local sales efforts in 1995
included three week-long 'Our Town' promotions, a winter sale-a-thon, a health
matters and family matters live line program and a season-long educational
program entitled 'Weatherschool.' WIFR-TV is also this market's Big Ten Football
and Basketball network station. WIFR-TV's first run and off-network syndicated
programming includes 'The Oprah Winfrey Show,' 'The Maury Povich Show,'
'Roseanne' and 'Inside Edition.' Beginning in 1996, WIFR-TV will add 'Doctor
Quinn, Medicine Woman' and 'Mad About You' to its syndicated programming
line-up.
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WIFR-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... (7.6%) 11.4% 6.6% 18.4% (3.1%)
Broadcast cash flow margin................................. 44.1% 46.0% 45.5% 50.1% 43.6%
Station audience share..................................... 21 23 24 24 19
Station rank in market..................................... 2 1 1 1 1
</TABLE>
KHQA-TV (CBS) QUINCY, ILLINOIS AND HANNIBAL, MISSOURI
Market Description. The Quincy-Hannibal DMA consists of 18 counties, eight
of which are in western Illinois, nine of which are in northeastern Missouri and
one of which is in southeastern Iowa. Quincy, Illinois and Hannibal, Missouri
are situated on opposite sides of the Mississippi River approximately 100 miles
northwest of St. Louis, Missouri. The Quincy-Hannibal economy is predominantly
agricultural. This market is considered one of the largest soybean, hog and corn
producing areas in the nation. Prominent corporations with facilities in this
market include Moorman Manufacturing Company, American Cyanamid Company,
Pillsbury, Inc., Quincy Soybean Co., Harris Corporation, Shaeffer Pen and
Buckhorn Rubber Products.
Station History and Characteristics. KHQA-TV was originally licensed in
1953 to serve the greater Quincy, Illinois-Hannibal, Missouri market. The
Quincy-Hannibal market is ranked 158th in the United States, with approximately
117,000 television households and a population of approximately 286,000. This
market has a cable penetration rate of 60.6%. KHQA-TV is broadcast on VHF
channel 7 and is a CBS affiliate. The Company acquired KHQA-TV in 1986. There is
one other station in this market, a NBC affiliate carried on a VHF channel.
Station Performance. According to the 1995 Nielsen ratings reports, KHQA-TV
was ranked number one in its market with an 8 rating and a 26% share of
households viewing television. KHQA-TV currently is the number two ranked news
station in this market and broadcasts two hours and 17 minutes of local news
programming each weekday. KHQA-TV's special value-added local sales efforts in
1995 included two local home shopping programs, a Mother's Day Get-A-Way
Give-A-Way promotion, a scholarship essay contest for high school students, a
Home for the Holidays promotion, a season-long educational program entitled
'Weatherschool' and a 'Weatherline,' which viewers can call to obtain local
forecasts. KHQA-TV's first run and off-network syndicated programming includes
'The Oprah Winfrey Show,' 'Wheel of Fortune,' 'Jeopardy,' 'Seinfeld' and
'Cheers.'
In 1993, the Quincy-Hannibal market was severely impacted by the flooding
of the Mississippi River. The flood adversely affected both local and national
advertising revenues of KHQA-TV during
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the second, third and fourth quarters of 1993. However, during the first quarter
of 1994, local and regional revenues returned to normal levels. During the
second and third quarters of 1993, the Station sponsored an on-going 'Flood Aid'
promotional campaign to raise financial support for flood victims and local
social service agencies assisting in flood relief throughout the Station's DMA.
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
KHQA-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... (13.7%) 5.4% (1.5%) 17.8% 2.7%
Broadcast cash flow margin................................. 40.0% 37.3% 30.1% 38.2% 33.3%
Station audience share..................................... 26 31 32 31 26
Station rank in market..................................... 1 1 1 1 1
</TABLE>
WTVY-TV (CBS) DOTHAN, ALABAMA AND PANAMA CITY, FLORIDA
Market Description. WTVY-TV is one of the few stations in the United States
that serves two DMAs. The Dothan DMA consists of six counties, five of which are
in southeastern Alabama and one of which is in southwestern Georgia. Dothan is
located approximately 80 miles southeast of Montgomery, Alabama and 65 miles
north of Panama City, Florida. The Panama City DMA consists of nine counties in
the middle of the Florida Panhandle.
The Dothan economy, historically agricultural, is currently evenly
distributed among the service, manufacturing and agricultural sectors. Dothan is
known as the 'Peanut Capital of the World.' Peanuts account for half of the
area's farm income, with cattle, poultry, corn, wheat, soybeans, cotton, fruits
and vegetables making up the other half. Prominent corporations with facilities
in the area include the Sony Corporation, Perdue Farms, Inc., General Electric
Company and AAA Cooper Transport Company. Dothan is also home to the area's
largest regional shopping mall, two regional hospitals and five educational
institutions offering collegiate, technical and vocational studies. The Dothan
DMA is also the site of the Fort Rucker United States Army Aviation Station.
Currently, the base is not on the government list of facilities to be closed,
but there can be no assurance that such status will not change in the future.
Panama City is the county seat of Bay County, Florida and is located on the
Gulf of Mexico at the mouth of St. Andrew's Bay. The Panama City economy is
heavily based on year-round tourism as a result of its affordability when
compared to other Florida beach areas. Prominent corporations in the area
include the Champion Paper Company and Stone Container Corporation, as well as
more than 100 other manufacturers. The Panama City DMA is also the site of the
Tyndall United States Air Force Base and the Coastal Systems Station of the
United States Navy. Currently these locations are not on the government list of
facilities to be closed, but there can be no assurance that such status will not
change in the future. In addition, Panama City has a foreign trade zone and deep
water port, rail transportation and easy access to Interstate-10, the
Jacksonville, Florida to New Orleans, Louisiana Interstate highway.
Station History and Characteristics. WTVY-TV, originally licensed in 1955
to serve the Dothan, Alabama metropolitan area, currently serves the DMAs of
Dothan, Alabama and Panama City, Florida. The Dothan market is ranked 172nd in
the United States, with approximately 86,000 television households and a
population of approximately 219,000, while the Panama City market is ranked
159th with approximately 110,000 television households and a population of
approximately 275,000. The Dothan market has a cable penetration rate of 65.8%
and the Panama City market has a cable penetration rate of 68.3%. If combined,
these two markets would rank as the 123rd largest market in the United States.
WTVY-TV is broadcast on VHF channel 4 and is a CBS affiliate. The Company
acquired WTVY-TV on March 31, 1995. WTVY-TV competes with two other stations in
the Dothan market, affiliates of ABC and Fox which broadcast on UHF channels. In
the Panama City market, WTVY-TV competes with three other commercial stations,
affiliates of ABC and NBC which broadcast on VHF channels and a Fox affiliate
which broadcasts on a UHF channel.
Station Performance. According to the 1995 Nielsen ratings reports, WTVY-TV
was ranked number one in the Dothan market with a 9 rating and a 29% share of
households viewing television. It was also ranked third in the Panama City
market with a 4 rating and a 13% share of households viewing
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television. WTVY-TV currently is the number one ranked news station in the
Dothan market and broadcasts four hours of local news programming each weekday,
including a new 6:00 a.m. to 7:00 a.m. news program added in August 1995.
WTVY-TV's special value-added local sales efforts in 1995 included the
production of a live call-in program entitled 'Health Matters' in which viewers
could speak with local doctors and hospital representatives, a weekly program
concerning local community affairs issues entitled 'Community Focus' and student
of the week news segments. WTVY-TV's first run and off-network syndicated
programming includes 'Wheel of Fortune' and 'Roseanne.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WTVY-TV (for all periods prior to March 31, 1995, the data pertains to the
operation of WTVY-TV under former ownership):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... (9.4%) (9.3%) 6.8% 21.4% (6.8%)
Broadcast cash flow margin................................. 47.1% 41.2% 33.5% 43.9% 34.4%
Station audience share(a).................................. 35 33 33 31 29
Station rank in market(a).................................. 1 1 1 1 1
</TABLE>
- ------------
(a) Station audience share and rank in market provided for Dothan, Alabama DMA
only.
WBKO-TV (ABC) BOWLING GREEN, KENTUCKY
Market Description. The Bowling Green DMA consists of seven counties in
southcentral Kentucky. Bowling Green is approximately 110 miles south of
Louisville, Kentucky and 60 miles north of Nashville, Tennessee. Bowling Green
lies between two different geographic regions: the 'Pennyroyal,' a rural area
where agriculture and mining are major factors in the economy, and the
'Bluegrass,' a region featuring rich soil and rolling hills on which some of the
most prominent thoroughbred horse farms in the world are located. Prominent
corporations with facilities in this area include Fruit of the Loom, General
Motors Corvette Assembly Division, the Holley Division of Coltec Industries,
Eaton Corporation, Lord Corporation, Pan American Mills, Inc., Country Oven
Bakery Division of Kroger Stores, Inc. and Hills Pet Products. Bowling Green is
also the home of Western Kentucky University with approximately 16,000 students
and 2,500 employees.
Station History and Characteristics. WBKO-TV was originally licensed in
1962 to serve southcentral Kentucky. The Bowling Green market is ranked 181st in
the United States, with approximately 68,000 television households and a
population of approximately 170,000. This market has a cable penetration rate of
56.7%. WBKO-TV is broadcast on VHF channel 13 and is an ABC affiliate. The
Company acquired WBKO-TV in 1983. The only other local commercial station
broadcasting in this market is a Fox affiliate which broadcasts on a UHF
channel. WBKO-TV also competes to some extent with three stations broadcasting
from Nashville, Tennessee.
Station Performance. According to the 1995 Nielsen ratings reports, WBKO-TV
was ranked number one in its market with a 10 rating and a 36% share of
households viewing television. WBKO-TV has been ranked first in this market
since its acquisition by the Company. WBKO-TV currently is the number one ranked
news station in this market and broadcasts three hours of local news programming
each weekday. WBKO-TV's special value-added local sales efforts in 1995 included
the sale and production of a number of live broadcasts of Western Kentucky
University basketball games, the sale and production of a men's and women's
Western Kentucky University basketball coaches show, a live 30 minute call-in
program on personal finance and a year-long series of news stories,
announcements and vignettes entitled 'Kids First' which emphasized positive news
about youth and their involvement in the Bowling Green community. WBKO-TV's
first run and off-network syndicated programming includes 'The Oprah Winfrey
Show,' 'Wheel of Fortune,' 'Live with Regis & Kathie Lee' and 'Home
Improvement.'
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<PAGE>
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WBKO-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... 11.7% (4.1%) 8.0% 17.5% 10.8%
Broadcast cash flow margin................................. 50.1% 47.8% 47.6% 49.4% 53.3%
Station audience share..................................... 39 39 40 39 36
Station rank in market..................................... 1 1 1 1 1
</TABLE>
WTOK-TV (ABC) MERIDIAN, MISSISSIPPI
Market Description. The Meridian DMA consists of seven counties, five of
which are in eastern Mississippi and two of which are in western Alabama.
Meridian is approximately 150 miles west of Montgomery, Alabama and 90 miles
east of Jackson, Mississippi. The Meridian economy, traditionally based on the
cattle and timber industries, has recently evolved into a medical and financial
hub for eastern Mississippi and western Alabama. In addition, Meridian's
favorable industrial climate has lured over 100 manufacturing plants to the
area, including Peavey Electronics Corporation, James River Corp., Avery
Dennison Stationery Products Division and the Delco-Remy Division of General
Motors. There are also many large hospitals in the area, including Rush
Foundation Hospital, East Mississippi State Hospital, Riley Memorial Hospital
and Jeff Anderson Regional Medical Center, which together employ over 3,800
individuals. Meridian is also site of the Meridian Naval Air Station, a United
States Naval training facility. Currently, the base is not on the government
list of facilities to be closed, but there can be no assurance that such status
will not change in the future. Additionally, property has recently been cleared
for a ground breaking of a long awaited regional mall to be built in Meridian.
The target date for completion of the mall is the fall of 1997.
Station History and Characteristics. WTOK-TV was originally licensed in
1953 to serve Meridian, Mississippi. The Meridian market is ranked 182nd in the
United States, with approximately 66,000 television households and a population
of approximately 173,000. This market has a cable penetration rate of 52.4%.
WTOK-TV is broadcast on VHF channel 11 and is an ABC affiliate. The Company
acquired WTOK-TV in 1988. The other two commercial stations in the market,
affiliates of NBC and CBS, are broadcast on UHF channels with considerably
smaller broadcast coverage than WTOK-TV. The CBS affiliate recommenced
broadcasting in April 1994 after ceasing operations in April 1992. In August
1995, the CBS and NBC affiliates entered into a local marketing agreement
pursuant to which the CBS affiliate would manage the NBC affiliate.
Station Performance. According to the 1995 Nielsen ratings reports, WTOK-TV
was ranked number one in its market with a 10 rating and a 32% share of
households viewing television. WTOK-TV has been ranked first in this market
since its acquisition by the Company. WTOK-TV currently is the number one ranked
news station in this market and broadcasts two hours and 49 minutes of local
news programming each weekday. WTOK-TV's special value-added local sales efforts
in 1995 included the production of a live call-in program on the subject of
health, the staging of a year-long series of 30 second announcements, news
features and programs aimed at increasing public awareness of the needs of
children in today's society and the production of several one hour 'Town
Meetings' on topics such as the needs of all levels of education in the Meridian
area and economic development in the Station's DMA. Additionally, a tie-in
advertising opportunity, combining television and direct mail through a full
color magazine, was distributed to 45,000 homes in the area in October 1995.
WTOK-TV's first run syndicated programming includes 'The Oprah Winfrey Show,'
'Sally Jesse Raphael' and 'Wheel of Fortune.'
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The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WTOK-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... (0.6%) 1.8% 7.0% 6.9% 3.4%
Broadcast cash flow margin................................. 43.1% 37.2% 39.4% 39.6% 38.4%
Station audience share..................................... 44 40 38 37 32
Station rank in market..................................... 1 1 1 1 1
</TABLE>
WTAP-TV (NBC) PARKERSBURG, WEST VIRGINIA
Market Description. The Parkersburg DMA consists of three counties, two of
which are in western West Virginia and one of which is in eastern Ohio.
Parkersburg is located at the confluence of the Little Kanawha and the Ohio
rivers, approximately 140 miles from Pittsburgh, Pennsylvania and approximately
75 miles from Charleston, West Virginia. The Parkersburg economy is evenly
distributed among the manufacturing and services sectors. A number of prominent
companies maintain facilities in the Parkersburg market, including E. I. du Pont
de Nemours & Co., General Electric Plastics, Shell Chemical, Ames Company,
Nashua Photo, Inc. and Schott Scientific Glass, Inc. The area is also home to
the Bureau of Public Debt, the printer for all United States government bonds,
as well as several regional educational institutions including West Virginia
University at Parkersburg, Ohio Valley College and Marietta College.
Station History and Characteristics. WTAP-TV was originally licensed in
1953 and is the only commercial television station licensed to serve the
Parkersburg market. The Parkersburg market is ranked 184th in the United States,
with approximately 61,500 television households and a population of
approximately 153,000. This market has a cable penetration rate of 76.4%.
WTAP-TV is broadcast on UHF channel 15 and is an NBC affiliate. The Company
acquired WTAP-TV in 1979. Other network affiliated stations, including one NBC
affiliate, located in Charleston, West Virginia and Columbus, Ohio are carried
on cable systems in Parkersburg, but are not part of the Parkersburg DMA.
Station Performance. According to the 1995 Nielsen ratings reports, WTAP-TV
had a 9 rating and a 29% share of households viewing television. WTAP-TV
currently broadcasts two hours and 35 minutes of local news programming each
weekday, including 30 minutes which were added in mid-1995. WTAP-TV's special
value-added local sales efforts in 1995 included a year-long series of news
features on outstanding community volunteers, the production of special high
school athlete of the week awards, a program entitled 'Prom Promise' focusing on
drug and alcohol prevention for high school students on prom night and a
three-day celebration of the 'Parkersburg Homecoming Festival.' WTAP-TV's first
run and off-network syndicated programming includes 'The Oprah Winfrey Show,'
'Wheel of Fortune,' 'Jeopardy,' 'Ricki Lake,' 'Home Improvement,' 'Seinfeld' and
'Live with Regis & Kathie Lee.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WTAP-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth over prior year......................... 10.7% 16.3% 11.1% 21.8% 10.4%
Broadcast cash flow margin................................. 36.4% 41.3% 44.3% 49.0% 48.2%
Station audience share..................................... 26 30 27 27 29
Station rank in market..................................... 1 1 1 1 1
</TABLE>
WHSV-TV (ABC) HARRISONBURG, VIRGINIA
Market Description. The Harrisonburg DMA consists of three counties, one of
which is in northwestern Virginia and two of which are in northeastern West
Virginia. Harrisonburg is located in the Shenandoah Valley between the
Appalachian and Blue Ridge Mountains, approximately 110 miles west of
Washington, D.C. and 110 miles northwest of Richmond, Virginia. The Harrisonburg
economy
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<PAGE>
has been growing rapidly over the past several years. Several prominent
companies have established regional operations in the Harrisonburg market,
including the Coors Brewing Company and R.R. Donnelly & Sons Co., Inc. Other
companies in this area include Rocco Turkey, Inc., WLR Foods, Inc., Tyson Foods,
Inc., Hershey Co., Owens-Brockway Plastics & Closures and Merck & Co., Inc.
Harrisonburg is also the home of James Madison University, the largest state
university in the Virginia University system with approximately 13,000 students.
Station History and Characteristics. Since its inception in 1953, WHSV-TV
has been the only VHF commercial television station serving the Harrisonburg
market. The Harrisonburg market is ranked 201st in the United States, with
approximately 40,000 television households and a population of approximately
103,000. This market has a cable penetration rate of 67.3%. WHSV-TV is broadcast
on VHF channel 3 and is an ABC affiliate. The Company acquired WHSV-TV in 1986.
The Station is also carried on a UHF translator on channel 64 in the adjacent
Charlottesville, Virginia market. The higher costs for advertising in
surrounding urban areas results in a competitive advantage for WHSV-TV in
attracting local advertising revenues.
Station Performance. According to the 1995 Nielsen ratings reports, WHSV-TV
had a 7 rating and a 29% share of households viewing television. WHSV-TV
currently broadcasts two hours and 45 minutes of local news programming each
weekday, including one hour which was added in October 1995. WHSV-TV's special
value-added local sales efforts in 1995 included production of a Fourth of July
'Sky Concert' and fireworks show, a weekly student-athlete of the week news
segment, a locally produced Friday night high school football wrap-up show
called 'The EndZone' and a holiday shopping program featuring local retailers.
WHSV-TV's first run and off-network syndicated programming includes 'The Oprah
Winfrey Show,' 'Wheel of Fortune,' 'Jeopardy,' 'Home Improvement' and 'Live with
Regis & Kathie Lee.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WHSV-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... 4.5% 5.2% 7.3% 4.6% (2.1%)
Broadcast cash flow margin................................. 55.5% 55.6% 57.4% 57.9% 53.4%
Station audience share..................................... 35 34 33 29 29
Station rank in market..................................... 1 1 1 1 1
</TABLE>
STAUFFER STATIONS
KCOY-TV (CBS) SANTA BARBARA, SANTA MARIA AND SAN LUIS OBISPO, CALIFORNIA
Market Description. The Santa Barbara - Santa Maria - San Luis Obispo DMA
consists of three counties on the southcentral coast of California. Santa Maria
is approximately 170 miles north of Los Angeles and 270 miles south of San
Francisco. The region has a stable economic base which includes agriculture,
transportation, oil, tourism and manufacturing. Prominent corporations with
facilities in the area include Raytheon Company, Delco Systems Operations,
Chevron USA, Santa Barbara Research (a subsidiary of the Hughes Corporation),
Applied Magnetics Corp. and Lockheed-Martin. The area is also site of the
Vandenberg United States Air Force Base with approximately 8,400 military, civil
service and civilian employees. Currently, the base is not on the government
list of facilities to be closed, but there can be no assurance that such status
will not change in the future. Additionally, the University of California at
Santa Barbara and California Polytechnic University, with an aggregate student
population of approximately 34,000, are located within this DMA.
Station History and Characteristics. KCOY-TV was originally licensed in
1964 to serve Santa Maria, California. The Santa Barbara - Santa Maria - San
Luis Obispo market is ranked 115th in the United States, with approximately
211,000 television households and a population of approximately 564,000. This
market has a cable penetration rate of 85.7%. KCOY-TV is broadcast on VHF
channel 12 and is a CBS affiliate. There are three other commercial stations in
this market, ABC and NBC affiliates which broadcast on VHF channels and an
independent station which broadcasts on a UHF
77
<PAGE>
<PAGE>
channel. Until recently, KCOY-TV was negatively impacted by the cable television
retransmission in Santa Barbara of KCBS, Los Angeles, California. However, in
September 1995, KCOY-TV was granted non-duplication protection against KCBS and
is now the only CBS affiliate whose programming is available on the Santa
Barbara cable system.
Station Performance. According to the 1995 Nielsen ratings reports, KCOY-TV
was ranked number three in its market with a 3 rating and an 11% share of
households viewing television compared to a 5 rating and 17% share and a 3
rating and 12% share for the numbers one and two stations, respectively. KCOY-TV
currently is the number two ranked news station in this market and broadcasts
two hours of local news programming each weekday. KCOY-TV's special value-added
local sales efforts in 1995 included a 12-month sponsorship of the close
captioning of newscasts, a three-week series entitled 'Child Lure' concerning
protecting children from abduction, a series of vignettes entitled 'Health
Minutes' providing important health information, publication of the 'KCOY
Weather Almanac' and the production of a Friday night high school football
program called 'High School Game Day.' KCOY-TV's first run and off-network
syndicated programming includes 'The Maury Povich Show,' 'Montel Williams' and
'Golden Girls.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
KCOY-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Net revenue growth (decline) over prior year..................................... (6.9%) 21.0% (16.2%)
Broadcast cash flow margin....................................................... 13.1% 22.8% 18.1%
Station audience share........................................................... 13 15 11
Station rank in market........................................................... 3 2 3
</TABLE>
WIBW-TV (CBS) TOPEKA, KANSAS
Market Description. The Topeka DMA consists of 14 counties in northeastern
Kansas. Topeka, the capital of Kansas, is located near the geographic center of
the United States, approximately 60 miles west of Kansas City, Missouri and 120
miles south of Omaha, Nebraska. This area's diversified economy includes
concentrations in the agriculture, manufacturing and service industries. Major
employers in this market include Goodyear Tire & Rubber Company, Payless
ShoeSource, Jostons Printing and Publishing, Hallmark Cards, Inc., Frito-Lay,
Inc., Burlington Northern Santa Fe Railway, Blue Cross/Blue Shield of Kansas,
Stormont-Vail Regional Medical Center and Menninger Hospital and School of
Psychiatric Medicine. The region is also home to several universities including
the University of Kansas, Kansas State University, Washburn University of Topeka
and Emporia State University, with an aggregate student population in excess of
60,000.
Station History and Characteristics. WIBW-TV was originally licensed in
1953 to serve Topeka, Kansas. The Topeka market is ranked 140th in the United
States with approximately 154,000 television households and a population of
384,000. This market has a cable penetration rate of 73.1%. WIBW-TV is broadcast
on VHF channel 13 and is a CBS affiliate. The other two commercial stations in
the market, affiliates of ABC and NBC, are broadcast on UHF channels with
smaller broadcast coverage than WIBW-TV.
Station Performance. According to the 1995 Nielsen ratings reports, WIBW-TV
was ranked number one in its market with a 6 rating and a 23% share of
households viewing television. WIBW-TV currently is the number one ranked news
station in this market and broadcasts two hours and 50 minutes of local news
programming each weekday. WIBW-TV's special value-added local sales efforts in
1995 included the sale of a trip incentive package, a long-term educational
program entitled 'Baby Your Baby' concerning prenatal care which included
vignettes, a live call-in program and a community charity baby shower, a weekly
segment and annual live call-in program on general health issues called 'To Your
Health,' a high school player of the week award and the sponsorship of the
'Bridal Fair,' 'Health & Fitness Expo' and 'Women's Show.' WIBW-TV's first run
syndicated programming includes 'Wheel of Fortune,' 'Montel Williams' and 'Star
Trek: Deep Space 9.'
78
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<PAGE>
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WIBW-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Net revenue growth (decline) over prior year...................................... 6.2% 13.4% (9.4%)
Broadcast cash flow margin........................................................ 30.7% 39.5% 31.7%
Station audience share............................................................ 28 28 23
Station rank in market............................................................ 1 1 1
</TABLE>
KMIZ(TV) (ABC) COLUMBIA AND JEFFERSON CITY, MISSOURI
Market Description. The Columbia-Jefferson City DMA consists of 13 counties
in central Missouri. Columbia and Jefferson City, approximately 30 miles apart,
are situated in the center of Missouri within 130 miles of Kansas City, Missouri
to the west and St. Louis, Missouri to the east. The Columbia-Jefferson City
economy is based primarily on education, health, insurance and agriculture.
Additionally, Jefferson City is the capital of Missouri adding governmental
employment to the economic base of the area that has been called a recession
resistant community due to its diversity and stable economy. Prominent
corporations with facilities in this market include Toastmaster, Inc., State
Farm Insurance Companies, Shelter Insurance Companies, Quaker Oats, Oscar Mayer
Foods Corporation, Scholastic Books, ABB Power T&D Company and A.B. Chance
Company. The area is also home to the University of Missouri, with approximately
24,000 students and 13,000 employees. In addition, the Fort Leonard Wood United
States Army Base and the Whitman United States Air Force Base are located within
this market. Currently, these locations are not on the government list of
facilities to be closed, but there can be no assurance that such status will not
change in the future.
Station History and Characteristics. KMIZ(TV) was originally licensed in
1971 to serve the Columbia-Jefferson City, Missouri area. The Columbia-Jefferson
City market is ranked 146th in the United States, with approximately 140,000
television households and a population of approximately 356,000. This market has
a cable penetration rate of 59.7%. KMIZ(TV) is broadcast on UHF channel 17 and
is an ABC affiliate. The two other commercial stations in the market, affiliates
of CBS and NBC, are broadcast on VHF channels.
Station Performance. According to the 1995 Nielsen ratings reports,
KMIZ(TV) was ranked number three in its market with a 4 rating and a 13% share
of households viewing television. KMIZ(TV) currently is the number three news
station in this market and broadcasts one hour and 30 minutes of local news
programming each weekday. KMIZ(TV)'s special value-added local sales efforts in
1995 included the sponsorship and live broadcast of the 'Fire in the Sky' Fourth
of July fireworks celebration, a year-long series of vignettes promoting the
efforts of local not-for-profit organizations entitled 'Leadership in Mid
Missouri,' production of live call-in programs on local college and professional
sports called 'Sports Line' and production of a special program on asthma in
conjunction with the American Lung Association. KMIZ(TV)'s first run and
off-network syndicated programming includes 'Live with Regis & Kathie Lee,'
'Home Improvement,' 'Seinfeld' and 'Married . . . With Children.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
KMIZ(TV):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Net revenue growth over prior year................................................ 4.4% 15.2% 17.1%
Broadcast cash flow margin........................................................ 17.3% 24.5% 24.2%
Station audience share............................................................ 12 12 13
Station rank in market............................................................ 3 3 3
</TABLE>
KGWC-TV (CBS) CASPER, WYOMING
KGWL-TV (CBS) LANDER, WYOMING
KGWR-TV (CBS) ROCK SPRINGS, WYOMING
Market Description. The Casper-Riverton DMA consists of six counties in
central Wyoming. Casper is located approximately 290 miles southeast of
Billings, Montana and 275 miles north of Denver, Colorado. The Casper economy,
historically centered on oil and agriculture, has recently
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diversified with the growth of its service sector. Major employers in the area
include the Wyoming Medical Center, Wotco, Inc, Conoco, True Oil & Affiliates
and Rissler McMurry. Casper is also home to Casper College and the University of
Wyoming-Casper, with an aggregate student population of approximately 4,500.
In order to properly serve the vast geographic area covered by the
Casper-Riverton DMA, KGWC-TV operates two satellite television stations, KGWL-TV
in Lander, Wyoming and KGWR-TV in Rock Springs, Wyoming. Lander is located in
Freemont County approximately 120 miles west of Casper. Rock Springs is located
in Sweetwater County approximately 165 miles southwest of Casper. The satellite
stations serve sparsely populated rural areas which lack the resources to
support full-service broadcast operations unrelated to the parent Station's more
populous communities.
Station History and Characteristics. KGWC-TV, originally licensed in 1980
to serve Casper, Wyoming, also serves Lander, Wyoming through satellite station
KGWL-TV and Rock Springs, Wyoming through satellite station KGWR-TV. The
Casper-Riverton market is ranked 192nd in the United States, with approximately
50,000 television households and a population of approximately 125,000. This
market has a cable penetration rate of 68.9%. KGWC-TV is broadcast on UHF
channel 14 and is a CBS affiliate. KGWL-TV, broadcast on VHF channel 5, and
KGWR-TV, broadcast on VHF channel 13, are operated as S-1 satellite stations
receiving all of their programming from KGWC-TV. KGWC-TV competes with two other
commercial stations in this market, an NBC affiliate which broadcasts on a VHF
channel and an ABC/Fox affiliate which broadcasts on a UHF channel.
Station Performance. According to the 1995 Nielsen ratings reports, KGWC-TV
was ranked number two in its market with a 3 rating and a 12% share of
households viewing television. KGWC-TV currently is tied for the number two news
ranking in this market and broadcasts one hour and five minutes of local news
programming each weekday. KGWC-TV's special value-added local sales efforts in
1995 included special coverage of the Powder River Rodeo Association Season
Finale Rodeo (the last stop on the National Finals Rodeo circuit) including
interviews, news segments and a 'Cutest Little Cowboy & Cowgirl' contest,
sponsorship of the local and state-wide 'Catch a Rising Star' talent contest,
sponsorship of the Classicfest, Karaoke Fest and Slam Fest, all part of a
special summer festival culminating with a Fourth of July celebration, and a
daily community events program entitled 'Wyoming Wake Up.' KGWC-TV's first run
syndicated programming includes 'Live with Regis & Kathie Lee,' 'Ricki Lake,'
'Jenny Jones' and 'Hard Copy.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
KGWC-TV (including its satellite stations):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1994 1995
------- ------ -------
<S> <C> <C> <C>
Net revenue growth (decline) over prior year.................................... (12.5%) 2.9% (27.0%)
Broadcast cash flow margin...................................................... (7.7%) 9.0% (15.0%)
Station audience share.......................................................... 16 11 12
Station rank in market.......................................................... 2 3 2
</TABLE>
KGWN-TV (CBS) CHEYENNE, WYOMING
KSTF-TV (CBS) SCOTTSBLUFF, NEBRASKA
KTVS-TV (CBS) STERLING, COLORADO
Market Description. The Cheyenne-Scottsbluff-Sterling DMA consists of the
three counties, two in southeastern Wyoming and one in western Nebraska.
Cheyenne, the state capital of Wyoming, is located approximately 100 miles north
of Denver, Colorado. The Cheyenne economy is supported primarily by government,
transportation, tourism, services and light manufacturing. Significant employers
in the area include Union Pacific Railroad, United Medical Center, Veteran's
Administration Hospital, Safecard and Frontier Oil Refinery. Cheyenne is also
home to the F. E. Warren United States Air Force Base, which employs more than
4,000 people in military and civilian capacities. Currently, the base is not on
the government list of facilities to be closed, but there can be no assurance
that such status will not change in the future.
In order to properly serve the Cheyenne-Scottsbluff-Sterling DMA, KGWN-TV
operates two satellite television stations, KSTF-TV in Scottsbluff, Nebraska and
KTVS-TV in Sterling, Colorado. Scottsbluff is located in Scotts Bluff County,
Nebraska approximately 100 miles northeast of Cheyenne.
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Sterling is located in Logan County, Colorado approximately 100 miles southeast
of Cheyenne. The satellite stations serve sparsely populated rural areas which
lack the resources to support full-service broadcast operations unrelated to the
parent Station's more populous communities.
Station History and Characteristics. KGWN-TV, originally licensed in 1954
to serve Cheyenne, Wyoming, also serves Scottsbluff, Nebraska through satellite
station KSTF-TV and Sterling, Colorado through satellite station KTVS-TV. Since
first going on the air, KGWN-TV has been the only home market station in the
city of Cheyenne and Laramie County. The Cheyenne-Scottsbluff-Sterling market is
ranked 193rd in the United States with approximately 50,000 television
households and a population of approximately 123,000. This market has a cable
penetration rate of 73.0%. KGWN-TV is broadcast on VHF channel 5 and is a CBS
affiliate. KSTF-TV, broadcast on VHF channel 10, and KTVS-TV, broadcast on VHF
channel 3, are operated as S-2 satellites receiving a substantial portion of
their programming from KGWN-TV. However, as S-2 satellites, KSTF-TV and KTVS-TV
broadcast some self-produced local programming which is not provided by KGWN-TV.
KGWN-TV competes with two other commercial stations in the Cheyenne market, a
satellite station of an ABC affiliate in Casper, Wyoming which broadcasts Fox
programming in Cheyenne, and a satellite station of an NBC affiliate, both of
which satellite stations broadcast on UHF channels. KSTF-TV competes with one
other commercial station in the Scottsbluff market, a satellite station of an
ABC affiliate which broadcasts on a VHF channel. KTVS-TV competes to some extent
with several stations broadcasting from Denver, Colorado.
Station Performance. According to the 1995 Nielsen ratings reports, KGWN-TV
was ranked number one in its market with a 5 rating and a 20% share of
households viewing television. KGWN-TV currently is the number one news station
in this market and broadcasts one hour and 10 minutes of local news programming
each weekday. KGWN-TV's special value-added local sales efforts in 1995 included
live and promotional coverage of Cheyenne Frontier Days, a 10-day western
celebration featuring the world's largest outdoor rodeo, live and promotional
coverage of the Laramie County Small Business Showcase, a daily five-minute
program highlighting local not-for-profit organizations and community activities
entitled '5 In The Morning' and the live broadcast of the 'Fire in the Sky'
Fourth of July celebration. KGWN-TV's first run syndicated programming includes
'Live with Regis & Kathie Lee,' 'Ricki Lake' and 'Jenny Jones.'
KSTF-TV has the largest television production facilities in western
Nebraska and broadcasts 12 local newscasts each week. KSTF-TV also produced a
variety of local specials in 1995 including the annual 'Crimestoppers Telethon,'
as well as extensive news coverage of such activities as the 'Oregon Trail Days'
and other local events.
KTVS-TV produces the only local news program in the Sterling area. KTVS-TV
broadcasts 12 local newscasts each week. KTVS-TV also broadcasts two
self-produced weekly programs, 'Government in Action,' focusing on government
and politics, and 'Plains Talk,' focusing on public service.
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
KGWN-TV (including its satellite stations):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Net revenue growth (decline) over prior year..................................... (7.7%) 12.1% (12.6%)
Broadcast cash flow margin....................................................... 19.6% 30.3% 22.4%
Station audience share........................................................... 24 22 20
Station rank in market........................................................... 1 1 1
</TABLE>
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BRISSETTE STATIONS
WMTV(TV) (NBC) MADISON, WISCONSIN
Market Description. The Madison DMA consists of 11 counties in southwestern
Wisconsin. Recent growth in the area has increased the population in the Madison
DMA, moving it from the 93rd largest market in 1991 to the 83rd largest market
in 1995. Madison, the Wisconsin state capital, is located in southcentral
Wisconsin, 150 miles north of Chicago, Illinois and 75 miles west of Milwaukee,
Wisconsin. The Madison economy is a diverse and stable balance of the
industrial, governmental and service sectors. Additionally, agricultural
production of corn, alfalfa, tobacco, oats, eggs, cattle, hogs and, of course,
dairy products have greatly contributed to further stability in the local
economy. Many of the country's leading insurance companies, including American
Family Mutual Insurance Group, CUNA Mutual Insurance Group and General Casualty
have facilities in Madison. Other prominent corporations with facilities in the
area include General Motors Corporation, Meriter Health Services, Oscar Mayer
Foods Corporation, Famous Footwear, Lands' End and Rayovac Corporation. Madison
is also home to the University of Wisconsin, with approximately 40,000 students.
Station History and Characteristics. WMTV(TV) was originally licensed in
1953 to serve Madison, Wisconsin. The Madison market is ranked 83rd in the
United States, with approximately 308,000 television households and a population
of approximately 775,000. This market has a cable penetration rate of 61.5%.
WMTV(TV) is broadcast on UHF channel 15 and is an NBC affiliate. There are three
other commercial television stations in the Madison DMA, a CBS affiliate which
broadcasts on a VHF channel and ABC and Fox affiliates which broadcast on UHF
channels.
Station Performance. According to the 1995 Nielsen ratings reports,
WMTV(TV) was tied for the number two ranking in its market with a 4 rating and a
14% share of households viewing television. WMTV(TV) currently is the number
three ranked news station in this market and broadcasts two hours and 19 minutes
of local news programming each weekday. WMTV(TV)'s special value-added local
sales efforts in 1995 included a weekly series of educational programs entitled
'Honor Roll,' the publication of five issues of a newspaper entitled 'Kids
Matter' distributed to approximately 27,000 grade school students featuring art
and literary works of local students, quarterly sponsorship of six web page
segments covering the Station's history, news, weather, sports, programming and
personality profiles, the sale of trip incentive packages, a season-long high
school football series entitled 'Game Day' and local coverage of University of
Wisconsin and other Big Ten conference basketball and football games. WMTV(TV)'s
first run syndicated programming includes 'Wheel of Fortune' and 'Live with
Regis & Kathie Lee.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WMTV(TV):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... (9.3%) 7.1% (3.8%) 10.4% 9.9%
Broadcast cash flow margin................................. 51.8% 49.3% 50.2% 51.3% 50.6%
Station audience share..................................... 14 15 13 13 14
Station rank in market..................................... 3 3 3 3 2
</TABLE>
WWLP(TV) (NBC) SPRINGFIELD AND HOLYOKE, MASSACHUSETTS
Market Description. The Springfield-Holyoke DMA consists of three counties
in midwestern Massachusetts running north to south between the New
Hampshire/Vermont and Connecticut state borders. Springfield is located in the
Pioneer Valley, approximately 25 miles north of Hartford, Connecticut and 85
miles east of Boston, Massachusetts. The Springfield economy has a diversified
industrial base. The area's most prominent employers include Massachusetts
Mutual Life Insurance Company, Milton Bradley, Inc., Monsanto Company, Friendly
Ice Cream Corporation, Spalding Sports Worldwide, Stanhome, Inc. and Baystate
Medical Center. Many universities and colleges are located in this region,
including, the University of Massachusetts, with a student population of
approximately
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23,000, Amherst College, Smith College and Mount Holyoke College. Springfield is
also the home of the Naismith Memorial Basketball Hall of Fame.
Station History and Characteristics. WWLP(TV) was originally licensed in
1953 to serve the greater Springfield area. Springfield-Holyoke is the 102nd
largest market in the United States, with approximately 242,000 television
households and a population of approximately 613,000. This market has a cable
penetration rate of 81.8%. WWLP(TV) is broadcast on UHF channel 22 and is an NBC
affiliate. The only other commercial television station in this market is an ABC
affiliate which also broadcasts on a UHF channel. WWLP(TV) also competes with a
CBS affiliate on a VHF channel and, to a lesser extent, a Fox affiliate on a UHF
channel both of which are broadcast from Hartford, Connecticut.
Station Performance. According to the 1995 Nielsen ratings reports,
WWLP(TV) was ranked number one in its market with an 7 rating and 21% share of
households viewing television. WWLP(TV) is the number one ranked news station in
this market and currently broadcasts four hours and 32 minutes of local news
programming each weekday. WWLP(TV)'s special value-added local sales efforts in
1995 included 'As Schools Match Wits,' the nation's longest running locally
produced quiz show in which area high school students compete academically, and
a home showcase by a local real estate agency providing viewers the opportunity
to shop for homes and real estate on television. WWLP(TV)'s first run syndicated
programming includes 'Wheel of Fortune,' 'Jeopardy' and 'Live with Regis &
Kathie Lee.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WWLP(TV):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... (19.8%) 14.2% (0.3%) 15.9% 6.0%
Broadcast cash flow margin................................. 50.2% 52.3% 50.1% 53.6% 52.3%
Station audience share..................................... 21 21 19 21 21
Station rank in market..................................... 1 1 1 1 1
</TABLE>
WILX-TV (NBC) LANSING, MICHIGAN
Market Description. The Lansing DMA consists of five counties in
southcentral Michigan. Lansing is the state capital of Michigan and is located
approximately 75 miles west of Detroit, Michigan. The Lansing economy, though
recently diversified, is still a stronghold of the automotive industry.
Prominent employers in the area include General Motors Corporation (Oldsmobile
Worldwide Headquarters), Meijer, Inc., Michigan Capital Healthcare and Michigan
National Bank. Additionally, there are many smaller companies, employing in
excess of 3,000 people, that provide auto parts to General Motors. Lansing is
also home to the largest university in Michigan, Michigan State University, with
more than 40,000 students and 12,000 faculty and staff.
Station History and Characteristics. WILX-TV was originally licensed in
1957 to Onondaga, Michigan. The Lansing market is ranked 106th in the United
States, with approximately 229,000 television households and a population of
approximately 589,000. This market has a cable penetration rate of 65.1%.
WILX-TV is broadcast on VHF channel 10 and is an NBC affiliate. WILX-TV competes
with three other commercial stations in this market, a CBS affiliate which also
broadcasts on a VHF channel and ABC and Fox affiliates which broadcast on UHF
channels.
Station Performance. According to the 1995 Nielsen ratings reports, WILX-TV
was ranked second in its market with a 4 rating and a 15% share of households
viewing television. WILX-TV is currently the number two ranked news station in
this market and broadcasts one hour and 27 minutes of local news programming
each weekday. WILX-TV's special value-added local sales efforts in 1995 included
the production of a series of live call-in programs entitled 'Ask the Mayor,'
production of the local broadcast of the Children's Miracle Network Telethon, a
season-long educational program entitled 'Weatherschool' and a 'Weatherline,'
which viewers can call for up-to-the-minute weather information. WILX-TV's first
run and off-network syndicated programming includes 'Seinfeld,' 'Live with Regis
& Kathie Lee,' 'Married . . . With Children' and 'Cheers.'
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The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WILX-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............. (17.4%) 1.1% (10.0%) 9.8% 9.2%
Broadcast cash flow margin............................... 54.6% 55.3% 47.7% 48.2% 48.7%
Station audience share................................... 19 18 17 14 15
Station rank in market................................... 2 2 2 2 2
</TABLE>
WHOI(TV) (ABC) PEORIA AND BLOOMINGTON, ILLINOIS
Market Description. The Peoria-Bloomington DMA consists of 10 counties
located in central Illinois. Peoria is located approximately 150 miles southwest
of Chicago, Illinois and 170 miles north of St. Louis, Missouri. The major
economic sectors in the area include agriculture, manufacturing and information
technology. Prominent employers in the greater Peoria area include Caterpillar,
Inc., State Farm Insurance, Saint Francis Medical Center, Diamond Star Motors
and Methodist Medical Center. This area is also home to Illinois State
University, with approximately 18,000 students and 3,100 employees, as well as
Bradley University and the University of Illinois School of Medicine.
Station History and Characteristics. WHOI(TV) was originally licensed in
1953 to serve Peoria, Illinois. The Peoria-Bloomington market is ranked 109th in
the United States, with approximately 225,000 television households and a
population of approximately 562,000. This market has a cable penetration rate of
73.1%. WHOI(TV) is broadcast on UHF channel 19 and is an ABC affiliate. There
are three other commercial stations in this market, affiliates of CBS, NBC and
Fox. All of these competitor stations are also broadcast on UHF channels.
Station Performance. According to the 1995 Nielsen ratings reports,
WHOI(TV) was ranked number three in its market with a 5 rating and a 16% share
of households viewing television as compared to a 6 rating and 22% share and a 5
rating and 18% share for the numbers one and two stations, respectively. As a
result of this relatively even market share distribution, WHOI(TV) maintains its
ability to sell advertising time at competitive rates. WHOI(TV) currently is the
number three ranked news station in this market and broadcasts two hours and 5
minutes of local news programming each weekday. WHOI(TV)'s special value-added
local sales efforts in 1995 included the sale and production of live broadcasts
of commercials from remote locations, local advertiser sponsorship of features
such as 'Athlete of the Week,' 'Person of the Week' and 'Stock Quotes' as well
as sponsorship of the close captioning of newscasts, an eight-week series
entitled 'Best in the Class' saluting the top high school graduates in the area
and a twice-weekly report entitled 'Health Segment' reporting the latest changes
in health care issues. WHOI(TV)'s first run and off-network syndicated
programming includes 'Live with Regis & Kathie Lee,' 'Home Improvement,'
'Married . . . With Children' and 'Golden Girls.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WHOI(TV):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... (18.7%) 5.8% (7.8%) 12.3% 1.0%
Broadcast cash flow margin................................. 44.9% 45.3% 45.3% 48.9% 48.8%
Station audience share..................................... 22 20 18 17 16
Station rank in market..................................... 1 2 3 3 3
</TABLE>
WSAW-TV (CBS) WAUSAU AND RHINELANDER, WISCONSIN
Market Description. The Wausau-Rhinelander DMA consists of 13 counties in
central Wisconsin bisected by the Wisconsin River. Wausau is approximately 90
miles west of Green Bay, Wisconsin and 180 miles east of Minneapolis, Minnesota.
The Wausau economy, historically based on the timber industry, has diversified
into the farming, manufacturing and service sectors. The area continues to be
one of the nation's leading producers of cheddar cheese and ginseng. Prominent
corporations with
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facilities in the greater Wausau area include Wausau Insurance Companies, Sentry
Insurance, Kolbe & Kolbe Millwork, Inc., Weyerhauser Co., Consolidated Papers,
Inc., Ore-Ida Foods, Inc., Marathon Cheese Corp. and Georgia-Pacific
Corporation. The area is also home to the University of Wisconsin-Stevens Point
with approximately 10,000 students and the University of Wisconsin-Marathon
Center with a student population of approximately 1,300.
Station History and Characteristics. WSAW-TV was originally licensed in
1954 to serve Wausau, Wisconsin. The Wausau-Rhinelander market is ranked 131st
in the United States, with approximately 173,000 television households and a
population of approximately 447,000. This market has a cable penetration rate of
50.6%. WSAW-TV is broadcast on VHF channel 7 and is a CBS affiliate. WSAW-TV
competes with affiliates of ABC and NBC which are also broadcast on VHF
channels.
Station Performance. According to the 1995 Nielsen ratings reports, WSAW-TV
was ranked number one in its market with a 7 rating and a 26% share of
households viewing television. WSAW-TV currently is the number one ranked news
station in the market and broadcasts two hours and 38 minutes of local news
programming each weekday. WSAW-TV's special value-added local sales efforts in
1995 included a program co-produced with a local newspaper entitled 'Behind The
Headlines,' live remote broadcasts of 'News 7 at Noon' from the Marathon County
Fair and the production and broadcast of a local fishing tips program. WSAW-TV's
first run and off-network syndicated programming includes 'Live with Regis &
Kathie Lee,' 'Home Improvement,' 'Full House' and 'Cheers.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WSAW-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... (6.5%) 11.6% (0.4%) 14.5% 9.4%
Broadcast cash flow margin................................. 48.1% 54.0% 53.6% 54.5% 53.6%
Station audience share..................................... 31 31 30 30 26
Station rank in market..................................... 1 1 1 1 1
</TABLE>
WTRF-TV (CBS) WHEELING, WEST VIRGINIA AND STEUBENVILLE, OHIO
Market Description. The Wheeling-Steubenville DMA consists of 12 counties,
six of which are in northwestern West Virginia and six of which are in eastern
Ohio. Located in the Ohio Valley, Wheeling and Steubenville are situated along
opposite sides of the Ohio River approximately 25 miles apart. Wheeling is
approximately 55 miles southwest of Pittsburgh, Pennsylvania and approximately
120 miles east of Columbus, Ohio. The area's economy, historically based on
heavy manufacturing, has diversified into the manufacturing, services and
advanced technology sectors. Prominent corporations with facilities in this
region include Wheeling Pittsburgh Steel Corporation, TIMET, Miles, Inc., PPG
Industries and Consolidation Coal Company. Wheeling is also home to the National
Technology Transfer Center, an independent organization formed to provide
private business and industry with a central access point for the knowledge and
data gathered by the Federal government's 100,000 research professionals.
Station History and Characteristics. WTRF-TV was originally licensed in
1953 to serve the Wheeling, West Virginia market. The Wheeling-Steubenville
market is ranked 138th in the United States, with approximately 157,000
television households and a population of approximately 391,000. This market has
a cable penetration rate of 76.4%. WTRF-TV is broadcast on VHF channel 7 and is
a CBS affiliate. There is one other commercial station in this market, an NBC
affiliate also broadcast on a VHF channel.
Station Performance. According to the 1995 Nielsen ratings reports, WTRF-TV
was ranked number two in its market with an 8 rating and an 20% share of
households viewing television compared to a 7 rating and a 22% share for the
number one station in the market. WTRF-TV currently is the number two ranked
news station in this market and broadcasts 57 minutes of local news programming
each weekday. WTRF-TV's special value-added local sales efforts in 1995 included
the sale of a trip incentive package, production of a live call-in program
entitled 'Health Fair Lifeline,' a weekly 30 minute
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educational program entitled 'Good News Network,' a weekly high school sports
update program called 'WTRF Sports Blitz' and the live broadcast of the Wheeling
'Fantasy of Lights Parade' and related festivities. WTRF-TV's first run and
off-network syndicated programming includes 'Live with Regis & Kathie Lee,'
'Home Improvement,' 'Married . . . With Children' and 'Roseanne.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
WTRF-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... (8.0%) 2.0% (6.0%) 10.9% 6.1%
Broadcast cash flow margin................................. 49.8% 50.8% 49.7% 48.2% 35.8%
Station audience share..................................... 26 24 24 24 20
Station rank in market..................................... 1 1 1 1 2
</TABLE>
KAUZ-TV (CBS) WICHITA FALLS, TEXAS AND LAWTON, OKLAHOMA
Market Description. The Wichita Falls-Lawton DMA consists of 18 counties,
12 of which are in northcentral Texas and six of which are in southwestern
Oklahoma. Wichita Falls is located in the cross timbers section of the North
Central Plains of Texas, approximately 60 miles south of Lawton, Oklahoma and
approximately 125 miles from Dallas, Texas and Oklahoma City, Oklahoma. The
Wichita Falls-Lawton economy, historically based on agriculture, ranching and
petroleum, also includes the manufacturing, transportation, tourism and service
industries. Prominent corporations with facilities in the area include the
Cryovac Division of W.R. Grace & Co., the Mechanics Tools Division of Stanley
Works, Levi Strauss & Company, PPG Industries and Goodyear Tire & Rubber Co. In
addition, in 1995 the Texas Department of Criminal Justice ('TDCJ') opened its
James V. Allred Unit in Wichita Falls adding approximately 875 jobs to the area.
The TDCJ has announced expansion plans for this Unit which is expected to create
an additional 200 local jobs. The area is also home to the Sheppard United
States Air Force Base which trains over 20,000 military, civilian and allied
students, annually. Currently, the base is not on the government list of
facilities to be closed, but there can be no assurance that such status will not
change in the future.
Station History and Characteristics. KAUZ-TV was originally licensed in
1953 to serve the Wichita Falls area. The Wichita Falls-Lawton market is ranked
139th in the United States, with approximately 155,000 television households and
a population of approximately 391,000. This market has a cable penetration rate
of 68.8%. KAUZ-TV is broadcast on VHF channel 6 and is a CBS affiliate. KAUZ-TV
competes with three other commercial stations in this market, ABC and NBC
affiliates which broadcast on VHF channels and a Fox affiliate which broadcasts
on a UHF channel.
Station Performance. According to the 1995 Nielsen ratings reports, KAUZ-TV
was ranked number three in its market with a 5 rating and a 14% share of
households viewing television as compared to a 6 rating and 19% share and a 5
rating and 16% share for the numbers one and two stations, respectively. KAUZ-TV
currently is the number three ranked news station in this market and broadcasts
two hours and 5 minutes of local news programming each weekday. KAUZ-TV's
special value-added local sales efforts in 1995 included a program entitled
'Youth of the Month' honoring outstanding young people in the community, the
production of a series entitled 'Texoma Farm and Ranch Report,' production of a
week-long series to educate viewers about threatening weather entitled
'Surviving Spring's Fury,' a season-long high school football program entitled
'Friday Night High School Football Update' and a local news insert entitled
'About the House' providing helpful hints to homeowners. KAUZ-TV's first run
syndicated programming includes 'The Oprah Winfrey Show,' 'Married . . . With
Children' and 'COPS.' Beginning in 1996, KAUZ-TV will add 'Wheel of Fortune' and
'Jeopardy' to its syndicated programming line-up.
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The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
KAUZ-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... (9.3%) 0.1% (4.8%) (0.6%) (4.1%)
Broadcast cash flow margin................................. 30.8% 29.8% 28.8% 27.5% 21.7%
Station audience share..................................... 18 17 17 17 14
Station rank in market..................................... 2 2 2 3 3
</TABLE>
KOSA-TV (CBS) ODESSA AND MIDLAND, TEXAS
Market Description. The Odessa-Midland DMA consists of 20 counties, 19 of
which are in southwestern Texas and one of which is in southeastern New Mexico.
Odessa, the largest city in the Permian Basin, is approximately 275 miles east
of El Paso, Texas and 350 miles west of Dallas, Texas. The Odessa-Midland
economy is historically based on the oil and gas industry. The area has recently
diversified into the manufacturing and industrial services sectors, although
ties to the energy sector remain very significant. Some of the major employers
in the area include Phillips Petroleum Company, Exxon Corporation, the Shell Oil
Co. Odessa Refinery, EVI-Highland Pump Company, Rexene Corporation, Ref-Chem
Corporation, Texas Instruments Inc. and Medical Center Hospital. Odessa is also
home to the University of Texas of the Permian Basin, Texas Tech University
Health Sciences Center at Odessa and Odessa College, with an aggregate student
enrollment of approximately 7,000.
Station History and Characteristics. KOSA-TV was originally licensed in
1956 to serve Odessa, Texas. The Odessa-Midland market is ranked 149th in the
United States, with approximately 137,000 television households and a population
of approximately 375,000. This market has a cable penetration rate of 73.5%.
KOSA-TV is broadcast on VHF channel 7 and is a CBS affiliate. There are three
other commercial stations in the market, ABC and NBC affiliates which broadcast
on VHF channels and a Fox affiliate which broadcasts on a UHF channel.
Station Performance. According to the 1995 Nielsen ratings reports, KOSA-TV
was tied for the number two ranking in its market with a 4 rating and a 15%
share of households viewing television as compared to a 5 rating and 17% share
for the number one station in the market and a 5 rating and 15% share for the
other number two station in the market. KOSA-TV currently is the number three
ranked news station in the market and broadcasts one hour and 21 minutes of
local news programming each weekday. KOSA-TV's special value-added local sale
efforts in 1995 included the sale of a trip incentive package, a weekly
student-athlete of the week news segment, production of a weekly program of
Hispanic music videos and local human interest stories entitled 'Tiempo Tejano,'
special advertising tie-in sweepstakes promotions providing viewers the chance
to win trips to Disney World, Las Vegas and a taping of Late Night with David
Letterman in New York City. KOSA-TV's first run and off-network syndicated
programming includes 'Live With Regis & Kathie Lee,' 'Married . . . With
Children' and 'Montel Williams.'
The following table sets forth certain historical data with respect to the
television advertising revenues and station rank and audience share data for
KOSA-TV:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue growth (decline) over prior year............... (13.6%) (0.2%) 1.5% 11.9% (9.0%)
Broadcast cash flow margin................................. 28.2% 34.9% 38.0% 38.1% 33.1%
Station audience share..................................... 20 18 17 18 15
Station rank in market..................................... 2 2 2 1 2
</TABLE>
COMPETITION
The principal methods of competition in television broadcasting are the
development of audience interest through programming and promotions and
competition in rates charged to advertisers. Broadcast television stations
compete for advertising revenues with other broadcast stations, cable
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television and all other advertising media in their market areas and generally
do not compete with stations in other markets. The Company has generally
acquired stations in markets where there are only a limited number of
over-the-air television stations competing for local viewership and for local
advertising revenues. In two of its markets, the Company owns the only local
television station. In four markets, the Company owns one of only two local
television stations. In seven markets, the Company owns one of three local
television stations. In eight markets, the Company owns one of four local
television stations. WTVY-TV competes with two other stations in the Dothan
market and with three other stations in the Panama City market.
Audience. Stations compete for audience on the basis of program popularity
which has a direct effect on advertising rates. A significant portion of the
Company's daily programming is supplied by the networks. In those time periods,
the Stations are totally dependent upon the performance of the networks'
programs in attracting viewers. Non-network time periods are programmed by the
Stations with local news and syndicated programs generally purchased for cash
and barter and, to a lesser extent, barter-only. The Stations also air sports,
public affairs and other entertainment programming.
The development of methods of television transmission of video programming
other than over-the-air broadcasting, and in particular the growth of cable
television, has significantly altered competition for audience in the television
industry. These other transmission methods can increase competition for a
broadcasting station by bringing into its market distant broadcasting signals
not otherwise available to the station's audience and also by serving as a
distribution system for non-broadcast programming distributed by the cable
system. As the technology of satellite program delivery to cable systems
advanced in the late 1970s, development of programming for cable television
accelerated dramatically, resulting in the emergence of multiple, national-scale
program alternatives and the rapid expansion of cable television and higher
subscriber growth rates. Historically, cable operators have not sought to
compete with broadcast stations for a share of the local news audience.
The FCC has authorized several entities to construct and launch satellites
to deliver DBS to homes from satellites. Two DBS companies provide nationwide
service, a third is expected to launch its satellite server in mid-1996, and MCI
Communications has acquired the right to launch a fourth DBS satellite server in
a joint venture with the parent of Fox. The FCC has also adopted rules which may
significantly increase the number of multipoint distribution service stations
('MDS') (i.e., video service distributed on microwave frequencies which can only
be received by special microwave antennae). These MDS stations have launched
service in several cities, and several telephone companies have also begun
offering MDS service. In addition, the FCC has proposed to authorize a 28 GHz
microwave cable service that will have the potential to provide up to 100
channels of video. The FCC is also licensing low power television stations which
are television stations with coverage areas much smaller than those served by
full power conventional television stations.
Current technology offers several different methods for transmitting
television signals with greatly improved definition, color rendition, sound and
wider screen picture. Collectively, these improvements are referred to as ATV,
with the most advanced type of transmission system being high definition
television. Intensive research and development efforts have achieved forms of
ATV that can be transmitted by existing terrestrial broadcasters in the United
States. A number of such proposed systems have been extensively tested by an
industry test center under the auspices of an Industry Advisory Committee
reporting to the FCC. Following such testing, the major proponents of the
competing systems agreed to combine their efforts to produce a single ATV
system, and these efforts resulted in technical standards that were submitted to
the FCC in 1995, and the FCC is now accepting comments on that standard. The
proposed standard will involve the broadcast of ATV on a separate television
channel from that used for conventional broadcasting and that channel may also
be used by broadcasters for data transmission and multi-channel transmission.
The FCC currently is determining whether and how to assign licenses to permit
television broadcasters to provide ATV services. The FCC has tentatively decided
to issue a second channel to each television broadcaster to permit it to provide
ATV during a transition period. At the end of the transition period, each
broadcaster would be required to return to the FCC one of these two channels.
This transition ultimately will permit broadcasters to provide higher quality
services to their viewers and may permit broadcasters to compete more
effectively with other digital video systems. However, constructing and
operating a
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second television channel will require a substantial capital outlay for all of
the Stations. The Company is unable to predict the effect that technological
changes will have on the broadcast television industry or the future results of
the Company's operations.
In addition, certain leaders in Congress and the Administration have
proposed legislation that would require broadcasters to (i) bid at auction for
ATV channels, potentially against other non-broadcast applicants, (ii) return
their analog channels on an expedited basis by 2005 to permit the old channels
to be reauctioned to new licensees and/or (iii) pay a fee for the use of the
second channel, starting either immediately or after 2005. These proposals, if
enacted, could affect the Company. First, auctions for ATV channels could
substantially increase the Company's up-front costs of converting to ATV and
would raise the possibility that the Company could be subject to additional
competition in its markets if it, or another licensee, is out-bid by a newcomer.
Second, an expedited transition period could require the Company to end analog
transmission before all its viewers (particularly those in the smaller markets
which the Company serves) have purchased ATV-compatible reception equipment. See
'Risk Factors -- Competition Within the Television Industry; Advanced
Television.'
Programming. Competition for programming involves negotiating with national
program distributors or syndicators which sell first run and rerun packages of
programming. The Stations compete against local broadcast stations for exclusive
access to first run product (such as 'The Oprah Winfrey Show,' 'Wheel of
Fortune' and 'Jeopardy') and for off-network reruns (such as 'Home Improvement,'
'Seinfeld' and 'Roseanne') in their respective markets. Cable systems generally
do not compete with local stations for programming, although various national
cable networks have acquired programs that would have otherwise been offered to
local television stations. Competition also occurs for exclusive news stories
and features.
Advertising. The Stations compete for advertising revenues with other
television stations in their respective markets, as well as with other
advertising media, such as newspapers, radio, magazines, outdoor advertising,
transit advertising, yellow page directories, direct mail and local cable
systems. Competition for advertising expenditures in the broadcasting industry
occurs primarily in individual markets. Generally, television broadcasting
stations in one market do not compete with stations in other market areas.
Management cannot predict the exact nature of the competition it will face
in any market since competing stations may change owners, affiliations and/or
programming focus at any time. The Company cannot predict the effect the changes
in legislation or technology, discussed herein, will have on its operations. In
certain markets, construction permits for new stations have been or may be
granted.
FEDERAL REGULATION OF TELEVISION BROADCASTING
Existing Regulation. Television broadcasting is subject to the jurisdiction
of the FCC, pursuant to the Communications Act. The Communications Act prohibits
the operation of television broadcasting stations except under a license issued
by the FCC and empowers the FCC to issue, renew, revoke and modify broadcasting
licenses, regulate the frequency and operating power of stations, determine
station location, regulate the equipment used by stations, adopt rules and
regulations to carry out the provisions of the Communications Act and to impose
certain penalties for violation of the Communications Act. The Communications
Act prohibits the assignment of a license or the transfer of control of a
licensee without prior approval of the FCC.
License Grant and Renewal. Television broadcasting licenses are usually
granted or renewed for the maximum allowable term of five years which will be
expanded to eight years under recently enacted legislation. The FCC may revoke a
license or renew a license for a period shorter than the maximum allowable term
if the FCC finds that the licensee has committed a serious violation of FCC
rules, has committed other violations which taken together would constitute a
pattern of abuse, or has otherwise failed to serve the public interest. At the
time the application is made for renewal of a television license, parties in
interest may file petitions to deny renewal, and such parties as well as members
of the public may comment upon the service the station has provided during the
preceding license term and urge
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denial of the application. Additionally, if an incumbent licensee fails to meet
the renewal standard, and if if does not show other mitigating factors
warranting a lesser sanction, the FCC then has the authority to deny the renewal
application and consider a competing application.
In the vast majority of cases, broadcast licenses are renewed by the FCC
even when petitions to deny are filed against broadcast license renewal
applications. All of the Stations are presently operating under five-year
licenses expiring on various dates from 1996 to 1999. Currently, WTAP-TV,
Parkersburg, West Virginia, WHSV-TV, Harrisonburg, Virginia, and WTRF-TV,
Wheeling, West Virginia and Steubenville, Ohio, have pending applications for
license renewal. The Company is not aware of any facts or circumstances that
might prevent any of the Stations from having its current license renewed at the
end of its respective term or which might prevent the license renewal for
WTAP-TV, WHSV-TV or WTRF-TV from being granted.
The Communications Act prohibits the assignment of a license or the
transfer of control of a license without prior approval of the FCC. Under the
Communications Act, no license may be held by a corporation of which more than
20% of the capital stock is owned of record, voted or subject to control by
aliens, and no corporation may hold the capital stock of another corporation
holding broadcast licenses if more than 25% of the capital stock of such parent
corporation is owned of record, voted or subject to control by aliens, unless
specific FCC authorization is obtained.
Multiple Ownership Restrictions. The FCC has promulgated a number of rules
designed to limit the ability of individuals and entities to own or have an
ownership interest above a certain level (an 'attributable interest,' defined
more fully below) in broadcast stations, as well as other mass media entities.
These rules include limits on the number of television stations that may be
owned both on a national and a local basis. On a national basis, FCC rules
generally limit any individual or entity from having attributable interests in
television stations with an aggregate audience reach exceeding 35% of all United
States households.
The FCC also limits the common ownership of broadcast stations with
overlapping service areas, combined local ownership of a newspaper and a
broadcast station and combined local ownership of a cable television system and
a broadcast television station. FCC rules currently allow an entity to have an
attributable interest in only one television station in a market. In approving
the Brissette acquisition, the FCC granted six-month waivers of that rule as it
pertains to the transmission signal overlap of (i) WIFR-TV, the Benedek Station
serving Rockford, Illinois, and WMTV(TV), the Brissette Station serving Madison,
Wisconsin; (ii) WYTV, the Benedek Station serving Youngstown, Ohio, and WTRF-TV,
the Brissette Station serving Wheeling, West Virginia and Steubenville, Ohio;
and (iii) WTAP-TV, the Benedek Station serving Parkersburg, West Virginia, and
WTRF-TV. These waivers will permit the Company to hold the Stations in question
for a six-month period after closing before divesting one of the two Stations
that do not comply with the duopoly rule in each instance. The FCC has a pending
proceeding, which it has committed to complete during 1996, that may result in
the liberalization of the duopoly rule to permit the Company to continue to own
all the Stations it currently owns as well as all of those it has received FCC
consent to acquire. There can be no assurance that the FCC will act to
liberalize the rule or that it will do so in time to avoid the Company's being
required to divest certain Stations in order to eliminate any signal overlap.
See 'Risk Factors -- Regulation by FCC.' Expansion of the Company's broadcast
operations in particular areas and nationwide will continue to be subject to the
FCC's ownership rules and any changes the FCC may adopt.
Under the FCC's ownership rules, if a purchaser of the Company's common
stock acquires an 'attributable' interest in the Company, a violation of FCC
regulations could result if that purchaser owned or acquired an attributable
interest in other media properties in a manner prohibited by the FCC's rules.
All officers and directors of a licensee, as well as stockholders who own 5% or
more of the outstanding voting stock of a licensee (either directly or
indirectly), will generally be deemed to have an attributable interest. For
certain institutional investors who exert no control or influence over a
licensee, the bench-mark is 10% or more of such outstanding voting stock before
attribution occurs. Under FCC regulations, debt instruments, non-voting stock
and certain limited partnership interests and voting stock held by non-majority
stockholders in cases in which there is a single majority stockholder are not
generally subject to attribution. The Company currently has a single
stockholder. In the event the Company no longer had a single majority
stockholder, minority interests would be deemed to be
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attributable interests. The FCC has initiated an inquiry into modifying several
of these attribution standards. It is unlikely that this inquiry will be
concluded before the end of 1996, and there can be no assurance that these rules
will be changed.
To the best of the Company's knowledge, no officer, director or stockholder
of the Company holds an interest in another radio or television station, cable
television system or daily newspaper that is inconsistent with the FCC's
ownership rules and policies.
Regulation of Broadcast Operations. Television broadcasters are subject to
FCC regulation in several other areas, including political broadcasting,
children's programming, obscene and indecent programming and equal employment
opportunities.
Candidates for Federal elective office have a right to buy advertising time
on television stations. Stations may also choose, but are not required, to carry
advertising by state or local candidates. When a station carries advertising by
one candidate (whether Federal, state, or local), the station must afford 'equal
time' for advertising by that candidate's opponent(s). During the last 45 days
of a primary campaign and the last 60 days of a general electlon campaign,
stations may not charge political candidates rates any higher than the rate
being charged to the most favored commercial advertiser during the same period.
These requirements can have the effect of reducing the revenues that a station
might otherwise earn during pre-election periods.
Television stations must serve the educational and informational needs of
children in their overall programming, and must air some programming
specifically designed to serve those needs. The programming obligation applies
to programs originally produced and broadcast for an audience of children 16
years of age and younger. Commercial time is limited to 10.5 minutes per hour on
weekends and 12 minutes per hour on weekdays for programs originally produced
and broadcast primarily for an audience of children 12 years of age and younger.
Television stations may not air obscene programming at any time, and may
not air indecent programming during the morning, afternoon and early evening.
Material is obscene if it appeals to viewers' prurient interests by depicting
sexual conduct in a patently offensive manner and lacks serious literary,
artistic, political or scientific value. Material is indecent if it describes in
patently offensive terms, sexual or excretory activities or organs.
Television stations must have an equal employment opportunity ('EEO')
policy that prohibits discrimination based on race, color, sex, religion or
national origin, and must establish EEO programs that encourage recruitment and
hiring of women and minorities. The FCC requires licensees to file regular
employment reports with the agency, recruit minority or female applicants for
vacancies, maintain records documenting the recruitment of women and minorities,
work with local organizations to identify female and minority job candidates,
and examine their sources of job referrals to determine if those sources are
effective in providing a station with female or minority applicants. The FCC
recently issued a notice of proposed rulemaking regarding its EEO rules, stating
that it hoped to make its EEO rules less burdensome (especially for small
stations).
In all of the foregoing areas, as well as in other matters that affect
operations and competition in the television broadcast industry, regulatory
policies are subject to change over time and cannot be fully predicted.
Proposed Legislation and Regulation. The Congress and the FCC currently
have under consideration, and may in the future adopt, new rules, regulations
and policies regarding a wide variety of matters which could, directly or
indirectly, affect the operation and ownership of the Stations. In addition to
the proposed changes set forth above, examples of such matters include policies
concerning eliminating certain cross-ownership restrictions, political
advertising and programming practices, flexible use of broadcast spectrum,
spectrum use fees, the standards to govern evaluation of television programming
directed toward children and violent and indecent programming. 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 the initiation of DBS, the continued
establishment of wireless cable systems and low power television stations and
the participation of telephone companies in the provision of video programming
by wire.
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Implementation of the Cable Act of 1992. The Cable Television Consumer
Protection and Competition Act of 1992 (the 'Cable Act') was enacted on October
5, 1992. The Cable Act imposes cable rate regulation, establishes cable
ownership limitations, regulates the relationships between cable operators and
their program suppliers, regulates signal carriage and retransmission consent
and regulates numerous other aspects of the cable television business.
The signal carriage, or 'must carry,' provisions of the Cable Act require
cable operators to carry the signals of local commercial and non-commercial
television stations and certain low power television stations. Systems with 12
or fewer usable activated channels and more than 300 subscribers must carry the
signals of at least three local commercial television stations. A cable system
with more than 12 usable activated channels, regardless of the number of
subscribers, must carry the signals of all local commercial television stations,
up to one-third of the aggregate number of usable activated channels of such
system. The Cable Act also includes a retransmission consent provision that
requires cable operators and other multi-channel video programming distributors
to obtain the consent of broadcast stations prior to carrying them in certain
circumstances. The must carry and retransmission consent provisions are related
in that a television station must elect once every three years either to waive
its right to mandatory, but uncompensated, carriage or to negotiate a grant of
retransmission consent to permit the cable system to carry the station's signal.
In April 1993, a three-judge panel of the United States District Court of
the District of Columbia upheld the constitutionality of the legislative
must-carry provisions. In June 1994, the Supreme Court ruled that the must-carry
provisions were 'content-neutral' and, thus, not subject to strict scrutiny and
that Congress's stated interests in preserving the benefits of free, off-air
local broadcast television, promoting the widespread dissemination of
information from a multiplicity of sources and promoting fair competition in the
market for television programming all qualify as important governmental
interests. The Court, however, remanded to the lower federal court with
instructions to hold further proceedings with respect to evidence that lack of
the must-carry requirements would harm free, off-air broadcasting. In 1995, the
lower court again upheld the constitutionality of must-carry requirements after
reviewing the required evidence. The Supreme Court recently agreed to review the
case again in the fall of 1996.
Under rules adopted to implement these must carry and retransmission
consent provisions, local broadcast stations were required to make their initial
elections of must carry or retransmission consent by June 17, 1993, effective
October 6, 1993. The next opportunity for election will be October 1, 1996,
effective January 1, 1997. Stations that failed to elect were deemed to have
elected carriage under the must carry provisions. Other issues addressed in the
FCC rules were market designations, the scope of retransmission consent and
procedural requirements for implementing the signal carriage provisions.
In 1993, the Company elected and negotiated retransmission consents with
all of the local cable systems which carry the signals of the Benedek Stations.
The Company has entered into agreements for each Benedek Station with all of
these cable system operators. All of these agreements grant such cable system
operators consent to retransmit the Benedek Station's signal. These
retransmission arrangements do not represent a significant source of revenue for
the Company. The terms of these retransmission agreements range from one to five
years. In 1993, each of Stauffer and Brissette also elected and negotiated
retransmission consents with all the local cable systems carrying the signals of
their respective Stations and each entered into agreements for its Stations
similar to the retransmission consent agreements entered into by the Company.
The Stations are currently negotiating with these operators to enter into longer
term agreements. The Company cannot predict the outcome of these negotiations.
In addition, although the Company expects to be able to renew its current
retransmission agreements when such agreements expire, there can be no assurance
that such renewals will be obtained.
EMPLOYEES
The Company currently employs approximately 1,277 full-time and 252
part-time employees, of which 12 are part of the Company's corporate
headquarters staff and the balance are employed at the Stations. Approximately
272 of the Company's employees located at WMTV(TV), WILX-TV, WHOI(TV), WTRF-TV,
KDLH-TV and WYTV are represented by labor unions under collective bargaining
agreements. The WYTV collective bargaining agreement expired in July 1996 and is
currently being
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renegotiated. The KDLH-TV, WMTV(TV), WILX-TV, WHOI(TV) and WTRF-TV collective
bargaining agreements expire at various times from 1996 through 1999. There are
no unionized employees at the remaining Stations. The Company believes that its
relationship with all of its employees, including those represented by labor
unions, is satisfactory.
PROPERTIES
The Company's principal executive offices are located in leased premises in
Rockford, Illinois.
The types of properties required to support each of the Stations include
offices, studios and tower and transmitter sites. A station's studio and office
are generally located in business districts while tower and transmitter sites
are generally located so as to provide maximum signal coverage to each market.
The following table contains certain information describing the general
character of the properties of the Company.
BENEDEK STATIONS
<TABLE>
<CAPTION>
MARKET AREA, STATION AND USE OWNED OR LEASED APPROXIMATE SIZE(A) HEIGHT/POWER EXPIRATION OF LEASE
- ---------------------------------- --------------- ------------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Youngstown, Ohio
WYTV
Office and Studio................. Owned 18,964 sq. ft. -- --
Tower/Transmitter Site............ Owned (b) 642 ft./550 kw --
Duluth, Minnesota and Superior,
Wisconsin
KDLH-TV
Office and Studio................. Owned 25,000 sq. ft.(c) -- --
Tower/Transmitter Site............ Owned 1,040 sq. ft. 811 ft./100 kw --
Rockford, Illinois
WIFR-TV
Office and Studio................. Owned 13,500 sq. ft. -- --
Tower/Transmitter Site............ Owned (b) 674 ft./562 kw --
Quincy, Illinois and
Hannibal, Missouri
KHQA-TV
Office and Studio................. Leased 13,120 sq. ft. -- (d)
Tower/Transmitter Site............ Owned 1,200 sq. ft. 804 ft./269 kw --
Dothan, Alabama and
Panama City, Florida
WTVY-TV
Office and Studio................. Leased 20,440 sq. ft. -- 12/31/02
Tower/Transmitter Site............ Owned 2,500 sq. ft. 1,880 ft./100 kw --
Bowling Green, Kentucky
WBKO-TV
Office and Studio................. Owned 17,598 sq. ft. -- --
Tower/Transmitter Site............ Owned 1,175 sq. ft. 603 ft./316 kw --
Meridian, Mississippi
WTOK-TV
Office and Studio................. Owned 13,188 sq. ft. -- --
Tower/Transmitter Site............ Owned 1,504 sq. ft. 316 ft./316 kw --
Parkersburg, West Virginia
WTAP-TV
Office and Studio................. Leased 17,500 sq. ft. -- 04/30/05(e)
Tower/Transmitter Site............ Owned 3,600 sq. ft. 439 ft./208 kw --
Harrisonburg, Virginia
WHSV-TV
Office and Studio................. Owned 6,720 sq. ft. -- --
Tower/Transmitter Site............ Leased 2,016 sq. ft. 337 ft./8.32 kw 12/31/01(f)
</TABLE>
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STAUFFER STATIONS
<TABLE>
<CAPTION>
MARKET AREA, STATION AND USE OWNED OR LEASED APPROXIMATE SIZE(A) HEIGHT/POWER EXPIRATION OF LEASE
- ------------------------------ --------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Santa Barbara, Santa Maria and
San Luis Obispo, California
KCOY-TV
Office and Studio............. Owned 18,000 sq. ft. -- --
Tower/Transmitter Site........ Leased 1,200 sq. ft. 140 ft./115 kw (g)
Topeka, Kansas
WIBW-TV
Office and Studio............. Leased 18,774 sq. ft.(h) -- 08/31/98
Tower/Transmitter Site........ Leased 2,338 sq. ft. 1,249 ft./316 kw 02/14/62
Columbia and Jefferson City,
Missouri
KMIZ(TV)
Office and Studio............. Owned 5,993 sq. ft. -- --
Tower/Transmitter Site........ Owned 875 sq. ft. 1,030 ft./1,580 kw --
Casper and Riverton,
Wyoming
KGWC-TV
Office and Studio............. Leased 6,827 sq. ft. -- 8/31/97
Tower/Transmitter Site........ Owned 1,692 sq. ft. 235 ft./60 kw --
Lander, Wyoming
KGWL-TV (satellite)
Tower/Transmitter Site........ Leased 768 sq. ft. 155 ft./30 kw 12/31/07
Rock Springs, Wyoming
KGWR-TV (satellite)
Tower/Transmitter Site........ Leased 400 sq. ft. 100 ft./12 kw 05/22/99
Cheyenne, Wyoming
KGWN-TV
Office and Studio............. Owned 7,500 sq. ft. -- --
Tower/Transmitter Site........ (i) 2,646 sq. ft. 620 ft./100 kw --
Scottsbluff, Nebraska
KSTF-TV (satellite)
Office and Studio............. Owned 2,400 sq. ft. -- --
Tower/Transmitter Site........ Owned 2,457 sq. ft. 674 ft./240 kw --
Sterling, Colorado
KTVS-TV (satellite)
Office and Studio............. Owned 3,750 sq. ft. -- --
Tower/Transmitter Site........ Owned 2,640 sq. ft. 730 ft./60.6 kw --
</TABLE>
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BRISSETTE STATIONS
<TABLE>
<CAPTION>
MARKET AREA, STATION AND USE OWNED OR LEASED APPROXIMATE SIZE(A) HEIGHT/POWER EXPIRATION OF LEASE
- ------------------------------ --------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Madison, Wisconsin
WMTV(TV)
Office and Studio............. Owned 16,485 sq. ft. -- --
Tower/Transmitter Site........ Owned (b) 1,040 ft./955 kw --
Springfield and Holyoke,
Massachusetts
WWLP(TV)
Office and Studio............. Owned 20,000 sq. ft. -- --
Tower/Transmitter Site........ Owned (b) 500 ft./342 kw --
Lansing, Michigan
WILX-TV
Office and Studio............. Owned 13,700 sq. ft. -- --
Tower/Transmitter Site........ Owned 5,000 sq. ft. 994 ft./309 kw --
Peoria and Bloomington,
Illinois
WHOI(TV)
Office and Studio............. Owned 16,900 sq. ft. -- --
Tower/Transmitter Site........ Owned (b) 640 ft./2,240 kw --
Wausau and Rhinelander,
Wisconsin
WSAW-TV
Office and Studio............. Owned 24,400 sq. ft. -- --
Tower/Transmitter Site........ Leased(j) 432 sq. ft. 650 ft./316 kw 08/01/02
Wheeling, West Virginia and
Steubenville, Ohio
WTRF-TV
Office and Studio............. Owned 43,872 sq. ft.(k) -- --
Tower/Transmitter Site........ Owned 2,000 sq. ft. 741 ft. /316 kw --
Wichita Falls, Texas and
Lawton, Oklahoma
KAUZ-TV
Office and Studio............. Owned 13,078 sq. ft. -- --
Tower/Transmitter Site........ Owned (b) 1,028 ft./100 kw --
Odessa and Midland, Texas
KOSA-TV
Office and Studio............. Owned 14,222 sq. ft. -- --
Tower/Transmitter Site........ Leased 930 sq. ft. 726 ft./316 kw 10/31/98
</TABLE>
--------------
(a) Approximate size is for building space only and does not include the land on
which the facilities are located.
(b) Tower/Transmitter Site is located at and included within the size of the
office and studio premises.
(c) The Company owns a building of approximately 55,000 sq. ft. in which the
offices and studio of KDLH-TV are located and of which approximately 30,000
sq. ft. are leased to third parties.
(d) The Company has an option to purchase the premises on each of May 1, 2000
and 2005 for $650,000 and $750,000, respectively.
(e) Occupied on a month-to-month basis.
(f) Occupied pursuant to a Special Use Permit granted by the United States
Department of Agriculture Forest Service.
(g) Occupied on a month-to-month basis pursuant to approval of the United States
Department of Agriculture Forest Service. This property was previously
occupied pursuant to a Special Use Permit. Currently the United States
Department of Agriculture Forest Service is revising certain provisions of
its form of Special Use Permit which would otherwise have been reissued to
Stauffer in the ordinary course of business. The Company has applied for and
anticipates that it will be issued a Special Use Permit with respect to this
property upon completion of the aforementioned revisions. However, there can
be no assurance that such a Special Use Permit will be issued in the future.
(h) The Company leases a building of approximately 23,837 sq. ft. in which the
offices and studio of WIBW-TV are located and of which approximately 5,063
sq. ft. are subleased to the Stauffer Topeka Radio Trust, which is
beneficially owned by Stauffer and operates radio stations WIBW AM and FM.
(i) This property is utilized subject to an easement granted by the State of
Wyoming.
(j) Leased together with TAK Communications from the Wisconsin Educational
Board.
(k) The Company owns a building of approximately 46,872 sq. ft. in which the
offices and studio of WTRF-TV are located and of which approximately 3,000
sq. ft. are leased to a third party.
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LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. The Company (including in its
capacity as successor to Brissette) is not currently a party to any lawsuit or
proceeding which, in the opinion of the Company, is likely to have a material
adverse effect on the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to each
director and executive officer of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ ------- -----------------------------------------------------------
<S> <C> <C>
A. Richard Benedek.................. 57 Chairman, Chief Executive Officer and Director
K. James Yager...................... 61 President and Director
Douglas E. Gealy.................... 36 Executive Vice President of Benedek Broadcasting
Ronald L. Lindwall.................. 51 Senior Vice President-Finance, Chief Financial Officer,
Treasurer, Secretary and Director
Terrance F. Hurley.................. 40 Senior Vice President of Benedek Broadcasting
Keith L. Bland...................... 40 Senior Vice President-Planning and Technology of Benedek
Broadcasting
Mary L. Flodin...................... 40 Vice President and Controller
Jay Kriegel......................... 55 Director
Paul S. Goodman..................... 42 Director
</TABLE>
Mr. A. Richard Benedek has been engaged in the television broadcasting
industry for over 15 years. Mr. Benedek is the Chairman and Chief Executive
officer of the Company. Mr. Benedek has served as Chairman and Chief Executive
Officer of Benedek Broadcasting since its formation in January 1979. From the
formation of Benedek Broadcasting until March 1995, Mr. Benedek also served as
President of Benedek Broadcasting. Additionally, Mr. Benedek has also served as
President and Chief Executive Officer of Blue Grass Television, Inc. ('Blue
Grass') and Youngstown Broadcasting Co., Inc. ('Youngstown') from their
formation in January 1980, and September 1982, respectively, until both were
merged into Benedek Broadcasting on March 10, 1995 (the 'Merger'). Prior to his
activities in the television broadcasting industry, Mr. Benedek was a partner in
the investment banking firm of Bear, Stearns & Co. Inc.
Mr. K. James Yager has been engaged in the television broadcasting industry
for over 35 years. Mr. Yager is the President of the Company. Mr. Yager has
served as President of Benedek Broadcasting since March 1995. From 1987 until he
became President, Mr. Yager served as Executive Vice President of Benedek
Broadcasting. Mr. Yager has also served as Vice President of each of Blue Grass
and Youngstown from 1990 and 1993, respectively, until the Merger. Mr. Yager was
employed by Cosmos Broadcasting from 1960 until 1980, including as general
manager of its television stations in Columbia, South Carolina and New Orleans,
Louisiana. From 1980 until 1986, Mr. Yager was Executive Vice President and
Chief Operating Officer of Spartan Radiocasting, which then owned three
television stations and four radio stations.
Mr. Douglas E. Gealy was recently hired in anticipation of the completion
of the Acquisitions to serve as Executive Vice President of Benedek
Broadcasting. Mr. Gealy was employed as Vice President and General Manager of
WCMH-TV, the NBC affiliate serving Columbus, Ohio which was owned by Outlet
Communications until February 1996. WCMH-TV was acquired by the National
Broadcasting Company in February 1996 at which time Mr. Gealy was promoted to
President of WCMH-TV. Prior thereto, Mr. Gealy was General Manager of WHOI-TV
(now a Brissette Station) from 1989 until 1991.
Mr. Ronald L. Lindwall is the Senior Vice President-Finance, Chief
Financial Officer, Secretary and Treasurer of the Company. Mr. Lindwall has also
held the same positions at Benedek Broadcasting since March 1995. From 1990
until March 1995, Mr. Lindwall served as Senior Vice President, Chief Financial
Officer and Treasurer of Benedek Broadcasting. Mr. Lindwall has also served as
Senior Vice President, Chief Financial Officer and Treasurer of each of Blue
Grass and Youngstown until the Merger. From 1982 to 1990, Mr. Lindwall was a
partner at the accounting firm of McGladrey & Pullen.
Mr. Terrance F. Hurley was recently promoted to Senior Vice President of
Benedek Broadcasting in anticipation of the completion of the Acquisitions. From
December 1995 until his promotion, Mr. Hurley served as Vice President/General
Manager of KDLH-TV serving Duluth, Minnesota and Superior,
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Wisconsin. Mr. Hurley also served as General Manager of KDLH-TV from October
1994 until December 1995 and General Sales Manager of KHQA-TV serving Quincy,
Illinois and Hannibal, Missouri from May 1993 until December 1995. From 1991
until May 1993, Mr. Hurley was employed by Dix Communications as the General
Sales Manager of KAAL-TV, serving Austin, Minnesota.
Mr. Keith L. Bland has been engaged in the television broadcasting industry
for over 22 years. Mr. Bland has served as Vice President-Planning and
Technology of Benedek Broadcasting since January 1996. From March 1995 until
January 1996, Mr. Bland served as Vice President and General Manager of WTAP-TV
serving Parkersburg, West Virginia. Mr. Bland also served as General Manager of
WTAP-TV from January 1990 until March 1995, General Sales Manager of WIFR-TV
serving Rockford, Illinois from September 1989 until January 1990 and
Local/Regional Sales Manager of WIFR-TV from July 1987 until September 1989.
Ms. Mary L. Flodin is the Vice President and Controller of the Company. Ms.
Flodin has also held the same positions at Benedek Broadcasting since 1990. From
1988 to 1990, Ms. Flodin served as Controller of Benedek Broadcasting. Ms.
Flodin has also served as Vice President and Controller of each of Blue Grass
and Youngstown from 1990 until the Merger. From 1983 to 1988, Ms. Flodin served
in various financial capacities as Vice President of AMCORE Financial, Inc.
Mr. Jay L. Kriegel has been engaged in the communications industry for over
20 years. Since March 1994, Mr. Kriegel has been a counsellor with the public
relations firm of Abernathy MacGregor Scanlon. From 1988 to 1994, Mr. Kriegel
was Senior Vice President of CBS Inc. Mr. Kriegel has served as a director of
Benedek Broadcasting since May 1994 and as a Director of the Company since its
inception.
Mr. Paul S. Goodman has been corporate counsel to the Company since 1983.
Since April 1993, Mr. Goodman has been a member of the law firm of Shack &
Siegel, P.C. From January 1990 to April 1993, Mr. Goodman was a member of the
law firm of Whitman & Ransom. Mr. Goodman has served as a director of Benedek
Broadcasting since November 1994 and as a Director of the Company since its
inception.
All directors hold office until their successors are duly elected and
qualify. Executive officers of the Company are appointed by the Board of
Directors and serve at the Board's discretion. Directors of the Company received
no cash compensation for such services to the Company during 1994. In 1995, the
Company paid each director who is not an employee of the Company $2,500 per
quarter and $500 per Board meeting for his services as a director. No family
relationship exists between any of the executive officers or directors of the
Company.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid to the Company's Chief Executive Officer and to each executive
officer whose aggregate compensation exceeded $100,000 during the fiscal years
ended December 31, 1995 and December 31, 1994. The amounts set forth in the
following table for 1994 include amounts paid to the listed executive officers
by Benedek Group, Inc., which was owned by Messrs. Benedek, Yager and Lindwall
and which provided management and accounting services to the Company during part
of 1994.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL
---------------------- OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(a)
- ----------------------------------------------------- ---- --------- -------- ------------------
<S> <C> <C> <C> <C>
A. Richard Benedek, Chairman and 1995 475,000 -- --
Chief Executive Officer 1994 450,000 -- --
K. James Yager, President 1995 344,950 -- 2,300
1994 307,550 -- 2,700
Ronald L. Lindwall, Senior Vice President-Finance, 1995 107,652 55,000 2,310
Chief Financial Officer, Secretary and Treasurer 1994 109,808 10,000 1,859
</TABLE>
- ------------
(a) Represents the amount of the Company's contribution under its 401(k) plan.
------------------------
The following table sets forth the value, at December 31, 1995, of options
to purchase common stock of Benedek Broadcasting held by the executive officers
named in the Summary Compensation Table above.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT FISCAL YEAR-END FISCAL YEAR-END
-------------------------------------------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------------------------- ----------------------------- ----------- -------------
<S> <C> <C> <C> <C>
K. James Yager.................. 7.78 -- $ 3,982,000(a) --
</TABLE>
- ------------
(a) The value of the options at December 31, 1995 is based upon a multiple of
operating cash flow. The Company believes this method of valuation is
reasonable because there is no public market for the shares underlying the
options and operating cash flow best represents the underlying value of
Benedek Broadcasting. The multiple chosen by the Company is based on
existing broadcast market conditions. All of Mr. Yager's options are
immediately exercisable. The foregoing options, in the aggregate, will
entitle Mr. Yager to acquire shares representing 5% of the outstanding
common stock of the Company, after giving effect to the issuance thereof
but prior to any dilution resulting from the exercise of any of the
Warrants.
EMPLOYMENT AGREEMENTS
Mr. Benedek is employed by Benedek Broadcasting pursuant to an employment
agreement that expires May 31, 2000. During the term of the agreement, Mr.
Benedek is to be paid at a rate per annum of not less than $525,000. The
employment agreement requires Mr. Benedek to devote substantially all of his
business time to the business of Benedek Broadcasting and precludes Mr. Benedek
from engaging in activities competitive with the business of Benedek
Broadcasting throughout the term of the employment agreement.
Mr. Yager is employed by Benedek Broadcasting pursuant to an employment
agreement that expires May 31, 2000. During the term of the agreement, Mr. Yager
is to be paid at a rate per annum of not less than $400,000. The employment
agreement requires Mr. Yager to devote his full time to the business of Benedek
Broadcasting and precludes Mr. Yager from engaging in activities competitive
with the business of Benedek Broadcasting throughout the term of the employment
agreement.
Mr. Gealy is employed by Benedek Broadcasting pursuant to an employment
agreement that expires April 30, 1999. Pursuant to the employment agreement, Mr.
Gealy is to be paid a base salary at the rate of $235,000 per annum through
April 30, 1997, $260,000 per annum from May 1, 1997 through April 30, 1998, and
$285,000 per annum from May 1, 1998 through April 30, 1999. The employment
agreement requires Mr. Gealy to devote his full time to the business of Benedek
Broadcasting and precludes Mr. Gealy from engaging in activities competitive
with the business of Benedek Broadcasting throughout the term of the employment
agreement and for a period of one year thereafter with respect to designated
market areas then served by a television station owned by Benedek Broadcasting.
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Mr. Lindwall is employed by Benedek Broadcasting pursuant to an employment
agreement that expires May 31, 1999. During the term of the agreement, Mr.
Lindwall is to be paid at a rate per annum of not less than $150,000. The
employment agreement requires Mr. Lindwall to devote his full time to the
business of Benedek Broadcasting.
Mr. Hurley is employed by Benedek Broadcasting pursuant to an employment
agreement that expires May 31, 1999. During the term of the agreement, Mr.
Hurley is to be paid at a rate per annum of not less than $150,000. The
employment agreement requires Mr. Hurley to devote his full time to the business
of Benedek Broadcasting and precludes Mr. Hurley from engaging in activities
competitive with the business of Benedek Broadcasting throughout the term of the
employment agreement and for a period of one year thereafter with respect to
designated market areas then served by a television station owned by Benedek
Broadcasting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Benedek, Yager and Lindwall, all of whom are executive officers of
the Company, serve as directors of the Company. Presently, the Company does not
have a compensation committee. Compensation for executive officers is
recommended to the Board of Directors by the Chief Executive Officer. In making
his compensation recommendations, the Chief Executive Officer considers several
criteria, including the Company's performance and growth, industry standards for
similarly situated companies and experience and qualitative performance of such
executive officers.
STOCK OWNERSHIP
Mr. Benedek owns 7,030,000 shares of Class B common stock of the Company,
representing all of its outstanding common stock.
Mr. Yager holds options to purchase 370,000 shares of common stock of the
Company for an aggregate purchase price of approximately $1.2 million. All of
Mr. Yager's options are immediately exercisable.
The Initial Warrants are exercisable for approximately 7.5% of the common
stock of the Company, on a fully-diluted basis, but excluding the Contingent
Warrants. The Contingent Warrants are exercisable for approximately 10.0% of
such common stock on a fully-diluted basis, including the Initial Warrants.
DESCRIPTION OF INDEBTEDNESS
CREDIT AGREEMENT
The Credit Agreement was entered into concurrently with the consummation of
the Acquisitions and the Financing Plan. The material terms of the Credit
Agreement are described below.
The Term Loan Facilities consist of (i) an AXELsSM Series A Facility of
$70.0 million and (ii) an AXELsSM Series B Facility of $58.0 million. The Term
Loan Facilities provide for quarterly amortization until final maturity (except
in the first year during which amortization will be on a semi-annual basis). The
AXELsSM Series A Facility will mature five years and the AXELsSM Series B
Facility will mature six and one-half years after the closing. Benedek
Broadcasting is required to make scheduled amortization payments on the Term
Loan Facilities, on an aggregate basis for AXELsSM Series A and Series B
Facilities, as follows: first year after closing, $6.0 million; second year
after closing, $11.0 million; third year after closing, $14.5 million; fourth
year after closing, $16.0 million; fifth year after closing, $27.5 million;
sixth year after closing, $15.0 million; and the first half of the seventh year
after closing, $38.0 million.
In addition, Benedek Broadcasting is required to make prepayments on the
Term Loan Facilities under certain circumstances, including upon certain asset
sales and issuance of debt or equity securities by the Company or Benedek
Broadcasting. Benedek Broadcasting is also required to make prepayments on the
Term Loan Facilities in an amount equal to 50% of Benedek Broadcasting's Excess
Cash Flow (as defined). These mandatory prepayments will be applied to prepay,
on a pro rata basis, the AXELsSM Series A and Series B Facilities. The AXELsSM
Series A Facility bear interest, at
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<PAGE>
Benedek Broadcasting's option, at a customary base rate plus a spread of 2.0% or
at a Eurodollar rate plus a spread of 3.0%. The AXELsSM Series B Facility bear
interest, at Benedek Broadcasting's option, at a customary base rate plus a
spread of 2.5% or at a Eurodollar rate plus a spread of 3.5%. The margins above
the customary base rate and the Eurodollar rate at which the Term Loan
Facilities and Revolving Credit Facility bear interest will be subject to
reductions at such times as certain leverage ratio performance tests are met.
Benedek Broadcasting has the ability, subject to a borrowing base and
compliance with certain covenants and conditions, to borrow up to an additional
$15.0 million for general corporate purposes pursuant to the Revolving Credit
Facility. The Revolving Credit Facility has a term of five years and is fully
revolving until final maturity. The Revolving Credit Facility will bear interest
when drawn upon, at Benedek Broadcasting's option, at a customary base rate plus
a spread or at a Eurodollar rate plus a spread.
The Term Loan Facilities and the Revolving Credit Facility are guaranteed
by the Company and are secured by certain of the Company's and Benedek
Broadcasting's present and future property and assets. The Term Loan Facilities
are also guaranteed by BLC and are secured by all of the stock of BLC.
The Term Loan Facilities and the Revolving Credit Facility contain certain
financial covenants applicable to the Company and Benedek Broadcasting,
including, but not limited to, covenants related to cash interest coverage,
fixed charge coverage, Bank Debt/EBITDA ratio, total debt/EBITDA ratio and
minimum EBITDA. In addition, the Term Loan Facilities and the Revolving Credit
Facility will contain other affirmative and negative covenants relating to
(among other things) liens, payments on other debt, restricted junior payments
(excluding distributions from Benedek Broadcasting to the Company) transactions
with affiliates, mergers and acquisitions, sales of assets, leases, guarantees
and investments. The Term Loan Facilities and the Revolving Credit Facility
contain customary events of default for highly-leveraged financings, including
certain changes in ownership or control of the Company.
Although the Credit Agreement does not limit the ability of Benedek
Broadcasting to pay dividends or make other payments to the Company, the Senior
Secured Note Indenture does contain such limitations. However, after giving
effect to the Transactions (assuming the contribution to the common equity of
Benedek Broadcasting of net cash proceeds of approximately $188.5 million from
the sale of the Notes, the Units and the Seller Junior Discount Preferred
Stock), as of December 31, 1995, Benedek Broadcasting could have distributed
approximately $188.5 million to the Company under such limitations.
SENIOR SECURED NOTES
Benedek Broadcasting currently has outstanding $135.0 million aggregate
principal amount of its 11 7/8% Senior Secured Notes due 2005, which were issued
in an exchange offer in December 1995. The Senior Secured Notes were issued in
exchange for all of Benedek Broadcasting's then outstanding 11 7/8% senior
secured notes (the 'Original Notes'). The Original Notes and the Senior Secured
Notes exchanged therefor were both issued pursuant to an indenture (the 'Senior
Secured Note Indenture') dated as of March 1, 1995, among Benedek Broadcasting,
the LLC and The Bank of New York, as trustee. The Senior Secured Notes are
senior secured obligations of Benedek Broadcasting and will rank pari passu in
right of payment with the Term Loan Facilities and Revolving Credit Facility
under the Credit Agreement. The Senior Secured Notes are currently guaranteed by
the LLC and, upon consummation of the Transactions, will be guaranteed by BLC
and the Company. The Senior Secured Notes will mature on March 1, 2005. The
Senior Secured Notes are redeemable at Benedek Broadcasting's option, in whole
or in part, at any time after March 1, 2000, at the following redemption prices
(expressed as percentages of the principal amount): if redeemed during the
12-month period commencing March 1 of (a) 2000, 105.938%; (b) 2001, 102.969%;
(c) 2002, 101.484%; and (d) 2003 and thereafter, 100.0%.
So long as the Senior Secured Notes remain outstanding, Benedek
Broadcasting will remain subject to the Senior Secured Note Indenture. The
Senior Secured Note Indenture contains covenants that, among other things, limit
(i) the issuance of additional indebtedness by Benedek Broadcasting, (ii) the
creation of liens on the assets of Benedek Broadcasting and its subsidiaries,
(iii) Benedek
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Broadcasting from entering into sale and leaseback transactions, (iv) the
issuance of debt and preferred stock by Benedek Broadcasting's subsidiaries, (v)
the payment of dividends on, and redemption of, capital stock of Benedek
Broadcasting and its subsidiaries and the redemption of certain subordinated
obligations of Benedek Broadcasting, (vi) investments in certain affiliates,
(vii) sales of assets and subsidiary stock, (viii) transactions with affiliates
and (ix) consolidations, mergers and transfers of all or substantially all of
Benedek Broadcasting's assets. The Senior Secured Note Indenture also prohibits
certain restrictions on distributions from subsidiaries. The Senior Secured Note
Indenture also contains certain customary events of default, which include the
failure to pay interest and principal, the failure to comply with certain
covenants in the Senior Secured Notes or the Senior Secured Note Indenture, a
default under certain indebtedness, the imposition of certain final judgements
or warrants of attachment and certain events occurring under bankruptcy laws.
In connection with the Transactions, all of the obligations of Benedek
Broadcasting under the Senior Secured Notes and the Senior Secured Note
Indenture were unconditionally guaranteed by the Company.
SENIOR SUBORDINATED DISCOUNT NOTES
Upon consummation of the Transactions, the Company issued its Senior
Subordinated Discount Notes due 2006 for gross proceeds of approximately $90.2
million. Although for Federal income tax purposes a significant amount of
original issue discount, taxable as ordinary income, will be recognized by a
holder thereof as such discount accretes, no interest will accrue on the Senior
Subordinated Discount Notes prior to May 15, 2001. The Senior Subordinated
Discount Notes were issued pursuant to an indenture (the 'Senior Subordinated
Discount Note Indenture'), among the Company and United States Trust Company of
New York, as trustee. The Senior Subordinated Discount Notes are senior
subordinated, unsecured obligations of the Company. The payment of principal of,
premium (if any), interest and all other obligations in respect of the Senior
Subordinated Discount Notes are subordinated in right of payment to the prior
payment in full in cash or cash equivalents of all Senior Debt of the Company,
including the Company's guarantee of the obligations of Benedek Broadcasting
under the Credit Agreement and the Senior Secured Notes. The Senior Subordinated
Discount Notes will rank pari passu with all other senior subordinated
indebtedness of the Company which may be incurred in the future. The Senior
Subordinated Discount Notes will mature on May 15, 2006 and will be redeemable
at the Company's option, in whole or in part, at any time after May 15, 2000, at
specified redemption prices. In addition, at any time prior to May 15, 1999, the
Company may redeem the Senior Subordinated Discount Notes in part and from time
to time, with the net proceeds of certain equity offerings or investments;
provided, that at least 75% of the initial aggregate principal amount of the
Senior Subordinated Discount Notes remains outstanding after each such
redemption.
The Senior Subordinated Discount Note Indenture contains covenants that,
among other things, limit (i) the issuance of additional indebtedness by the
Company and its subsidiaries, (ii) the Company and its subsidiaries from
entering into sale and leaseback transactions, (iii) the payment of dividends
on, and redemption of, capital stock of the Company and its subsidiaries and the
redemption of certain subordinated obligations of the Company, (iv) investments
in certain affiliates, (v) the creation of limitations on the payment of
dividends and other distributions on the capital stock of its subsidiaries, (vi)
sales of assets and subsidiary stock and (vii) transactions with affiliates. The
Senior Subordinated Discount Note Indenture also prohibits certain
consolidations and mergers and contains customary events of default, which
include the failure to pay interest and principal, the failure to comply with
certain covenants, acceleration of certain indebtedness, the imposition of
certain final judgments and certain bankruptcy events.
The Company has filed a registration statement on Form S-4 relating to a
registered exchange offer for the Senior Subordinated Discount Notes (the
'Senior Subordinated Discount Notes Exchange Offer'). The Company anticipates
that the registration statement relating to the Senior Subordinated Discount
Notes Exchange Offer will be declared effective shortly before or
contemporaneously with the Registration Statement relating to the Exchange Offer
made hereby. Additionally, the Company anticipates that the Senior Subordinated
Discount Notes Exchange Offer will (i) take place contemporaneously, in whole or
in part, with the Exchange Offer and (ii) expire shortly before or on the
expiration date of the Exchange Offer.
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DESCRIPTION OF THE EXCHANGEABLE
PREFERRED STOCK AND EXCHANGE DEBENTURES
EXCHANGEABLE PREFERRED STOCK
The summary contained herein of certain provisions of the Existing
Exchangeable Preferred Stock and the Exchange Securities to be issued by the
Company does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Certificate of
Designation for the Exchangeable Preferred Stock. A copy of the Certificate of
Designation is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The definitions of certain capitalized terms used in the
following summary are set forth under ' -- Certain Definitions' below. Other
capitalized terms used herein and not otherwise defined under ' -- Certain
Definitions' below are defined in the Certificate of Designation.
GENERAL
At the consummation of the Exchange Offer, the Company will issue up to
600,000 shares of preferred stock, $0.01 par value per share, designated as
'15.0% Exchangeable Redeemable Senior Preferred Stock due 2007'. Subject to
certain conditions, the Exchangeable Preferred Stock will be exchangeable for
the Exchange Debentures at the option of the Company on any dividend payment
date on or after the Issue Date. The Exchange Securities, when issued in
accordance with the terms of the Exchange Offer, will be fully paid and
nonassessable and the holders thereof will not have any subscription or
preemptive rights in connection therewith. 1.48 Contingent Warrants, each to
acquire one share of Class A Common Stock of the Company, trade together with
each share of Exchangeable Preferred Stock. The Contingent Warrants will become
exercisable only in the event the Exchangeable Preferred Stock or Exchange
Debentures, as the case may be, are not redeemed on or prior to the Contingent
Warrant Release Date. The Contingent Warrants are exercisable for approximately
10% of the Common Stock of the Company on a fully-diluted basis, including the
Initial Warrants. The Contingent Warrants, if released on the Contingent Warrant
Release Date, will not trade separately from the Exchangeable Preferred Stock or
the Exchange Debentures, as the case may be, until such date. See 'Description
of the Warrants.'
RANKING
The Exchangeable Preferred Stock, with respect to dividend rights and
rights on liquidation, winding-up and dissolution, ranks (i) senior to all
classes of common stock and to each other class of Capital Stock or series of
Preferred Stock established hereafter by the Board of Directors of the Company
the terms of which do not expressly provide that it ranks senior to, or on a
parity with, the Exchangeable Preferred Stock as to dividend rights and rights
on liquidation, winding-up and dissolution of the Company (collectively referred
to, together with all classes of common stock of the Company, as 'Junior
Stock'); (ii) subject to certain conditions, on a parity with each other class
of Capital Stock or series of Preferred Stock established hereafter by the Board
of Directors of the Company, the terms of which expressly provide that such
class or series will rank on a parity with the Exchangeable Preferred Stock as
to dividend rights and rights on liquidation, winding-up and dissolution
(collectively referred to as 'Parity Stock'); and (iii) subject to certain
conditions, junior to each class of Capital Stock or series of Preferred Stock
established hereafter by the Board of Directors of the Company, the terms of
which expressly provide that such class or series will rank senior to the
Exchangeable Preferred Stock as to dividend rights and rights upon liquidation,
winding-up and dissolution of the Company (collectively referred to as 'Senior
Stock'). The Company may not authorize any new class of Parity Stock or Senior
Stock without the approval of the holders of at least two-thirds of the shares
of Exchangeable Preferred Stock then outstanding, voting or consenting, as the
case may be, as one class. All claims of the holders of the Exchangeable
Preferred Stock, including without limitation, claims with respect to dividend
payments, redemption payments, mandatory repurchase payments or rights upon
liquidation, winding-up or dissolution, shall rank junior to the claims of the
holders of any debt of the Company and all other creditors of the Company.
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DIVIDENDS
Holders of the outstanding shares of Exchangeable Preferred Stock are
entitled to receive, when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefor, cash dividends on the
Exchangeable Preferred Stock at a rate per annum equal to 15.0% of the then
effective liquidation preference per share of Exchangeable Preferred Stock,
payable quarterly (each such quarterly period being herein called a 'Dividend
Period'). In the event that, after July 1, 2001, dividends on the Exchangeable
Preferred Stock are in arrears and unpaid for four or more Dividend Periods
(whether or not consecutive), holders of Exchangeable Preferred Stock will be
entitled to certain voting rights. See ' -- Voting Rights' below. All dividends
will be cumulative, whether or not earned or declared, on a daily basis from the
Issue Date and will be payable quarterly in arrears on January 1, April 1, July
1, and October 1, of each year (each a 'Dividend Payment Date'), commencing on
July 1, 1996 to holders of record on the December 15, March 15, June 15 and
September 15, immediately preceding the relevant Dividend Payment Date.
If any dividend payable on any Dividend Payment Date on or before July 1,
2001, is not declared or paid in full in cash on such Dividend Payment Date, the
amount payable as dividends on such Dividend Payment Date that is not paid in
cash on such Dividend Payment Date will be added automatically to the
liquidation preference of the Exchangeable Preferred Stock on such Dividend
Payment Date and will be deemed paid in full and will not accumulate. All
dividends paid with respect to shares of the Exchangeable Preferred Stock
pursuant to the foregoing shall be paid pro rata to the holders entitled
thereto.
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Stock for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid (or are
deemed declared and paid) in full or declared and, if payable in cash, a sum in
cash sufficient for such payment set apart for such payment on the Exchangeable
Preferred Stock. If full dividends are not so paid, the Exchangeable Preferred
Stock will share dividends pro rata with the Parity Stock. No dividends may be
paid or set apart for such payment on Junior Stock (except dividends on Junior
Stock payable in additional shares of Junior Stock) and no Junior Stock or
Parity Stock may be repurchased, redeemed or otherwise retired nor may funds be
set apart for payment with respect thereto, if full cumulative dividends have
not been paid in full (or deemed paid) on the Exchangeable Preferred Stock.
Dividends on account of arrears for any past Dividend Period and dividends in
connection with any optional redemption may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to holders of record on
such date, not more than 45 days prior to the payment thereof, as may be fixed
by the Board of Directors of the Company. So long as any shares of the
Exchangeable Preferred Stock are outstanding, the Company shall not make any
payment on account of, or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption or other retirement of, any Parity
Stock or Junior Stock or any warrants, rights, calls or options exercisable for
or convertible into any Parity Stock or Junior Stock, and shall not permit any
corporation or other entity directly or indirectly controlled by the Company to
purchase or redeem any Parity Stock or Junior Stock or any such warrants,
rights, calls or options unless full cumulative dividends determined in
accordance herewith on the Exchangeable Preferred Stock have been paid (or are
deemed paid) in full.
OPTIONAL REDEMPTION
The Exchangeable Preferred Stock may be redeemed (subject to contractual
and other restrictions with respect thereto and to the legal availability of
funds therefor) at any time, in whole or in part, at the option of the Company,
at the redemption prices (expressed in percentages of the then effective
liquidation preference thereof) set forth below, plus, without duplication, an
amount in cash equal to all accrued and unpaid dividends to the redemption date
(including an amount in cash equal to a prorated dividend for the period from
the Dividend Payment Date immediately prior to the redemption date to the
redemption date), if redeemed during the 12-month period beginning July 1 of
each of the years set
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forth below at the following redemption prices plus, without duplication, in
each case, an amount in cash equal to all accrued and unpaid dividends to the
redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
1996............................................................................. 115.000%
1997............................................................................. 115.000
1998............................................................................. 115.000
1999............................................................................. 115.000
2000............................................................................. 112.000
2001............................................................................. 109.000
2002............................................................................. 106.000
2003............................................................................. 103.000
2004............................................................................. 100.000
2005............................................................................. 100.000
2006............................................................................. 100.000
</TABLE>
In the event of a redemption of only a portion of the then outstanding
shares of the Exchangeable Preferred Stock, the Company shall effect such
redemption on a pro rata basis, except that the Company may redeem such shares
held by Holders of fewer than 1,000 shares (or shares held by holders who would
hold less than 1,000 shares as a result of such redemption), as may be
determined by the Company.
The Credit Agreement and the Senior Subordinated Discount Note Indenture
restrict the ability of the Company to redeem the Exchangeable Preferred Stock
and the Senior Secured Note Indenture restricts the ability of Benedek
Broadcasting to make cash dividends and other transfers to the Company. Although
the Credit Agreement does not limit the ability of Benedek Broadcasting to pay
dividends or make other payments to the Company, the Senior Secured Note
Indenture does contain such limitations. However, after giving effect to the
Transactions (assuming the contribution to the common equity of Benedek
Broadcasting of net cash proceeds of approximately $188.5 million from the sale
of the Units, the Senior Subordinated Discount Notes and the Seller Junior
Discount Preferred Stock), as of March 31, 1996, Benedek Broadcasting could have
distributed approximately $188.5 million to the Company under such limitations.
See 'Description of Indebtedness.'
MANDATORY REDEMPTION
The Exchangeable Preferred Stock is subject to mandatory redemption
(subject to the legal availability of funds therefor) in whole on July 1, 2007,
at a price equal to 100% of the then effective liquidation preference thereof,
plus, without duplication, all accrued and unpaid dividends to the date of
redemption. Future agreements of the Company may restrict or prohibit the
Company from redeeming the Exchangeable Preferred Stock.
PROCEDURE FOR REDEMPTION
On and after the redemption date, unless the Company defaults in the
payment of the applicable redemption price, dividends will cease to accumulate
on shares of Exchangeable Preferred Stock called for redemption and all rights
of holders of such shares will terminate except for the right to receive the
redemption price, without interest; provided, however, that if a notice of
redemption shall have been given as provided in the succeeding sentence and the
funds necessary for redemption (including an amount in respect of all dividends
that will accrue to the redemption date) shall have been segregated and
irrevocably set apart by the Company, in trust for the benefit of the holders of
the shares called for redemption, then dividends shall cease to accumulate on
the redemption date on the shares to be redeemed and, at the close of business
on the day or when such funds are segregated and set apart, the holders of the
shares to be redeemed shall cease to be stockholders of the Company and shall be
entitled only to receive the redemption price for such shares. The Company will
send a written notice of redemption by first-class mail to each holder of record
of shares of Exchangeable Preferred Stock, not fewer than 30 days nor more than
60 days prior to the date fixed for such redemption at its registered address.
Shares of Exchangeable Preferred Stock issued and
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reacquired will, upon compliance with the applicable requirements of Delaware
law, have the status of authorized but unissued shares of preferred stock of the
Company undesignated as to series and may, with any and all other authorized but
unissued shares of preferred stock of the Company, be designated or redesignated
and issued or reissued, as the case may be, as part of any series of preferred
stock of the Company, except that any issuance or reissuance of shares of
Exchangeable Preferred Stock must be in compliance with the Certificate of
Designation.
EXCHANGE
The Company may, at its option, subject to certain conditions, on any
scheduled Dividend Payment Date, exchange the Exchangeable Preferred Stock, in
whole but not in part, for the Exchange Debentures; provided, however, that (i)
on the date of such exchange there are no accumulated and unpaid dividends on
the Exchangeable Preferred Stock (including the dividend payable on such date)
or other contractual impediment to such exchange; (ii) there shall be funds
legally available sufficient therefor; and (iii) immediately before and
immediately after giving effect to such exchange, no Default (as defined in the
Exchange Indenture) shall have occurred and be continuing and (iv) the Company
shall have delivered to the Trustee under the Exchange Indenture an opinion of
counsel with respect to the due authorization and issuance of the Exchange
Debentures. The exchange of the Exchange Debentures is limited by covenants
contained in the Senior Subordinated Discount Note Indenture and the Credit
Agreement, in each case, relating to, among other things, the incurrence of
debt.
Upon any exchange pursuant to the preceding paragraph, holders of
outstanding shares of Exchangeable Preferred Stock will be entitled to receive,
subject to the second succeeding sentence, $1.00 principal amount of Exchange
Debentures for each $1.00 liquidation preference of Exchangeable Preferred Stock
held by them. The Exchange Debentures will be issued in registered form, without
coupons. Exchange Debentures issued in exchange for Exchangeable Preferred Stock
will be issued in principal amounts of $1,000 and integral multiples thereof to
the extent possible, and will also be issued in principal amounts less than
$1,000 so that each holder of Exchangeable Preferred Stock will receive
certificates representing the entire amount of Exchange Debentures to which such
holder's shares of Exchangeable Preferred Stock entitle such holder; provided,
however, that the Company may pay cash in lieu of issuing an Exchange Debenture
in a principal amount less than $1,000. The Company will send a written notice
of exchange by mail to each holder of record of shares of Exchangeable Preferred
Stock not fewer than 30 days nor more than 60 days before the date fixed for
such exchange. On and after the date of exchange, dividends will cease to accrue
on the outstanding shares of Exchangeable Preferred Stock, and all rights of the
holder of Exchangeable Preferred Stock (except the right to receive the Exchange
Debentures, an amount in cash, to the extent applicable, equal to the
accumulated and unpaid dividends to the exchange date and, if the Company so
elects, cash in lieu of any Exchange Debenture that is in a principal amount
that is not an integral multiple of $1,000) will terminate. The person entitled
to receive the Exchange Debentures issuable upon such exchange will be treated
for all purposes as the registered holder of such Exchange Debentures. See
' -- Exchange Debentures.'
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, holders of Exchangeable Preferred Stock will be entitled to be
paid, out of the assets of the Company available for distribution to
stockholders, the then effective liquidation preference per share of
Exchangeable Preferred Stock, plus, without duplication, an amount in cash equal
to all accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal to a prorated
dividend for the period from the last Dividend Payment Date to the date fixed
for liquidation, dissolution or winding-up and including an amount equal to the
redemption premium that would have been payable had the Exchangeable Preferred
Stock been the subject of an optional redemption on such date), before any
distribution is made on any Junior Stock, including, without limitation, common
stock of the Company. If, upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the amounts payable with respect to
the Exchangeable Preferred Stock and all other Parity Stock are not paid in
full, the holders of the Exchangeable Preferred Stock and the
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Parity Stock will share equally and ratably in any distribution of assets of the
Company in proportion to the full liquidation preference to which each is
entitled. After payment of the full amount of the liquidation preference and
accumulated and unpaid dividends to which they are entitled, the holders of
shares of Exchangeable Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company. However, neither the
sale, conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Company nor the consolidation or merger of the Company with one or more
entities shall be deemed to be a liquidation, dissolution or winding-up of the
Company.
The Certificate of Designation for the Exchangeable Preferred Stock does
not contain any provision requiring funds to be set aside to protect the
liquidation preference of the Exchangeable Preferred Stock, although such
liquidation preference will be substantially in excess of the par value of such
shares of Exchangeable Preferred Stock. In addition, the Company is not aware of
any provision of Delaware law or any controlling decision of the courts of the
State of Delaware (the state of incorporation of the Company) that requires a
restriction upon the surplus of the Company solely because the liquidation
preference of the Exchangeable Preferred Stock will exceed its par value.
Consequently, there is no restriction upon the surplus of the Company solely
because the liquidation preference of the Exchangeable Preferred Stock will
exceed its par value, and there are no remedies available to holders of the
Exchangeable Preferred Stock before or after the payment of any dividend, other
than in connection with the liquidation of the Company, solely by reason of the
fact that such dividend would reduce the surplus of the Company to an amount
less than the difference between the liquidation preference of the Exchangeable
Preferred Stock and its par value.
VOTING RIGHTS
The holders of Exchangeable Preferred Stock, except as otherwise required
under Delaware law or as set forth below, are not entitled or permitted to vote
on any matter required or permitted to be voted upon by the stockholders of the
Company.
The Certificate of Designation provides that if (i) after July 1, 2001,
dividends on the Exchangeable Preferred Stock are in arrears and unpaid for four
or more Dividend Periods (whether or not consecutive); (ii) the Company fails to
redeem the Exchangeable Preferred Stock on July 1, 2007, or fails to otherwise
discharge any redemption obligation with respect to the Exchangeable Preferred
Stock; (iii) the Company fails to make a Change of Control Offer if such offer
is required by the provisions set forth under ' -- Change of Control' below or
fails to purchase shares of Exchangeable Preferred Stock from holders who elect
to have such shares purchased pursuant to the Change of Control Offer; (iv) a
breach or violation of any of the provisions described under the caption
' -- Certain Covenants' occurs and the breach or violation continues for a
period of 30 days or more after the Company receives notice thereof specifying
the default from the holders of at least 25% of the shares of Exchangeable
Preferred Stock then outstanding; or (v) the Company fails to pay at the final
stated maturity (giving effect to any extensions thereof) the principal amount
of any Indebtedness of the Company or any Subsidiary of the Company, or the
final stated maturity of any such Indebtedness is accelerated, or the Company
fails to observe any covenant with respect to any such Indebtedness (which
failure is not waived by the holders of such Indebtedness within 30 days
thereof), if the aggregate principal amount of such Indebtedness, together with
the aggregate principal amount of any other such Indebtedness in default for
failure to pay principal at the final stated maturity (giving effect to any
extensions thereof) or which has been accelerated or which is the subject of
such non-waived default, aggregates $5.0 million or more at any time, in each
case, after a 10-day period during which such default shall not have been cured
or such acceleration rescinded, then the number of directors constituting the
Board of Directors of the Company will be adjusted to permit the holders of a
majority of the then outstanding shares of Exchangeable Preferred Stock, voting
separately and as a class, to elect the greater of two directors and that number
of directors constituting 25% of the members of the Board of Directors of the
Company. Such voting rights will continue until such time as, in the case of a
dividend default, all dividends in arrears on the Exchangeable Preferred Stock
are paid in full in cash and, in all other cases, any failure, breach or default
giving rise to such voting rights is remedied or waived by the holders of at
least a majority of the shares of Exchangeable Preferred Stock then
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outstanding, at which time the term of any directors elected pursuant to the
provisions of this paragraph shall terminate. Each such event described in
clauses (i) through (v) above is referred to herein as a 'Voting Rights
Triggering Event.'
The Certificate of Designation also provides that the Company will not
authorize any class of Senior Stock or Parity Stock and will not make any
election under Subchapter S of the Internal Revenue Code without the affirmative
vote or consent of holders of at least two-thirds of the shares of Exchangeable
Preferred Stock then outstanding, voting or consenting, as the case may be, as
one class. In addition, the Certificate of Designation provides that the Company
may not authorize the issuance of any additional shares of Exchangeable
Preferred Stock without the affirmative vote or consent of the holders of at
least a majority of the then outstanding shares of Exchangeable Preferred Stock,
voting or consenting, as the case may be, as one class. The Certificate of
Designation also provides that, except as set forth above, (a) the creation,
authorization or issuance of any shares of Junior Stock, Parity Stock or Senior
Stock, including the designation of a series thereof within the existing class
of Exchangeable Preferred Stock, or (b) the increase or decrease in the amount
of authorized Capital Stock of any class, including any preferred stock, shall
not require the consent of the holders of Exchangeable Preferred Stock and shall
not be deemed to affect adversely the rights, preferences, privileges or voting
rights of shares of Exchangeable Preferred Stock.
Under Delaware law, holders of preferred stock are entitled to vote as a
class upon a proposed amendment to the certificate of incorporation, whether or
not entitled to vote thereon by the certificate of incorporation, if the
amendment would increase or decrease the par value of the shares of such class,
or alter or change the powers, preferences or special rights of the shares of
such class so as to affect them adversely.
CHANGE OF CONTROL
The Certificate of Designation provides that, upon the occurrence of a
Change of Control, each holder will have the right to require that the Company
purchase all or a portion of such holder's Exchangeable Preferred Stock in cash
pursuant to the offer described below (the 'Change of Control Offer'), at a
purchase price equal to 101% of the then effective liquidation preference
thereof, plus, without duplication, all accrued and unpaid dividends per share
to the Change of Control Payment Date (as defined below), including an amount in
cash equal to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the Change of Control Payment Date to the Change of Control
Payment Date.
The Certificate of Designation provides that, prior to the mailing of the
notice referred to below, but in any event within 45 days following the date on
which the Company becomes aware that a Change of Control has occurred, the
Company covenants that if the purchase of the Exchangeable Preferred Stock would
violate or constitute a default under the Credit Agreement, the Senior
Subordinated Discount Note Indenture or other indebtedness of the Company, then
the Company shall either (i) repay all such indebtedness and terminate all
commitments outstanding thereunder or (ii) obtain the requisite consents, if
any, under the Credit Agreement, the Senior Subordinated Discount Note Indenture
or such indebtedness required to permit the purchase of the Exchangeable
Preferred Stock as provided below. The Company will first comply with the
covenant in the preceding sentence before it will be required to make the Change
of Control Offer or purchase the Exchangeable Preferred Stock pursuant to the
provisions described below.
Within 45 days following the date on which the Company becomes aware that a
Change of Control has occurred, the Company must send, by first-class mail,
postage prepaid, a notice to each holder of Exchangeable Preferred Stock, which
notice shall govern the terms of the Change of Control Offer. Such notice shall
state, among other things, the purchase date, which must be no earlier than 30
days nor later than 45 days from the date such notice is mailed, other than as
may be required by law (the 'Change of Control Payment Date'). Holders electing
to have any shares of Exchangeable Preferred Stock purchased pursuant to a
Change of Control Offer will be required to surrender such shares of
Exchangeable Preferred Stock, properly endorsed for transfer, together with such
other customary documents as the Company and the transfer agent may reasonably
request, to the transfer agent and
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registrar for the Exchangeable Preferred Stock at the address specified in the
notice prior to the close of business on the business day prior to the Change of
Control Payment Date.
A 'Change of Control' is defined as one of the following events:
(i) prior to the first public offering of common stock of the Company
or Parent, the Permitted Holders cease to be the 'beneficial owner' (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of a majority in the aggregate of the total voting power of the
Voting Stock of the Company or Parent, whether as a result of Issuance of
securities of the Company, any merger, consolidation, liquidation or
dissolution of the Company, any direct or indirect transfer of securities
or otherwise (for purposes of this clause (i) and clause (ii) below, the
Permitted Holders shall be deemed to beneficially own any Voting Stock of a
corporation (the 'specified corporation') held by any other corporation
(the 'parent corporation') so long as the Permitted Holders beneficially
own (as so defined), directly or indirectly, in the aggregate a majority of
the voting power of the Voting Stock of the parent corporation.
(ii) any 'person' (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in clause (i) above, except that such
person shall be deemed to have 'beneficial ownership' of all shares that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
more than 35% of the total voting power of the Voting Stock of the Company
or Parent; provided, however, that the Permitted Holders beneficially own
(as defined in clause (i) above), directly or indirectly, in the aggregate
a lesser percentage of the total voting power of the Voting Stock of the
Company or Parent than such other person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company or Parent (for
the purposes of this clause (ii), such other person shall be deemed to
beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person is the beneficial owner (as
defined in this clause (iii), directly or indirectly, of more than 35% of
the voting power of the Voting Stock of such parent corporation and the
Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of such parent
corporation); or
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of 66 2/3% of the directors of the Company
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
The foregoing provisions cannot be waived by the Board of Directors of the
Company (except that the Board may approve a new group of directors as described
in paragraph (iii) above and thereby prevent the occurrence of such a Change of
Control). The provisions relative to the Company's obligation to make an offer
to repurchase the Exchangeable Preferred Stock as a result of a Change of
Control may be waived or modified with the written consent of the holders of a
majority of the outstanding shares of the Exchangeable Preferred Stock.
The Change of Control purchase feature is a result of negotiations between
the Company and the Placement Agents. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control, but that could increase the
amount of indebtedness outstanding at such time or otherwise affect the
Company's capital structure or credit ratings. Restrictions on the ability of
the Company to incur additional Debt are contained in the covenant described
under 'Certain Covenants -- Limitation on Debt.' Such restrictions can only be
waived with the consent of the holders
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of two-thirds of the outstanding shares of the Exchangeable Preferred Stock.
Except for the limitations contained in such covenant, however, the Certificate
of Designation does not contain any covenants or provisions that may afford
holders of the outstanding shares of the Exchangeable Preferred Stock protection
in the event of a highly leveraged transaction.
The Senior Secured Note Indenture, the Credit Agreement and the Senior
Subordinated Discount Note Indenture contain, and future indebtedness of the
Company and Benedek Broadcasting may contain, prohibitions of certain events
which would constitute a Change of Control or require such indebtedness to be
repurchased upon a Change of Control. Moreover, the exercise by the holders of
their right to require the Company to repurchase the Exchangeable Preferred
Stock could cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on the
Company. Finally, the Company's ability to pay cash to the holders of
Exchangeable Preferred Stock upon a repurchase may be limited by the Company's
then existing financial resources. There can be no assurance that sufficient
funds will be available when necessary to make any required repurchases. In the
event a Change of Control occurs at a time when the Company is prohibited from
purchasing Exchangeable Preferred Stock, the Company could seek the consent of
its lenders to the purchase of Exchangeable Preferred Stock or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing Exchangeable Preferred Stock. In such case, the
Company's failure to purchase Exchangeable Preferred Stock would constitute a
Voting Rights Triggering Event.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rules 13e-4 and 14e-1, in connection
with any offer required to be made by the Company to repurchase the Exchangeable
Preferred Stock as a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with provisions of the
Certificate of Designation, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the Certificate of Designation by virtue thereof.
CERTAIN COVENANTS
Set forth below are certain covenants in the Certificate of Designation:
Limitation on Debt. (a) The Company shall not, and shall not permit any
Restricted Subsidiary to, Issue, directly or indirectly, any Debt; provided,
however, that the Company or its Restricted Subsidiaries may Issue Debt if at
the date of such Issuance the Cash Flow Leverage Ratio does not exceed the ratio
indicated below for Debt Issued in each period indicated:
<TABLE>
<CAPTION>
PERIOD RATIO
------ ----------
<S> <C>
Through September 30, 1996...................................................... 7.0 to 1.0
From October 1, 1996 through March 31, 1998..................................... 6.5 to 1.0
From April 1, 1998 and thereafter............................................... 6.0 to 1.0
</TABLE>
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries may Issue the following Debt: (1) Debt of the Company or
Benedek Broadcasting issued pursuant to the Bank Credit Agreement (including
Guarantees thereof and any letters of credit issued thereunder) or any other
agreement or indenture in a principal amount which, when taken together with the
principal amount of all other Debt Issued pursuant to this clause (1) and then
outstanding, does not exceed the greater of (i) $15.0 million and (ii) 75% of
the book value of the accounts receivable of the Company and the Restricted
Subsidiaries; (2) Debt of the Company or Benedek Broadcasting (including
Guarantees thereof and any letters of credit issued thereunder) Issued pursuant
to the Bank Credit Agreement or any other agreement or indenture in an aggregate
principal amount which, when taken together with the principal amount of all
other Debt Issued pursuant to this clause (2) and then outstanding, does not
exceed (A) $128.0 million less (B) the lesser of (i) the aggregate amount of all
principal repayments of any such Debt actually made after the Issue Date (other
than any such principal repayments made as a result of the Refinancing of any
such Debt) and (ii) the scheduled principal amortization payments to have been
made by then under the terms of the Bank Credit Agreement (but without giving
effect to any changes to such scheduled principal payments after the
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Issue Date); (3) Debt owed to and held by the Company or a Wholly Owned
Subsidiary; provided, however, that any subsequent Issuance or transfer of any
Capital Stock or any other event which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of
such Debt (other than to a Wholly Owned Subsidiary) shall be deemed, in each
case, to constitute the Issuance of such Debt by the issuer thereof; (4) the
Senior Subordinated Discount Notes, the Exchangeable Preferred Stock, the
Exchange Debentures and Refinancing Debt of the Company Issued in respect of any
Debt permitted by this clause (4) (including the accretion of any original issue
discount associated with Debt permitted by this clause (4) and the increase in
liquidation preference with respect to any Debt permitted by this clause (4));
(5) Debt (other than Debt described in clause (1), (2), (3) or (4) of this
covenant but including the Debt represented by the Company Pledge Agreement)
outstanding on the Issue Date, and Refinancing Debt in respect of any Debt
permitted by this clause (5) or by paragraph (a) above; (6) Debt or Preferred
Stock of a Subsidiary Issued and outstanding on or prior to the date on which
such Subsidiary became a Subsidiary or was acquired by the Company (other than
Debt or Preferred Stock Issued in connection with, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Subsidiary became a
Subsidiary or was acquired by the Company) and Refinancing Debt of such
Subsidiary Issued in respect of any Debt of such Subsidiary permitted by this
clause (6); provided, however, that after giving effect thereto, except in the
case of any Refinancing Debt, the Company and any Restricted Subsidiary could
Issue an additional $1.00 of Debt pursuant to paragraph (a) above; (7) Debt
consisting of Guarantees by BLC of Permitted Acquisition Debt; and (8) Debt of
the Company or any Restricted Subsidiary (in addition to the Debt permitted to
be Issued pursuant to paragraph (a) above or in any other clause of this
paragraph (b)) in an aggregate principal amount on the date of Issuance which,
when added to all other Debt Issued pursuant to this clause (8) and then
outstanding, shall not exceed $15.0 million.
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay
any dividend or make any distribution on or in respect of, in the case of the
Company, any Junior Stock or, in the case of any Restricted Subsidiary, any
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company) or to the direct or indirect holders of any
such Stock (except dividends or distributions payable solely in its
Non-Convertible Common Stock or in options, warrants or other rights to purchase
its Non-Convertible Common Stock and except dividends or distributions payable
to the Company or a Subsidiary and, if a Subsidiary is not wholly owned, to the
other stockholders on a pro rata basis), (ii) purchase, redeem or otherwise
acquire or retire for value any Junior Stock of the Company or any Capital Stock
of any direct or indirect parent of the Company, or (iii) make any Investment in
any Affiliate of the Company other than a Restricted Subsidiary or a person
which will become a Restricted Subsidiary as a result of any such Investment
(any such dividend, distribution, purchase, redemption, other acquisition,
retirement or Investment being herein referred to as a 'Restricted Payment') if
at the time the Company or such Restricted Subsidiary makes such Restricted
Payment: (1) a Voting Rights Triggering Event shall have occurred and be
continuing (or would result therefrom); (2) the Company is not able to Issue an
additional $1.00 of Debt pursuant to paragraph (a) of the covenant described
under ' -- Limitation on Debt' above; or (3) the aggregate amount of such
Restricted Payment and all other Restricted Payments since the Issue Date would
exceed the sum of: (a) the cumulative Operating Cash Flow (whether positive or
negative) accrued during the period (treated as one accounting period) from the
beginning of the fiscal quarter during which the Issue Date occurs to the end of
the most recent fiscal quarter ending at least 45 days prior to the date of such
Restricted Payment less the product of 1.4 multiplied by the cumulative
Consolidated Interest Expense during such period; provided, however, that
Operating Cash Flow and Consolidated Interest Expense for the period from the
beginning of the fiscal quarter during which the Debt under the Bank Credit
Agreement and Senior Subordinated Discount Notes are originally Issued through
the date the Debt under the Bank Credit Agreement and Senior Subordinated
Discount Notes are originally Issued shall be calculated on a pro forma basis to
give effect to the Acquisitions, including the financing thereof (as if the
Acquisitions were consummated on the last day of the fiscal quarter prior to the
fiscal quarter during which such Debt and the Senior Subordinated Discount Notes
are originally Issued); (b) the aggregate Net Cash Proceeds received by the
Company from the Issue or sale of its Capital Stock (other than Redeemable
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Stock, Exchangeable Stock, Senior Stock or Parity Stock and other than the
Exchangeable Preferred Stock and the Seller Junior Discount Preferred Stock)
subsequent to the Issue Date (other than an Issuance or sale to a Subsidiary or
to an employee stock ownership plan or other trust established by the Company or
any of the Subsidiaries for the benefit of their employees or to officers,
directors or employees to the extent that the Company or any Subsidiary has
outstanding loans or advances to such employees pursuant to clause (vii) of the
second paragraph of this covenant or clause (iii) of the second paragraph under
' -- Limitations on Transactions with Affiliates' (all such excluded Capital
Stock being herein collectively called 'Excluded Stock')); and (c) the amount by
which indebtedness of the Company is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary), subsequent to the Issue
Date, of any Debt of the Company that is by its original terms convertible or
exchangeable for Capital Stock (other than Redeemable Stock, Exchangeable Stock,
Senior Stock or Parity Stock) of the Company (less the amount of any cash, or
other property, distributed by the Company upon such conversion or exchange);
provided, however, that, for the purposes of the calculation required by this
clause (3), the value of any such Restricted Payment, if other than cash, shall
be evidenced by a resolution of the Board of Directors and determined in good
faith by the disinterested members of the Board of Directors; provided further,
however, that, in the case of a distribution or other disposition by the Company
of all or substantially all the assets of a broadcast station or other business
unit, the value of any such Restricted Payment shall be determined by an
investment banking firm of national prominence that is not an Affiliate of the
Company. Notwithstanding the foregoing, the Company shall not declare or pay any
cash dividend or make any cash distribution on or in respect of any Parity Stock
or any Junior Stock (including the Seller Junior Discount Preferred Stock and
its Common Stock) prior to October 1, 2001.
(b) The provisions of the preceding paragraph shall not prohibit: (i) any
purchase or redemption of Junior Stock of the Company made by exchange for, or
out of the proceeds of the substantially concurrent sale of, Junior Stock (other
than Redeemable Stock or Exchangeable Stock and other than Excluded Stock);
provided, however, that (A) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds
from such sale shall be excluded from clauses (3)(b) and (3)(c) of the previous
paragraph; (ii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied with
this covenant; provided, however, that at any time of payment of such dividend,
no other Default shall have occurred and be continuing (or result therefrom);
provided further, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments; (iii) Investments in
Non-Recourse Affiliates in an aggregate amount (which amount shall be reduced by
the amount equal to the net reduction in Investments in Non-Recourse Affiliates
resulting from payments of dividends, repayments of loans or advances or other
transfers of assets to the Company or any Restricted Subsidiary from
Non-Recourse Affiliates) not to exceed $6.0 million; provided, however, that the
amount of such Investments shall be excluded in the calculation of the amount of
Restricted Payments; (iv) with respect to each tax period that Benedek
Broadcasting qualifies as an S Corporation under the Code, or any similar
provision of state or local law, distributions of Tax Amounts; provided,
however, that prior to any distribution of Tax Amounts a duly authorized officer
of Benedek Broadcasting certifies to the Trustee that Benedek Broadcasting
qualified as an S Corporation for Federal income tax purposes for such period
and for the states in respect of which distributions are being made and that at
the time of such distributions, the most recent audited financial statements of
Benedek Broadcasting provide that Benedek Broadcasting was treated as an S
Corporation for Federal income tax purposes for the applicable portion of the
period of such financial statements; provided further, however, that the amount
of such distributions shall be excluded in the calculation of the amount of
Restricted Payments; or (v) loans or advances to officers and directors of the
Company (other than a Restricted Holder) (A) in the ordinary course of business
in an aggregate amount outstanding not in excess of $1.0 million or (B) the
proceeds of which are used to acquire Capital Stock of the Company (other than
Redeemable Stock, Exchangeable Stock, Senior Stock or Parity Stock); provided,
however, that such loans and advances shall be excluded in the calculation of
the amount of Restricted Payments.
The Company shall not be permitted to make distributions pursuant to clause
(iv) above (1) unless and until the Company has entered into a binding written
agreement with each stockholder (copies of which will be promptly furnished to
the Trustee prior to the making of any such distribution) providing
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that if any amount distributed to such stockholder pursuant to such clause (iv)
is later determined to have been, as a result of a change in applicable law or
the failure of Benedek Broadcasting to effect or maintain a valid S Corporation
election or otherwise, in excess of that amount permitted to be distributed or
paid under such clause (iv), such excess shall be refunded to the Company at
least five Business Days prior to the next due date of individual estimated
income tax payments and (2) in the event it has been determined that any such
excess distribution or payment has been made, unless the Company has requested
and received all refunds pursuant to such agreements.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (i)
pay dividends or make any other distributions on its Capital Stock or pay any
Debt owed to the Company, (ii) make any loans or advances to the Company or
(iii) transfer any of its property or assets to the Company, except: (1) any
encumbrance or restriction pursuant to an agreement in effect at or entered into
on the Issue Date; (2) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any Debt Issued by
such Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Debt Issued as consideration
in, or to provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the
Company) and outstanding on such date; (3) any encumbrance or restriction
pursuant to an agreement effecting a Refinancing of Debt Issued pursuant to an
agreement referred to in clause (1) or (2) of this covenant or contained in any
amendment to an agreement referred to in clause (1) or (2) of this covenant;
provided, however, that the encumbrances and restrictions contained in such
Refinancing agreement or amendment are no less favorable to the Holders than
encumbrances or restrictions contained in such agreements; (4) any such
encumbrance or restriction consisting of customary nonassignment provisions in
leases governing leasehold interests to the extent such provisions restrict the
transfer of the lease; (5) in the case of clause (iii) above, restrictions
contained in security agreements securing Debt of a Restricted Subsidiary to the
extent such restrictions restrict the transfer of the property subject to such
security agreements; and (6) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or disposition.
Limitation on Sales of Assets and Subsidiary Stock. The Company shall not,
and shall not permit any Restricted Subsidiary to, make any Asset Disposition
unless (i) the Company or such Restricted Subsidiary receives consideration at
the time of such Asset Disposition at least equal to the fair market value, as
determined in good faith by the Board of Directors (including as to the value of
all non-cash consideration), of the shares and assets subject to such Asset
Disposition and at least 90% of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash and (ii) an amount
equal to 100% of the Net Available Cash from such Asset Disposition is applied
by the Company (or such Restricted Subsidiary, as the case may be) (A) first, to
the extent the Company elects (or is required by the terms of any Debt) to
prepay, repay or purchase Debt of the Company or Debt (other than Redeemable
Stock) of a Wholly Owned Subsidiary (in each case other than Debt owed to the
Company or an Affiliate of the Company) within 60 days after the later of the
date of such Asset Disposition or the receipt of such Net Available Cash; (B)
second, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), at the Company's election to the
investment by the Company or any Restricted Subsidiary in assets to replace the
assets that were the subject of such Asset Disposition or in assets that, as
determined by the Board of Directors and evidenced by resolutions of the Board
of Directors, will be used in the businesses of the Company and its Restricted
Subsidiaries existing on the Issue Date or in businesses reasonably related
thereto, in all cases within 270 days after the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; (C) third, to the extent
the Company is entitled pursuant to then existing contractual limitations to
receive dividends or distributions from the relevant Restricted Subsidiary and
to the extent of the balance of such Net Available Cash after application in
accordance with clauses (A) and (B), to make an offer pursuant to and subject to
the conditions contained in the Certificate of Designation to the holders of the
Exchangeable Preferred Stock (and to holders of any Parity Stock designated by
the
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Company) to purchase Exchangeable Preferred Stock (and such Parity Stock) at a
purchase price of 100% of the liquidation preference thereof (without premium)
plus accrued and unpaid dividends (or in respect of such Parity Stock such
lesser price, if any, as may be provided for by the terms of such other Parity
Stock) and (D) fourth, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A), (B) and (C), to (x) the
acquisition by the Company or any Restricted Subsidiary of assets to replace the
assets that were the subject of such Asset Disposition or assets that, as
determined by the Board of Directors and evidenced by resolutions of the Board
of Directors, will be used in the businesses of the Company and its Restricted
Subsidiaries existing on the Issue Date or in businesses reasonably related
thereto or (y) the prepayment, repayment or purchase of Debt (other than any
Redeemable Stock) of the Company (other than Debt owed to an Affiliate of the
Company) or Debt of any Restricted Subsidiary (other than Debt owed to the
Company or an Affiliate of the Company), in each case within 360 days after the
later of the receipt of such Net Available Cash and the date the offer described
in clause (C) is consummated; provided, however, that in connection with any
prepayment, repayment or purchase of Debt pursuant to clause (A), (C) or (D)
above, the Company or such Restricted Subsidiary shall retire such Debt and
shall cause the related loan commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this paragraph, the Company and the
Restricted Subsidiaries shall not be required to apply any Net Available Cash in
accordance with this paragraph except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this paragraph exceeds $5.0 million. The Company shall not permit any
Non-Recourse Subsidiary to make any Asset Disposition unless such Non-Recourse
Subsidiary receives consideration at the time of such Asset Disposition at least
equal to the fair market value of the shares or assets so disposed of. Pending
application of Net Available Cash pursuant to this covenant, such Net Available
Cash shall be invested in Permitted Investments.
In the event of an Asset Disposition that requires the purchase of
Exchangeable Preferred Stock (and other Parity Stock) pursuant to clause (ii)(C)
above, the Company will be required to purchase Exchangeable Preferred Stock
tendered pursuant to an offer by the Company for the Exchangeable Preferred
Stock (and other Parity Stock at the purchase price set forth above) in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Certificate of Designation. The Company shall
not be required to make such an offer to purchase Exchangeable Preferred Stock
if the Net Available Cash available therefor is less than $5.0 million for any
particular Asset Disposition (which lesser amount shall be carried forward for
purposes of determining whether such an offer is required with respect to any
subsequent Asset Disposition).
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Exchangeable Preferred Stock
pursuant to this covenant. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this covenant, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this clause by virtue thereof.
Limitation on Transactions with Affiliates. The Company shall not, and
shall not permit any Restricted Subsidiary to, conduct any business or enter
into any transaction or series of related transactions (including the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any Affiliate of the Company unless the terms of such business, transaction or
series of transactions are as favorable to the Company or such Restricted
Subsidiary as terms that would be obtainable at the time for a comparable
transaction or series of similar transactions in arm's-length dealings with an
unrelated third person; provided, however, that in the case of any transaction
or series of related transactions involving aggregate payments or other
transfers by the Company and its Restricted Subsidiaries in excess of (i) $5.0
million, the Company shall deliver an Officers' Certificate to the Trustee
certifying that the terms of such business, transaction or series of
transactions (x) comply with this covenant, (y) have been set forth in writing
and (z) have been determined in good faith by the disinterested members of the
Board of Directors to satisfy the criteria set forth in this covenant, and (ii)
$5.0 million, the Company shall also deliver to the Transfer Agent an opinion
from an investment banking firm of national prominence that is not an Affiliate
of the Company to the effect that such
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business, transaction or transactions are fair to the Company or such Restricted
Subsidiary from a financial point of view.
The provisions of the preceding paragraph shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the provisions of the
covenant described under ' -- Limitation on Restricted Payments,' (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors in the
ordinary course of business and consistent with industry practices, (iii) loans
or advances to employees of the Company and the Subsidiaries (other than
Restricted Holders) (A) in the ordinary course of business in an aggregate
amount outstanding not to exceed $5.0 million or (B) the proceeds of which are
used to acquire from the Company Capital Stock of the Company (other than
Redeemable Stock or Exchangeable Stock); (iv) the payment of reasonable fees to
directors of the Company and its Subsidiaries (other than a Restricted Holder)
who are not employees of the Company or its Subsidiaries; (v) salaries to
employees in the ordinary course of business and consistent with industry
practices; and (vi) any transaction between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries; provided, however, that no
portion of the minority interest in any such Restricted Subsidiary is owned by
an Affiliate (other than the Company or a Wholly Owned Subsidiary) of the
Company.
SEC Reports and Other Information. Notwithstanding that the Company may not
be required to be subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, the Company shall file with the SEC and thereupon provide
the Transfer Agent and holders of the Exchangeable Preferred Stock with such
annual reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections, such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections. In addition, for so
long as any of the shares of Exchangeable Preferred Stock are outstanding, the
Company will make available to any prospective purchaser of the shares of
Exchangeable Preferred Stock or beneficial owner of the shares of Exchangeable
Preferred Stock in connection with any sales thereof the information required by
Rule 144A(d)(4) under the Securities Act.
SUCCESSOR COMPANY
The Company may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any person unless: (i)
the resulting, surviving or transferee person (if not the Company) is organized
and existing under the laws of the United States of America or any State thereof
or the District of Columbia and the Exchangeable Preferred Stock shall be
converted into or exchanged for and shall become shares of such resulting,
surviving or transferee person, having in respect of such resulting, surviving
or transferee person the same powers, preference and relative participating,
optional or other special rights and the qualifications, limitations or
restrictions thereon, that the Exchangeable Preferred Stock had immediately
prior to such transaction; (ii) immediately prior to and after giving effect to
such transaction (and treating any Debt which becomes an obligation of the
resulting, surviving or transferee person or any Subsidiary as a result of such
transaction as having been incurred by such person or such Subsidiary at the
time of such transaction), no Default has occurred and is continuing; (iii)
immediately after giving effect to such transaction, the resulting, surviving or
transferee person would be able to issue an additional $1.00 of Debt pursuant to
paragraph (a) of the covenant described under ' -- Certain
Covenants -- Limitation on Debt' above; (iv) immediately after giving effect to
such transaction, the resulting, surviving or transferee person has Consolidated
Net Worth in an amount which is not less than the Consolidated Net Worth of the
Company prior to such transaction; and (v) the Company delivers to the Transfer
Agent an Officers' Certificate and an Opinion of Counsel stating that such
consolidation, merger or transfer complies with the Certificate of Designation.
The resulting, surviving or transferee person will be the successor company.
The Company shall not permit Benedek Broadcasting to consolidate with or
merge with or into, or convey, transfer or lease all or substantially all its
assets to, any person unless: (i) the resulting, surviving or transferee person
(if not Benedek Broadcasting) is organized and existing under the laws
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of the United States of America or any State thereof or the District of
Columbia; (ii) immediately prior to and after giving effect to such transaction
(and treating any Debt which becomes an obligation of the resulting, surviving
or transferee person or any Subsidiary as a result of such transaction as having
been incurred by such person or such Subsidiary at the time of such
transaction), no Default has occurred and is continuing; (iii) immediately after
giving effect to such transaction, the Company would be able to issue an
additional $1.00 of Debt pursuant to paragraph (a) of the covenant described
under ' -- Certain Covenants -- Limitation on Debt' above; and (iv) the Company
delivers to the Transfer Agent an Officers' Certificate and an Opinion of
Counsel stating that such consolidation, merger or transfer complies with the
Certificate of Designation.
TRANSFER AGENT AND REGISTRAR
IBJ Schroder Bank & Trust Company is the transfer agent and registrar for
the Exchangeable Preferred Stock.
EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued under the Exchange
Indenture to be entered into between the Company and IBJ Schroder Bank & Trust
Company, as Trustee (the 'Trustee'). A copy of the form of Exchange Indenture is
available from the Company upon request. The following summary of certain
provisions of the Exchange Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the 'TIA'), and to all the provisions of the
Exchange Indenture, including the definitions of certain terms therein and those
terms made a part of the Exchange Indenture by reference to the TIA as in effect
on the date of the Exchange Indenture. The definitions of certain terms used in
the following summary are set forth below under ' -- Certain Definitions.' The
Credit Agreement and the Senior Subordinated Discount Note Indenture limit the
Company's ability to issue the Exchange Debentures.
The Exchange Debentures will be general unsecured obligations of the
Company and will be limited in the aggregate principal amount to the liquidation
preference of the Exchangeable Preferred Stock, plus, without duplication,
accumulated and unpaid dividends, on the Exchange Date of the Exchangeable
Preferred Stock into Exchange Debentures (plus any additional Exchange
Debentures issued in lieu of cash interest as described herein). The Exchange
Debentures will be issued in fully registered form only in denominations of
$1,000 and integral multiples thereof (other than as described in
' -- Exchangeable Preferred Stock -- Exchange' or with respect to additional
Exchange Debentures issued in lieu of cash interest as described herein). The
Exchange Debentures will be subordinated to all existing and future senior debt
and senior subordinated debt of the Company, including the Senior Subordinated
Discount Notes.
Principal of, and premium, if any, and interest on the Exchange Debentures
will be payable, and the Exchange Debentures may be presented for registration
of transfer or exchange, at the office of the Paying Agent and Registrar. The
Trustee will initially act as Paying Agent and Registrar. The Company may change
any Paying Agent and Registrar without prior notice to holders of the Exchange
Debentures. Holders of the Exchange Debentures must surrender Exchange
Debentures to the Paying Agent to collect principal payments.
The Exchange Debentures will mature on July 1, 2007. Each Exchange
Debenture will bear interest at the rate of 15.0% per annum from the Exchange
Date or from the most recent interest payment date to which interest has been
paid or provided for or, if no interest has been paid or provided for, from the
Exchange Date. Interest will be payable semiannually in cash (or, on or prior to
July 1, 2001, in additional Exchange Debentures, at the option of the Company)
in arrears on each January 1 and July 1 commencing with the first such date
after the Exchange Date. Interest on the Exchange Debentures will be computed on
the basis of a 360-day year comprised of twelve 30-day months and the actual
number of days elapsed.
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OPTIONAL REDEMPTION
The Exchange Debentures will be redeemable, at the Company's option, in a
whole at any time or in part from time to time at the redemption prices
(expressed as percentages of the principal amount thereof) set forth below,
plus, without duplication, accrued and unpaid interest thereon to the date of
redemption, if redeemed during the 12-month period beginning on July 1 of each
of the years set forth below, at the following redemption prices, plus, without
duplication, in each case, accrued and unpaid interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
1996............................................................................. 115.000%
1997............................................................................. 115.000
1998............................................................................. 115.000
1999............................................................................. 115.000
2000............................................................................. 112.000
2001............................................................................. 109.000
2002............................................................................. 106.000
2003............................................................................. 103.000
2004............................................................................. 100.000
2005............................................................................. 100.000
2006 and thereafter.............................................................. 100.000
</TABLE>
The Senior Subordinated Discount Note Indenture and the Credit Agreement
restrict the ability of the Company to optionally redeem the Exchange Debentures
and the Senior Secured Note Indenture restricts the ability of Benedek
Broadcasting to make cash dividends and other transfers to the Company. Although
the Credit Agreement does not limit the ability of Benedek Broadcasting to pay
dividends or make other payments to the Company, the Senior Secured Note
Indenture does contain such limitations. However, after giving effect to the
Transactions (assuming the contribution to the common equity of Benedek
Broadcasting of net cash proceeds of approximately $188.5 million from the sale
of the Units, the Senior Subordinated Discount Notes and the Seller Junior
Discount Preferred Stock), as of March 31, 1996, Benedek Broadcasting could have
distributed approximately $188.5 million to the Company under such limitations.
See 'Description of Indebtedness.'
CHANGE OF CONTROL
The Exchange Indenture will provide that upon the occurrence of a Change of
Control (as defined above under ' -- Exchangeable Preferred Stock -- Change of
Control'), each holder will have the right to require that the Company
repurchase all or a portion of such holder's Exchange Debentures pursuant to the
offer described below (the 'Debenture Change of Control Offer'), at a purchase
price equal to 101% of the principal amount thereof plus, without duplication,
accrued interest, if any, to the date of repurchase.
The Exchange Indenture will provide that, prior to the mailing of the
notice referred to below, but in any event within 45 days following the date on
which the Company becomes aware that a Change of Control has occurred, the
Company covenants that if the purchase of the Exchange Debentures would violate
or constitute a default under the Credit Agreement, the Senior Subordinated
Discount Note Indenture or other indebtedness of the Company, then the Company
shall either (i) repay all such indebtedness and terminate all commitments
outstanding thereunder or (ii) obtain the requisite consents under the Credit
Agreement, the Senior Subordinated Discount Note Indenture and any other
agreement governing such other indebtedness to permit the repurchase of the
Exchange Debentures as provided below. The Company will first comply with the
covenant in the preceding sentence before it will be required to repurchase
Exchange Debentures pursuant to the provisions described below; provided,
however, that the Company's failure to comply with the covenant described in the
preceding sentence shall constitute an Event of Default described under clause
(iii) under ' -- Default' below.
Within 45 days following the date upon which the Company becomes aware that
a Change of Control has occurred, the Company must send, by first-class mail,
postage prepaid, a notice to each holder of Exchange Debentures, with a copy to
the Trustee, which notice shall govern the terms of the
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Debenture Change of Control Offer. Such notice will state, among other things,
the purchase date, which must be no earlier than 30 days nor later than 45 days
from the date such notice is mailed, other than as may be required by law (the
'Debenture Change of Control Payment Date'). Holders electing to have an
Exchange Debenture purchased pursuant to a Debenture Change of Control Offer
will be required to surrender the Exchange Debenture, properly endorsed for
transfer together with such other customary documents as the Company may
reasonably request, to the paying agent at the address specified in the notice
prior to the close of business on the business day prior to the Debenture Change
of Control Payment Date.
The foregoing provisions cannot be waived by the Board of Directors of the
Company (except that the Board may approve a new group of directors as described
in paragraph (iii) above and thereby prevent the occurrence of such a Change of
Control). The provisions relative to the Company's obligation to make an offer
to repurchase the Exchange Debentures as a result of a Change of Control may be
waived or modified with the written consent of the holders of two-thirds in
principal amount of the Exchange Debentures.
The Change of Control purchase feature is a result of negotiations between
the Company and the Placement Agents. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control but that could increase the amount
of indebtedness outstanding at such time or otherwise affect the Company's
capital structure or credit ratings. Restrictions on the ability of the Company
to incur additional Debt are contained in the covenant described under
' -- Certain Covenants -- Limitation on Debt.' Such restrictions can only be
waived with the consent of the holders of a majority in principal amount of the
Exchange Debentures. Except for the limitations contained in such covenant,
however, the Exchange Indenture will not contain any covenants or provisions
that may afford holders of the the Exchange Debentures protection in the event
of a highly leveraged transaction.
The Senior Secured Note Indenture, the Senior Subordinated Discount Note
Indenture and the Credit Agreement contain, and future indebtedness of the
Company and Benedek Broadcasting may contain, prohibitions of certain events
which would constitute a Change of Control or require such indebtedness to be
repurchased upon a Change of Control. Moreover, the exercise by the holders of
their right to require the Company to repurchase the Exchange Debentures could
cause a default under such indebtedness, even if the Change of Control itself
does not, due to the financial effect of such repurchase on the Company.
Finally, the Company's ability to pay cash to the holders of Exchange Debentures
upon a repurchase may be limited by the Company's then existing financial
resources. There can be no assurance that sufficient funds will be available
when necessary to make any required repurchases. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing Exchange
Debentures, the Company could seek the consent of its lenders to the purchase of
Exchange Debentures or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Exchange
Debentures. In such case, the Company's failure to offer to purchase or to
purchase tendered Exchange Debentures would constitute an Event of Default under
the Exchange Indenture and could, in turn, constitute a default under the Credit
Agreement and any future indebtedness. In such circumstances, the subordination
provisions in the Exchange Indenture would restrict payments to the holders of
the Exchange Debentures.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rule 14e-1, in connection with any offer
required to be made by the Company to repurchase the Exchange Debentures as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with provisions of the Exchange
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
Exchange Indenture by virtue thereof.
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RANKING
The indebtedness evidenced by the Exchange Debentures will be subordinated,
unsecured obligations of the Company. The payment of the principal of, premium
(if any), interest on and all other obligations in respect of the Exchange
Debentures is subordinate in right of payment, as set forth in the Exchange
Indenture, to the prior payment in full in cash or cash equivalents of all
Senior Debt (including senior subordinated debt), whether outstanding on the
Issue Date or thereafter incurred, including Senior Subordinated Discount Notes
and the guarantee of Benedek Broadcasting's obligations under the Credit
Agreement and with respect to the Senior Secured Notes.
As of March 31, 1996, after giving pro forma effect to the Transactions,
the Company's Senior Debt, which includes the Senior Subordinated Discount
Notes, would have been approximately $353.9 million. Although the Exchange
Indenture will contain limitations on the amount of additional Debt that the
Company may incur, under certain circumstances the amount of such Debt could be
substantial and, in any case, such Debt may be Senior Debt. See ' -- Certain
Covenants -- Limitation on Debt.'
Only Debt of the Company that is Senior Debt will rank senior to the
Exchange Debentures in accordance with the provisions of the Exchange Indenture.
The Exchange Debentures will in all respects rank pari passu with all other
subordinated debt of the Company. Unsecured debt is not deemed to be
subordinated or junior to secured debt merely because it is unsecured.
The Company may not pay principal of, premium (if any), interest on, or any
other obligation in respect of, the Exchange Debentures or make any deposit
pursuant to the provisions described under 'Defeasance' below and may not
repurchase, redeem or otherwise retire any Exchange Debentures (collectively,
'pay the Exchange Debentures') if (i) any Designated Senior Debt is not paid
when due or (ii) any other default on Designated Senior Debt occurs and the
maturity of such Designated Senior Debt is accelerated in accordance with its
terms unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Designated Senior Debt has been paid in
full in cash or cash equivalents. However, the Company may pay the Exchange
Debentures without regard to the foregoing if the Company and the Trustee
receive written notice approving such payment from the Representative of the
Designated Senior Debt with respect to which either of the events set forth in
clause (i) or (ii) of the immediately preceding sentence has occurred and is
continuing. Upon the occurrence and during the continuance of any default (other
than a default described in clause (i) or (ii) of the second preceding sentence)
with respect to any Designated Senior Debt pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Company may not pay the Exchange Debentures for a
period (a 'Payment Blockage Period') commencing upon the receipt by the Trustee
(with a copy to the Company) of written notice (a 'Blockage Notice') of such
default from the Representative of the holders of such Designated Senior Debt
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Representative of the
Designated Senior Debt who gave such Blockage Notice, (ii) because the default
giving rise to such Blockage Notice is no longer continuing or (iii) because
such Designated Senior Debt has been repaid in full in cash or cash
equivalents). Notwithstanding anything in the foregoing to the contrary, a
Blockage Notice may only be given by and, therefore shall only be effective in
respect of the Company and the Trustee if given by, (i) the Representative of
the Bank Debt if at such time any Bank Debt is outstanding or (ii) if no Bank
Debt is outstanding, any other Representative of outstanding Designated Senior
Debt. Notwithstanding the provisions described in the immediately preceding
sentence, unless the holders of such Designated Senior Debt or the
Representative of such holders have accelerated the maturity of such Designated
Senior Debt, the Company may resume payments on the Exchange Debentures after
the end of such Payment Blockage Period. The Exchange Debentures shall not be
subject to more than one Payment Blockage Period in any consecutive 360-day
period, irrespective of the number of defaults with respect to Designated Senior
Debt during such period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, the holders of Senior Debt will be
entitled to receive payment in full in cash or cash equivalents of such
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Senior Debt before the holders of the Exchange Debentures are entitled to
receive any payment, and until the Senior Debt is paid in full in cash or cash
equivalents, any payment or distribution to which holders of the Exchange
Debentures would be entitled but for the subordination provisions of the
Exchange Indenture will be made to holders of such Senior Debt as their
interests may appear. The foregoing shall not prohibit the receipt by holders of
the Exchange Debentures in such a proceeding prior to the payment in full of the
Senior Debt of a distribution of shares of stock or debt securities that are
subordinated to the same extent as the Exchange Debentures. If a distribution is
made to holders of the Exchange Debentures that, due to the subordination
provisions, should not have been made to them, such holders of the Exchange
Debentures are required to hold it in trust for the holders of Senior Debt and
pay it over to them as their interests may appear.
If payment of the Exchange Debentures is accelerated because of an Event of
Default, the Company or the Trustee shall promptly notify the holders of
Designated Senior Debt or the Representative of such holders of the
acceleration.
For purposes of the subordination provisions in the Exchange Indenture,
Senior Debt outstanding under the Bank Credit Agreement shall not be deemed paid
in full in cash or cash equivalents at any time unless all letters of credit
outstanding under the Bank Credit Agreement which have not been drawn upon at
such time are fully cash collateralized or returned undrawn.
By reason of the subordination provisions contained in the Exchange
Indenture, in the event of insolvency, creditors of the Company who are holders
of Senior Debt may recover more, ratably, than the holders of the Exchange
Debentures, and creditors of the Company who are not holders of Senior Debt may
recover less, ratably, than holders of Senior Debt and may recover more,
ratably, than the holders of the Exchange Debentures.
CERTAIN COVENANTS
Set forth below are certain covenants in the Exchange Indenture:
Limitation on Debt. (a) The Company shall not, and shall not permit any
Restricted Subsidiary to, Issue, directly or indirectly, any Debt; provided,
however, that the Company or its Restricted Subsidiaries may Issue Debt if at
the date of such Issuance the Cash Flow Leverage Ratio does not exceed the ratio
indicated below for Debt Issued in each period indicated:
<TABLE>
<CAPTION>
PERIOD RATIO
------ ----------
<S> <C>
Through September 30, 1996...................................................... 7.0 to 1.0
From October 1, 1996 through March 31, 1998..................................... 6.5 to 1.0
From April 1, 1998 and thereafter............................................... 6.0 to 1.0
</TABLE>
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries may Issue the following Debt: (1) Debt of the Company or
Benedek Broadcasting Issued pursuant to the Bank Credit Agreement (including
guarantees thereof and any letters of credit issued thereunder) or any other
agreement or indenture in a principal amount which, when taken together with the
principal amount of all other Debt Issued pursuant to this clause (1) and then
outstanding, does not exceed the greater of (i) $15.0 million and (ii) 75% of
the book value of the accounts receivable of the Company and the Restricted
Subsidiaries; (2) Debt of the Company or Benedek Broadcasting (including any
letters of credit) Issued pursuant to the Bank Credit Agreement or any other
agreement or indenture in an aggregate principal amount which, when taken with
the principal amount of all other Debt Issued pursuant to this clause (2) and
then outstanding, does not exceed (A) $128.0 million less (B) the lesser of (i)
the aggregate amount of all principal repayments of any such Debt actually made
after the Issue Date (other than any such principal repayments made as a result
of the Refinancing of any such Debt) and (ii) the scheduled principal
amortization payments to have been made by then under the terms of the Bank
Credit Agreement (but without giving effect to any changes to such scheduled
principal payments after the Issue Date); (3) Debt owed to and held by the
Company or a Wholly Owned Subsidiary; provided, however, that any subsequent
Issuance or transfer of any Capital Stock or any other event which results in
any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any
subsequent transfer of such Debt (other than to a Wholly Owned Subsidiary)
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shall be deemed, in each case, to constitute the Issuance of such Debt by the
issuer thereof; (4) the Exchange Debentures (including any Exchange Debentures
issued in lieu of cash interest payments with respect to Exchange Debentures),
the Exchangeable Preferred Stock, the Senior Subordinated Discount Notes and
Refinancing Debt of the Company Issued in respect of any Debt permitted by this
clause (4) (including the accretion of any original issue discount associated
with Debt permitted by this clause (4) and the increase in liquidation
preference with respect to any Debt permitted by this clause (4)); (5) Debt
(other than Debt described in clause (1), (2), (3) or (4) of this covenant but
including the Debt represented by the Company Pledge Agreement) outstanding on
the Issue Date, and Refinancing Debt in respect of any Debt permitted by this
clause (5) or by paragraph (a) above; (6) Debt or Preferred Stock of a
Subsidiary Issued and outstanding on or prior to the date on which such
Subsidiary became a Subsidiary or was acquired by the Company (other than Debt
or Preferred Stock Issued in connection with, or to provide all or any portion
of the funds or credit support utilized to consummate, the transaction or series
of related transactions pursuant to which such Subsidiary became a Subsidiary or
was acquired by the Company) and Refinancing Debt of such Subsidiary Issued in
respect of any Debt of such Subsidiary permitted by this clause (6); provided,
however, that after giving effect thereto, except in the case of any Refinancing
Debt, the Company or any Restricted Subsidiary could Issue an additional $1.00
of Debt pursuant to paragraph (a) above; (7) Debt consisting of Guarantees by
BLC of Permitted Acquisition Debt; and (8) Debt of the Company or any Restricted
Subsidiary (in addition to the Debt permitted to be Issued pursuant to paragraph
(a) above or in any other clause of this paragraph (b)) in an aggregate
principal amount on the date of Issuance which, when added to all other Debt
Issued pursuant to this clause (8) and then outstanding, shall not exceed $15.0
million.
(c) Notwithstanding any other provision of this covenant, the Company shall
not Issue any Debt under paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to repay, prepay, redeem, defease, retire, refund or
refinance any Subordinated Obligations unless such Debt shall be subordinated to
the Exchange Debentures to at least the same extent as such Subordinated
Obligations.
Limitation on Liens. The Company shall not create, incur or suffer to exist
any Lien upon any of its property or assets now owned or hereafter acquired by
it securing any Debt that is not Senior Debt, unless contemporaneously therewith
effective provision is made for securing the Exchange Debentures equally and
ratably with such Debt as to such property for so long as such Senior Debt will
be so secured.
Limitation on Sale/Leaseback Transactions. The Company shall not enter into
a Sale/Leaseback Transaction unless (i) the Company would be able to incur Debt
in an amount equal to the Attributable Debt with respect to such Sale/Leaseback
Transaction secured by a Lien pursuant to the provisions of the covenants
described under ' -- Limitation on Debt' and ' -- Limitation on Liens' above or
(ii) the Company receives consideration from such Sale/Leaseback Transaction at
least equal to the fair market value of the property subject thereto (which
shall be determined in good faith by the Board of Directors and evidenced by a
resolution of the Board of Directors) and elects to treat the assets subject to
such Sale/Leaseback Transaction as an Asset Disposition subject to the covenant
described under ' -- Limitation on Sales of Assets and Subsidiary Stock' below.
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay
any dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
the Company) or to the direct or indirect holders of its Capital Stock (except
dividends or distributions payable solely in its Non-Convertible Capital Stock
or in options, warrants or other rights to purchase its Non-Convertible Capital
Stock and except dividends or distributions payable to the Company or a
Subsidiary and, if a Subsidiary is not wholly owned, to the other stockholders
on a pro rata basis), (ii) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or of any direct or indirect parent of
the Company, (iii) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or scheduled
sinking fund payment any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund
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obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition) or (iv) make any Investment in any Affiliate of
the Company other than a Restricted Subsidiary or a person which will become a
Restricted Subsidiary as a result of any such Investment (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a 'Restricted Payment') if
at the time the Company or such Restricted Subsidiary makes such Restricted
Payment: (1) a Default shall have occurred and be continuing (or would result
therefrom); (2) the Company is not able to Issue an additional $1.00 of Debt
pursuant to paragraph (a) of the covenant described under ' -- Limitation on
Debt' above; or (3) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Issue Date would exceed the sum of: (a) the
cumulative Operating Cash Flow (whether positive or negative) accrued during the
period (treated as one accounting period) from the beginning of the fiscal
quarter during which the Issue Date occurs to the end of the most recent fiscal
quarter ending at least 45 days prior to the date of such Restricted Payment
less the product of 1.4 multiplied by the cumulative Consolidated Interest
Expense during such period; provided, however, that Operating Cash Flow and
Consolidated Interest Expense for the period from the beginning of the fiscal
quarter during which the Issue Date occurs through the Issue Date shall be
calculated on a pro forma basis to give effect to the Acquisitions, including
the financing thereof (as if the Acquisitions were consummated on the last day
of the fiscal quarter prior to the fiscal quarter during which the Issue Date
occurs); (b) the aggregate Net Cash Proceeds received by the Company from the
Issue or sale of its Capital Stock (other than Redeemable Stock, Exchangeable
Stock, Senior Stock or Parity Stock and other than the Exchange Preferred Stock
and the Seller Junior Discount Preferred Stock) subsequent to the Issue Date
(other than an Issuance or sale to a Subsidiary or to an employee stock
ownership plan or other trust established by the Company or any of the
Subsidiaries for the benefit of their employees or to officers, directors or
employees to the extent that the Company or any Subsidiary has outstanding loans
or advances to such employees pursuant to clause (vii) of the second paragraph
of this covenant or clause (iii) of the second paragraph under ' -- Limitations
on Transactions with Affiliates' (all such excluded Capital Stock being herein
collectively called 'Excluded Stock')); and (c) the amount by which indebtedness
of the Company is reduced on the Company's balance sheet upon the conversion or
exchange (other than by a Subsidiary), subsequent to the Issue Date, of any Debt
of the Company that is by its original terms convertible or exchangeable for
Capital Stock (other than Redeemable Stock, Exchangeable Stock, Senior Stock or
Parity Stock) of the Company (less the amount of any cash, or other property,
distributed by the Company upon such conversion or exchange); provided, however,
that, for the purposes of the calculation required by this clause (3), the value
of any such Restricted Payment, if other than cash, shall be evidenced by a
resolution of the Board of Directors and determined in good faith by the
disinterested members of the Board of Directors; provided further, however,
that, in the case of a distribution or other disposition by the Company of all
or substantially all the assets of a broadcast station or other business unit,
the value of any such Restricted Payment shall be determined by an investment
banking firm of national prominence that is not an Affiliate of the Company.
Notwithstanding the foregoing, the Company shall not declare or pay any cash
dividend or make any cash distribution on or in respect of any Capital Stock
(including the Seller Junior Discount Preferred Stock and its Common Stock)
prior to October 1, 2001.
(b) The provisions of the preceding paragraph shall not prohibit: (i) any
purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Redeemable Stock or
Exchangeable Stock and other than Excluded Stock); provided, however, that (A)
such purchase or redemption shall be excluded in the calculation of the amount
of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be
excluded from clauses (3)(b) and (3)(c) of the previous paragraph; (ii) any
purchase or redemption of Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Debt of the Company which is permitted to be Issued pursuant to the covenant
described above under ' -- Limitation on Debt'; provided, however, that such
purchase or redemption shall be excluded in the calculation of the amount of
Restricted Payments; (iii) any purchase or redemption of Subordinated
Obligations from Net Available Cash to the extent permitted by the covenant
described below under ' -- Limitation on Sales of Assets and Subsidiary Stock';
provided, however, that such purchase or
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redemption shall be excluded in the calculation of the amount of Restricted
Payments; (iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied with
this covenant; provided, however, that at any time of payment of such dividend,
no other Default shall have occurred and be continuing (or result therefrom);
provided further, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments; (v) Investments in
Non-Recourse Affiliates in an aggregate amount (which amount shall be reduced by
the amount equal to the net reduction in Investments in Non-Recourse Affiliates
resulting from payments of dividends, repayments of loans or advances or other
transfers of assets to the Company or any Restricted Subsidiary from
Non-Recourse Affiliates) not to exceed $6.0 million; provided, however, that the
amount of such Investments shall be excluded in the calculation of the amount of
Restricted Payments; (vi) with respect to each tax period that Benedek
Broadcasting qualifies as an S Corporation under the Code, or any similar
provision of state or local law, distributions of Tax Amounts; provided,
however, that prior to any distribution of Tax Amounts a duly authorized officer
of Benedek Broadcasting certifies to the Trustee that Benedek Broadcasting
qualified as an S Corporation for Federal income tax purposes for such period
and for the states in respect of which distributions are being made and that at
the time of such distributions, the most recent audited financial statements of
Benedek Broadcasting provide that Benedek Broadcasting was treated as an S
Corporation for Federal income tax purposes for the applicable portion of the
period of such financial statements; provided further, however, that the amount
of such distributions shall be excluded in the calculation of the amount of
Restricted Payments; or (vii) loans or advances to officers and directors of the
Company (other than a Restricted Holder) (A) in the ordinary course of business
in an aggregate amount outstanding not in excess of $1.0 million or (B) the
proceeds of which are used to acquire Capital Stock of the Company (other than
Redeemable Stock or Exchangeable Stock); provided further, however, that such
loans or advances shall be excluded in the calculation of the amount of
Restricted Payments; or (viii) the retirement of the Exchangeable Preferred
Stock through the issuance of the Exchange Debentures; provided, however, the
amount thereof shall be excluded in the calculation of the amount of Restricted
Payments.
The Company shall not be permitted to make distributions pursuant to clause
(vi) above (1) unless and until the Company has entered into a binding written
agreement with each stockholder (copies of which will be promptly furnished to
the Trustee prior to the making of any such distribution) providing that if any
amount distributed to such stockholder pursuant to such clause (vi) is later
determined to have been, as a result of a change in applicable law or the
failure of Benedek Broadcasting to effect or maintain a valid S Corporation
election or otherwise, in excess of that amount permitted to be distributed or
paid under such clause (vi), such excess shall be refunded to the Company at
least five Business Days prior to the next due date of individual estimated
income tax payments and (2) in the event it has been determined that any such
excess distribution or payment has been made, unless the Company has requested
and received all refunds pursuant to such agreements.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (i)
pay dividends or make any other distributions on its Capital Stock or pay any
Debt owed to the Company, (ii) make any loans or advances to the Company or
(iii) transfer any of its property or assets to the Company, except: (1) any
encumbrance or restriction pursuant to an agreement in effect at or entered into
on the Issue Date; (2) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any Debt Issued by
such Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Debt Issued as consideration
in, or to provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the
Company) and outstanding on such date; (3) any encumbrance or restriction
pursuant to an agreement effecting a Refinancing of Debt Issued pursuant to an
agreement referred to in clause (1) or (2) of this covenant or contained in any
amendment to an agreement referred to in clause (1) or (2) of this covenant;
provided, however, that the encumbrances and restrictions contained in such
Refinancing agreement or amendment are no less favorable to the Debentureholders
than encumbrances or restrictions contained in such
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agreements; (4) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of the lease; (5) in the case of clause
(iii) above, restrictions contained in security agreements securing Debt of a
Restricted Subsidiary to the extent such restrictions restrict the transfer of
the property subject to such security agreements; and (6) any restriction with
respect to a Restricted Subsidiary imposed pursuant to an agreement entered into
for the sale or disposition of all or substantially all of the Capital Stock or
assets of such Restricted Subsidiary pending the closing of such sale or
disposition.
Limitation on Sales of Assets and Subsidiary Stock. The Company shall not,
and shall not permit any Restricted Subsidiary to, make any Asset Disposition
unless (i) the Company or such Restricted Subsidiary receives consideration at
the time of such Asset Disposition at least equal to the fair market value, as
determined in good faith by the Board of Directors (including as to the value of
all non-cash consideration), of the shares and assets subject to such Asset
Disposition and at least 90% of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash and (ii) an amount
equal to 100% of the Net Available Cash from such Asset Disposition is applied
by the Company (or such Restricted Subsidiary, as the case may be) (A) first, to
the extent the Company elects (or is required by the terms of any Debt) to
prepay, repay or purchase Senior Debt or Debt (other than Redeemable Stock) of a
Wholly Owned Subsidiary (in each case other than Debt owed to the Company or an
Affiliate of the Company) within 60 days after the later of the date of such
Asset Disposition or the receipt of such Net Available Cash; (B) second, to the
extent of the balance of such Net Available Cash after application in accordance
with clause (A), at the Company's election to the investment by the Company or
any Restricted Subsidiary in assets to replace the assets that were the subject
of such Asset Disposition or in assets that, as determined by the Board of
Directors and evidenced by resolutions of the Board of Directors, will be used
in the businesses of the Company and its Restricted Subsidiaries existing on the
Issue Date or in businesses reasonably related thereto, in all cases within 270
days after the later of the date of such Asset Disposition or the receipt of
such Net Available Cash; (C) third, to the extent the Company is entitled
pursuant to then existing contractual limitations to receive dividends or
distributions from the relevant Restricted Subsidiary and to the extent of the
balance of such Net Available Cash after application in accordance with clauses
(A) and (B), to make an offer pursuant to and subject to the conditions
contained in the Exchange Indenture to the holders of the Exchange Debentures
(and to holders of Debt designated by the Company that is pari passu with the
Exchange Debentures) to purchase Exchange Debentures (and such other Debt) at a
purchase price of 100% of the principal amount thereof (without premium) plus
accrued and unpaid interest (or in respect of such other Debt such lesser price,
if any, as may be provided for by the terms of such other Debt) and (D) fourth,
to the extent of the balance of such Net Available Cash after application in
accordance with clauses (A), (B) and (C), to (x) the acquisition by the Company
or any Restricted Subsidiary of assets to replace the assets that were the
subject of such Asset Disposition or assets that, as determined by the Board of
Directors and evidenced by resolutions of the Board of Directors, will be used
in the businesses of the Company and its Restricted Subsidiaries existing on the
Issue Date or in businesses reasonably related thereto or (y) the prepayment,
repayment or purchase of Debt (other than any Redeemable Stock) of the Company
(other than Debt owed to an Affiliate of the Company) or Debt of any Restricted
Subsidiary (other than Debt owed to the Company or an Affiliate of the Company),
in each case within 360 days after the later of the receipt of such Net
Available Cash and the date the offer described in clause (C) is consummated;
provided, however, that in connection with any prepayment, repayment or purchase
of Debt pursuant to clause (A), (C) or (D) above, the Company or such Restricted
Subsidiary shall retire such Debt and shall cause the related loan commitment
(if any) to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this
paragraph, the Company and the Restricted Subsidiaries shall not be required to
apply any Net Available Cash in accordance with this paragraph except to the
extent that the aggregate Net Available Cash from all Asset Dispositions which
are not applied in accordance with this paragraph exceeds $5.0 million. The
Company shall not permit any Non-Recourse Subsidiary to make any Asset
Disposition unless such Non-Recourse Subsidiary receives consideration at the
time of such Asset Disposition at least equal to the fair market value of
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the shares or assets so disposed of. Pending application of Net Available Cash
pursuant to this covenant, such Net Available Cash shall be invested in
Permitted Investments.
In the event of an Asset Disposition that requires the purchase of Exchange
Debentures (and other Debt that is pari passu with the Exchange Debentures)
pursuant to clause (ii)(C) above, the Company will be required to purchase
Exchange Debentures tendered pursuant to an offer by the Company for the
Exchange Debentures (and other Debt at the purchase price set forth above) in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Exchange Indenture. The Company shall not be
required to make such an offer to purchase Exchange Debentures if the Net
Available Cash available therefor is less than $5.0 million for any particular
Asset Disposition (which lesser amount shall be carried forward for purposes of
determining whether such an offer is required with respect to any subsequent
Asset Disposition).
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Exchange Debentures pursuant to
this covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
Limitation on Transactions with Affiliates. The Company shall not, and
shall not permit any Restricted Subsidiary to, conduct any business or enter
into any transaction or series of related transactions (including the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any Affiliate of the Company unless the terms of such business, transaction or
series of transactions are as favorable to the Company or such Restricted
Subsidiary as terms that would be obtainable at the time for a comparable
transaction or series of similar transactions in arm's-length dealings with an
unrelated third person; provided, however, that in the case of any transaction
or series of related transactions involving aggregate payments or other
transfers by the Company and its Restricted Subsidiaries in excess of (i) $1.0
million, the Company shall deliver an Officers' Certificate to the Trustee
certifying that the terms of such business, transaction or series of
transactions (x) comply with this covenant, (y) have been set forth in writing
and (z) have been determined in good faith by the disinterested members of the
Board of Directors to satisfy the criteria set forth in this covenant, and (ii)
$5.0 million, the Company shall also deliver to the Trustee an opinion from an
investment banking firm of national prominence that is not an Affiliate of the
Company to the effect that such business, transaction or transactions are fair
to the Company or such Restricted Subsidiary from a financial point of view.
The provisions of the preceding paragraph shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the provisions of the
covenant described under ' -- Limitation on Restricted Payments,' (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors in the
ordinary course of business and consistent with industry practices, (iii) loans
or advances to employees of the Company and the Subsidiaries (other than
Restricted Holders) (A) in the ordinary course of business in an aggregate
amount outstanding not to exceed $1.0 million or (B) the proceeds of which are
used to acquire from the Company Capital Stock of the Company (other than
Redeemable Stock or Exchangeable Stock); (iv) the payment of reasonable fees to
directors of the Company and its Subsidiaries (other than a Restricted Holder)
who are not employees of the Company or its Subsidiaries; (v) salaries to
employees in the ordinary course of business and consistent with industry
practices; and (vi) any transaction between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries; provided, however, that no
portion of the minority interest in any such Restricted Subsidiary is owned by
an Affiliate (other than the Company or a Wholly Owned Subsidiary) of the
Company.
SEC Reports and Other Information. Notwithstanding that the Company may not
be required to subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, the Company shall file with the SEC and thereupon provide the
Trustee and holders of the Exchange Debentures with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
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Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filing of such information, documents
and reports under such Sections. In addition, for so long as any of the Exchange
Debentures are outstanding, the Company will make available to any prospective
purchaser of the Exchange Debentures or beneficial owner of the Exchange
Debentures in connection with any sales thereof the information required by Rule
144A(d)(4) under the Securities Act.
SUCCESSOR COMPANY
The Company may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any person unless: (i)
the resulting, surviving or transferee person (if not the Company) is organized
and existing under the laws of the United States of America or any State thereof
or the District of Columbia and such entity expressly assumes by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Exchange Indenture and the
Exchange Debentures; (ii) immediately prior to and after giving effect to such
transaction (and treating any Debt which becomes an obligation of the resulting,
surviving or transferee person or any Subsidiary as a result of such transaction
as having been incurred by such person or such Subsidiary at the time of such
transaction), no Default has occurred and is continuing; (iii) immediately after
giving effect to such transaction, the resulting, surviving or transferee person
would be able to issue an additional $1.00 of Debt pursuant to paragraph (a) of
the covenant described under ' -- Certain Covenants -- Limitation on Debt'
above; (iv) immediately after giving effect to such transaction, the resulting,
surviving or transferee person has Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company prior to such
transaction; and (v) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that such consolidation, merger or
transfer and such supplemental indenture (if any) comply with the Exchange
Indenture. The resulting, surviving or transferee person will be the successor
company.
The Company shall not permit Benedek Broadcasting to consolidate with or
merge with or into, or convey, transfer or lease all or substantially all its
assets to, any person unless: (i) the resulting, surviving or transferee person
(if not Benedek Broadcasting) is organized and existing under the laws of the
United States of America or any State thereof or the District of Columbia; (ii)
immediately prior to and after giving effect to such transaction (and treating
any Debt which becomes an obligation of the resulting, surviving or transferee
person or any Subsidiary as a result of such transaction as having been incurred
by such person or such Subsidiary at the time of such transaction), no Default
has occurred and is continuing; (iii) immediately after giving effect to such
transaction, the Company would be able to issue an additional $1.00 of Debt
pursuant to paragraph (a) of the covenant described under ' -- Certain
Covenants -- Limitation on Debt' above; and (iv) the Company delivers to the
Transfer Agent an Officers' Certificate and an Opinion of Counsel stating that
such consolidation, merger or transfer complies with the Exchange Indenture.
DEFAULTS
An Event of Default is defined in the Exchange Indenture as (i) a default
in payment of interest on the Exchange Debentures when due, continued for 30
days, (ii) a default in the payment of principal of any Exchange Debenture when
due at its Stated Maturity, upon optional redemption, upon required repurchase,
upon declaration or otherwise, (iii) the failure by the Company to comply for 30
days after notice with any of its obligations under the covenants described
under ' -- Change of Control' above or under the covenants described under
' -- Certain Covenants' above (in each case, other than a failure to purchase
Exchange Debentures), (iv) the failure by the Company to comply for 60 days
after notice with any of its other agreements or covenants or any provisions
contained in the Exchange Indenture, (v) Debt of the Company, BLC or any
Significant Subsidiary is not paid within any applicable grace period after
final maturity or is accelerated by the holders thereof because of a default and
the total amount of such Debt unpaid or accelerated exceeds $5.0 million and
such failure continues for 10 days after notice (the 'cross acceleration
provision'), (vi) certain events of bankruptcy, insolvency or reorganization of
the Company, BLC or a Significant Subsidiary (the 'bankruptcy provisions'),
(vii) any judgment or decree for the payment of money in excess of $5.0 million
is rendered against the
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Company, BLC or a Significant Subsidiary, remains outstanding for a period of 60
days following such judgment and is not discharged, waived or stayed (the
'judgment default provision') or (viii) the Company, Benedek Broadcasting, BLC
or a Significant Subsidiary fails to maintain any License or Licenses with
respect to a Television Station or Television Stations owned by it which License
is necessary for the continued transmission of such Television Station's normal
programming and the Operating Cash Flow for the most recently completed four
fiscal quarters of the Company of such Television Station or Television Stations
exceeds 10% of the Operating Cash Flow of the Company for such period (the
'license maintenance provision'). However, a default under clause (iii), (iv),
(v) or (vii) will not constitute an Event of Default until the Trustee or the
holders of 25% in principal amount of the outstanding Exchange Debentures notify
the Company of the default and the Company does not cure such default within the
time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Exchange Debentures may
declare the principal amount of and accrued but unpaid interest on all the Notes
(collectively, the 'Default Amount') to be due and payable. Upon such a
declaration, such Default Amount shall be due and payable immediately. If an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs and is continuing, the Default Amount will
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holders of the Exchange Debentures.
Under certain circumstances, the holders of a majority in principal amount of
the outstanding Exchange Debentures may rescind any such acceleration with
respect to the Exchange Debentures and its consequences. In addition, if an
Event of Default occurs within 12 calendar months after the issuance of the
Exchange Debentures and so long as such Event of Default is continuing, the
holders of the Exchange Debentures will have the voting rights described under
'Exchangeable Preferred Stock -- Voting Rights.'
Subject to the provisions of the Exchange Indenture relating to the duties
of the Trustee, in case an Event of Default occurs and is continuing, the
Trustee will be under no obligation to exercise any of the rights or powers
under the Exchange Indenture at the request or direction of any of the holders
of the Exchange Debentures unless such holders have offered to the Trustee
reasonable indemnity or security against any loss, liability or expense. Except
to enforce the right to receive payment of principal, premium (if any) or
interest when due, no holder of a Exchange Debenture may pursue any remedy with
respect to the Indenture or the Exchange Debentures unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25% in principal amount of the outstanding Exchange
Debentures have requested the Trustee to pursue the remedy, (iii) such holders
have offered the Trustee reasonable security or indemnity against any loss,
liability or expense, (iv) the Trustee has not complied with such request within
10 days after the receipt thereof and the offer of security or indemnity and (v)
the holders of a majority in principal amount of the outstanding Exchange
Debentures have not given the Trustee a direction inconsistent with such request
within such 10-day period. Subject to certain restrictions, the holders of a
majority in principal amount of the outstanding Exchange Debentures are given
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or of exercising any trust or power
conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Exchange Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other holder of an
Exchange Debenture or that would involve the Trustee in personal liability.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Exchange Debentures
pursuant to the provisions described under ' -- Optional Redemption' above, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Exchange Debentures.
The Exchange Indenture provides that if a Default occurs and is continuing
and is known to the Trustee, the Trustee must mail to each holder of the
Exchange Debentures notice of the Default within 10 days after it occurs. In
addition, the Company is required to deliver to the Trustee, within 90 days
after the end of each fiscal year and within 45 days after the end of each of
the first three fiscal
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quarters of each year, a certificate indicating whether the signers thereof know
of any Default that occurred during the previous year. The Company also is
required to deliver to the Trustee, within 10 days after the occurrence thereof,
written notice of any event which would constitute certain Defaults, their
status and what action the Company is taking or proposes to take in respect
thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Exchange Indenture may be amended with
the consent of the holders of two-thirds in principal amount of the Exchange
Debentures then outstanding and any past default or compliance with any
provisions may be waived with the consent of the holder of two-thirds in
principal amount of the Exchange Debentures then outstanding. However, without
the consent of each holder of an outstanding Exchange Debenture, no amendment
may, among other things, (i) reduce the amount of Exchange Debentures whose
holders must consent to an amendment, (ii) reduce the rate of or extend the time
for payment of interest on any Exchange Debenture, (iii) reduce the principal of
or extend the Stated Maturity of any Exchange Debenture, (iv) reduce the premium
payable upon the redemption of any Exchange Debenture or change the time at
which any Exchange Debenture may be redeemed as described under ' -- Optional
Redemption' above, (v) make any Exchange Debenture payable in money other than
that stated in the Exchange Debenture, (vi) impair the right of any holder of
the Exchange Debentures to receive payment of principal of and interest on such
holder's Exchange Debentures on or after the due dates therefor or to institute
suit for the enforcement of any payment on or with respect to such holder's
Exchange Debentures, (vii) make any change in the amendment provisions which
require each holder's consent or in the waiver provisions or (viii) make any
change to the subordination provisions of the Exchange Indenture.
Without the consent of any holder of the Exchange Debentures, the Company
and the Trustee may amend or supplement the Exchange Indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by a
successor corporation of the obligations of the Company under the Exchange
Indenture, to provide for uncertificated Exchange Debentures in addition to or
in place of certificated Exchange Debentures (provided that the uncertificated
Exchange Debentures are issued in registered form for purposes of Section 163(f)
of the Internal Revenue Code of 1986, as amended (the 'Code'), or in a manner
such that the uncertificated Exchange Debentures are described in Section
163(f)(2)(B) of the Code), to add Guarantees with respect to or secure the
Exchange Debentures, to add to the covenants of the Company for the benefit of
the holders of the Exchange Debentures or to surrender any right or power
conferred upon the Company or to make any change that does not adversely affect
the rights of any holder of the Exchange Debentures or to comply with any
requirements of the SEC in connection with the qualification of the Exchange
Indenture under the TIA. However, no amendment may be made to the subordination
provisions of the Exchange Indenture that adversely affects the rights of any
holder of Debt then outstanding unless the holders of such Debt (or their
Representative) consents to such change.
The consent of the holders of the Exchange Debentures is not necessary
under the Exchange Indenture to approve the particular form of any proposed
amendment. It is sufficient if such consent approves the substance of the
proposed amendment.
After an amendment under the Exchange Indenture becomes effective, the
Company is required to mail to holders of the Exchange Debentures a notice
briefly describing such amendment. However, the failure to give such notice to
all holders of the Exchange Debentures, or any defect therein, will not impair
or affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the
Exchange Debentures and the Exchange Indenture ('legal defeasance'), except for
certain obligations, including those respecting the defeasance trust and
obligations to register the transfer or exchange of the Exchange Debentures, to
replace mutilated, destroyed, lost or stolen Exchange Debentures and to maintain
a registrar and paying agent in respect of the Exchange Debentures. The Company
at any time may terminate its obligations under the covenants described under
' -- Certain Covenants' and ' -- Change of Control,'
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the operation of the cross acceleration provision, the bankruptcy provisions
with respect to Significant Subsidiaries, the judgment default provision and the
license maintenance provision described under 'Defaults' above and the
limitations contained in clauses (iii) and (iv) of the first paragraph or clause
(iii) of the second paragraph described under ' -- Successor Company' above
('covenant defeasance').
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Exchange Debentures may not be
accelerated because of an Event of Default with respect thereto. If the Company
exercises its covenant defeasance option, payment of the Exchange Debentures may
not be accelerated because of an Event of Default specified in clause (iii),
(v), (vi) (with respect only to Significant Subsidiaries) (vii) or (viii) under
' -- Defaults' above or because of the failure of the Company to comply with
clause (iii) or (iv) of the first paragraph or clause (iii) of the second
paragraph under ' -- Successor Company' above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the 'defeasance trust') with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Exchange Debentures to redemption or maturity, as the case may
be, and must comply with certain other conditions, including delivering to the
Trustee an Opinion of Counsel to the effect that holders of the Exchange
Debentures will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and defeasance and will be subject to
Federal income tax on the same amount and in the same manner and at the same
times as would have been in the case if such deposit and defeasance had not
occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
CONCERNING THE TRUSTEE
IBJ Schroder Bank & Trust Company is to be the Trustee under the Exchange
Indenture and has been appointed by the Company as Registrar and Paying Agent
with regard to the Exchange Debentures.
The Exchange Indenture and provisions of the TIA incorporated by reference
therein contain limitations on the rights of the Trustee, should it become a
creditor of the Company, to obtain payment of claims in certain cases or to
realize on certain property received by it in respect of any such claim as
security or otherwise. The Trustee is permitted to engage in other transactions
with the Company or any Affiliate; provided, however, that if it acquires any
conflicting interest (as defined in the Exchange Indenture or in the TIA), it
must eliminate such conflict or resign.
GOVERNING LAW
The Exchange Indenture provides that it and the Exchange Debentures will be
governed by, and construed in accordance with, the laws of the State of New York
without giving effect to applicable principles of conflicts of law to the extent
that the application of the law of another jurisdiction would be required
thereby.
CERTAIN DEFINITIONS
'Acquired Station' means any Television Station acquired by the Company
after the Issue Date.
'Affiliate' of any specified person means (i) any other person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified person or (ii) any other person who is a director or
officer (A) of such specified person, (B) of any subsidiary of such specified
person or (C) of any person described in clause (i) above. For purposes of the
covenants described under 'Certain Covenants -- Limitation on Restricted
Payments,' ' -- Limitation on Transactions with Affiliates' and ' -- Limitation
on Sales of Assets and Subsidiary Stock,' (a) control of a person means the
power, direct or indirect, to direct or cause the direction of the management
and policies of such person whether by contract or otherwise and (b) beneficial
ownership of 5% or more of the voting
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common equity (on a fully diluted basis) or warrants to purchase such equity
(whether or not currently exercisable) of a person shall be deemed to be control
of such person; and the terms 'controlling' and 'controlled' have meanings
correlative to the foregoing.
'Asset Disposition' means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) of shares of
Capital Stock of a Subsidiary (other than directors' qualifying shares),
property or other assets (each referred to for the purposes of this definition
as a 'disposition') by the Company or any of its Subsidiaries (including any
disposition by means of a merger, consolidation or similar transaction) other
than (i) a disposition by a Subsidiary to the Company or by the Company or a
Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of property or
assets at fair market value in the ordinary course of business, (iii) a
disposition of obsolete assets in the ordinary course of business, (iv) for
purposes of the covenant described under 'Certain Covenants -- Limitation on
Sales of Assets and Subsidiary Stock' only, a disposition subject to the
covenant described under ' -- Limitation on Restricted Payments' (v) a
disposition subject to the provisions set forth in 'Successor Company' (except
to the extent the Company disposes of substantially all (but not all) of its
assets, in which event the assets not so disposed of shall be deemed as having
been sold by the Company), (vi) a disposition pursuant to the terms of the
Company Pledge Agreement or (vii) a disposition by the Company in which and to
the extent the Company receives as consideration Capital Stock of a person
engaged in, or assets that will be used in, the business of the Company existing
on the Issue Date or in businesses reasonably related thereto, as determined by
the Board of Directors of the Company, the determination of which will be
conclusive and evidenced by a resolution of the Board of Directors of the
Company at the time of such disposition.
'Attributable Debt' in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
set forth on the face of the Exchange Debentures, compounded annually) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
'Average Life' means, as of the date of determination, with respect to any
Debt, the quotient obtained by dividing (i) the sum of the products of (a) the
numbers of years from the date of determination to the dates of each successive
scheduled principal payment or redemption or similar payment with respect to
such Debt multiplied by (b) the amount of such payment, by (ii) the sum of all
such payments.
'Bank Credit Agreement' means the Credit Agreement, dated as of June 6,
1996 among Benedek Broadcasting, as borrower, the Company, the Lenders referred
to therein, CIBC, as administrative agent and collateral agent, Pearl Street, as
arranging agent, and Goldman, Sachs & Co., as syndication agent, and all
promissory notes, guarantees, security agreements, pledge agreements, deeds of
trust, mortgages, letters of credit and other instruments, agreements and
documents executed pursuant thereto or in connection therewith, in each case as
the same may be amended, supplemented, restated, renewed, refinanced, replaced
or otherwise modified (in whole or in part and without limitation as to amount,
terms, conditions, covenants or other provisions) from time to time.
'Bank Debt' means all Senior Debt outstanding under the Bank Credit
Agreement.
'BLC' means Benedek License Corporation, a corporation organized under the
laws of the State of Delaware, and any successor company.
'Board of Directors' means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
'Business Day' means each day which is not a Legal Holiday.
'Capital Lease Obligations' of a person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such person prepared in accordance with generally accepted
accounting principles; the amount of such obligation shall be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles; and the Stated Maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty.
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'Capital Stock' of any person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such person, including any Preferred
Stock, but excluding any debt securities convertible into or exchangeable for
such equity.
'Cash Flow Leverage Ratio' as of any date of determination means the ratio
of (i) the aggregate amount outstanding of all Debt of the Company and the
Restricted Subsidiaries (including any Debt issued under paragraph (b) of the
covenant described under 'Certain Covenants -- Limitation on Debt') at the end
of the most recent fiscal quarter ending at least 45 days prior to the date of
determination to (ii) Operating Cash Flow for the four fiscal quarters ending on
the last day of such fiscal quarter; provided, however, that (1) if the Company
or any Restricted Subsidiary has Issued any Debt since the beginning of such
period that remains outstanding or if the transaction giving rise to the need to
calculate the Cash Flow Leverage Ratio is an Issuance of Debt, or both, Debt as
of such date and Operating Cash Flow (including Consolidated Interest Expense)
for such period shall be calculated after giving effect on a pro forma basis to
such Debt (in the case of Operating Cash Flow, as if such Debt had been Issued
on the first day of such period) and the discharge of any other Debt repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new Debt
(in the case of Operating Cash Flow, as if such discharge had occurred on the
first day of such period), (2) if since the beginning of such period the Company
or any Restricted Subsidiary shall have made any Asset Disposition, (A) the
Operating Cash Flow for such period shall be reduced by an amount equal to the
Operating Cash Flow (if positive) directly attributable to the assets which are
the subject of such Asset Disposition for such period, or increased by an amount
equal to the Operating Cash Flow (if negative), directly attributable thereto
for such period (including an adjustment for Consolidated Interest Expense
directly attributable to any Debt (the 'Discharged Debt') of the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries in connection
with such Asset Dispositions for such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Discharged Debt of such Restricted Subsidiary)) and
(B) Debt for such period shall be reduced by an amount equal to the Discharged
Debt, (3) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any person which becomes a Restricted Subsidiary) or
an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business,
Operating Cash Flow for such period shall be calculated after giving pro forma
effect thereto (including the Issuance of any Debt) as if such Investment or
acquisition occurred on the first day of such period and (4) if since the
beginning of such period any person (that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted Subsidiary
since the beginning of such period) shall have made any Asset Disposition or any
Investment or acquisition of assets that would have required an adjustment
pursuant to clause (2) or (3) above if made by the Company or a Restricted
Subsidiary during such period, Operating Cash Flow (including Consolidated
Interest Expense) for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition occurred
on the first day of such period. For purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto, and the amount of Consolidated Interest Expense
associated with any Debt Issued in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting Officer of the Company. If any Debt bears a floating rate of interest
and is being given pro forma effect, the interest on such Debt shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Protection Agreement applicable to such Debt if such Interest Rate Protection
Agreement has a remaining term in excess of 12 months).
'Code' means the Internal Revenue Code of 1986, as amended.
'Consolidated Interest Expense' means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such interest expense, (i) interest expense
attributable to capital leases, (ii) amortization of debt discount and debt
Issuance cost, (iii) capitalized interest, (iv) non-cash interest expense, (v)
commissions, discounts and other fees
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and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) interest actually paid by the Company or any such Restricted
Subsidiary under any Guarantee of Debt or other obligation of any other person,
(vii) net costs associated with Hedging Obligations (including amortization of
fees), (viii) Preferred Stock dividends in respect of all Preferred Stock of
Restricted Subsidiaries and Redeemable Stock of the Company held by persons
other than the Company or a Wholly Owned Subsidiary and (ix) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any person (other than the Company) in connection with loans incurred by such
plan or trust to purchase newly issued or treasury shares of the Company.
'Consolidated Net Income' means, for any period, the net income of the
Company and its consolidated subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
person if such person is not a Restricted Subsidiary, except that (A) the
Company's equity in the net income of any such person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) the Company's equity in a
net loss of any such person for such period shall be included in determining
such Consolidated Net Income, (ii) any net income of any person acquired by the
Company or a Restricted Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition, (iii) any net income of any
Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions,
directly or indirectly, on the payment of dividends or the making of
distributions by such Restricted Subsidiary, directly or indirectly, to the
Company, except that (A) the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Restricted Subsidiary during such period to the Company or another Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) the Company's equity in a net loss
of any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income, (iv) any gain (but not loss) realized
upon the sale or other disposition of any property, plant or equipment of the
Company or its consolidated subsidiaries (including pursuant to any
sale-and-leaseback arrangement) which is not sold or otherwise disposed of in
the ordinary course of business and any gain (but not loss) realized upon the
sale or other disposition of any Capital Stock of any person and (v) the
cumulative effect of a change in accounting principles. Notwithstanding the
foregoing, for the purposes of the covenant described under 'Certain
Covenants -- Limitation on Restricted Payments' only, there shall be excluded
from Consolidated Net Income any dividends, repayments of loans or advances or
other transfers of assets from a Non-Recourse Affiliate to the Company or a
Restricted Subsidiary to the extent such dividends, repayments or transfers
increase the amount of Restricted Payments permitted under such covenant
pursuant to clause (v) of paragraph (b) thereof.
'Consolidated Net Worth' of any person means the total of the amounts shown
on the balance sheet of such person and its consolidated subsidiaries,
determined on a consolidated basis in accordance with generally accepted
accounting principles, as of the end of the most recent fiscal quarter of such
person ending at least 45 days prior to the taking of any action for the purpose
of which the determination is being made, as (i) the par or stated value of all
outstanding Capital Stock of such person plus (ii) paid-in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit, (B) any amounts attributable to
Redeemable Stock and (C) any amounts attributable to Exchangeable Stock.
'Debentureholder' or 'Holder' means the person in whose name an Exchange
Debenture is registered on the Registrar's books.
'Debt' of any person means, without duplication, (i) the principal of and
premium (if any) in respect of (A) indebtedness of such person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such person is responsible or
liable; (ii) all Capital Lease Obligations and all Attributable Debt of such
person; (iii) all obligations of
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such person Issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such person and all obligations of such person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of such person
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect to
letters of credit securing obligations (other than obligations described in (i)
through (iii) above) entered into in the ordinary course of business of such
person to the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third Business
Day following receipt by such person of a demand for reimbursement following
payment on the letter of credit); (v) the amount of all obligations of such
person with respect to the redemption, repayment or other repurchase of, in the
case of a Subsidiary, any Preferred Stock and, in the case of any other person,
any Redeemable Stock (but excluding any accrued dividends); (vi) all obligations
of the type referred to in clauses (i) through (v) of other persons and all
dividends of other persons for the payment of which, in either case, such person
is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including any Guarantees of such obligations and dividends; and (vii)
all obligations of the type referred to in clauses (i) through (vi) of other
persons secured by any Lien on any property or asset of such person (whether or
not such obligation is assumed by such person), the amount of such obligation
being deemed to be the lesser of the value of such property or assets or the
amount of the obligation so secured.
The amount of Debt of any person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
'Default' means any event which is, or after notice or passage of time or
both would be, in the case of the Exchangeable Preferred Stock, a Voting Rights
Triggering Event and, in the case of the Exchange Debentures, an Event of
Default.
'Designated Senior Debt' means (i) the Bank Debt and the Senior
Subordinated Discount Notes and (ii) any other Debt of the Company which, at the
date of determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are committed to
lend up to, at least $25.0 million and is specifically designated by the Company
in the instrument evidencing or governing such Debt as 'Designated Senior Debt'
for purposes of the Exchange Debentures.
'EBITDA' for any period means the Consolidated Net Income for such period
(but without giving effect to adjustments, accruals, deductions or entries
resulting from purchase accounting, extraordinary losses or gains and any gains
or losses from any Asset Dispositions), plus the following to the extent
deducted in calculating such Consolidated Net Income: (i) income tax expense,
(ii) Consolidated Interest Expense, (iii) depreciation expense, (iv)
amortization expense (including the amortization of Program Obligations) and (v)
all other noncash charges deducted in the calculation of such Consolidated Net
Income (but excluding (a) any noncash charges related to the items described in
clauses (i) through (v) of the definition of 'Consolidated Net Income' and (b)
any noncash charges to the extent that they require an accrual of or a reserve
for cash disbursements for any future period), and minus, without duplication,
all noncash items (but excluding revenue from barter transactions) that
increased such Consolidated Net Income.
'Exchange Act' means the Securities Exchange Act of 1934, as amended.
'Exchange Date' means the date on which the Exchange Debentures are
exchanged for the Exchangeable Preferred Stock.
'Exchangeable Stock' means any Capital Stock which is exchangeable or
convertible into another security (other than Capital Stock of the Company which
is neither Exchangeable Stock nor Redeemable Stock).
'Existing Station' means (i) each of the 22 Television Stations owned by
the Company as of June 6, 1996 and (ii) each other Television Station acquired
by the Company after June 6, 1996 and the License for which is owned by BLC.
'Guarantee' means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing any Debt or other obligation of any person
and any obligation, direct or indirect,
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contingent or otherwise, of such person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other obligation of
such person (whether arising by virtue of partnership arrangements, or by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for purposes of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided, however, that
the term 'Guarantee' shall not include endorsements for collection or deposit in
the ordinary course of business. The term 'Guarantee' used as a verb has a
corresponding meaning.
'Hedging Obligations' of any person means the obligations of such person
pursuant to any interest rate swap agreement, foreign currency exchange
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement designed to protect such person against changes
in interest rates or foreign exchange rates.
'Interest Rate Protection Agreement' means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Subsidiary against
fluctuations in interest rates.
'Investment' in any person means any loan or advance to, any Guarantee of,
any acquisition of any Capital Stock, equity interest, obligation or other
security of, or capital contribution or other investment in, such person.
Investments shall exclude advances to customers and suppliers in the ordinary
course of business.
'Issue' means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Debt or Capital Stock of a person existing at
the time such person becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be issued by such Subsidiary at the
time it becomes a Subsidiary; and the term 'Issuance' has a corresponding
meaning. For purposes of the covenant described under 'Certain
Covenants -- Limitation on Debt,' if any Debt Issued by a Non-Recourse
Subsidiary thereafter ceases to be Non-Recourse Debt of a Non-Recourse
Subsidiary, then such event shall be deemed for the purpose of such covenant to
constitute the Issuance of such Debt by the issuer thereof.
'Issue Date' means the date on which the Exchangeable Preferred Stock is
initially issued.
'Legal Holiday' means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
'License' means, with respect to any Television Station, any and all
licenses and authorizations issued by the Federal Communications Commission with
respect to such Television Station.
'Lien' means any mortgage, pledge, security interest, condition sale or
other title retention agreement or other similar lien.
'Maximum Amount' as of any date of determination means, with respect to any
Acquired Station, the product of (i) the Operating Cash Flow of such Acquired
Station for the four recent fiscal quarters ending at least 45 days prior to
such date of determination and (ii) the number 5.0; provided, however, that if
such Acquired Station is acquired by the Company in connection with an Asset
Disposition of an Existing Station, the amount in clause (i) above shall be
reduced by the Operating Cash Flow for such period of such Existing Station.
'Net Available Cash' from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Debt or other obligations relating to such
properties or assets or received in any other noncash form) therefrom, in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, provincial, foreign
and local taxes required to be accrued as a liability under generally accepted
accounting principles, as a consequence of such Asset Disposition, (ii) all
payments made on any Debt which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any lien upon or other security
agreement of any kind with respect to such assets, or which must by its
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terms, or in order to obtain a necessary content to such Asset Disposition, or
by applicable law be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (iv) the deduction of appropriate amounts to be provided by the
seller as a reserve in accordance with generally accepted accounting principles,
against any liabilities associated with the assets disposed of in such Asset
Disposition and retained by the Company or any Subsidiary after such Asset
Disposition.
'Net Cash Proceeds' with respect to any Issuance or sale of Capital Stock,
means the cash proceeds of such Issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such Issuance or sale and net of taxes paid or payable as a
result thereof.
'Non-Convertible Common Stock' means, with respect to any corporation, any
non-convertible Capital Stock of such corporation and any Capital Stock of such
corporation convertible solely into non-convertible common stock of such
corporation; provided, however, that Non-Convertible Common Stock shall not
include any Redeemable Stock or Exchangeable Stock or, in the case of the
Company, any Senior Stock or Parity Stock.
'Non-Recourse Affiliate' means a Non-Recourse Subsidiary or any other
Affiliate of the Company or a Restricted Subsidiary which (i) has not acquired
any assets (other than cash) directly or indirectly from the Company or any
Restricted Subsidiary, (ii) only owns properties acquired after the Issue Date
and (iii) has no Debt other than Non-Recourse Debt.
'Non-Recourse Debt' means Debt or that portion of Debt (i) as to which
neither the Company nor its Restricted Subsidiaries (A) provide credit support
(including any undertaking, agreement or instrument which would constitute
Debt), (B) is directly or indirectly liable or (C) constitute the lender and
(ii) no default with respect to which (including any rights which the holders
thereof may have to take enforcement action against a Non-Recourse Affiliate)
would permit (upon notice, lapse of time or both) any holder of any other Debt
of the Company or its Restricted Subsidiaries to declare a default on such other
Debt or cause the payment thereof to be accelerated or payable prior to its
Stated Maturity.
'Non-Recourse Subsidiary' means a Subsidiary which (i) has not acquired any
assets (other than cash) directly or indirectly from the Company or any
Restricted Subsidiary, (ii) only owns properties acquired after the Issue Date
and (iii) has no Debt other than Non-Recourse Debt.
'Officer' means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
'Officers' Certificate' means a certificate signed by two Officers.
'Operating Cash Flow' for any period means EBITDA for such period less
Program Obligation Payments for such period; provided, however, that, when used
in the definition of 'Maximum Amount' with respect to a Television Station, all
references to the Company and Restricted Subsidiaries and consolidated
subsidiaries used in the definitions of 'EBITDA' and 'Program Obligation
Payments' and the definitions used therein shall be deemed to refer to such
Television Station.
'Opinion of Counsel' means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
'Parent' means any person that beneficially owns, directly or indirectly,
all the Voting Stock of the Company.
'Permitted Acquisition Debt' means Debt of the Company or any Restriced
Subsidiary Issued to finance all or any portion of the cost of the acquisition
of an Acquired Station, where the License for such Acquired Station is owned by
BLC, and Refinancing Debt in respect of such Debt; provided, however, that the
aggregate amount of such Permitted Acquisition Debt with respect to any Acquired
Station shall not exceed the Maximum Amount with respect to such Acquired
Station.
'Permitted Holders' shall mean (i) A. Richard Benedek; (ii) family members
or relatives of A. Richard Benedek; (iii) any trusts created for the benefit of
the persons described in clauses (i), (ii) or (iv) of this paragraph or any
trust for the benefit of any trust; (iv) in the event of the death or
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incompetence of any person described in clauses (i) or (ii) of this paragraph
such person's estate, executor, administrator, committee or other personal
representative or beneficiaries; or (v) any Affiliate of A. Richard Benedek.
'Permitted Investments' shall mean (i) investments in direct obligations of
the United States of America maturing within 90 days of the date of acquisition
thereof, (ii) investments in certificates of deposit maturing within 90 days of
the date of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States or any state thereof having
capital, surplus and undivided profits aggregating in excess of $500.0 million,
and (iii) investments in commercial paper given the highest rating by two
established national credit rating agencies and maturing not more than 90 days
from the date of acquisition thereof.
'person' means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
'Preferred Stock' as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
'principal' of any debt security means the principal amount of such debt
security plus the premium, if any, payable on such debt security which is due or
overdue or is to become due at the relevant time.
'Program Obligation Payments' means, for any period of calculation, an
amount equal to the aggregate amount paid in cash by or on behalf of the Company
and the Restricted Subsidiaries during such period with respect to, or on
account of, Program Obligations.
'Program Obligations' means the obligations of the Company and the
Restricted Subsidiaries with respect to the acquisition of the right to
broadcast films and other programming material, payable in a form other than
barter.
'Redeemable Stock' means the Exchangeable Preferred Stock and any Capital
Stock that by its terms or otherwise is required to be redeemed on or prior to
the first anniversary of the Stated Maturity of the Exchangeable Preferred Stock
or the Exchange Debentures, as the case may be or is redeemable at the option of
the holder thereof at any time on or prior to the first anniversary of the
Stated Maturity of the Exchangeable Preferred Stock or the Exchange Debentures,
as the case may be.
'Refinance' means, in respect of any Debt, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to Issue indebtedness in
exchange or replacement for, such Debt. 'Refinanced' and 'Refinancing' shall
have correlative meanings.
'Refinancing Debt' means Debt that Refinances any Debt of the Company or
any Restricted Subsidiary existing on the Issue Date or Issued in compliance
with the Certificate of Designation or, after the Exchange Date, the Exchange
Indenture; provided, however, that (i) such Refinancing Debt has a Stated
Maturity no earlier than the Stated Maturity of the Debt being Refinanced, (ii)
such Refinancing Debt has an Average Life at the time such Refinancing Debt is
Issued that is equal to or greater than the Average Life of the Debt being
Refinanced and (iii) such Refinancing Debt has an aggregate principal amount (or
if Issued with original issue discount, an aggregate issue price) that is equal
to or less than the aggregate principal amount (or if Issued with original issue
discount, the aggregate accreted value) then outstanding or committed under the
Debt being Refinanced; provided further, however, that Refinancing Debt shall
not include (x) Debt of a Subsidiary that Refinances Debt of the Company or (y)
Debt of the Company or a Restricted Subsidiary that Refinances Debt of a Non-
Recourse Subsidiary.
'Representative' means any trustee, agent or representative (if any) for an
issue of Debt of the Company.
'Restricted Holder' means a Permitted Holder or a person (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act and will be deemed to
include each person included in such person)
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that owns, directly or indirectly, 10% or more of the total voting power of the
Voting Stock of the Company; provided, however, that for purposes of this
definition a person shall be deemed to have ownership of all shares (a) that any
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time and (b) of a corporation held by
any other corporation (the 'parent corporation') if such person is the owner,
directly or indirectly, of more than 10% of the total voting power of the Voting
Stock of such parent corporation.
'Restricted Subsidiary' shall mean any Subsidiary that is not a
Non-Recourse Subsidiary.
'Sale/Leaseback Transaction' means any arrangement relating to a property
owned as of the Issue Date of the Indenture whereby the Company or a Restricted
Subsidiary transfers such property to a person and leases it back from such
person.
'SEC' means the Securities and Exchange Commission.
'Senior Debt' means (i) all obligations of the Company now or hereafter
existing under the Bank Credit Agreement, including principal of, premium, and
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
post-petition interest is allowed as a claim in such proceeding) on Debt
outstanding under the Bank Credit Agreement, reimbursement obligations of the
Company with respect to any letters of credit outstanding under the Bank Credit
Agreement and any obligations thereunder for fees, expenses and indemnities,
(ii) Debt of the Company, whether outstanding on the Issue Date or thereafter
issued and (iii) accrued and unpaid interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
the Company whether or not post-filing interest is allowed in such proceeding)
in respect of (A) indebtedness of the Company for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which the Company is responsible or liable unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are not superior in right of
payment to the Exchange Debentures; provided, however, that Debt shall not
include (i) any obligation of the Company to any Subsidiary, (ii) any liability
for Federal, state, local or other taxes owed or owing by the Company, (iii) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including Guarantees thereof or instruments evidencing such
liabilities), or (iv) that portion of any Debt which at the time of Issuance is
Issued in violation of the Exchange Indenture.
'Senior Secured Notes' means the 11 7/8% Senior Secured Notes due 2005 of
Benedek Broadcasting.
'Senior Subordinated Debt' means the Senior Subordinated Discount Notes and
any other Debt of the Company that specifically provides that such Debt is to
rank pari passu with the Senior Subordinated Discount Notes in right of payment
and is not subordinated by its terms in right of payment to any Debt or other
obligation of the Company which is not Senior Debt.
'Significant Subsidiary' means (i) any domestic Subsidiary of the Company
(other than a Non-Recourse Subsidiary) which at the time of determination either
(A) had assets which, as of the date of the Company's most recent quarterly
consolidated balance sheet, constituted at least 3% of the Company's total
assets on a consolidated basis as of such date, or (B) had revenues for the
12-month period ending on the date of the Company's most recent quarterly
consolidated statement of income which constituted at least 3% of the Company's
total revenues on a consolidated basis for such period, (ii) any foreign
Subsidiary of the Company (other than a Non-Recourse Subsidiary) which at the
time of determination either (A) had assets which, as of the date of the
Company's most recent quarterly consolidated balance sheet, constituted at least
5% of the Company's total assets on a consolidated basis as of such date, in
each case determined in accordance with generally accepted accounting
principles, or (B) had revenues for the 12-month period ending on the date of
the Company's most recent quarterly consolidated statement of income which
constituted at least 5% of the Company's total revenues on a consolidated basis
for such period, or (iii) any Subsidiary of the Company (other than a
Non-Recourse Subsidiary) which, if merged with all Defaulting Subsidiaries of
the Company, would at the time of determination either (A) have had assets
which, as of the date of the Company's most recent quarterly consolidated
balance sheet, would have constituted at least 10% of the Company's
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total assets on a consolidated basis as of such date or (B) have had revenues
for the 12-month period ending on the date of the Company's most recent
quarterly consolidated statement of income which would have constituted at least
10% of the Company's total revenues on a consolidated basis for such period
(each such determination being made in accordance with generally accepted
accounting principles). 'Defaulting Subsidiary' means any Subsidiary of the
Company (other than a Non-Recourse Subsidiary) with respect to which an event
described under clause (vi), (vii) or (viii) of the first paragraph under
' -- Defaults' has occurred and is continuing.
'Stated Maturity' means, with respect to any security, the date specified
in such security as the fixed date on which the principal of such security is
due and payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof upon the happening of any contingency unless such
contingency has occurred).
'Subordinated Obligation' means any Debt of the Company (whether
outstanding on the date of the Indenture or thereafter Issued) which is
expressly subordinate or junior in right of payment to the Exchange Debentures.
'Subsidiary' means any corporation, association, partnership, limited
liability company or other business entity of which more than 50% of the total
voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) the Company,
(ii) the Company and one or more Subsidiaries or (iii) one or more Subsidiaries.
'Tax Amounts' with respect to any calendar year means the sum of (a) an
amount equal to the product of (i) the Federal taxable income of Benedek
Broadcasting for such year as determined in good faith by the Board of Directors
and as certified by a nationally recognized tax accounting firm and without
taking into account the deductibility of state income taxes for Federal income
tax purposes multiplied by (ii) the State Tax Percentage (as defined below) plus
(b) the greater of (i) the product of (w) the Federal taxable income of Benedek
Broadcasting for such year as determined in good faith by the Board of Directors
and as certified by a nationally recognized tax accounting firm and taking into
account the deductibility of the amount determined in clause (a) above as a
state income tax for Federal income tax purposes multiplied by (x) the Federal
Tax Percentage (as defined below) and (ii) the product of (y) the alternative
minimum taxable income attributable to Benedek Broadcasting's stockholder(s) by
reason of the income of Benedek Broadcasting for such year as determined in good
faith by the Board of Directors and as certified by a nationally recognized tax
accounting firm multiplied by (z) the Federal Tax Percentage; provided, however,
the amount as calculated above shall be reduced by the amount of any income tax
benefit attributable to Benedek Broadcasting which could be realized by Benedek
Broadcasting's stockholders in the current or a prior taxable year (including
tax losses, alternative minimum tax credits, other tax credits and carryforwards
or carrybacks thereof) to the extent not previously taken into account. The
amount of any such income tax benefit described in the proviso to the preceding
sentence shall be determined in a manner consistent with the calculation of the
Tax Amount for the relevant year. Any part of the Tax Amount not distributed in
respect of a tax year for which it is calculated shall be available for
distribution in subsequent tax years. The term 'State Tax Percentage' shall mean
the highest applicable statutory marginal rate of state and local income tax to
which an individual resident of the Relevant Jurisdiction (as defined below)
would be subject in the relevant year of determination as a result of being a
stockholder of a corporation taxable as an S Corporation in such jurisdiction
(as certified to the Trustee by a nationally recognized tax accounting firm).
The term 'Relevant Jurisdiction' shall mean the jurisdiction in which, during
the relevant taxable year, (c) Benedek Broadcasting is doing business for state
and local income tax purposes, (d) Benedek Broadcasting derives the first,
second, third or fourth highest percentage of its gross income as calculated for
Federal income tax purposes (excluding therefrom any gain or loss from the sale
or other disposition of any television station then owned by Benedek
Broadcasting) and (e) Benedek Broadcasting is taxable as an S Corporation for
state and local income tax purposes that imposes the highest aggregate marginal
rate of state and local income tax on individuals (as certified to the Trustee
by a nationally recognized tax accounting firm). The term 'Federal Tax
Percentage' shall mean the
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highest applicable statutory marginal rate of Federal income tax or, in the case
of clause (b)(ii) above, alternative minimum tax, to which an individual
resident of the United States would be subject in the relevant year of
determination (as certified to the Trustee by a nationally recognized tax
accounting firm); provided, however, that, for any year in which Benedek
Broadcasting is not taxable as an S Corporation for Federal income tax purposes,
the Federal Tax Percentage shall be zero. Notwithstanding the foregoing, the sum
of the State Tax Percentage and the Federal Tax Percentage (the 'Total Tax
Percentage') shall not exceed the percentage (the 'Maximum Tax Percentage')
equal to the lesser of (f) the highest applicable statutory marginal rate of
Federal, state and local income tax or, when applicable, alternative minimum
tax, to which a corporation doing business in any state in which Benedek
Broadcasting is doing business at the time of determination would be subject in
the relevant year of determination (as certified to the Trustee by a nationally
recognized tax accounting firm) plus 5% and (g) 55%. If the Total Tax Percentage
exceeds the Maximum Tax Percentage the Federal Tax Percentage shall be reduced
to the extent necessary to cause the Total Percentage of equal the Maximum Tax
Percentage. Distributions of Tax Amounts may be made from time to time with
respect to a tax year based on reasonable estimates, with reconciliation within
40 days of the earlier of (i) Benedek Broadcasting's filing of the Internal
Revenue Service Form 1120S for the applicable taxable year and (ii) the last
date such form is required to be filed. The stockholder of Benedek Broadcasting
will enter into a binding agreement with Benedek Broadcasting to reimburse
Benedek Broadcasting for certain positive differences between the distributed
amount and the Tax Amount, which difference must be paid at the time of such
reconciliation.
'Television Station' means any group of assets which constitutes all or
substantially all of the assets which would be necessary to carry on the
business of a commercial television broadcast station and which, when purchased
by a single purchaser would (together with any necessary licenses,
authorizations, working capital and operating location) be substantially
sufficient to allow such purchaser to carry on such business.
'TIA' means the Trust Indenture Act of 1939 (15 U.S.C. 77aaa-77bbbb) as in
effect on the Issue Date.
'U.S. Government Obligations' means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
'Voting Stock' of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
'Wholly Owned Subsidiary' means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or another Wholly Owned Subsidiary.
REGISTRATION RIGHTS
Holders of the Exchange Securities are not entitled to any registration
rights with respect to the Exchange Securities. Under the Registration
Agreement, the Company has agreed to use its best efforts to consummate the
Exchange Offer by December 1, 1996 for the benefit of the Holders of shares of
Existing Exchangeable Preferred Stock. The Company will keep the Exchange Offer
open for not less than 30 days (or longer if required by applicable law) after
the date notice of the Exchange Offer is mailed to the Holders of shares of
Existing Exchangeable Preferred Stock.
In the event that applicable interpretations of the staff of the SEC in
letters issued to third parties do not permit the Company to effect the Exchange
Offer, or if any Holder of shares of Existing Exchangeable Preferred Stock is
not eligible to participate in the Exchange Offer or does not receive freely
tradeable Exchange Securities in the Exchange Offer, the Company will, at its
cost, (a) as promptly as practicable, file a Shelf Registration Statement
covering resales of shares of Existing Exchangeable Preferred Stock or the
Exchange Securities, as the case may be, (b) use its best efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act
and (c) keep the Shelf Registration Statement effective until three years after
the date of original issuance of the Existing Exchangeable Preferred Stock. The
Company will, in the event a Shelf Registration
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Statement is filed, among other things, provide to each Holder for whom such
Shelf Registration Statement was filed copies of the prospectus which is a part
of the Shelf Registration Statement, notify each such Holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of shares of Existing Exchangeable
Preferred Stock or the Exchange Securities, as the case may be. A Holder that
sells such shares of Exchangeable Preferred Stock pursuant to the Shelf
Registration Statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Agreement which are applicable to such a Holder.
The summary herein of certain provisions of the Registration Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Agreement, a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
DESCRIPTION OF THE WARRANTS
Each Unit included ten Initial Warrants and 14.8 Contingent Warrants. The
Initial Warrants and the Contingent Warrants were issued pursuant to a Warrant
Agreement (the 'Warrant Agreement') entered into between the Company and IBJ
Schroder Bank & Trust Company, as the warrant agent (the 'Warrant Agent'). The
following summary of certain provisions of the Warrant Agreement does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Warrant Agreement, including the
definitions of certain terms therein. Capitalized terms not defined in this
Prospectus shall have the meanings ascribed to them in the Warrant Agreement. A
copy of the Warrant Agreement is filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
GENERAL
Each Warrant is evidenced by a Warrant Certificate which entitles the
holder thereof to purchase one share of Class A Common Stock from the Company at
a price (the 'Exercise Price') of $0.01 per share. The Exercise Price and the
number of Warrant Shares issuable upon exercise of a Warrant are both subject to
adjustment in certain cases. See ' -- Adjustments' below. The Initial Warrants
may be exercised at any time on or after the date the Exchange Offer is
commenced. The Contingent Warrants will initially be held in escrow pursuant to
the Warrant Escrow Agreement and will be released from escrow, subject to
certain conditions described below, on the Contingent Warrant Release Date. The
'Contingent Warrant Release Date' shall mean July 1, 2000; provided, however,
that if on June 30, 1999, the ratio (which shall be calculated on a pro forma
basis in the same manner as is 'Cash Flow Leverage Ratio' in the Certification
of Designation) of (i) the sum of the aggregate amount outstanding of all Debt
(net of cash and cash equivalents) of the Company and the Restricted
Subsidiaries and the aggregate liquidation preference of the Exchangeable
Preferred Stock, in each case as of June 30, 1999 to (ii) Operating Cash Flow
(as defined in the Certificate of Designation) for the four fiscal quarters
ending on June 30, 1999, exceeds 8.0 to 1.0, then the Contingent Warrant Release
Date will be August 16, 1999. If on the Contingent Warrant Release Date no
Exchangeable Preferred Stock or Exchange Debentures are outstanding, the
Contingent Warrants will not be delivered to holders of the Exchangeable
Preferred Stock or Exchange Debentures but will be returned to the Company for
cancellation. The Contingent Warrants were issued on the Issue Date but not
deemed to be outstanding until delivered following the Contingent Warrant
Release Date to holders of record of the Exchangeable Preferred Stock or
Exchange Debentures on the Contingent Warrant Release Date. Unless earlier
exercised, the Warrants will expire on July 1, 2007 (the 'Expiration Date'). The
Company will give notice of expiration not less than 90 nor more than 120 days
prior to the Expiration Date to the registered holders of the then outstanding
Warrants. Even if the Company does not give such notice, the Warrants will still
terminate and become void on the Expiration Date.
The Contingent Warrants, if released from escrow on the Contingent Warrant
Release Date, will not trade separately from the Exchangeable Preferred Stock or
Exchange Debentures, as the case
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may be, until such date. If on the Contingent Warrant Release Date any shares of
Exchangeable Preferred Stock or Exchange Debentures are outstanding (the
'Outstanding Securities'), the holders of such Outstanding Securities will be
entitled to receive their pro rata portion of the Contingent Warrants, based on
the then effective liquidation preference or principal amount of such
Outstanding Securities (the 'Notional Amount'). However, if the aggregate
Notional Amount of the then Outstanding Securities is less than the Maximum
Accreted Amount on the Contingent Warrant Release Date, the aggregate number of
such Contingent Warrants will be reduced pro rata. For example, assuming an
initial liquidation preference of Exchangeable Preferred Stock of $60.0 million
and a dividend rate of 15.0%, paid quarterly, the Maximum Accreted Amount would
equal $108.1 million (assuming four full years of accretion until July 1, 2000).
If, for example, on the Contingent Warrant Separation Date the aggregate
liquidation preference of the Exchangeable Preferred Stock, through partial
redemption by the Company, has been reduced to $40.0 million, the aggregate
number of Contingent Warrants available to holders of the Exchangeable Preferred
Stock would be 37.0% ($40.0 million then outstanding aggregate liquidation
preference divided by the Maximum Accreted Amount on July 1, 2000 of $108.1
million) of the original number of Contingent Warrants.
The aggregate number of shares of Class A Common Stock issuable upon
exercise of the Contingent Warrants is equal to approximately 10.0% of the
shares of Common Stock currently outstanding (calculated on a fully-diluted
basis assuming the exercise of all outstanding stock options and previously
issued warrants, including the Initial Warrants).
At the Company's option, fractional Warrant Shares may not be issued upon
exercise of the Warrants. If any fraction of a Warrant Share would, except for
the foregoing provision, be issuable upon the exercise of any such Warrants (or
specified portion thereof), the Company will pay an amount in cash equal to the
current market price per Warrant Share, as determined on the day immediately
preceding the date the Warrant is presented for exercise, multiplied by such
fraction, computed to the nearest whole cent.
No service charge will be made for registration of transfer or exchange
upon surrender of any Warrant certificate at the office of the Warrant Agent
maintained for that purpose. The Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration or transfer or exchange of Warrant Certificates.
CERTAIN DEFINITIONS
The Warrant Agreement and the Warrant Escrow Agreement contain, among
others, the following definitions:
'Common Stock' will include both the Class A Common Stock and the Class B
Common Stock of the Company.
'Maximum Accreted Amount' means a dollar amount equal to the maximum
aggregate liquidation preference of all the Exchangeable Preferred Stock issued
on the Issue Date as of the Contingent Warrant Release Date assuming that such
Exchangeable Preferred Stock remains outstanding on the Contingent Warrant
Release Date and no cash dividends have been paid on such Exchangeable Preferred
Stock on or prior to such time.
'Tax Amounts' will have the same meaning as in the Exchangeable Preferred
Stock and Exchange Debentures. See 'Description of the Exchangeable Preferred
Stock and Exchange Debentures -- Certain Definitions.'
CERTAIN TERMS
Exercise. In order to exercise all or any of the Warrants represented by a
Warrant Certificate, the holder thereof is required to surrender to the Warrant
Agent the Warrant Certificate and payment in full of the Exercise Price for each
share of Class A Common Stock or other securities issuable upon exercise of the
Warrants as to which a Warrant is exercised. The Exercise Price may be paid (i)
in cash or by certified or official bank check or (ii) by the surrender (which
surrender shall be evidenced by cancellation of the number of Warrants
represented by any Warrant Certificate presented in connection
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with a Cashless Exercise (as defined below)) of a Warrant or Warrants
(represented by one or more relevant Warrant Certificates), and without the
payment of the Exercise Price in cash, for such number of shares of Common Stock
equal to the product of (1) the number of shares of Common Stock for which such
Warrant is exercisable as of the date of exercise (if the Exercise Price were
being paid in cash) and (2) the Cashless Exercise Ratio. For purposes of the
Warrant Agreement, the 'Cashless Exercise Ratio' shall equal a fraction, the
numerator of which is the excess of the Current Market Price (as defined in the
Warrant Agreement) per share of Common Stock on the date of exercise over the
Exercise Price per share as of the date of exercise and the denominator of which
is the Current Market Price per share of the Common Stock on the date of
exercise (calculated as set forth in the Warrant Agreement). An exercise of a
Warrant in accordance with the immediately preceding sentences is herein called
a 'Cashless Exercise.' Upon surrender of a Warrant Certificate representing more
than one Warrant in connection with the holder's option to elect a Cashless
Exercise, the number of shares of Common Stock deliverable upon a Cashless
Exercise shall be equal to the number of Warrants that the holder specifies is
to be exercised pursuant to a Cashless Exercise multiplied by the Cashless
Exercise Ratio. All provisions of the Warrant Agreement shall be applicable with
respect to an exercise of a Warrant Certificate pursuant to a Cashless Exercise
for less than the full number of Warrants represented thereby. If, pursuant to
the Securities Act, the Company is not able to effect the registration under the
Securities Act of the issuance and sale of the Warrant Shares by the Company to
the holders of the Warrants upon the exercise thereof as required by the Warrant
Agreement, the holders of the Warrants will be required to effect the exercise
of the Warrants solely pursuant to the Cashless Exercise option. Upon the
exercise of any Warrants in accordance with the Warrant Agreement, the Warrant
Agent will cause the Company to transfer promptly to or upon the written order
of the holder of such Warrant Certificate appropriate evidence of ownership of
any shares of Class A Common Stock or other securities or property to which it
is entitled, registered or otherwise to the person or persons entitled to
receive the same and an amount in cash, in lieu of any fractional shares, if
any. All shares of Class A Common Stock or other securities issuable by the
Company upon the exercise of the Warrants must be validly issued, fully paid and
nonassessable.
No Rights as Stockholders. The holders of unexercised Warrants are not
entitled, as such, to receive dividends or other distributions, receive notice
of or vote at any meeting of the stockholders, consent to any action of the
stockholders, receive notice of any other proceedings of the Company or any
other rights as stockholders of the Company.
Mergers, Consolidations, etc. Except as provided below, in the event that
the Company consolidates with, merges with or into, or sells all or
substantially all of its property and assets to another person, each Warrant
thereafter shall entitle the holder thereof to receive upon exercise thereof the
number of shares of capital stock or other securities or property which the
holder of a share of Class A Common Stock is entitled to receive upon completion
of such consolidation, merger or sale of assets. If the Company merges or
consolidates with, or sells all or substantially all the property and assets of
the Company to, another person and, in connection therewith, consideration to
the holders of Class A Common Stock in exchange for their shares is payable
solely in cash, or in the event of the dissolution, liquidation or winding-up of
the Company, then the holders of the Warrants will be entitled to receive
distributions on an equal basis with the holders of Class A Common Stock or
other securities issuable upon exercise of the Warrants, as if the Warrants had
been exercised immediately prior to such event, less the Exercise Price. Upon
receipt of such payment, if any, the Warrants will expire and the rights of the
holders thereof will cease. In case of any such merger, consolidation or sale of
assets, the surviving or acquiring person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company must deposit promptly with
the Warrant Agent the funds, if any, to pay to the holders of the Warrants.
After such funds and the surrendered Warrant Certificates are received, the
Warrant Agent must make payment by delivering a check in such amount as is
appropriate (or, in the case of consideration other than cash, such other
consideration as is appropriate) to such person or persons as it may be directed
in writing by the holders surrendering such Warrants.
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ADJUSTMENTS
The number of Warrant Shares that may be purchased upon the exercise of the
Warrants and the Exercise Price will both be subject to adjustment in certain
events including: (i) the payment by the Company of dividends (or other
distributions) on Class A Common Stock of the Company payable in shares of such
Class A Common Stock or other shares of the Company's capital stock, (ii)
subdivisions, combinations and certain reclassifications of Class A Common
Stock, (iii) the issuance to all holders of Class A Common Stock of rights,
options or warrants entitling them to subscribe for shares of Class A Common
Stock, or of securities convertible into or exchangeable for shares of Class A
Common Stock, for a consideration per share which is less than the current
market price per share (as defined in the Warrant Agreement) of the Class A
Common Stock and (iv) the distribution to all holders of the Class A Common
Stock of any of the Company's assets, debt securities or any rights or warrants
to purchase securities (excluding those rights and warrants referred to in
clause (iii) above and distributions of Tax Amounts for each tax period that
Benedek Broadcasting qualifies as an S Corporation under the Internal Revenue
Code or any similar provision of state or local law and including cash dividends
and other cash distributions). In addition, the Exercise Price may be reduced in
the event of purchase of shares of the Class A Common Stock pursuant to a tender
or exchange offer made by the Company or any subsidiary thereof at a price
greater than the current market price of the Class A Common Stock at the time
such tender or exchange offer expires.
In the event of a taxable distribution to holders of Class A Common Stock
which results in an adjustment to the number of shares of Class A Common Stock
or other consideration for which a Warrant may be exercised, the holders of the
Warrants may, in certain circumstances, be deemed to have received a
distribution subject to United States Federal income tax as a dividend. See
'Certain Federal Income Tax Consequences.'
No adjustment in the Exercise Price will be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Exercise Price; provided, however, that any adjustment which is not made will be
carried forward and taken into account in any subsequent adjustment.
In the case of certain reclassifications, redesignations, reorganizations
or changes in the number of outstanding shares of Class A Common Stock or
consolidations or mergers of the Company or the sale of all or substantially all
of the assets of the Company, each Warrant shall thereafter be exercisable for
the right to receive the kind and amount of shares of stock or other securities
or property to which such holder would have been entitled as a result of such
consolidation, merger or sale had the Warrants been exercised immediately prior
thereto.
AMENDMENT
From time to time, the Company and the Warrant Agent, without the consent
of the holders of the Warrants, may amend or supplement the Warrant Agreement
for certain purposes, including, without limitation, curing defects or
inconsistencies or making any change that does not adversely affect the rights
of any holder. Any amendment or supplement to the Warrant Agreement that has an
adverse effect on the interests of the holders of the Warrants shall require the
written consent of the holders of two-thirds of the then outstanding Warrants.
The consent of each holder of the Warrants affected shall be required for any
amendment pursuant to which the Exercise Price would be increased or the number
of Warrant Shares purchasable upon exercise of Warrants would be decreased
(other than pursuant to adjustments provided in the Warrant Agreement).
SEC REPORTS AND OTHER INFORMATION
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file
with the SEC and thereupon provide the Warrant Agent and holders of the Warrants
with such annual reports and such information, documents and other reports as
are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a
U.S. corporation subject to such Sections, such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such
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Sections. In addition, for so long as any of the Warrants are outstanding, the
Company will make available to any prospective purchaser of the Warrants or the
Warrant Shares or beneficial owner thereof in connection with any sales thereof
the information required by Rule 144A(d)(4) under the Securities Act.
REGISTRATION RIGHTS
The Company has agreed, pursuant to a Common Stock Registration Rights
Agreement (the 'Common Stock Registration Rights Agreement'), upon request of
holders of Initial Warrants representing at least 20% of all outstanding Initial
Warrants, subject to customary limitations, on not more than two occasions not
earlier than the earlier of (x) the second anniversary of the Issue Date and (y)
180 days after the initial public offering of the Company's common stock, to use
its best efforts to file as soon as practicable thereafter (i) a registration
statement providing for the registration of issuance by the Company of all
shares of Class A Common Stock issuable upon exercise of the Initial Warrants or
(ii) in the event that the above registration is prohibited by any law or
applicable interpretation of the staff, a registration statement providing for
the sale of all Class A Common Stock issuable upon the exercise of the Initial
Warrants by the holders thereof and, in each case, to have such registration
statement declared effective by the SEC. The Company has also agreed, subject to
customary limitations, upon request of holders of Contingent Warrants
representing at least 20% of all outstanding Contingent Warrants, on not more
than two occasions following the Contingent Warrant Release Date, to use its
best efforts to file as soon as practicable thereafter (i) a registration
statement providing for the registration of issuance by the Company of all
shares of Class A Common Stock issuable upon exercise of the Contingent Warrants
or (ii) in the event that the above registration is prohibited by any law or
applicable interpretation of the staff, a registration statement providing for
the sale of all Class A Common Stock issuable upon the exercise of the
Contingent Warrants by the holders thereof and, in each case, to have such
registration statement declared effective by the SEC.
Holders of Warrants will also have the right on an unlimited number of
occasions, subject to customary limitations, to include the shares subject to
their Warrants in a registration statement filed by the Company with respect to
a public offering of any class of its common stock (other than registration
statements on Form S-8 and certain other customary exceptions).
The Common Stock Registration Rights Agreement contains customary
provisions whereby the beneficiaries thereof and the Company indemnify and agree
to contribute to the other with regard to losses caused by the misstatement of
any information required to be provided in a registration statement filed under
the Securities Act. The Common Stock Registration Rights Agreement requires the
Company to pay the expenses associated with any registration, other than
underwriting discounts, commissions and transfer taxes.
The summary herein of certain provisions of the Common Stock Registration
Rights Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by references to, all of the provisions of the Common
Stock Registration Rights Agreement, a copy of which is filed as an exhibit to
the Registration Statement of which this Prospectus is a part.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000 shares
of Class A Common Stock, par value $0.01 per share, 25,000,000 shares of Class B
Common Stock, par value $.01 per share, and 2,500,000 shares of preferred stock,
par value $0.01 per share. The Company has outstanding 7,030,000 shares of Class
B Common Stock, 600,000 shares of Existing Exchangeable Preferred Stock and
450,000 shares of Seller Junior Discount Preferred Stock. In addition, the
Company has 1,488,000 shares of Class A Common Stock reserved for issuance upon
exercise of the Warrants and 370,000 shares of Class B Common Stock reserved for
issuance upon exercise of outstanding options held by the President of the
Company. For a description of the Exchangeable Preferred Stock, see 'Description
of Exchangeable Preferred Stock and Exchange Debentures.'
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COMMON STOCK
The following description of the Common Stock of the Company does not
purport to be complete and is subject to, and is qualified in its entirety by
the provisions of its Certificate of Incorporation. A copy of the Certificate of
Incorporation is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
Dividends. Holders of shares of Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors out of funds legally
available for such purpose. No dividend may be declared or paid in cash or
property on any share of any class of Common Stock, however, unless
simultaneously the same dividend is declared or paid on each share of the other
classes of Common Stock. In the case of any stock dividend, holders of Class A
Common Stock are entitled to receive the same percentage dividend (payable in
shares of Class A Common Stock) as the holders of Class B Common Stock (payable
in shares of Class B Common Stock).
Voting Rights. Holders of shares of Class A Common Stock and Class B Common
Stock vote as a single class on all matters submitted to a vote of the
stockholders, with each share of Class A Common Stock entitled to one vote and
each share of Class B Common Stock entitled to ten votes, except (i) at such
time as any class of Common Stock of the Company is subject to Rule 13e-3
promulgated under the Exchange Act, with respect to any 'going private'
transaction between the Company and any Permitted Holder and (ii) as otherwise
provided by law. A 'going private' transaction is any 'Rule 13e-3 Transaction,'
as such term is defined in Rule 13e-3.
The holders of the Class A Common Stock and Class B Common Stock vote as a
single class with respect to any proposed 'going private' transaction with any
Permitted Holder, with each share of Class A Common Stock and Class B Common
Stock entitled to one vote.
Under Delaware law, the affirmative vote of the holders of a majority of
the outstanding shares of any class of Common Stock is required to approve,
among other things, a change in the designations, preferences or limitations of
the shares of such class of Common Stock.
Liquidation Rights. Upon liquidation, dissolution or winding-up of the
Company, the holders of Class A Common Stock are entitled to share ratably with
the holders of Class B Common Stock in all assets available for distribution
after payment in full of creditors.
Other Provisions. Each share of Class B Common Stock is convertible,
subject to compliance with FCC rules and regulations, at the option of its
holder, into one share of Class A Common Stock at any time. Each share of Class
B Common Stock converts automatically into one share of Class A Common Stock
upon its sale or other transfer to a party other than a Permitted Holder,
subject to compliance with FCC rules and regulations. The holders of Common
Stock are not entitled to preemptive or subscription rights. The shares of
Common Stock presently outstanding are validly issued, fully paid and
nonassessable. In any merger, consolidation or business combination, the
consideration to be received per share by holders of Class A Common Stock must
be identical to that received by holders of Class B Common Stock. No class of
Common Stock may be subdivided, consolidated, reclassified or otherwise changed
unless concurrently the other classes of Common Stock are subdivided,
consolidated, reclassified or otherwise changed in the same proportion and in
the same manner.
SELLER JUNIOR DISCOUNT PREFERRED STOCK
The following description of the Seller Junior Discount Preferred Stock
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all of the provisions in the Certificate of
Designation relating therefor. A copy of the Certificate of Designation for the
Seller Junior Discount Preferred Stock is filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
Ranking. The Seller Junior Discount Preferred Stock, with respect to
dividend rights and rights on liquidation, winding-up and dissolution, ranks (i)
junior to the Exchangeable Preferred Stock and each class of Capital Stock or
series of Preferred Stock established hereafter by the Board of Directors of the
Company, the terms of which expressly provide that such class or series will
rank senior to the Seller Junior Discount Preferred Stock as to dividend rights
and rights upon liquidation, winding-up and
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dissolution of the Company; (ii) senior to all classes of common stock and to
each other class of Capital Stock or series of Preferred Stock established
hereafter by the Board of Directors of the Company the terms of which do not
expressly provide that it ranks senior to, or on a parity with, the Seller
Junior Discount Preferred Stock as to dividend rights and rights on liquidation,
winding-up and dissolution of the Company; and (iii) subject to certain
conditions, on a parity with each other class of Capital Stock or series of
Preferred Stock established hereafter by the Board of Directors of the Company,
the terms of which expressly provide that such class or series will rank on a
parity with the Seller Junior Discount Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution. All claims of the holders of
the Seller Junior Discount Preferred Stock, including without limitation, claims
with respect to dividend payments, redemption payments, mandatory repurchase
payments or rights upon liquidation, winding-up or dissolution, shall rank
junior to the claims of the holders of any debt of the Company, holders of any
senior preferred stock, including the Exchangeable Preferred Stock, and, except
with respect to declared and unpaid dividends, all other creditors of the
Company. The Certificate of Designation for the Seller Junior Discount Preferred
Stock contains limitations on the issuance of additional preferred stock by the
Company. See ' -- Voting Rights.'
Dividends. Holders of the Seller Junior Discount Preferred Stock are
entitled to receive out of any funds legally available therefor, dividends on
the Seller Junior Discount Preferred Stock at a rate per annum equal to the
Dividend Rate (as defined) of the then effective liquidation value per share of
Seller Junior Discount Preferred Stock, payable (i) during the period from the
date of issuance thereof (the 'Seller Junior Discount Preferred Stock Issue
Date') through, but not including, the fifth anniversary of the Seller Junior
Discount Preferred Stock Issue Date, quarterly, and (ii) thereafter,
semi-annually. The term 'Dividend Rate' means (i) for the period from the Seller
Junior Discount Preferred Stock Issue Date through (but not including) the fifth
anniversary of the Seller Junior Discount Preferred Stock Issue Date, 7.92% per
annum, (ii) for the period from the fifth anniversary of the Seller Junior
Discount Preferred Stock Issue Date through (but not including) the seventh
anniversary of the Seller Junior Discount Preferred Stock Issue Date, 15% per
annum, and (iii) from the seventh anniversary of the Seller Junior Discount
Preferred Stock Issue Date and thereafter, 18% per annum, provided, however,
that during any period during which any dividend is not paid, the Seller Junior
Discount Preferred Stock is not redeemed in accordance with the terms of the
Certificate of Designation therefor or the Company takes any action in violation
of such Certificate of Designation, the Dividend Rate shall be the Dividend Rate
determined in accordance with clauses (i) through (iii) above plus 2% per annum.
Dividends on the Seller Junior Discount Preferred Stock will be cumulative from
the Seller Junior Discount Preferred Stock Issue Date. Through and including the
fifth anniversary of the Seller Junior Discount Preferred Stock Issue Date,
dividend payments thereon may not be made in cash and will instead be added
automatically to the liquidation preference of the Seller Junior Discount
Preferred Stock on the dividend payment date and will be deemed paid in full and
will not accumulate.
Liquidation. The Seller Junior Discount Preferred Stock was issued with an
initial aggregate liquidation preference of $45.0 million. Holders of the Seller
Junior Discount Preferred Stock, in the event of any liquidation, dissolution or
winding-up of the Company, will be entitled to be paid, out of the assets of the
Company available for distribution to stockholders, the then effective
liquidation preference per share of Seller Junior Discount Preferred Stock
(initially $100 per share, but subject to increase to the extent dividends
thereon accrue prior to the fifth anniversary of the Seller Junior Discount
Preferred Stock Issue Date), plus, without duplication, accrued and unpaid
dividends, thereon, before any distribution is made on any Common Stock of the
Company or any securities which are junior to the Seller Junior Discount
Preferred Stock. If the assets of the Company are insufficient to permit payment
of the full preferential amounts payable to holders of the Seller Junior
Discount Preferred Stock and holders of any other class of securities that rank
on par thereto upon liquidation, dissolution or winding-up of the affairs of the
Company, each holder of Seller Junior Discount Preferred Stock and such parity
securities will share equally and ratably in any distribution of assets of the
Company in proportion to the respective preferential amounts to which they are
entitled.
Mandatory Redemption. The Seller Junior Discount Preferred Stock is subject
to mandatory redemption (subject to contractual and other restrictions with
respect thereto and to the legal availability of funds therefor) in whole on
July 1, 2008, at a price equal to the sum of the liquidation
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value per share plus an amount equal to all accumulated and unpaid dividends per
share to the date of redemption.
Optional Redemption. The Seller Junior Discount Preferred Stock may be
redeemed (subject to contractual and other restrictions with respect thereto and
to the legal availability of funds therefor), in whole or in part at any time at
the option of the Company, at the redemption price equal to the sum of the
liquidation value per share redeemed plus an amount equal to all accumulated and
unpaid dividends per share to the date of redemption.
Voting Rights. The holders of Seller Junior Discount Preferred Stock have
no voting rights, except as required by law, provided, however, that the holders
of Seller Junior Discount Preferred Stock, voting separately as a class, have
the right to elect one director to the Board of Directors of the Company in
addition to the number to be elected by the holders of the Company's common
stock or any other shares of preferred stock of the Company upon the failure by
the Company to pay dividends for any six consecutive quarterly dividend periods
or three consecutive semi-annual periods or the failure of the Company to
discharge any mandatory redemption or repayment obligation with respect to the
Seller Junior Discount Preferred Stock, provided further, however, that without
the affirmative vote of the holders of at least a majority of the outstanding
Seller Junior Discount Preferred Stock, neither the Company nor any of its
subsidiaries may, after the Seller Junior Discount Preferred Stock Issue Date
(and therefore not applicable to the Financing Plan), incur any indebtedness
(which includes any preferred stock of a subsidiary of the Company) if, on the
date of such incurrence, after giving effect to the incurrence of such
indebtedness, the cash flow leverage ratio of the Company (defined in the same
manner as in the Senior Secured Note Indenture as to Benedek Broadcasting)
exceeds 8.5 to 1.0; provided that the Company and its subsidiaries may incur
indebtedness, without regard to such cash flow leverage ratio, if, after giving
effect to such incurrence, the aggregate amount of all indebtedness of the
Company and its subsidiaries outstanding which was incurred at such time or
times as the cash flow leverage ratio exceeded 8.5 to 1.0, does not exceed 150%
of the consolidated net interest expense for the four quarter period ending as
of the end of the fiscal quarter ending immediately prior thereto. Preferred
stock that is senior or pari passu in ranking to the Seller Junior Discount
Preferred Stock or that is junior in ranking thereto but is mandatorily
redeemable within one year prior to the mandatory redemption date of the Seller
Junior Discount Preferred Stock is considered indebtedness (and interest thereon
is considered interest expense) for purposes of the foregoing limitations. The
Exchangeable Preferred Stock is considered indebtedness for purposes of the
foregoing limitation and the Seller Junior Discount Preferred Stock is not
considered indebtedness for such purposes. Indebtedness is not deemed incurred
for this purpose upon either (i) the issuance of additional preferred stock on
account of then existing payment-in-kind preferred stock as a payment of
dividends (such as dividends on the Exchangeable Preferred Stock) or (ii) the
accretion of discount with respect to indebtedness (such as accretion of
discount on the Notes).
WARRANTS
The Company has outstanding 600,000 Initial Warrants and 888,000 Contingent
Warrants. The warrants were issued as part of the Units. Each Unit consisted of
ten shares of Existing Exchangeable Preferred Stock, ten Initial Warrants and
14.8 Contingent Warrants, each Warrant to acquire one share of Class A Common
Stock of the Company, at an initial exercise price of $0.01 per share. The
Initial Warrants and the Existing Exchangeable Preferred Stock did not trade
separately prior to date the Registration Statement of which this Prospectus is
a part was declared effective by the SEC. The Contingent Warrants, if released
on the Contingent Warrant Release Date, will not trade separately from the
Exchangeable Preferred Stock or the Exchange Debentures, as the case may be,
until such date. Additionally, under certain circumstances, the number of
Contingent Warrants may be reduced or the Contingent Warrants may be required to
be returned to the Company. The foregoing description of the Warrants does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Warrant Agreement. A copy of the
Warrant Agreement is filed as an exhibit to the Registration Statement of which
this Prospectus is a part. For a more detailed discussion with respect to the
Contingent Warrants, see 'Description of the Warrants.'
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BOOK-ENTRY SYSTEM; DELIVERY AND FORM
GENERAL
The Exchange Securities will be issued in the form of one or more shares of
Exchange Securities in global form ('Global Exchangeable Preferred Stock
Certificate'). If Exchange Debentures are issued, the Company intends to have
the Exchange Debentures issued in the form of one or more registered Exchange
Debentures in global form ('Global Exchange Debentures'). The Global
Exchangeable Preferred Stock Certificate and Global Exchange Debentures are
sometimes referred to herein as the 'Global Securities'. Exchangeable Preferred
Stock Certificate or Exchange Debentures in definitive form ('Certificated
Exchangeable Preferred Stock' or 'Certificated Debentures,' respectively, and
sometimes referred to collectively as 'Certificated Securities') will not be
issued except in the circumstances described below when Certificated Securities
are distributed to the beneficial owners of the Global Securities.
Upon issuance of the Global Exchangeable Preferred Stock Certificate, The
Depository Trust Company, New York, New York ('DTC') or its nominee will credit,
on its book-entry registration and transfer system, the number of shares of
Exchange Securities represented by such Global Exchangeable Preferred Stock
Certificate to the accounts of institutions that have accounts with DTC or its
nominee ('participants'). Ownership of beneficial interests in the Global
Securities will be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests in such Global
Securities will be shown on, and the transfer of that ownership will be effected
only through, records maintained by DTC or its nominee (with respect to
participants' interests) for such Global Securities, or by participants or
persons that hold interests through participants (with respect to interests of
persons other than participants). The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair the ability to transfer beneficial
interests in the Global Securities.
So long as DTC is the registered holder of any Global Securities, DTC will
be considered the sole owner and holder of the Securities, represented by such
Global Securities for all purposes under the Certificate of Designation for the
Exchangeable Preferred Stock and the Exchange Indenture, as the case may be. No
beneficial owner of an interest in any Global Securities will be able to
transfer that interest except in accordance with DTC's applicable procedures (in
addition to those under the Certificate of Designation for the Exchangeable
Preferred Stock and the Exchange Indenture, as applicable).
Except in the circumstances referred to below, owners of beneficial
interests in Global Securities will not be entitled to have such Global
Securities or any Securities represented thereby registered in their names, will
not receive or be entitled to receive physical delivery of Certificated
Securities in exchange therefor and will not be considered to be the owners or
holders of such Global Securities or any securities represented thereby for any
purpose under the Certificate of Designation for the Exchangeable Preferred
Stock or the Exchange Indenture.
Global Securities shall be exchangeable for corresponding Certificated
Securities registered in the name of persons other than DTC or its nominee only
if (A) DTC (i) notifies the Company that it is unwilling or unable to continue
as depository for any of the Global Securities or (ii) at any time ceases to be
a clearing agency registered under the Exchange Act, (B) with respect to the
Global Exchangeable Preferred Stock Certificate only, there shall have occurred
and be continuing a Voting Rights Triggering Event (as defined in the
Certificate of Designation for the Exchangeable Preferred Stock), (C) with
respect to the Global Exchange Debentures only, there shall have occurred and be
continuing an Event of Default (as defined in the Exchange Indenture) or (D) the
Company executes and delivers, in the case of the Global Exchangeable Preferred
Stock Certificate, the transfer agent and registrar therefor or in the case of
the Global Exchange Debentures, the Trustee under the Exchange Indenture, an
order that the Global Exchangeable Preferred Stock Certificate or Global
Exchange Debentures, as the case may be, shall be so exchangeable. Any
Certificated Securities will be issued only in fully registered form. Any
Certificated Securities so issued will be registered in such names and in such
denominations as DTC shall request.
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Any payment on or in respect of the Exchangeable Preferred Stock or the
Exchange Debentures will be made available by the Company to DTC or its nominee,
as the case may be, as the registered owner of the Global Exchangeable Preferred
Stock Certificate and the Global Exchange Debentures. The Company expects that
DTC or its nominee, upon receipt of any payment on or in respect of any Global
Security, will credit immediately the accounts of the related participants with
payments in amounts proportionate to their respective beneficial interests
therein as shown on the records of DTC. The Company also expects that payments
by participants to owners of beneficial interests in the Global Securities held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in 'street name', and will be the
responsibility of such participants. Neither the Company nor any of its agents
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
Unless and until exchanged in whole or in part for Certificated Securities
in definitive form, the Global Securities may not be transferred except as a
whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or by DTC as depositary of any such nominee to a successor of DTC
or a nominee of such successor.
THE CLEARING SYSTEM
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the Banking Law of the State of New York, a member of
the Federal Reserve System, a 'clearing corporation' within the meaning of the
New York Uniform Commercial Code and a 'clearing agency' registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movements of securities certificates. DTC's
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations, some of whom (and/or
their representatives) own DTC. Indirect access to DTC's book-entry system is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly. DTC agrees with and represents to its
participants that it will administer its book-entry system in accordance with
its rules and by-laws and requirements of law.
SETTLEMENT
All payments with respect to the Exchangeable Preferred Stock and the
Exchange Debentures will be made by the Company by wire transfer in same-day
funds. The Global Securities will trade in the Same-Day Funds Settlement System
of DTC until maturity. Secondary market trading between DTC participants (other
than the depositaries) will be settled in same-day funds using the procedures
applicable to United States corporate debt obligations.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE PURSUANT TO THE EXCHANGE OFFER,
OWNERSHIP AND DISPOSITION OF EXCHANGEABLE PREFERRED STOCK, EXCHANGE DEBENTURES,
WARRANTS AND WARRANT SHARES
The following discussion sets forth the material anticipated Federal income
tax consequences of the exchange pursuant to the Exchange Offer, ownership and
disposition of the Exchangeable Preferred Stock, the Exchange Debentures and the
Contingent Warrants (for purposes of this tax discussion, collectively, the
'Securities') by a person that obtains such Securities pursuant to the Exchange
Offer and by holders that receive Exchange Debentures upon an exchange by the
Company of such Debentures for Exchangeable Preferred Stock. This summary is
based upon the provisions of the Internal Revenue Code of 1986, as amended (the
'Code'), the final, temporary and proposed regulations promulgated thereunder,
and administrative rulings and judicial decisions now in effect, all
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of which are subject to change (possibly with retroactive effect) or different
interpretations. This summary does not purport to deal with all aspects of
Federal income taxation that may be relevant to a holder's decision to
participate in the Exchange Offer and it is not intended to be applicable to all
categories of holders, some of which, such as dealers in securities, banks,
insurance companies, tax-exempt organizations and foreign persons, may be
subject to special rules. In addition, the summary is limited to persons that
will hold the Securities as 'capital assets' (generally, property held for
investment) within the meaning of Section 1221 of the Code and is not applicable
to holders who own, directly or through attribution, stock in the Company other
than stock acquired in the Exchange Offer or upon the exercise of a Contingent
Warrant. Holders should note that this discussion is not binding on the Internal
Revenue Service (the 'Service') and there can be no assurance that the Service
will take a similar view with respect to the tax consequences described below.
No ruling has been or will be requested by the Company from the Service on any
tax matters relating to the Securities.
ALL PROSPECTIVE PARTICIPANTS IN THE EXCHANGE OFFER ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SECURITIES.
EXCHANGEABLE PREFERRED STOCK
DISTRIBUTIONS IN GENERAL
Dividends on the Exchangeable Preferred Stock will be taxable for Federal
income tax purposes as ordinary dividend income to the extent paid out of the
current or accumulated earnings and profits of the Company as determined for
Federal income tax purposes. To the extent that the amount of such a
distribution exceeds the current and accumulated earnings and profits of the
Company, such excess will be treated as a nontaxable recovery of the holder's
basis in the stock in respect of which the distribution is made (to the extent
thereof), with any remaining excess treated as gain from the sale or exchange of
such stock.
Although it is possible that cash dividends will be paid on or prior to
July 1, 2001, it is not expected that the Company will pay any dividends on the
Exchangeable Preferred Stock in cash for any period ending on or prior to July
1, 2001. Any unpaid dividends will accrue and compound and will be payable upon
the optional or mandatory redemption of the Exchangeable Preferred Stock or the
exchange of Exchange Debentures for Exchangeable Preferred Stock. The tax
treatment of such accruing and compounding dividends ('Accrued Dividends') is
not free from doubt. Under current law, it would appear that Accrued Dividends
would not be treated as having been received by holders of the Exchangeable
Preferred Stock until such Accrued Dividends were actually paid in cash (and
would then be taxable for Federal income tax purposes as a dividend to the
extent of the Company's current and accumulated earnings and profits at such
time). The legislative history to the 1990 amendments to Section 305(c) of the
Code, however, grants the Service authority to issue regulations (possibly with
retroactive effect) which would treat such Accrued Dividends as part of the
redemption price of the stock. If Accrued Dividends were included in the
redemption price of the Exchangeable Preferred Stock, a holder would be required
to take such Accrued Dividends into account in determining the amount that
constitutes an excessive redemption price for purposes of Section 305(c) of the
Code, as described below under 'Excessive Redemption Price'. The effect of such
treatment could be to treat such holder as having received such Accrued
Dividends as constructive distributions at the time they accrue, rather than at
the time they are paid in cash. Until regulations requiring such treatment with
respect to accrued Dividends are issued, however, the Company intends to take
the position that Accrued Dividends on Exchangeable Preferred Stock need not be
treated as received by a holder until such time as such Accrued Dividends are
actually paid to such holder in cash and will report to the Service on that
basis.
PROSPECTIVE PARTICIPANTS IN THE EXCHANGE OFFER ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS AS TO THE TAX TREATMENT OF ACCRUED DIVIDENDS.
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EXCESSIVE REDEMPTION PRICE
Under Section 305 of the Code and the Treasury Regulations authorized
thereunder, if the redemption price of preferred stock exceeds its issue price
(i.e., its fair market value at its date of original issue) by more than a de
minimis amount, such excess may under certain circumstances, be taxable as a
constructive distribution to the holder (treated as a dividend to the extent of
the Company's current and accumulated earnings and profits and otherwise subject
to the treatment described above for distributions in excess of current and
accumulated earnings and profits). A holder of such preferred stock is required
to treat such excess as a constructive distribution received by the holder over
the life of the preferred stock under a constant interest (economic yield)
method that takes into account the compounding of yield.
The offering price of each Unit was allocated between the Existing
Exchangeable Preferred Stock and associated Initial Warrants comprising such
Unit based upon their relative fair market values. The Company has allocated a
portion of the offering price for a Unit to the Existing Exchangeable Preferred
Stock and a portion of such offering price to the associated Initial Warrants as
set forth herein. That allocation by the Company will be binding on each holder,
unless the holder explicitly discloses (on a statement attached to the holder's
timely filed Federal income tax return for the year that includes the
acquisition date of the Unit) that his allocation of the Unit's issue price
between the Existing Exchangeable Preferred Stock and the Initial Warrants is
different from the Company's allocation. The mandatory redemption price of the
Exchangeable Preferred Stock exceeds such stock's issue price by more than a de
minimis amount (the 'Discount Amount'), and holders are required to treat such
excess as a constructive distribution, as described above over the term of the
Exchangeable Preferred Stock.
Although the Exchangeable Preferred Stock is not mandatorily redeemable
until July 1, 2007, applicable U.S. Treasury Regulations will treat the Company
as exercising its optional redemption rights on any date that an exercise of
such optional redemption right is more likely than not to occur (based upon all
of the facts and circumstances as of the Issue Date). Since the Contingent
Warrants will only be issued if the Exchangeable Preferred Stock or Exchange
Debentures are not redeemed prior to the Contingent Warrant Release Date, the
Company intends to take the position that it will be deemed to exercise its
optional redemption right on July 1, 2000 (the 'Deemed Exercise Date'). As a
result, the Company intends to take the position that the Discount Amount as
well as the amount of the redemption premium payable at such time will be
treated as a constructive distribution over the period commencing on the Issue
Date and ending on June 30, 2000. If the Exchangeable Preferred Stock is not in
fact redeemed on such date, it will be treated as reissued on such date for an
amount equal to its adjusted issue price (i.e., 115% of the liquidation
preference).
DIVIDENDS TO CORPORATE STOCKHOLDERS
In general, an actual or constructive distribution that is treated as a
dividend for Federal income tax purposes and that is made to a corporate
stockholder with respect to the Exchangeable Preferred Stock will qualify for
the 70% dividends-received deduction. Holders should note, however, that the
Company does not currently have any accumulated earnings and profits and that
there can be no assurance regarding the amount of current or accumulated
earnings and profits of the Company in the future. As a result, there can be no
assurance that the dividends received deduction will apply to distributions on
the Exchangeable Preferred Stock (including Accrued Dividends and a distribution
of the Contingent Warrants).
Under Section 1059 of the Code, the tax basis of Exchangeable Preferred
Stock that has been held by a corporate stockholder for two years or less
(ending on the earliest of the date on which the Company declares, announces or
agrees to the payment of such actual or constructive dividend) is reduced (but
not below zero) by the nontaxed portion of an 'extraordinary dividend' for which
a dividends-received deduction is allowed. To the extent a corporate holder's
tax basis would have been reduced below zero but for the foregoing limitation,
such holder must increase the amount of gain recognized on the ultimate sale or
exchange of such Exchangeable Preferred Stock. Generally, an 'extraordinary
dividend' is a dividend that (1) equals or exceeds 5% of the holder's adjusted
basis in the Exchangeable Preferred Stock or, in the case of Warrant Shares, 10%
of the holder's adjusted basis in the Warrant Shares (treating all dividends
having ex-dividend dates within an 85-day dividend
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period as a single dividend) or (2) exceeds 20% of the holder's basis in the
Exchangeable Preferred Stock or Warrant Shares (treating all dividends having
ex-dividend dates within a 365-day period as a single dividend). If an election
is made by the holder, under certain circumstances the fair market value of the
Exchangeable Preferred Stock or the Warrant Shares as of the day before the
ex-dividend date may be substituted for the holder's basis in applying these
tests.
As part of President Clinton's 1997 balanced budget proposal, as released
on March 19, 1996 (the 'President's Proposal'), the dividends-received deduction
available to corporations owning less than 20% (by vote and value) of the stock
of a U.S. corporation would be reduced to 50% of the dividends received. The
proposal would be effective for dividends paid or accrued more than 30 days
after the date of enactment. In addition, under the President's Proposal, the
extraordinary dividend rules of Section 1059 would be amended to provide that a
corporate stockholder will recognize gain immediately whenever the basis of
stock with respect to which any extraordinary dividend was received is reduced
below zero. The proposal would be effective for distributions after September
13, 1995.
CORPORATE STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE POSSIBLE APPLICATION OF SECTION 1059 TO THEIR OWNERSHIP AND
DISPOSITION OF THE EXCHANGEABLE PREFERRED STOCK OR THE WARRANT SHARES.
A corporate stockholder's liability for alternative minimum tax may be
affected by the portion of dividends received which such corporate stockholder
deducts (pursuant to the dividends-received deduction) in computing taxable
income. This results from the fact that corporate stockholders are required to
increase alternative minimum taxable income by 75% of the excess of current
earnings and profits (with certain adjustments, but determined without regard to
the dividends-received deduction), over alternative minimum taxable income
(determined without regard to this earnings and profits adjustment or the
alternative tax net operating loss deduction, but taking into account the
dividends-received deduction).
SALE REDEMPTION OR OTHER TAXABLE DISPOSITION
Upon a sale, redemption or other taxable disposition of Exchangeable
Preferred Stock (including an exchange of Exchange Debentures for Exchangeable
Preferred Stock or Warrant Shares), a holder generally will recognize capital
gain or loss for Federal income tax purposes (except to the extent of cash
payments received on the disposition that are attributable to declared
dividends, which will be treated in the same manner as distributions described
above under 'Distributions in General') in an amount equal to the difference
between (1) the sum of the amount of cash and the fair market value of any
property received upon such sale, redemption or other taxable disposition (the
'amount realized') and (2) the holder's adjusted tax basis in the stock being
disposed of. Such capital gain or loss will be long-term capital gain or loss if
the stock had been held by the holder for more than one year at the time of the
disposition. Notwithstanding the foregoing, it is possible that the Service may
require a holder to treat amounts received upon the redemption of Exchangeable
Preferred Stock or the exchange of Exchange Debentures for Exchangeable
Preferred Stock that are attributable to Accrued Dividends (and not previously
treated as received by a holder as a constructive distribution as described
above under 'Distributions in General') as a constructive distribution,
regardless of whether the Company declares a dividend of such Accrued Dividends
in connection with such redemption or exchange. In such case, such amount would
be taxable for Federal income tax purposes as ordinary dividend income to the
extent of the Company's current and accumulated earnings and profits for Federal
income tax purposes at such time (and any amounts in excess thereof would be
taxable as described above under 'Distribution in General').
A holder's initial tax basis in the Exchangeable Preferred Stock will equal
the purchase price of the Exchangeable Preferred Stock, as described above under
'Excessive Redemption Price.' Thereafter, such initial tax basis will be (i)
increased by the amount (if any) of any constructive distributions the holder is
treated as having received pursuant to the rules described above under
'Distributions in General' and 'Excessive Redemption Price,' and (ii) decreased
by the portion of any (actual or constructive) distribution that is treated as a
tax-free recovery of basis as described above under 'Distributions in General.'
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If the Company elects to exchange Exchange Debentures for Exchangeable
Preferred Stock on a dividend date, the amount realized on the exchange will
depend on whether the Exchange Debentures and/or the Exchangeable Preferred
Stock is traded on an established market (as defined in applicable Treasury
Regulations) at the time of the exchange. The amount realized will equal (i) the
fair market value of the Exchange Debentures as of the exchange date if the
Exchange Debentures are traded on an established market at such time or (ii) the
fair market value of the Exchangeable Preferred Stock as of the exchange date if
such Exchangeable Preferred Stock is traded on an established market at such
time but the Exchange Debentures are not. If neither the Exchangeable Preferred
Stock nor the Exchange Debentures are so traded, the amount realized will equal
the stated principal amount of the Exchange Debentures provided that the yield
on the Exchange Debentures is equal to or greater than the relevant 'applicable
Federal rate'. (The applicable Federal rate is a rate announced monthly by the
Treasury that is intended to reflect the average yield of United States
government obligations.) If neither the Exchange Debentures nor the Exchangeable
Preferred Stock is so traded and the yield on the Exchange Debentures is less
than the applicable Federal rate, the amount realized will equal the present
value as of the exchange date of all payments to be made on the Exchange
Debentures, discounted at the applicable Federal rate. It cannot be determined
at the present time whether the Exchangeable Preferred Stock or the Exchange
Debentures will be, at the relevant time, traded on an established market within
the meaning of the Treasury Regulations.
Depending upon a holder's particular circumstances, the tax consequences of
holding Exchange Debentures (described below) may be less advantageous than the
tax consequences of holding Exchangeable Preferred Stock because, for example,
payments of interest on the Exchange Debentures will not be eligible for any
dividends-received deduction that may be available to corporate holders and
because, as discussed below, since the Exchange Debentures permit the
distribution of Additional Exchange Debentures in lieu of the payment of
interest in cash, such Exchange Debentures will be issued with original issue
discount ('OID').
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
LIKELIHOOD OF CAPITAL GAIN TREATMENT (IN WHOLE OR PART) ON THE REDEMPTION OF
EXCHANGEABLE PREFERRED STOCK OR THE EXCHANGE OF EXCHANGEABLE PREFERRED STOCK FOR
EXCHANGE DEBENTURES.
EXCHANGE DEBENTURES
CONSEQUENCES OF OWNING EXCHANGE DEBENTURES
The consequences of owning Exchange Debentures will depend in part upon the
facts existing at the time of issuance, as described below. Accordingly, the
ultimate Federal income tax treatment of the ownership of the Exchange
Debentures may differ substantially from that described below. If any Exchange
Debentures are issued, the Company will report to holders on a timely basis the
reportable amount of OID and interest income with respect to the Exchange
Debentures, based on its understanding of then applicable law.
PROSPECTIVE PARTICIPANTS IN THE EXCHANGE OFFER ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS AS TO THE CONSEQUENCES OF OWNING EXCHANGE DEBENTURES.
ORIGINAL ISSUE DISCOUNT
Because interest on the Exchange Debentures can, at the option of the
Company, be paid in cash or in additional Exchange Debentures, the Exchange
Debentures will be treated, for Federal income tax purposes, as having been
issued with OID. Under the provisions of the Treasury Regulations dealing with
OID (the 'OID Regulations') (i) the distribution of additional Exchange
Debentures in lieu of the payment of interest in cash ('Additional Exchange
Debentures') will not be treated as the payment of interest and accordingly,
(ii) an Exchange Debenture and all Additional Exchange Debentures that could be
issued with respect thereto (if all interest payments that could be satisfied in
Additional Exchange Debentures were satisfied in Additional Exchange Debentures)
will be treated as single OID obligation. Accordingly, under the provisions of
the OID Regulations (i) the stated redemption price at maturity of an Exchange
Debenture will be equal to the sum of all cash payments due on such Exchange
Debentures and on all Additional Exchange Debentures that could be issued
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with respect to such Exchange Debenture or Additional Exchange Debentures (if
all interest payments that could be satisfied in Additional Exchange Debentures
were satisfied in Additional Exchange Debentures), (ii) each Exchange Debenture
will be issued with OID in an amount equal to the excess of such stated
redemption price at maturity over the issue price of such Exchange Debenture and
(iii) no interest payment on the Exchange Debentures or on any Additional
Exchange Debentures distributed with respect thereto will be treated as
qualified stated interest and therefore no such interest will be included in
income when paid (because equivalent amounts will be included in income as OID).
As described above under 'Excessive Redemption Price,' the Company believes that
it will be deemed to exercise its optional redemption right with respect to the
Exchange Debentures on the Deemed Exercise Date (assuming the Exchange
Debentures have been previously issued). Thus, the stated redemption price at
maturity of the Exchange Debentures will be increased to reflect the redemption
premium payable on June 30, 2000 if the Exchange Debentures have been issued
prior to such date.
The holder of an Exchange Debenture issued with OID will be required to
include such OID in income as interest over the term of the Exchange Debentures,
in advance of the receipt of the cash attributable to such income, under a
constant interest rate method described below that takes account of the
compounding of interest. The term of any Exchange Debentures issued prior to
July 1, 2000 will be deemed to end on July 1, 2000. If such Exchange Debentures
are not actually redeemed on July 1, 2000, they will be treated as reissued on
such date for an amount equal to their adjusted issue price as of such date. Any
Exchange Debentures issued after July 1, 2000 will be deemed to have a term
ending July 1, 2007.
The amount of OID accruing the respect to any Exchange Debenture will be
the sum of the 'daily portions' of OID with respect to such Exchange Debenture
for each day during the taxable year in which a holder owns an Exchange
Debenture ('accrued OID'). The daily portion is determined by allocating to each
day in any 'accrual period' a pro rata portion of the OID allocable to that
accrual period. An accrual period may be of any length and may vary in length
over the term of an Exchange Debenture provided that each accrual period is no
longer than one year and each scheduled payment of principal or interest occurs
either on the final day of an accrual period or on the first day of an accrual
period. The amount of OID accruing during any accrual period with respect to an
Exchange Debenture will be equal to the following amount; (i) the 'adjusted
issue price' of such Exchange Debenture at the beginning of that accrual period,
multiplied by (ii) the yield to maturity of such Exchange Debenture. OID
allocable to a final accrual period is the difference between the amount payable
at maturity and the adjusted issue price at the beginning of the final accrual
period. If all accrual periods are of equal length, except for an initial short
accrual period, the amount of OID allocable to the initial short accrual period
may be computed under any reasonable method. The adjusted issue price of an
Exchange Debenture at the beginning of its first accrual period will be equal to
its issue price. An Exchange Debenture's issue price will equal the amount
realized upon the exchange of Exchange Debentures for Exchangeable Preferred
Stock, as described above under 'Sale, Redemption or other Taxable Disposition'.
The adjusted issue price at the beginning of any subsequent accrual period will
be equal to (i) the adjusted issue price at the beginning of the preceding
accrual period, plus (ii) the amount of OID allocable to the preceding accrual
period minus (iii) any payments (including payments of cash interest) made
during the preceding accrual period and on the first day of such subsequent
accrual period.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS
Pursuant to Section 163 of the Code, a portion of the OID accruing on
certain debt instruments will be treated as a dividend eligible for the
dividends-received deduction, and the corporation issuing such debt instrument
will not be entitled to deduct such portion of the OID and will be allowed to
deduct the remainder of the OID only when paid.
This treatment would apply to 'applicable high yield discount obligations'
('AHYDO'), that is, debt instruments that have a term of more than five years,
have a yield to maturity that equals or exceeds five percentage points over the
'applicable Federal rate' and have 'significant' OID. A debt instrument is
treated as having 'significant' OID if the aggregate amount that would be
includible in gross income with respect to such debt instrument for periods
before the close of any accrual period ending after the
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date five years after the date of issue exceeds the sum of (i) the aggregate
amount of interest to be paid in cash under the debt instrument before the close
of such accrual period and (ii) the product of the initial issue price of such
debt instrument and its yield to maturity. Because the amount of OID
attributable to the Exchange Debentures will be determined at the time such
Exchange Debentures are issued and the applicable Federal rate at the time the
Exchange Debentures are issued is not predictable, it is impossible to determine
at the present time whether the Exchange Debentures will be treated as an AHYDO.
If the Exchange Debentures are treated as AHYDOs, a holder would be treated
as receiving dividend income (to the extent of the Company's current and
accumulated earnings and profits) solely for purposes of the dividends-received
deduction in an amount equal to the 'disqualified portion' of the OID of such
AHYDO. The 'disqualified portion' of the OID is equal to the lesser of (i) the
amount of the OID or (ii) the portion of the 'total return' (the excess of all
payments to be made with respect to the Exchange Debenture obligation over its
issue price) on the Exchange Debenture that bears the same ratio to the Exchange
Debenture's total return as the 'disqualified yield' (the extent to which the
yield exceeds the applicable Federal rate plus 6%) bears to the Exchange
Debenture's yield to maturity. To the extent that the Company's earnings and
profits are insufficient, any portion of the OID that otherwise would have been
recharacterized as a dividend for purposes of the dividends-received deduction
will continue to be taxed as ordinary OID income in accordance with the rules
described above. The Company's deduction for OID will substantially deferred
with respect to an Exchange Debenture that is treated as an AHYDO. In addition,
such deduction will be disallowed to the extent that yield on such AHYDO exceeds
the applicable Federal rate by more than 6%.
SALE, REDEMPTION OR OTHER TAXABLE DISPOSITION OF EXCHANGE DEBENTURES
Generally, any sale, redemption other taxable disposition of Exchange
Debentures by a holder will result in taxable gain or loss equal to the
difference between (i) the sum of the amount of cash and the fair market value
of any property received upon such sale, redemption or disposition and (ii) the
holder's adjusted tax basis in such Exchange Debentures. The adjusted tax basis
of a holder in such Exchange Debentures will equal the issue price of such
Exchange Debentures, increased by any OID on the Exchange Debentures previously
included in such holder's income, and reduced by any payments (including
payments of cash interest) previously made on the Exchange Debentures. Such gain
or loss will be capital gain or loss, and will be long-term capital gain or loss
if the Exchange Debentures had been held by the holder for more than one year at
a time of the sale, redemption or disposition.
CONTINGENT WARRANTS
Since the Contingent Warrants are not separable from the Exchangeable
Preferred Stock prior to the Contingent Warrant Release Date, the Company
intends to treat the Contingent Warrants as a distribution with respect to the
Exchangeable Preferred Stock on the Contingent Warrant Release Date. Thus, the
fair market value of the Contingent Warrants, if any, distributed on the
Contingent Warrant Release Date will be a taxable distribution to holders of the
Exchangeable Preferred Stock (or the Exchange Debentures, as the case may be).
If the Contingent Warrants are issued with respect to Exchangeable Preferred
Stock (rather than Exchange Debentures), the amount of such distribution made
out of current or accumulated earnings and profits of the Company will be taxed
as a dividend. See ' -- Distributions in General' and ' -- Dividends to
Corporate Stockholders.'
WARRANTS
A holder's initial tax basis in a Contingent Warrant will equal the fair
market value, on the Contingent Warrant Release Date, of such Warrant. Upon a
sale, exchange or other disposition (including repurchase by the Company) of a
Warrant, a holder will generally recognize gain or loss for Federal income tax
purposes in an amount equal to the difference between (i) the sum of the amount
of cash and the fair market value of any property received upon such sale,
exchange or other disposition and (ii) the holder's adjusted tax basis in the
Warrant being disposed of. Gain or loss
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recognized upon a sale, exchange or other disposition of a Warrant generally
will be capital gain or loss and will be long-term capital gain or loss if the
Warrant has been held by the holder for more than one year at the time of the
disposition. Notwithstanding the foregoing, the repurchase of a Warrant by the
Company may not qualify for capital gain or loss treatment. Upon the lapse of a
Warrant, a holder will recognize a capital loss equal to such holder's adjusted
tax basis in the Warrant. Any such loss will be long-term capital loss if the
Warrant has been held by the holder for more than one year at the time of lapse.
A holder will not recognize gain or loss upon exercise of a Warrant. The tax
basis of a Warrant Share acquired upon exercise of a Warrant will equal the sum
of (i) the adjusted tax basis of such Warrant and (ii) the exercise price. The
holding period of a Warrant Share acquired upon exercise of a Warrant will begin
on the day after the day of exercise of the Warrant and will not include the
period during which the Warrant was held.
Alternatively, because Warrants are issued with a nominal exercise price,
they may constitute Common Stock of the Company for Federal income tax purposes.
In such cases, the tax consequences to holders would not materially differ from
those described above except that (i) a repurchase of the Warrants by the
Company would generally give rise to capital gain or loss and (ii) the holding
period of Common Stock actually received upon exercise of the Warrants would
include the period during which the Warrants were held by the holder.
The conversion ratio of the Warrants is subject to adjustment under certain
circumstances. Under Section 305 of the Code and the Treasury Regulations issued
thereunder, holders of the Warrants will be treated as having received a
constructive distribution, resulting in ordinary income (subject to a possible
dividends-received deduction in the case of corporate holders) to the extent of
the Company's current and/or accumulated earnings and profits, if, and to the
extent that, certain adjustments in the conversion ratio that may occur in
limited circumstances (particularly an adjustment to reflect a taxable dividend
to holders of Common Stock of the Company) increase the proportionate interest
of a holder of a Warrant in the fully diluted Common Stock, whether or not the
holder ever exercises the Warrant. Generally, a holder's tax basis will be
increased by the amount of any such constructive distribution.
BACKUP WITHHOLDING
In general, a noncorporate holder of Securities will be subject to backup
withholding at the rate of 31% with respect to reportable payments of dividends,
interest or OID accrued with respect to, or the proceeds of a sale, exchange or
redemption of, Securities, as the case may be, if the holder fails to provide a
taxpayer identification number or certification of foreign or other exempt
status or fails to report in full dividend and interest income. Amounts paid as
backup withholding do not constitute an additional tax and will be credited
against the holder's Federal income tax liabilities.
THE FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH HOLDER OF EXCHANGEABLE PREFERRED STOCK SHOULD CONSULT WITH ITS
OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE
EXCHANGE PURSUANT TO THE EXCHANGE OFFER, OWNERSHIP AND DISPOSITION OF THE
EXCHANGEABLE PREFERRED STOCK, INCLUDING THE APPLICATION AND EFFECT OF STATE,
LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
EXCHANGE OFFER
The exchange of Exchange Securities for shares of Existing Exchangeable
Preferred Stock pursuant to the Exchange Offer will not be treated as an
'exchange' for Federal income tax purposes because the Exchange Securities will
not be considered to differ materially in kind or extent from the Existing
Exchangeable Preferred Stock. Rather, the Exchange Securities received by a
holder will be treated as a continuation of the shares of Existing Exchangeable
Preferred Stock in the hands of such holder. As a result, there will be no
Federal income tax consequences to holders exchanging shares of Existing
Exchangeable Preferred Stock for the Exchange Securities pursuant to the
Exchange Offer. If, however, the exchange of share of Existing Exchangeable
Preferred Stock for Exchange Securities were treated as an 'exchange' for
Federal income tax purposes, such exchange would constitute a recapitalization
for Federal income tax purposes. Holders exchanging shares of Existing
Exchangeable
156
<PAGE>
<PAGE>
Preferred Stock pursuant to such recapitalization would not recognize any gain
or loss upon the exchange.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Existing Notes where such Existing Notes were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 1996, all
dealers effecting transactions in the Exchange Securities may be required to
deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an 'underwriter' within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. Each Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in its Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the holders of the
Notes) other than commissions or concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed on for the
Company by Shack & Siegel, P.C., New York, New York. Paul S. Goodman, a member
of the firm of Shack & Siegel, P.C., is a director of the Company and Benedek
Broadcasting. During fiscal 1995, the Company paid approximately $559,000 for
legal services to Shack & Siegel, P.C.
EXPERTS
The financial statement of the Company as of April 10, 1996 (date of
inception) included in this Prospectus have been audited by McGladrey & Pullen,
LLP, independent auditors, as stated in their report with respect thereto, and
is included herein in reliance upon the authority of said firm as experts in
giving said report.
The Consolidated Financial Statements of Benedek Broadcasting as of
December 31, 1994 and 1995 and for each of the three years ended December 31,
1995, included in this Prospectus have been audited by McGladrey & Pullen, LLP,
independent auditors, as stated in their report with respect thereto, and is
included herein in reliance upon the authority of said firm as experts in giving
said report.
157
<PAGE>
<PAGE>
The balance sheets of the TV Division of Stauffer as of December 31, 1994
and 1995 and the related statements of income, division equity and cash flows
for each of three years in the period ended December 31, 1995, included in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and is included
herein in reliance upon the authority of said firm as experts in giving said
report.
The consolidated balance sheets of Brissette as of December 25, 1994 and
December 31, 1995 and the related statements of operations, stockholder's
investment and cash flows for the fiscal years ended December 26, 1993, December
25, 1994 and December 31, 1995, included in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and is included herein in reliance upon the
authority of said firm as experts in giving said report.
158
<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Benedek Communications Corporation
Independent Auditor's Report..................................................................................... F-2
Balance Sheet as of April 10, 1996............................................................................... F-3
Note to Financial Statement...................................................................................... F-4
Benedek Broadcasting Corporation and Subsidiary
Independent Auditor's Report..................................................................................... F-5
Consolidated Balance Sheets as of December 31, 1994 and 1995..................................................... F-6
Consolidated Statements of Operations for the Three Years Ended December 31, 1995................................ F-7
Consolidated Statements of Stockholder's Deficit for the Years Ended
December 31, 1993, 1994 and 1995............................................................................... F-8
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1995................................ F-9
Notes to Consolidated Financial Statements....................................................................... F-10
Consolidated Balance Sheet as of March 31, 1996 (Unaudited)...................................................... F-20
Consolidated Statements of Operations for the Three Months Ended
March 31, 1995 and 1996 (Unaudited)............................................................................ F-21
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1995 and 1996 (Unaudited)............................................................................ F-22
Notes to Consolidated Financial Statements (Unaudited)........................................................... F-23
TV Division of Stauffer Communications, Inc.
Report of Independent Public Accountants......................................................................... F-26
Balance Sheets as of December 31, 1994 and 1995.................................................................. F-27
Statements of Income for the Three Years Ended December 31, 1995................................................. F-28
Statements of Division Equity for the Years Ended December 31, 1993, 1994 and 1995............................... F-29
Statements of Cash Flows for the Three Years Ended December 31, 1995............................................. F-30
Notes to Financial Statements.................................................................................... F-31
Balance Sheet as of March 31, 1996 (Unaudited)................................................................... F-34
Statements of Income for the Three Months Ended March 31, 1995 and 1996 (Unaudited).............................. F-35
Statement of Division Equity for the Three Months Ended March 31, 1996 (Unaudited)............................... F-36
Statements of Cash Flows for the Three Months Ended March 31, 1995 and 1996 (Unaudited).......................... F-37
Notes to Financial Statements (Unaudited)........................................................................ F-38
Brissette Broadcasting Corporation and Subsidiaries
Report of Independent Public Accountants......................................................................... F-41
Consolidated Balance Sheets as of December 25, 1994 and December 31, 1995........................................ F-42
Consolidated Statements of Operations for the Three Years Ended December 31, 1995................................ F-43
Consolidated Statements of Stockholder's Investment for the Years Ended
December 26, 1993, December 25, 1994 and December 31, 1995..................................................... F-44
Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1995.............................................................................................. F-45
Notes to Consolidated Financial Statements....................................................................... F-46
Consolidated Balance Sheet as of March 31, 1996 (Unaudited)...................................................... F-54
Consolidated Statements of Operations for the Thirteen Weeks Ended March 31, 1995 and 1996 (Unaudited)........... F-55
Consolidated Statements of Cash Flows for the Thirteen Weeks Ended March 31, 1995 and 1996 (Unaudited)........... F-56
Consolidated Statements of Stockholder's Investment for the Thirteen Weeks Ended March 31, 1996 (Unaudited)...... F-57
Note to Consolidated Financial Statements (Unaudited)............................................................ F-58
</TABLE>
F-1
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
BENEDEK COMMUNICATIONS CORPORATION
Rockford, Illinois
We have audited the accompanying balance sheet of Benedek Communications
Corporation as of April 10, 1996 (date of inception). This financial statement
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Benedek Communications
Corporation as of April 10, 1996, in conformity with generally accepted
accounting principles.
MCGLADREY & PULLEN, LLP
Rockford, Illinois
April 10, 1996
F-2
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION
BALANCE SHEET
APRIL 10, 1996
<TABLE>
<S> <C>
ASSETS
Cash...................................................................................................... $100
----
----
STOCKHOLDER'S EQUITY
Stockholder's Equity
Preferred Stock, $.01 par value, 2,500,000 shares authorized, none issued or outstanding............. $--
Common Stock, Class A, $.01 par value, 25,000,000 shares authorized, none issued or outstanding...... --
Common Stock, Class B, $.01 par value, 25,000,000 shares authorized, 10,000 shares issued and
outstanding......................................................................................... 100
----
$100
----
----
</TABLE>
The accompanying note is an integral part of the financial statement.
F-3
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION
NOTE TO FINANCIAL STATEMENT
(NOTE A) -- FORMATION AND NATURE OF BUSINESS
FORMATION AND NATURE OF BUSINESS: The Company was formed on April 10, 1996
by the sole stockholder of Benedek Broadcasting Corporation. Upon consummation
of certain acquisition and financing transactions, the sole stockholder will
contribute all of the outstanding shares of common stock of Benedek Broadcasting
Corporation to the Company in exchange for the issuance to him of all of the
outstanding shares of common stock of the Company.
F-4
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
Rockford, Illinois
We have audited the accompanying consolidated balance sheets of Benedek
Broadcasting Corporation and subsidiary as of December 31, 1994 and 1995 and the
related consolidated statements of operations, stockholder's deficit, and cash
flows for the years ended December 31, 1993, 1994 and 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Benedek
Broadcasting Corporation and subsidiary as of December 31, 1994 and 1995, and
the results of their operations and their cash flows for the years ended
December 31, 1993, 1994 and 1995 in conformity with generally accepted
accounting principles.
MCGLADREY & PULLEN, LLP
Rockford, Illinois
February 9, 1996, except for Note L as to
which the date is June 6, 1996.
F-5
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
ASSETS (Note F)
Current Assets
Cash and cash equivalents................................................ $ 4,617,242 $ 9,668,331
Receivables:
Trade, net, less allowance for doubtful accounts of $100,268 and
$249,023 for 1994 and 1995, respectively.......................... 7,923,039 9,918,633
Due from Network.................................................... -- 2,500,000
Other............................................................... 32,367 111,063
Current portion of program broadcast rights.............................. 1,501,396 1,575,325
Prepaid expenses......................................................... 521,109 576,697
------------ ------------
Total current assets........................................... 14,595,153 24,350,049
------------ ------------
Property and Equipment (Note D)............................................... 14,216,963 20,035,715
------------ ------------
Intangible Assets (Note E).................................................... 40,859,681 60,420,617
------------ ------------
Other Assets
Program broadcast rights, less current portion (Note G).................. 271,152 687,320
Advance to affiliate (Note C)............................................ 2,000,000 --
Deposit on Acquisition................................................... -- 3,000,000
Acquisition costs........................................................ -- 225,359
Deferred loan costs...................................................... 1,569,338 5,625,261
Land held for sale....................................................... 109,000 109,000
------------ ------------
3,949,490 9,646,940
------------ ------------
$ 73,621,287 $114,453,321
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities
Current maturities of notes and leases payable........................... $ 8,441,031 $ 318,077
Current maturities of program broadcast rights payable................... 1,920,745 2,042,643
Accounts payable and accrued expenses (Note H)........................... 2,622,169 7,824,296
Deferred revenue......................................................... -- 500,000
------------ ------------
Total current liabilities...................................... 12,983,945 10,685,016
------------ ------------
Long-Term Obligations
Notes and capital leases payable (Note F)................................ 99,165,618 135,448,948
Program broadcast rights payable (Note G)................................ 248,716 632,444
Deferred revenue......................................................... -- 4,250,000
Deferred and contingent interest payable................................. 3,838,213 --
------------ ------------
103,252,547 140,331,392
------------ ------------
Commitments (Note I, K)
Stockholder's Deficit (Note E)
Common stock, no par, authorized 200 shares; issued 178.09 shares........ 1,046,500 1,046,500
Additional paid-in capital............................................... 2,758,178 2,758,178
Accumulated deficit...................................................... (44,938,734) (38,886,616)
------------ ------------
(41,134,056) (35,081,938)
Less 30.24 shares held in treasury....................................... 1,481,149 1,481,149
------------ ------------
(42,615,205) (36,563,087)
------------ ------------
$ 73,621,287 $114,453,321
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net revenues................................................. $ 38,351,734 $ 44,221,027 $ 50,329,019
------------ ------------ ------------
Operating expenses:
Selling, technical and program expenses (Note C)........ 16,161,766 17,739,786 21,199,067
General and administrative.............................. 6,642,578 7,069,730 7,849,845
Depreciation and amortization........................... 3,721,415 3,403,263 5,041,719
Corporate (Note C)...................................... 1,248,666 1,308,984 1,575,792
Special bonus, officer-stockholder (Note C)............. 1,400,377 -- --
------------ ------------ ------------
29,174,802 29,521,763 35,666,423
------------ ------------ ------------
Operating income................................... 9,176,932 14,699,264 14,662,596
Financial income (expense):
Interest expense (Note A):
Cash interest...................................... (8,358,237) (7,904,530) (15,159,766)
Other interest..................................... (6,160,670) (4,904,834) (711,934)
------------ ------------ ------------
(14,518,907) (12,809,364) (15,871,700)
Interest income......................................... 163,711 164,627 397,460
Other, net.............................................. 143,850 (10,168) --
------------ ------------ ------------
(14,211,346) (12,654,905) (15,474,240)
------------ ------------ ------------
Income (loss) before extraordinary item............ (5,034,414) 2,044,359 (811,644)
Extraordinary item, gain on early extinguishment of debt
(Note F)................................................... -- -- 6,863,762
------------ ------------ ------------
Net income (loss).................................. $ (5,034,414) $ 2,044,359 $ 6,052,118
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
NOTE AND
ACCRUED
ADDITIONAL INTEREST
COMMON PAID-IN ACCUMULATED TREASURY RECEIVABLE,
STOCK CAPITAL DEFICIT STOCK STOCKHOLDER TOTAL
---------- ---------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992..... $1,046,500 $2,758,178 $(40,944,866) $(1,481,149) $(2,382,340) $(41,003,677)
Accrued interest............ -- -- -- -- (21,850) (21,850)
Net (loss).................. -- -- (5,034,414) -- -- (5,034,414)
Dividends (Note C).......... -- -- (1,003,813) -- 1,003,813 --
Bonus to officer-stockholder
(Note C).................. -- -- -- -- 1,400,377 1,400,377
---------- ---------- ------------ ----------- ----------- ------------
Balance at December 31, 1993..... 1,046,500 2,758,178 (46,983,093) (1,481,149) -- (44,659,564)
Net income.................. -- -- 2,044,359 -- -- 2,044,359
---------- ---------- ------------ ----------- ----------- ------------
Balance at December 31, 1994..... 1,046,500 2,758,178 (44,938,734) (1,481,149) -- (42,615,205)
Net income.................. -- -- 6,052,118 -- -- 6,052,118
---------- ---------- ------------ ----------- ----------- ------------
Balance at December 31, 1995..... $1,046,500 $2,758,178 $(38,886,616) $(1,481,149) $ -- $(36,563,087)
---------- ---------- ------------ ----------- ----------- ------------
---------- ---------- ------------ ----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1993 1994 1995
----------- ----------- ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss)...................................................... $(5,034,414) $ 2,044,359 $ 6,052,118
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Amortization of program broadcast rights........................... 2,178,974 2,103,606 2,161,545
Depreciation and amortization...................................... 2,288,487 2,133,940 3,268,939
(Gain) on early extinguishment of debt............................. -- -- (6,863,762)
Amortization of intangibles and deferred loan costs................ 1,731,444 2,775,321 2,425,488
(Gain) loss on sale of property and equipment...................... 10,644 (55,222) 27,535
Payment of deferred and contingent interest........................ -- -- (4,405,746)
Payment of prepayment premiums..................................... -- -- (2,748,896)
Interest added to capital note warrants and long-term debt......... 5,154,432 -- --
Bonus paid through reduction of note receivable, stockholder....... 1,400,377 -- --
Other.............................................................. 15,346 166,730 31,691
Change in assets and liabilities, net of effects of acquisition:
Receivables........................................................ (624,482) (329,105) (4,574,290)
Prepaid expenses................................................... 111,897 (102,858) (48,023)
Payments on program broadcast rights payable....................... (2,180,531) (1,887,768) (2,131,990)
Accounts payable and accrued expenses.............................. (677,184) 357,041 4,738,408
Deferred income.................................................... -- -- 4,750,000
Contingent and deferred interest payable........................... 550,882 3,287,331 567,533
----------- ----------- ------------
Net cash provided by (used in) operating activities............ 4,925,872 10,493,375 3,250,550
----------- ----------- ------------
Cash Flows From Investing Activities
Purchase of property and equipment..................................... (869,904) (574,171) (1,478,893)
Proceeds from sale of equipment........................................ 6,304 75,380 425,994
Payment for acquisition of station..................................... -- -- (26,698,516)
Deposit on acquisition................................................. -- -- (3,000,000)
Advance to affiliate................................................... -- (2,000,000) --
Payment of acquisition costs........................................... -- -- (225,359)
Other.................................................................. -- (8,267) 4,504
----------- ----------- ------------
Net cash (used in) investing activities........................ (863,600) (2,507,058) (30,972,270)
----------- ----------- ------------
Cash Flows From Financing Activities
Principal payments on notes, including capital lease payables.......... (5,665,212) (5,795,902) (96,351,288)
Proceeds from senior secured debt issue................................ -- -- 135,000,000
Payment of debt acquisition costs...................................... (1,285,332) (1,240,602) (5,875,903)
----------- ----------- ------------
Net cash provided by (used in) financing activities............ (6,950,544) (7,036,504) 32,772,809
----------- ----------- ------------
Increase (decrease) in cash and cash equivalents............... (2,888,272) 949,813 5,051,089
Cash and cash equivalents:
Beginning.............................................................. 6,555,701 3,667,429 4,617,242
----------- ----------- ------------
Ending................................................................. $ 3,667,429 $ 4,617,242 $ 9,668,331
----------- ----------- ------------
----------- ----------- ------------
Supplemental Disclosure of Cash Flow Information
Cash payments for interest............................................. $ 8,809,487 $ 7,904,530 $ 13,654,225
----------- ----------- ------------
----------- ----------- ------------
Supplemental Schedule of Non-Cash Investing and Financing Activities
Acquisition of program broadcast rights................................ $ 1,688,123 $ 2,044,692 $ 2,558,122
Note payable and capital lease obligation incurred for purchase of
equipment............................................................. 230,013 273,995 197,288
Equipment acquired by barter transactions.............................. 178,242 312,965 331,843
Reduction of note receivable, officer-stockholder through dividends
paid.................................................................. 1,003,813 -- --
Accrued interest added to long-term debt due to refinancing............ 4,996,568 -- --
Accounts payable transferred to note payable........................... -- 88,079 --
----------- ----------- ------------
----------- ----------- ------------
Acquisition of WTVY-TV:
Cash purchase price................................................ $ 26,698,516
------------
------------
Property and equipment acquired at fair market value............... 7,533,196
Intangible assets acquired......................................... 21,306,181
Other, net......................................................... (140,861)
------------
28,698,516
Less: Application of advance to affiliate.......................... 2,000,000
------------
$ 26,698,516
------------
------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-9
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE A) -- NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF BUSINESS: Benedek Broadcasting Corporation ('Benedek
Broadcasting') owns and operates nine television stations located throughout the
United States which operate under network affiliation contracts. The networks
provide programs to the affiliated stations and the stations sell commercial
time during the programs to national, regional, and local advertisers. The
networks also sell commercial time during the programs to national advertisers.
Credit arrangements are determined on an individual customer basis.
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Benedek Broadcasting and Benedek Broadcasting Company, L.L.C. (the
'LLC'), a 99% owned subsidiary. All significant intercompany items and
transactions have been eliminated in the consolidated financial statements.
SIGNIFICANT ACCOUNTING POLICIES
(1) ACCOUNTING ESTIMATES:
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts in the consolidated
financial statements and the accompanying notes. Actual results could differ
from those estimates.
(2) CASH EQUIVALENTS AND CONCENTRATION:
Benedek Broadcasting considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
At various times during the periods, Benedek Broadcasting had cash and cash
equivalents on deposit with a financial institution in excess of federal
depository insurance and it has not experienced any credit losses on these
deposits.
(3) REVENUES:
Revenue related to the sale of advertising, network compensation and
contracted time is recognized at the time of broadcast. Net revenues are shown
net of agency and national representatives commissions.
Deferred revenue relates to network compensation due from the network at
inception of the network affiliation agreement. This revenue is recognized over
the life of the agreement on a straight-line method. In 1995, Benedek
Broadcasting signed an agreement with a network which provided a $5,000,000
payment, $2,500,000 of which was receivable at December 31, 1995 and
subsequently paid in February 1996. Since this payment is earned over the life
of the affiliation agreement, it will be recognized over ten years.
(4) BARTER TRANSACTIONS:
Revenue from barter transactions (advertising provided in exchange for
goods and services) is recognized as income when advertisements are broadcast
and merchandise or services received are charged to expense (or capitalized as
appropriate) when received or used. The transactions are recorded at the fair
market value of the asset or service received.
(5) PROGRAM BROADCAST RIGHTS AND LIABILITIES:
Program broadcast rights represent rights for the telecast of feature
length motion pictures, series produced for television and other films, and are
presented at the lower of unamortized cost or net
F-10
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
realizable value. Each agreement is recorded as an asset and liability when the
license period begins and the program is available for its first showing.
Program broadcast rights are amortized on a straight-line method over the life
of the contract, which is included in selling, technical and program expenses.
The agreements are classified between current and long-term according to the
estimated time of future usage. The related liability is classified between
current and long-term on the basis of the payment terms. The amounts recorded as
rights and liabilities prior to December 31, 1995 have been reclassified to
conform with the 1995 presentation which at December 31, 1994, was a reduction
of approximately $4,806,000.
(6) DEFERRED LOAN AND ACQUISITION COSTS:
Deferred loan costs are amounts incurred in connection with long-term
financing. The costs are amortized on a straight-line method over the terms of
the related debt security. Costs incurred in connection with long-term financing
which is not consummated are expensed at the point in time when the negotiation
on the financing ceases. Included in other interest for the year ended December
31, 1994 are costs incurred in 1994 of approximately $900,000 related to
financing which was not consummated.
Acquisition costs are amounts incurred in connection with acquiring
additional television stations. Costs incurred in connection with acquisitions
which are not consummated are expensed at the point of time when the negotiation
on the acquisition ceases. The acquisition costs related to successful
acquisitions are treated as part of the purchase price and are allocated to the
assets purchased.
(7) PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost and depreciated using the
straight-line method over the following estimated ranges of useful lives:
<TABLE>
<CAPTION>
YEARS
---------
<S> <C>
Buildings and improvements................................................ 5-40
Towers.................................................................... 5-12
Transmission equipment.................................................... 3-10
Other equipment........................................................... 2-5
</TABLE>
Benedek Broadcasting records amortization expense on leased assets with the
depreciation expense on owned assets. Gains and losses on the disposition of
property and equipment are insignificant and included in depreciation and
amortization on the statement of operations.
(8) INTANGIBLE ASSETS:
Intangible assets, which include FCC licenses, network affiliation
agreements and goodwill, have been recorded at cost and are amortized over 40
years using the straight-line method.
Benedek Broadcasting reviews their intangibles periodically to determine
potential impairment by comparing the carrying value of the intangible with the
undiscounted anticipated future cash flows of the related property before
interest charges. If the future cash flows are less than the carrying value, the
Company would obtain an appraisal on the property and adjust the carrying value
of the intangibles to the appraisal value if the appraisal value is less than
the carrying value.
(9) OTHER INTEREST EXPENSE:
Other interest includes interest expense due to the increase in the BBC
Warrants (as defined), contingent equity value, accrued interest added to
long-term debt balances, deferred loan cost amortization, financing costs not
consummated, and accretion of discounts.
F-11
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) INCOME TAXES:
Benedek Broadcasting, with the consent of its stockholder, has elected to
be taxed as an 'S' Corporation under sections of the federal and state income
tax laws, which provide that, in lieu of corporation income taxes, the
stockholder accounts for items of income, deductions, losses and credits.
Therefore, historical net income (loss) does not include a provision (refund)
for corporate income taxes.
The LLC files a partnership tax return. Benedek Broadcasting and the
minority stockholder report their respective shares of the LLC's items of
income, deduction, losses and credits.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS:
Financial instruments include cash, short-term debt, current receivables
and payables, and fixed rate long-term debt. For each class of financial
instruments, the carrying amount approximates fair value.
(12) EMPLOYEE BENEFITS:
Benedek Broadcasting has a defined contribution plan covering all eligible
employees. The contribution is at the discretion of the Board of Directors.
Benedek Broadcasting self-insures for health benefits which are provided to
all full time employees with specified periods of service and maintains
insurance coverage for claims in excess of specific and annual aggregate limits.
(13) EMERGING ACCOUNTING STANDARDS:
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 123, 'Accounting for Stock Based Compensation'
in October 1995, which establishes financial accounting and reporting standards
for stock based employee compensation plans, including stock purchase plans,
stock options, restricted stock, and stock appreciation rights. Benedek
Broadcasting has elected to continue accounting for stock based compensation
under Accounting Principles Board Opinion No. 25. The disclosure requirements of
SFAS No. 123 will be effective for Benedek Broadcasting's financial statements
beginning in 1996. Management does not believe that the implementation of SFAS
123 will have a material effect on its consolidated financial statements.
(NOTE B) -- BUSINESS COMBINATION AND ACQUISITION
(1) BUSINESS COMBINATION:
On March 10, 1995, two affiliates of Benedek Broadcasting, Blue Grass
Television, Inc. ('Blue Grass') and Youngstown Broadcasting Co., Inc.
('Youngstown'), were merged into Benedek Broadcasting. Since these entities had
identical stockholder ownership, this was accounted for in a manner similar to
that in pooling-of-interests accounting.
Benedek Broadcasting issued 92.85 shares of its common stock for all the
outstanding common shares of Blue Grass and Youngstown, and such shares are
treated as if they were outstanding for all periods presented.
On March 10, 1995, the FCC licenses for all the television stations owned
by Benedek Broadcasting were transferred to the newly formed LLC. Benedek
Broadcasting owns 99% of the membership interest in the LLC and its principal
stockholder owns the remaining 1% minority membership interest. The assets,
liabilities and results of operations of the LLC are included in these
consolidated financial statements. The minority membership interest in the LLC
is not significant.
F-12
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) ACQUISITION:
On March 31, 1995, Benedek Broadcasting acquired substantially all of the
assets of WTVY-TV which serves Dothan, Alabama and Panama City, Florida for an
aggregate purchase price of approximately $28,699,000. The acquired assets
include property and equipment with a fair market value of approximately
$7,533,000 and program broadcast rights of approximately $93,000, offset by
liabilities under program broadcast rights of approximately $79,000 and net
liabilities under trade and barter contracts of approximately $155,000. Benedek
Broadcasting also assumed commitments of approximately $214,000 related to
programming. The excess of the purchase price over the net assets acquired
totaled approximately $21,306,000 and has been allocated to intangible assets
which will be amortized over 40 years. This transaction has been accounted for
under the purchase method of accounting. Accordingly, the results of operations
for WTVY-TV have been included in the results of operations of these
consolidated financial statements since the date of acquisition.
The pro forma results of operations for the years ended December 31, 1994
and 1995, assuming the acquisition of WTVY-TV had taken place on January 1,
1994, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995
------------ -----------
<S> <C> <C>
Net revenue............................................................ $ 51,582,464 $51,972,804
Operating expenses..................................................... 35,647,105 37,577,459
Financial expense...................................................... 16,442,853 16,173,049
------------ -----------
(Loss) before extraordinary item.................................. (507,494) (1,777,704)
Extraordinary item..................................................... -- 6,863,762
------------ -----------
Net income (loss)................................................. $ (507,494) $ 5,086,058
------------ -----------
------------ -----------
</TABLE>
(NOTE C) -- RELATED PARTY TRANSACTIONS
(1) NOTE RECEIVABLE FROM STOCKHOLDER:
On March 31, 1993, Benedek Broadcasting recorded a bonus of $1,400,377 to
its officer-stockholder and declared a dividend of $1,003,813 which were offset
against a note receivable and accrued interest from the stockholder.
(2) ADMINISTRATIVE SERVICES:
Benedek Broadcasting paid management fees for accounting services of
approximately $208,000 (two months) and $1,309,000 in 1993 and 1994 to a company
which was affiliated through common ownership. These services were terminated
January 1, 1995.
(3) BENEDEK ACQUISITION CORPORATION:
In December 1994, Benedek Acquisition Corporation, a company affiliated
through common ownership, entered into a definitive agreement to acquire
substantially all of the assets of WTVY-TV Dothan, Alabama. In conjunction with
the agreement, Benedek Broadcasting advanced $2,000,000 to Benedek Acquisition
Corporation which was used as a deposit on the purchase. In 1995, Benedek
Acquisition Corporation assigned to Benedek Broadcasting its rights under the
purchase agreement to acquire the television station. (See Note B).
(4) STOCK OPTION AGREEMENTS:
In 1988 a key employee was granted an option, expiring 1998, to purchase
2.75 shares of common stock of Benedek Broadcasting for $206,539.
F-13
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On March 10, 1995, Benedek Broadcasting granted the key employee an
additional option, expiring 2004, to acquire 5.03 shares of common stock of
Benedek Broadcasting at an aggregate exercise price of $986,000. This option,
along with the 1988 option, will entitle the key employee to shares representing
5% of the outstanding common stock of Benedek Broadcasting after giving effect
to the issuance thereof. The options were issued at fair market value on the
date of grant.
(5) LEASES:
In 1993, Benedek Broadcasting entered into a lease agreement for mobile
transmission equipment with an officer. The agreement calls for total rental
payments of approximately $163,000 over its three year term and is recorded as
an operating lease. In May 1994, Benedek Broadcasting entered into a lease
agreement for station equipment with an affiliated company. The agreement calls
for total rental payments of approximately $132,000 over its five year term and
is recorded as an operating lease. Effective January 1, 1995 the lease agreement
with the affiliated company was terminated and the related assets and the
associated note payable were transferred to Benedek Broadcasting.
(NOTE D) -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
Land and improvements.................................................. $ 1,208,337 $ 1,259,938
Buildings and improvements............................................. 11,151,081 12,183,267
Towers................................................................. 3,203,647 5,786,099
Transmission and studio equipment...................................... 19,674,920 23,205,748
Office equipment....................................................... 2,318,893 3,024,834
Records and tapes...................................................... 20,788 22,732
Transportation equipment............................................... 429,378 708,152
Construction in progress............................................... 10,628 150,188
----------- -----------
38,017,672 46,340,958
Less accumulated depreciation and amortization......................... 23,800,709 26,305,243
----------- -----------
$14,216,963 $20,035,715
----------- -----------
----------- -----------
</TABLE>
(NOTE E) -- INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
Goodwill............................................................... $20,883,109 $28,837,585
FCC licenses........................................................... 7,389,610 15,304,138
Network affiliations................................................... 12,570,077 15,998,174
Other.................................................................. 16,885 280,720
----------- -----------
$40,859,681 $60,420,617
----------- -----------
----------- -----------
</TABLE>
Intangible assets are recorded net of accumulated amortization of
$11,580,054 and $13,325,299 as of December 31, 1994 and 1995, respectively.
F-14
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(NOTE F) -- NOTES PAYABLE, GAIN ON EXTINGUISHMENT OF DEBT AND CAPITAL LEASES
PAYABLE
(1) NOTES PAYABLE:
During 1995, Benedek Broadcasting issued $135,000,000 of 11 7/8% Senior
Secured Notes due 2005 (the 'Senior Secured Notes'). The net proceeds of the
Senior Secured Notes were used, together with available cash, to (i) refinance
certain indebtedness, (ii) finance the acquisition of WTVY-TV and (iii) pay fees
and expenses in connection with the offering. The Senior Secured Notes have been
registered with the Securities and Exchange Commission in a registration
statement declared effective in November 1995.
The Senior Secured Notes bear interest at the rate of 11 7/8%, payable
semiannually on March 1 and September 1 of each year and mature in March 2005.
The Senior Secured Notes may be redeemed by Benedek Broadcasting in whole or in
part after March 1, 2000 subject to certain prepayment premiums. The Senior
Secured Notes contain various restrictive covenants relating to limitations on
dividends, transactions with affiliates, further issuance of debt, and sales of
assets, among others. As of December 31, 1995, Benedek Broadcasting was in
compliance with these covenants.
The Senior Secured Notes are collateralized by Benedek Broadcasting's 99%
interest in the LLC, certain agreements and contract rights related to the
stations which includes network affiliation agreements and certain general
intangibles. The minority membership interest holder has also entered into a
pledge and security agreement providing for the pledge of his 1% interest in the
LLC.
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
------------ ------------
<S> <C> <C>
Senior Secured Notes................................................ $ -- $135,000,000
Senior secured note, with interest at 9.5%.......................... 23,729,837 --
Series notes, with interest ranging from 10.36% to 11.325%.......... 36,095,000 --
Subordinated series notes, with interest ranging from 7.728% to
15%............................................................... 19,701,084 --
Subordinated capital notes, net of unamortized discount of $407,000,
and $573,730, respectively, interest at 11.5% compounded
quarter-annually with interest and principal payable December 31,
1996.............................................................. 8,203,000 --
BBC Warrants........................................................ 18,978,618 --
Capital leases and other............................................ 899,110 767,025
------------ ------------
107,606,649 135,767,025
Less current maturities............................................. 8,441,031 318,077
------------ ------------
$ 99,165,618 $135,448,948
------------ ------------
------------ ------------
</TABLE>
At December 31, 1995, the notes provide for annual reductions as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-----------------------
<S> <C>
1996.......................................... $ 318,077
1997.......................................... 256,980
1998.......................................... 144,882
1999.......................................... 45,778
2000.......................................... 1,308
Thereafter.................................... 135,000,000
------------
$135,767,025
------------
------------
</TABLE>
In 1994, Benedek Broadcasting recorded contingent interest of $1,000,000
relating to certain note agreements, which were paid in 1995 in connection with
the refinancing.
F-15
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) CAPITAL NOTES, DETACHABLE WARRANTS AND GAIN ON EARLY EXTINGUISHMENT OF DEBT:
Subordinated capital notes were issued with detachable stock purchase
warrants (the 'BBC Warrants'), which provided the right to purchase 45 shares of
common stock of Benedek Broadcasting for $.10 per share. The agreement
guaranteed an annual pretax return of 27.5% including interest paid and the
implied increase in value of the warrants. The original value assigned to the
BBC Warrants of $1,290,000 was reflected as debt discount and was amortized over
the term of these notes using the interest method.
In 1995, Benedek Broadcasting exercised an option to call the warrants for
a specific ladder call price of $7,850,912. The difference between this ladder
price and the carrying value of the warrants of $18,978,618 was recorded as an
extraordinary gain of $11,128,000 reduced by losses of approximately $1,140,000
from unrecognized deferred loan costs, approximately $2,749,000 of prepayment
premiums and contingent payments and $375,000 of unamortized debt discount
related to the existing debt.
(3) CAPITAL LEASES:
Benedek Broadcasting leases equipment under agreements which expire in 1996
through 2000. These leases are considered capital leases, and the leased
property and the related liabilities have been recorded at the present value of
the future payments using interest rates ranging from 6.9% to 15.8%.
The assets recorded under capital leases and the related accumulated
amortization are included in the accompanying balance sheets as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
-------- --------
<S> <C> <C>
Transmission and studio equipment............................................. $396,763 $396,763
Office equipment.............................................................. 164,839 219,972
Transportation equipment...................................................... 23,170 23,170
-------- --------
584,772 639,905
Less accumulated amortization................................................. 230,721 502,793
-------- --------
$354,051 $137,112
-------- --------
-------- --------
</TABLE>
(NOTE G) -- PROGRAM BROADCAST RIGHTS PAYABLE
(1) Program broadcast rights and program broadcast rights payable consist
of the following:
<TABLE>
<CAPTION>
PROGRAM BROADCAST PROGRAM BROADCAST
RIGHTS RIGHTS PAYABLE
----------------- -----------------
<S> <C> <C>
Balance at December 31, 1993................................. $ 1,831,462 $ 2,012,537
Contracts acquired...................................... 2,044,692 2,044,692
Amortization............................................ (2,103,606) --
Payments................................................ -- (1,887,768)
----------------- -----------------
Balance at December 31, 1994................................. 1,772,548 2,169,461
Contracts acquired...................................... 2,651,642 2,637,616
Amortization............................................ (2,161,545) --
Payments................................................ -- (2,131,990)
----------------- -----------------
Balance at December 31, 1995................................. $ 2,262,645 $ 2,675,087
----------------- -----------------
----------------- -----------------
</TABLE>
(2) The current maturities of program broadcast rights payable consist of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
---------- ----------
<S> <C> <C>
Program contracts, due in varying installments through 2000.............. $2,169,461 $2,675,087
Less current maturities.................................................. 1,920,745 2,042,643
---------- ----------
Long-term portion........................................................ $ 248,716 $ 632,444
---------- ----------
---------- ----------
</TABLE>
F-16
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The maturities of the contracts are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1996............................................. $2,042,643
1997............................................. 398,225
1998............................................. 206,486
1999............................................. 23,833
2000............................................. 3,900
----------
$2,675,087
----------
----------
</TABLE>
In addition, Benedek Broadcasting has entered into noncancelable
commitments for future program rights aggregating approximately $4,745,800 as of
December 31, 1995.
(NOTE H) -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
---------- ----------
<S> <C> <C>
Trade payables................................................. $ 499,618 $ 379,901
Barter, net.................................................... 358,308 292,051
Compensation and benefits...................................... 1,367,649 1,397,796
Interest....................................................... -- 5,343,754
Other.......................................................... 396,594 410,794
---------- ----------
$2,622,169 $7,824,296
---------- ----------
---------- ----------
</TABLE>
(NOTE I) -- LEASES
Benedek Broadcasting leases land, office space and office and
transportation equipment under agreements which expire from 1996 through 2004
and require various minimum annual rentals. The leases also require payment of
the normal maintenance, real estate taxes, and insurance on the properties.
Benedek Broadcasting has the option to acquire one of the leased premises on
each of May 1, 2000 and 2005 for $650,000 and $750,000, respectively.
The approximate total minimum rental commitments at December 31, 1995 under
these leases are due as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1996............................................. $ 582,700
1997............................................. 323,900
1998............................................. 250,400
1999............................................. 213,900
2000............................................. 186,600
Thereafter....................................... 512,900
----------
$2,070,400
----------
----------
</TABLE>
Total rental expense under these agreements and other monthly rentals for
the years ended 1993, 1994 and 1995 was approximately $455,000, $463,000 and
$626,000, respectively, including the related party lease discussed in Note C.
Benedek Broadcasting is a lessor of certain portions of its real property
to various organizations. Total rental income under these agreements for the
years ended 1993, 1994 and 1995 was approximately $233,000, $280,000 and
$324,000, respectively.
(NOTE J) -- PRO FORMA INCOME TAXES
Net income (loss) in the accompanying statements of operations does not
include a pro forma adjustment for income tax expense which would have been
provided had Benedek Broadcasting been taxed as a corporation because Benedek
Broadcasting would not have a tax provision due to net operating loss
carryforwards and a valuation allowance.
F-17
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the provision of Statement of Financial Accounting Standards (SFAS)
No. 109, the deferred tax asset and liabilities consist of the following
components:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax assets:
Loss carryforwards............................... $ 8,337,000 $ 6,823,000 $ 7,063,000
Non-deductible allowances and other.............. 80,000 70,000 416,000
Capital note warrants............................ 4,874,000 4,874,000 --
Network agreement................................ -- -- 1,900,000
Intangibles...................................... 1,739,000 2,013,000 2,131,000
----------- ----------- -----------
15,030,000 13,780,000 11,510,000
Less valuation allowance.............................. (14,372,000) (13,020,000) (10,628,000)
----------- ----------- -----------
658,000 760,000 882,000
----------- ----------- -----------
Deferred tax liabilities:
Property and equipment........................... 658,000 760,000 882,000
----------- ----------- -----------
$ -- $ -- $ --
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
A valuation allowance has been established since in the opinion of
management, it is more likely than not that the deferred tax assets will not be
realized.
The difference between the statutory federal income tax rate of 35% and the
pro forma income taxes reported in the statements of operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1993 1994 1995
---------- ----------- -----------
<S> <C> <C> <C>
Computed 'expected' tax expense (credits).............. ($1,762,000) $ 715,000 $ 2,118,000
Increase (decrease) in taxes resulting from:
State and local taxes, net of federal benefit..... (171,000) 71,000 242,000
Nondeductible expenses............................ 238,000 461,000 142,000
Change in enacted tax rate........................ (300,000) -- --
Change in valuation allowance before expiration of
net operating loss carryforwards................ 1,995,000 (1,247,000) (2,502,000)
---------- ----------- -----------
$ -- $ -- $ --
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
Under provisions of the Internal Revenue Code, Benedek Broadcasting has
approximately $414,400 of actual net operating loss carryforwards which arose
prior to its election to be an 'S' Corporation, which expire in varying amounts
from December 31, 1996 to 2001. These net operating loss carryforwards will only
be available to offset future tax liabilities of Benedek Broadcasting if it
terminates the 'S' Corporation status.
(NOTE K) -- PROGRAMMING COMMITMENTS
Benedek Broadcasting has assumed or has entered into commitments for future
syndicated programming. Future payments with respect to these commitments for
the years ending December 31 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1996............................................. $ 503,200
1997............................................. 1,307,300
1998............................................. 1,309,500
1999............................................. 1,181,400
2000............................................. 444,400
----------
$4,745,800
----------
----------
</TABLE>
F-18
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(NOTE L) -- ACQUISITIONS AND SUBSEQUENT EVENTS
(1) ACQUISITIONS:
On November 22, 1995, Benedek Broadcasting entered into an agreement,
subject to regulatory approvals, to acquire the assets of five television
stations (and four satellite stations) for a total purchase price of
$54,500,000.
On December 15, 1995, Benedek Broadcasting entered into a stock purchase
agreement to acquire all the issued and outstanding shares of capital stock of a
corporation which owned and operated eight television stations for a purchase
price of $270,000,000.
Both acquisitions were consummated on June 6, 1996 in conjunction with the
financing arrangements described in (2) below.
(2) SUBSEQUENT EVENTS:
On April 10, 1996, the sole stockholder of Benedek Broadcasting formed
Benedek Communications Corporation ('BCC') in conjunction with the above
acquisitions. At the closing of the acquisitions and related financing
transactions, the sole stockholder of Benedek Broadcasting contributed all of
the outstanding shares of common stock of Benedek Broadcasting to BCC in
exchange for the issuance to him of all of the outstanding shares of common
stock of BCC.
The financing transactions for the acquisitions consisted of (i) BCC
issuing (a) senior subordinated discount notes, (b) units, consisting of
exchangeable preferred stock and warrants to acquire common stock of BCC, and
(c) seller junior discount preferred stock and (ii) Benedek Broadcasting
entering into a new credit agreement. The new credit agreement includes
$128,000,000 term loan facilities and a $15,000,000 revolving credit facility.
These financing transactions were consummated concurrently with the
acquisitions.
On April 18, 1996, Benedek Broadcasting formed Benedek License Corporation
('BLC') in conjunction with the aforementioned acquisitions. On June 6, 1996,
the LLC was merged with BLC and all of the licenses and authorizations issued by
the FCC for the operation of the Stations are now held by BLC.
F-19
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
1996
------------
(UNAUDITED)
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents.................................................................. $ 7,381,555
Receivables:
Trade, net, less allowance for doubtful accounts of $241,883.......................... 7,770,821
Other................................................................................. 119,924
Current portion of program broadcast rights................................................ 1,204,839
Prepaid expenses........................................................................... 871,637
------------
Total current assets............................................................. 17,348,776
------------
Property and Equipment.......................................................................... 19,797,949
------------
Intangible Assets............................................................................... 59,952,607
------------
Other Assets
Program broadcast rights, less current portion............................................. 540,810
Deposit on Acquisition..................................................................... 4,000,000
Acquisition costs.......................................................................... 559,928
Deferred loan costs........................................................................ 5,624,178
Land held for sale......................................................................... 109,000
------------
10,833,916
------------
$107,933,248
------------
------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities
Current maturities of notes and leases payable............................................. $ 304,712
Current maturities of program broadcast rights payable..................................... 1,753,982
Accounts payable and accrued expenses...................................................... 3,643,758
Deferred revenue........................................................................... 500,000
------------
Total current liabilities........................................................ 6,202,452
------------
Long-Term Obligations
Notes and capital leases payable........................................................... 135,377,037
Program broadcast rights payable........................................................... 479,296
Deferred revenue........................................................................... 4,180,123
------------
140,036,456
------------
Commitments
Stockholder's Deficit
Common stock, no par, authorized 200 shares; issued 178.09 shares.......................... 1,046,500
Additional paid-in capital................................................................. 2,758,178
Accumulated deficit........................................................................ (40,629,189)
------------
(36,824,511)
Less 30.24 shares held in treasury......................................................... 1,481,149
------------
(38,305,660)
------------
$107,933,248
------------
------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-20
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net revenues..................................................................... $10,149,581 $11,682,871
----------- -----------
Operating expenses:
Selling, technical and program expenses..................................... 4,413,684 5,537,572
General and administrative.................................................. 1,893,658 2,010,695
Depreciation and amortization............................................... 856,107 1,360,430
Corporate................................................................... 343,256 495,892
----------- -----------
7,506,705 9,404,589
----------- -----------
Operating income....................................................... 2,642,876 2,278,282
Financial income (expense):
Interest expense:
Cash interest.......................................................... (2,410,691) (4,026,253)
Other interest......................................................... (752,658) (100,457)
----------- -----------
(3,163,349) (4,126,710)
Interest income............................................................. 136,906 105,855
----------- -----------
(3,026,443) (4,020,855)
----------- -----------
(Loss) before extraordinary item....................................... (383,567) (1,742,573)
Extraordinary item, gain on early extinguishment of debt......................... 6,863,762 --
----------- -----------
Net income (loss)...................................................... $ 6,480,195 $(1,742,573)
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-21
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Cash Flows From Operating Activities
Net income (loss).................................................................. $ 6,480,195 $(1,742,573)
Adjustments to reconcile net income (loss) to net cash (used in) operating
activities:
Amortization of program broadcast rights....................................... 510,967 597,308
Depreciation and amortization.................................................. 529,889 892,420
(Gain) on early extinguishment of debt......................................... (6,863,762) --
Amortization of intangibles and deferred loan costs............................ 482,505 568,467
(Gain) loss on sale of property and equipment.................................. (2,853) --
Payment of deferred and contingent interest.................................... (4,405,746) --
Payment of prepayment premiums................................................. (2,748,896) --
Other.......................................................................... 31,691 --
Change in assets and liabilities, net of effects of acquisition:
Receivables.................................................................... 539,518 4,638,951
Prepaid expenses............................................................... (204,128) (294,940)
Payments on program broadcast rights payable................................... (429,021) (522,121)
Accounts payable and accrued expenses.......................................... 593,679 (4,222,411)
Deferred income................................................................ -- (69,877)
Contingent and deferred interest payable....................................... 567,533 --
------------ -----------
Net cash (used in) operating activities.................................... (4,918,429) (154,776)
------------ -----------
Cash Flows From Investing Activities
Purchase of property and equipment................................................. (359,996) (612,766)
Proceeds from sale of equipment.................................................... 9,173 --
Payment for acquisition of station................................................. (26,558,152) --
Deposit on acquisition............................................................. -- (1,000,000)
Payment of acquisition costs....................................................... -- (334,569)
Other.............................................................................. -- (15)
------------ -----------
Net cash (used in) investing activities.................................... (26,908,975) (1,947,350)
------------ -----------
Cash Flows From Financing Activities
Principal payments on notes, including capital lease payables...................... (96,075,529) (85,276)
Proceeds from senior secured debt issue............................................ 135,000,000 --
Payment of debt acquisition costs.................................................. (5,085,944) (99,374)
------------ -----------
Net cash provided by (used in) financing activities........................ 33,838,527 (184,650)
------------ -----------
Increase (decrease) in cash and cash equivalents........................... 2,011,123 (2,286,776)
Cash and cash equivalents:
Beginning.......................................................................... 4,617,242 9,668,331
------------ -----------
Ending............................................................................. $ 6,628,365 $ 7,381,555
------------ -----------
------------ -----------
Supplemental Disclosure of Cash Flow Information
Cash payments for interest......................................................... $ 5,894,091 $ 8,034,064
------------ -----------
------------ -----------
Supplemental Schedule of Non-Cash Investing and Financing Activities
Acquisition of program broadcast rights............................................ $ 318,442 $ 80,312
Note payable and capital lease obligation incurred for purchase of equipment....... 107,672 --
Equipment acquired by barter transactions.......................................... 84,676 41,888
------------ -----------
------------ -----------
Acquisition of WTVY-TV:
Cash purchase price............................................................ $ 26,558,152 $ --
------------ -----------
------------ -----------
Property and equipment acquired at fair market value........................... 7,533,196 --
Intangible assets acquired..................................................... 21,306,181 --
Other, net..................................................................... (281,225) --
------------ -----------
28,558,152 --
Less: Application of advance to affiliate...................................... 2,000,000 --
------------ -----------
$ 26,558,152 $ --
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-22
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(NOTE A) -- NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF BUSINESS: Benedek Broadcasting Corporation ('Benedek
Broadcasting') owns and operates nine television stations located throughout the
United States which operate under network affiliation contracts. The networks
provide programs to the affiliated stations and the stations sell commercial
time during the programs to national, regional, and local advertisers. The
networks also sell commercial time during the programs to national advertisers.
Credit arrangements are determined on an individual customer basis.
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Benedek Broadcasting and Benedek Broadcasting Company, L.L.C. (the
'LLC'), a 99% owned subsidiary. All significant intercompany items and
transactions have been eliminated in the consolidated financial statements. The
financial statements include all adjustments, consisting of normal and recurring
adjustments, which are considered necessary in the opinion of management for the
fair presentation of the financial position as of March 31, 1996 and the results
of operations and cash flows for the three months ended March 31, 1995 and 1996.
These financial statements do not include all the information and footnotes
required by generally accepted accounting principles.
Operating results for the three month period ended March 31, 1996 are not
necessarily indicative of the operating results that may be expected for the
fiscal year ending December 31, 1996.
(NOTE B) -- BUSINESS COMBINATION, ACQUISITION AND SUBSEQUENT EVENTS
(1) BUSINESS COMBINATION:
On March 10, 1995, two affiliates of Benedek Broadcasting, Blue Grass
Television, Inc. ('Blue Grass') and Youngstown Broadcasting Co., Inc.
('Youngstown'), were merged into Benedek Broadcasting. Since these entities had
identical stockholder ownership, this was accounted for in a manner similar to
that in pooling-of-interests accounting.
Benedek Broadcasting issued 92.85 shares of its common stock for all the
outstanding common shares of Blue Grass and Youngstown, and such shares are
treated as if they were outstanding for all periods presented.
On March 10, 1995, the FCC licenses for all the television stations owned
by Benedek Broadcasting were transferred to the newly formed LLC. Benedek
Broadcasting owns 99% of the membership interest in the LLC and its principal
stockholder owns the remaining 1% minority membership interest. The assets,
liabilities and results of operations of the LLC are included in these
consolidated financial statements. The minority membership interest in the LLC
is not significant.
(2) ACQUISITION:
On March 31, 1995, Benedek Broadcasting acquired substantially all of the
assets of WTVY-TV which serves Dothan, Alabama and Panama City, Florida for an
aggregate purchase price of approximately $28,699,000. The acquired assets
include property and equipment with a fair market value of approximately
$7,533,000 and program broadcast rights of approximately $93,000, offset by
liabilities under program broadcast rights of approximately $79,000 and net
liabilities under trade and barter contracts of approximately $155,000. Benedek
Broadcasting also assumed commitments of approximately $214,000 related to
programming. The excess of the purchase price over the net assets acquired
totaled approximately $21,306,000 and has been allocated to intangible assets
which will be amortized over 40 years. This transaction has been accounted for
under the purchase method of accounting. Accordingly, the results of operations
for WTVY-TV have been included in the results of operations of these
consolidated financial statements since the date of acquisition.
F-23
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED
The pro forma results of operations for the three months ended March 31,
1995, assuming the acquisition of WTVY-TV had taken place on January 1, 1994, is
as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
1995
------------
<S> <C>
Net revenue......................................................... $ 11,793,367
Operating expenses.................................................. 9,346,343
Financial expense................................................... 3,952,089
------------
(Loss) before extraordinary item............................... (1,505,065)
Extraordinary item.................................................. 6,863,762
------------
Net income (loss).............................................. $ 5,358,697
------------
------------
</TABLE>
(3) SUBSEQUENT EVENTS
On November 22, 1995, Benedek Broadcasting entered into an agreement,
subject to regulatory approvals, to acquire the assets of five television
stations (and four satellite stations) for a total purchase price of
$54,500,000.
On December 15, 1995, Benedek Broadcasting entered into a stock purchase
agreement to acquire all the issued and outstanding shares of capital stock of a
corporation which owned and operated eight television stations for a purchase
price of $270,000,000.
Both acquisitions were consummated on June 6, 1996 in conjunction with the
financing arrangements described below.
On April 10, 1996, the sole stockholder of Benedek Broadcasting formed
Benedek Communications Corporation ('BCC') in conjunction with the above
acquisitions. At the closing of the acquisitions and related financing
transactions, the sole stockholder of Benedek Broadcasting contributed all of
the outstanding shares of common stock of Benedek Broadcasting to BCC in
exchange for the issuance to him of all of the outstanding shares of common
stock of BCC.
The financing transactions for the acquisitions consisted of (i) BCC
issuing (a) senior subordinated discount notes, (b) units, consisting of
exchangeable preferred stock and warrants to acquire common stock of BCC, and
(c) seller junior discount preferred stock and (ii) Benedek Broadcasting
entering into a new credit agreement. The new credit agreement includes
$128,000,000 term loan facilities and a $15,000,000 revolving credit facility.
These financing transactions were consummated concurrently with the
acquisitions.
On April 18, 1996, Benedek Broadcasting formed Benedek License Corporation
('BLC') in conjunction with the aforementioned acquisitions. On June 6, 1996,
the LLC merged with BLC and all of the licenses and authorizations issued by the
FCC for the operation of the Stations are now held by BLC.
(NOTE C) -- NOTES PAYABLE, GAIN ON EXTINGUISHMENT OF DEBT AND CAPITAL LEASES
PAYABLE
(1) NOTES PAYABLE:
During 1995, Benedek Broadcasting issued $135,000,000 of 11 7/8% Senior
Secured Notes due 2005 (the 'Senior Secured Notes'). The net proceeds of the
Senior Secured Notes were used, together with available cash, to (i) refinance
certain indebtedness, (ii) finance the acquisition of WTVY-TV and (iii) pay fees
and expenses in connection with the offering. The Senior Secured Notes have
F-24
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED
been registered with the Securities and Exchange Commission in a registration
statement declared effective in November 1995.
The Senior Secured Notes bear interest at the rate of 11 7/8%, payable
semiannually on March 1 and September 1 of each year and mature in March 2005.
The Senior Secured Notes may be redeemed by Benedek Broadcasting in whole or in
part after March 1, 2000 subject to certain prepayment premiums. The Senior
Secured Notes contain various restrictive covenants relating to limitations on
dividends, transactions with affiliates, further issuance of debt, and sales of
assets, among others.
The Senior Secured Notes are collateralized by Benedek Broadcasting's 99%
interest in the LLC, certain agreements and contract rights related to the
stations which includes network affiliation agreements and certain general
intangibles. The minority membership interest holder has also entered into a
pledge and security agreement providing for the pledge of his 1% interest in the
LLC.
Notes payable consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
1996
--------------
<S> <C>
Senior Secured Notes.............................................. $ 135,000,000
Capital leases and other.......................................... 681,749
--------------
135,681,749
Less current maturities........................................... 304,712
--------------
$ 135,377,037
--------------
--------------
</TABLE>
(2) CAPITAL NOTES, DETACHABLE WARRANTS AND GAIN ON EARLY EXTINGUISHMENT OF DEBT:
Subordinated capital notes were issued with detachable stock purchase
warrants (the 'BBC Warrants'), which provided the right to purchase 45 shares of
common stock of Benedek Broadcasting for $.10 per share. The agreement
guaranteed an annual pretax return of 27.5% including interest paid and the
implied increase in value of the warrants. The original value assigned to the
BBC Warrants of $1,290,000 was reflected as debt discount and was amortized over
the term of these notes using the interest method.
In 1995, Benedek Broadcasting exercised an option to call the warrants for
a specific ladder call price of $7,850,912. The difference between this ladder
price and the carrying value of the warrants of $18,978,618 was recorded as an
extraordinary gain of $11,128,000 reduced by losses of approximately $1,140,000
from unrecognized deferred loan costs, approximately $2,749,000 of prepayment
premiums and contingent payments and $375,000 of unamortized debt discount
related to the existing debt.
(NOTE D) -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
1996
----------
<S> <C>
Trade payables....................................................... $ 335,315
Barter, net.......................................................... 238,866
Compensation and benefits............................................ 1,332,756
Interest............................................................. 1,335,943
Other................................................................ 400,878
----------
$3,643,758
----------
----------
</TABLE>
F-25
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
STAUFFER COMMUNICATIONS, INC.:
We have audited the accompanying balance sheets of the TV Division of
Stauffer Communications, Inc. (a Delaware corporation) (the Company) as of
December 31, 1994 and 1995, and the related statements of income, division
equity and cash flows for each of the years in the three-year period ended
December 31, 1995. 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 the TV Division of Stauffer
Communications, Inc., as of December 31, 1994 and 1995 and its operations and
its cash flows for each of the years in the three-year period ended December 31,
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Kansas City, Missouri
March 1, 1996
F-26
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash........................................................................ $ 465,428 $ 209,987
Accounts receivable, net of reserve for doubtful accounts of $75,000 in 1994
and $99,000 in 1995....................................................... 3,750,721 3,515,457
Current portion of deferred film costs...................................... 769,513 941,766
Prepayments................................................................. 165,717 81,180
----------- -----------
Total current assets................................................... 5,151,379 4,748,390
Plant and Equipment, at Cost:
Land........................................................................ 867,937 867,937
Building.................................................................... 3,893,047 3,929,046
Equipment................................................................... 22,180,248 22,598,639
Construction in progress.................................................... 70,752 2,981
----------- -----------
27,011,984 27,398,603
Less -- Accumulated depreciation............................................ (15,145,074) (16,606,429)
----------- -----------
11,866,910 10,792,174
Other Assets:
Excess of cost over net assets of acquired companies, less accumulated
amortization of $8,028,122 in 1994 and $8,775,815 in 1995................. 8,021,715 7,274,023
Long-term portion of deferred film costs.................................... 614,619 1,055,472
Other....................................................................... 37,682 7,906
----------- -----------
8,674,016 8,337,401
----------- -----------
$25,692,305 $23,877,965
----------- -----------
----------- -----------
LIABILITIES AND DIVISION EQUITY
Current Liabilities:
Current maturities of film contract obligations............................. $ 606,173 $ 715,303
Accounts payable............................................................ 199,261 145,113
Accrued expenses............................................................ 615,448 569,335
----------- -----------
Total current liabilities.............................................. 1,420,882 1,429,751
Film Contract Obligations, Less Current Maturities............................... 189,857 911,342
Contingencies
Division Equity.................................................................. 24,081,566 21,536,872
----------- -----------
$25,692,305 $23,877,965
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-27
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Broadcast Operating Revenues:
Local...................................................... $11,815,748 $11,968,705 $12,076,769
National................................................... 5,222,225 6,045,572 5,652,105
Political.................................................. 77,979 2,222,724 87,345
Network programming........................................ 1,291,557 1,305,329 1,491,786
Other...................................................... 607,571 552,713 457,807
----------- ----------- -----------
19,015,080 22,095,043 19,765,812
Less --
Agency commissions....................................... 1,938,824 2,432,430 2,108,974
Representative's commissions............................. 515,332 706,626 512,319
----------- ----------- -----------
Net broadcast revenue................................. 16,560,924 18,955,987 17,144,519
Operating Expenses:
News-editorials............................................ 2,240,225 2,292,252 2,382,486
Technical.................................................. 1,249,882 1,270,885 1,347,207
Program.................................................... 3,145,641 2,901,656 2,986,263
Depreciation and amortization.............................. 2,264,114 2,303,848 2,228,832
Rent expense, net of sublease income....................... 223,798 224,188 192,685
Sales and promotions....................................... 2,936,347 3,219,720 2,949,498
General and administrative................................. 3,445,543 3,425,632 3,581,764
----------- ----------- -----------
Total operating expenses.............................. 15,505,550 15,638,181 15,668,735
----------- ----------- -----------
Income from operations................................ 1,055,374 3,317,806 1,475,784
Other Nonoperating Income....................................... 14,434 37,228 78,220
----------- ----------- -----------
Division-Net Income............................................. $ 1,069,808 $ 3,355,034 $ 1,554,004
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-28
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
STATEMENTS OF DIVISION EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Balance, Beginning of Year...................................... $25,636,696 $25,024,736 $24,081,566
Division net income........................................ 1,069,808 3,355,034 1,554,004
Cash transfers to parent, net.............................. (1,681,768) (4,298,204) (4,098,698)
----------- ----------- -----------
Balance, End of Year............................................ $25,024,736 $24,081,566 $21,536,872
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-29
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.................................................. $ 1,069,808 $ 3,355,034 $ 1,554,004
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation........................................... 1,516,422 1,556,156 1,481,140
Amortization of intangibles............................ 747,692 747,692 747,692
Amortization of deferred film costs.................... 1,276,500 1,044,561 1,025,491
(Increase) decrease in other assets.................... (31,234) (40,655) 114,311
(Increase) decrease in accounts receivable............. (219,462) (133,612) 235,264
Increase (decrease) in liabilities..................... (70,849) 70,683 (100,261)
Payments for film contract obligations................. (1,326,358) (1,081,130) (807,980)
----------- ----------- -----------
Total adjustments................................. 1,892,711 2,163,695 2,695,657
----------- ----------- -----------
Net cash provided by operating activities......... 2,962,519 5,518,729 4,249,661
Cash Flows from Investing Activities:
Property, plant and equipment, net.......................... (1,182,472) (934,294) (406,404)
----------- ----------- -----------
Net cash used in financing activities............. (1,182,472) (934,294) (406,404)
Cash Flows from Financing Activities:
Cash transfers to Parent, net............................... (1,681,768) (4,298,204) (4,098,698)
----------- ----------- -----------
Net cash used in financing activities............. (1,681,768) (4,298,204) (4,098,698)
Net Increase (Decrease) in Cash.................................. 98,279 286,231 (255,441)
Cash, Beginning of Year.......................................... 80,918 179,197 465,428
----------- ----------- -----------
Cash, End of Year................................................ $ 179,197 $ 465,428 $ 209,987
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-30
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
1. SUMMARY OF ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of the TV
Division of Stauffer Communications, Inc. (the 'Parent'). The TV Division
includes the following locations: KMIZ-TV in Columbia, Missouri; KGWN-TV in
Cheyenne, Wyoming; KTVS-TV in Scottsbluff, Nebraska; KSTF-TV in Sterling,
Colorado; KGWC-TV in Casper, Wyoming; KCOY-TV in Santa Maria, California; and
WIBW-TV in Topeka, Kansas. In June 1995, Stauffer Communications, Inc. was
acquired by Morris Communications Company and has continued to operate as a
wholly owned subsidiary under the name Stauffer Communications, Inc.
The Parent has entered into an Assets Purchase and Sale Agreement dated
November 22, 1995, whereby substantially all assets and liabilities of the TV
Division will be sold to Benedek Acquisition Corporation. Closing of this
transaction is contingent upon, among other things, obtaining a final order of
the FCC setting forth its consent to the transaction. The purchase price of
$54,500,000 may be adjusted based on changes in the amount of working capital,
as defined, on the closing date which is anticipated to occur before September
30, 1996.
These financial statements reflect the revenues and expenses of the TV
Division, including those direct expenses of the Division that are paid by the
Parent and charged directly to the Division. Certain expenses incurred by the
Parent have not been allocated to the TV Division. These expenses include
general corporate management, corporate accounting, general corporate legal
service and deferred compensation expense. Additionally, the taxable income of
the TV Division is included in the consolidated tax return of the Parent. No
income tax expense or related current or deferred tax assets or liabilities have
been allocated to the TV Division by the Parent.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
PLANT AND EQUIPMENT
Depreciation of plant and equipment is computed using both accelerated and
straight-line methods. Useful lives are 15 to 45 years for buildings and 3 to 20
years for equipment.
DEFERRED FILM COSTS
In accordance with Statement of Financial Accounting Standards No. 63 (SFAS
No. 63), deferred film costs are recorded at contract price when the license
period begins and all of the following conditions have been met: (a) the cost of
each program is known or reasonably determinable, (b) the program material has
been accepted in accordance with the conditions of the license agreement (c) the
program is available for its first showing or telecast. Contractual agreements
define the life of the license and the number of showings available. Deferred
film cost with lives greater than 12 months are amortized using the
sum-of-the-runs method over the life of the contract. All others are amortized
using the straight-line method. The contract rights estimated to be used within
one year are included in current assets.
Commitments for broadcast contract rights that have been executed, but
which have not been recorded in the accompanying consolidated financial
statements (because they do not meet the criteria prescribed in SFAS No. 63),
were approximately $460,000 as of December 31, 1994, and were insignificant at
December 31, 1995.
F-31
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994 AND 1995
BARTER TRANSACTIONS
Barter transactions, which represent the exchange of advertising time for
goods or services, are recorded at the estimated fair value of the products or
services received. Barter revenue is recognized when commercials are broadcast
and expenses are recognized when the related products or services are received.
Barter transactions were insignificant in 1993, 1994 and 1995.
DIVISION EQUITY
The TV Division participates in the Parent's cash management system. Under
this system, all cash generated by the TV Division is transferred to the Parent
and all cash requirements of the TV Division are funded by the Parent. These
transfers of funds are reflected in the division equity account.
2. EXCESS OF COST OVER NET ASSETS OF ACQUIRED COMPANIES:
Excess of cost over net assets of acquired companies consists of goodwill
and other intangible assets. Goodwill is amortized over periods of 20 to 40
years. Other intangible assets are amortized over periods of 4 to 18 years.
Amortization of such assets was approximately $748,000 in 1993, 1994 and 1995.
The following table details the components of these assets:
<TABLE>
<CAPTION>
ORIGINAL ACCUMULATED NET BOOK
BALANCE AMORTIZATION VALUE
----------- ----------- ----------
<S> <C> <C> <C>
Goodwill................................................. $ 7,854,879 $ 2,389,117 $5,465,762
Network affiliation...................................... 756,000 582,750 173,250
Operating license........................................ 2,123,723 812,605 1,311,118
Assembled work force..................................... 286,331 286,331 --
Advertising accounts..................................... 5,024,887 4,700,994 323,893
Other.................................................... 4,018 4,018 --
----------- ----------- ----------
$16,049,838 $ 8,775,815 $7,274,023
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
3. FILM CONTRACT OBLIGATIONS:
Film contract obligations consist of the following:
<TABLE>
<CAPTION>
1994 1995
-------- ----------
<S> <C> <C>
Film contracts payable, due in various installments through 2000............ $796,030 $1,626,645
Less -- Current portion..................................................... 606,173 715,303
-------- ----------
$189,857 $ 911,342
-------- ----------
-------- ----------
</TABLE>
Maturities on the TV Division's film contract obligations for each of the
next five years are as follows:
<TABLE>
<CAPTION>
YEAR MATURITY
- ---- ----------
<S> <C>
1996........................................................................... $ 715,303
1997........................................................................... 535,166
1998........................................................................... 314,685
1999........................................................................... 60,379
2000........................................................................... 1,112
----------
Total..................................................................... $1,626,645
----------
----------
</TABLE>
F-32
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994 AND 1995
4. PENSION PLANS:
Substantially all nonunion employees and officers of the TV Division are
covered by a defined benefit pension plan sponsored by the Parent. Benefits are
based on an integrated, career average, salary related formula and have been
funded by mandatory employee contributions, plus employer contributions that at
least equal the minimum funding requirements under ERISA.
A portion of the expense of this plan is allocated to the TV Division based
on the number of TV Division participants relative to the number of total
participants. The allocated cost was approximately $116,000, $170,000 and
$155,000 in 1993, 1994 and 1995, respectively.
5. CONTINGENCIES:
The Parent, including the TV Division, has various lawsuits outstanding
incidental to its operations. Management believes the outcome of this litigation
will not have a material adverse effect on the financial position or results of
operations of the TV Division.
The TV Division leases certain equipment and land, principally on a
month-to-month or annually renewable basis. Gross lease expenses were $284,241,
$287,212 and $299,777 for the years ending December 31, 1993, 1994 and 1995,
respectively.
F-33
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
BALANCE SHEETS
MARCH 31, 1995 AND 1996
<TABLE>
<CAPTION>
ASSETS 1995 1996
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Current Assets:
Cash...................................................................... $ 221,020 $ 346,859
Accounts receivable, net of reserve for doubtful accounts of $75,000 in
1995 and $99,000 in 1996................................................ 3,308,868 2,796,812
Current portion of deferred film costs.................................... 697,351 874,165
Prepayments............................................................... 124,073 127,984
------------ ------------
Total current assets................................................. 4,351,312 4,145,820
Plant and Equipment, at cost:
Land...................................................................... 867,937 867,937
Buildings................................................................. 3,893,047 3,929,046
Equipment................................................................. 22,377,540 22,644,212
Construction-in-progress.................................................. 106,682 --
------------ ------------
27,245,206 27,441,195
------------ ------------
Less -- Accumulated depreciation.......................................... (15,497,787) (16,995,153)
------------ ------------
11,747,419 10,446,042
Other Assets:
Excess of cost over net assets of acquired companies, less accumulated
amortization of $8,215,047 in 1995 and $8,962,738 in 1996............... 7,834,791 7,087,100
Long-term portion of deferred film costs.................................. 1,108,620 851,240
Other..................................................................... 29,801 12,241
------------ ------------
8,973,212 7,950,581
------------ ------------
$ 25,071,943 $ 22,542,443
------------ ------------
------------ ------------
LIABILITIES AND DIVISION EQUITY
Current Liabilities:
Current maturities of film contract obligations........................... $ 539,247 $ 684,442
Accounts payable.......................................................... 121,044 111,164
Accrued expenses.......................................................... 592,279 648,731
------------ ------------
Total current liabilities............................................ 1,252,570 1,444,337
Film Contract Obligations, less current maturities............................. 687,556 805,434
Contingencies
Division Equity................................................................ 23,131,817 20,292,672
------------ ------------
$ 25,071,943 $ 22,542,443
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to the financial statements should be read in conjunction
with these balance sheets.
F-34
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
STATEMENTS OF INCOME
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Broadcast Operating Revenues:
Local......................................................................... $2,829,765 $2,593,262
National...................................................................... 1,415,708 1,261,198
Political..................................................................... 3,100 140,485
Network programming........................................................... 336,577 400,274
Other......................................................................... 116,756 103,232
---------- ----------
4,701,906 4,498,451
Less --
Agency commissions....................................................... 504,722 473,854
Representative's commissions............................................. 128,780 111,917
---------- ----------
Net broadcast revenue............................................... 4,068,404 3,912,680
Operating Expenses:
News-editorials............................................................... 571,750 668,481
Technical..................................................................... 319,109 336,455
Program....................................................................... 720,003 801,275
Depreciation and amortization................................................. 553,898 575,648
Rent expense, net of sublease income.......................................... 43,933 43,545
Sales and promotions.......................................................... 718,567 665,057
General and administrative.................................................... 829,393 961,376
---------- ----------
Total operating expenses................................................. 3,756,653 4,051,837
---------- ----------
(Loss) income from operations............................................ 311,751 (139,157)
Other Nonoperating Income.......................................................... 7,949 12,997
---------- ----------
Division -- Net (loss) income...................................................... $ 319,700 $ (126,160)
---------- ----------
---------- ----------
</TABLE>
The accompanying notes to the financial statements should be read in conjunction
with these statements.
F-35
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
STATEMENTS OF DIVISION EQUITY
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Balance, beginning of period..................................................... $24,081,566 $21,536,872
Division net (loss) income.................................................. 319,700 (126,160)
Cash transfers to parent, net............................................... (1,269,449) (1,118,040)
----------- -----------
Balance, end of period........................................................... $23,131,817 $20,292,672
----------- -----------
----------- -----------
</TABLE>
The accompanying notes to the financial statements should be read in conjunction
with these statements.
F-36
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) income............................................................. $ 319,700 $ (126,160)
Adjustments to reconcile net (loss) income to cash provided by operating
activities --
Depreciation............................................................. 352,713 388,724
Amortization of intangibles.............................................. 186,923 186,923
Amortization of deferred film costs...................................... 234,491 314,400
(Increase) decrease in other assets...................................... 49,526 (51,136)
Decrease in accounts receivable.......................................... 441,853 718,645
Increase (decrease) in liabilities....................................... (101,386) 45,447
Payments for film contract obligations................................... (225,557) (179,339)
----------- ----------
Total adjustments................................................... 938,563 1,423,664
----------- ----------
Net cash provided by operating activities..................................... 1,258,263 1,297,504
Cash Flows from Investing Activities:
Property, plant and equipment, net............................................ (233,222) (42,592)
----------- ----------
Net cash used in financing activities......................................... (233,222) (42,592)
Cash Flows from Financing Activities:
Cash transfers to Parent, net................................................. (1,269,449) (1,118,040)
----------- ----------
Net cash used in financing activities......................................... (1,269,449) (1,118,040)
----------- ----------
Net Increase (Decrease) in Cash.................................................... (244,408) 136,872
Cash, beginning of period.......................................................... 465,428 209,987
----------- ----------
Cash, end of period................................................................ $ 221,020 $ 346,859
----------- ----------
----------- ----------
</TABLE>
The accompanying notes to the financial statements should be read in conjunction
with these statements.
F-37
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1996
1. SUMMARY OF ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of the TV
Division of Stauffer Communications, Inc. (the TV Division). The TV Division
includes the following locations: KMIZ-TV in Columbia, Missouri; KGWN-TV in
Cheyenne, Wyoming; KTVS-TV in Scottsbluff, Nebraska; KSTF-TV in Sterling,
Colorado; KGWC-TV in Casper, Wyoming; KCOY-TV in Santa Maria, California; and
WIBW-TV in Topeka, Kansas.
In June 1995, Stauffer Communications, Inc., was acquired by Morris
Communications Company and has continued to operate as a wholly owned subsidiary
under the name Stauffer Communications, Inc. (the Parent). The Parent has
entered into an assets purchase and sale agreement dated November 22, 1995,
whereby substantially all assets and liabilities of the TV Division will be sold
to Benedek Broadcasting Corporation. Closing of this transaction is contingent
upon, among other things, obtaining a final order from the FCC setting forth its
consent to the transaction. The purchase price of $54,500,000, may be adjusted
based on changes in the amount of working capital, as defined, on the closing
date which is expected to occur before September 30, 1996.
These financial statements reflect the revenues and expenses of the TV
Division, including those direct expenses of the TV Division that are paid by
the Parent and charged directly to the TV Division. Certain expenses incurred by
the Parent have not been allocated to the TV Division. These expenses include
general corporate management, corporate accounting, general corporate legal
service and deferred compensation expense. Additionally, the taxable income of
the TV Division is included in the consolidated tax return of the Parent. No
income tax expense or related current or deferred tax assets or liabilities have
been allocated to the TV Division by the Parent.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
PLANT AND EQUIPMENT
Depreciation of plant and equipment is computed using both accelerated and
straight-line methods. Useful lives are 15 to 45 years for buildings and 3 to 20
years for equipment.
DEFERRED FILM COSTS
In accordance with Statement of Financial Accounting Standards No. 63 (SFAS
No. 63), deferred film costs are recorded at contract price when the license
period begins and all of the following conditions have been met: (a) the cost of
each program is known or reasonably determinable, (b) the program material has
been accepted in accordance with the conditions of the license agreement, and
(c) the program is available for its first showing or telecast. Contractual
agreements define the life of the license and the number of showings available.
Deferred film costs with lives greater than 12 months are amortized using the
sum-of-the-runs method over the life of the contract. All others are amortized
using the straight-line method. The contract rights estimated to be used within
one year are included in current assets.
Commitments for broadcast contract rights that have been executed, but
which have not been recorded in the accompanying consolidated financial
statements (because they do not meet the criteria prescribed in SFAS No. 63),
were approximately $345,000 as of March 31, 1995, and were insignificant at
March 31, 1996.
F-38
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 1995 AND 1996
BARTER TRANSACTIONS
Barter transactions, which represent the exchange of advertising time for
goods or services, are recorded at the estimated fair value of the products or
services received. Barter revenue is recognized when commercials are broadcast
and expenses are recognized when the related products or services are received.
Barter transactions were insignificant during the three-month periods ended
March 31, 1995 and 1996.
DIVISION EQUITY
The TV Division participates in the Parent's cash management system. Under
this system, all cash generated by the TV Division is transferred to the Parent
and all cash requirements of the TV Division are funded by the Parent. These
transfers of funds are reflected in the division equity account.
2. EXCESS OF COST OVER NET ASSETS OF ACQUIRED COMPANIES:
Excess of cost over net assets of acquired companies consists of goodwill
and other intangible assets. Goodwill is amortized over periods of 20 to 40
years. Other intangible assets are amortized over periods of 4 to 18 years.
Amortization of such assets was approximately $187,000 during each of the
three-month periods ended March 31, 1995 and 1996. The following table details
the components of these assets at March 31, 1996:
<TABLE>
<CAPTION>
ORIGINAL ACCUMULATED NET BOOK
BALANCE AMORTIZATION VALUE
----------- ----------- ----------
<S> <C> <C> <C>
Goodwill................................................. $ 7,854,879 $ 2,436,254 $5,418,625
Network affiliation...................................... 756,000 592,200 163,800
Operating license........................................ 2,123,723 825,716 1,298,007
Assembled work force..................................... 286,331 286,331 --
Advertising accounts..................................... 5,024,887 4,818,219 206,668
Other.................................................... 4,018 4,018 --
----------- ----------- ----------
$16,049,838 $ 8,962,738 $7,087,100
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
3. FILM CONTRACT OBLIGATIONS:
Film contract obligations consist of the following:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Film contracts payable, due in various
installments through 2000.............................................. $1,226,803 $1,489,876
Less- Current portion.................................................... 539,247 684,442
---------- ----------
$ 687,556 $ 805,434
---------- ----------
---------- ----------
</TABLE>
Maturities on the TV Division's film contract obligations for each of the
next five years ending March 31 are as follows:
<TABLE>
<CAPTION>
YEAR MATURITY
- ---- ----------
<S> <C>
1997........................................................................... $ 684,442
1998........................................................................... 498,301
1999........................................................................... 276,061
2000........................................................................... 31,072
2001........................................................................... --
----------
Total..................................................................... $1,489,876
----------
----------
</TABLE>
F-39
<PAGE>
<PAGE>
TV DIVISION OF STAUFFER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 1995 AND 1996
4. PENSION PLANS:
In 1995 substantially all nonunion employees and officers of the TV
Division are covered by a defined benefit pension plan sponsored by the Parent.
Benefits are based on an integrated, career average, salary related formula and
have been funded by mandatory employee contributions, plus employer
contributions that at least equal the minimum funding requirements under ERISA.
A portion of the expense of this plan is allocated to the TV Division based on
the number of TV Division participants relative to the number of total
participants. The allocated cost was approximately $39,000 during the
three-month period ended March 31, 1995. In 1996, the TV Division has accrued
$72,000 for potential contributions for employee retirement benefits based on
the funding formula for the Morris Communications Profit Sharing Plan.
5. CONTINGENCIES:
The Parent, including the TV Division, has various lawsuits outstanding
incidental to its operations. Management believes the outcome of this litigation
will not have a material adverse effect on the financial position or results of
operations of the TV Division.
The TV Division leases certain equipment and land, principally on a
month-to-month or annually renewable basis. Gross lease expenses were $70,706
and $82,649 for the three-month periods ended March 31, 1995 and 1996,
respectively.
F-40
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of
BRISSETTE BROADCASTING CORPORATION:
We have audited the accompanying consolidated balance sheets of Brissette
Broadcasting Corporation (a Delaware corporation) and Subsidiaries as of
December 25, 1994 and December 31, 1995 and the related statements of
operations, stockholders' investment and cash flows for the fiscal years ended
December 26, 1993, December 25, 1994 and December 31, 1995. These financial
statements are the responsibility of Brissette Broadcasting Corporation
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
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 accompanying consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Brissette Broadcasting Corporation and Subsidiaries as of December 25, 1994, and
December 31, 1995, and the results of their operations and their cash flows for
the years ended December 26, 1993, December 25, 1994 and December 31, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 8, 1996
F-41
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 25, 1994 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................ $ 881,000 $ 2,102,000
Receivables, less allowances of $151,000 and $206,000 in 1994 and 1995,
respectively........................................................... 10,141,000 10,543,000
Film contract rights..................................................... 1,256,000 1,616,000
Prepaid expenses and other current assets................................ 387,000 176,000
------------ ------------
Total current assets................................................ 12,665,000 14,437,000
------------ ------------
Film Contract Rights.......................................................... 1,132,000 1,778,000
------------ ------------
Property and Equipment:
Land..................................................................... 1,838,000 1,838,000
Buildings and improvements............................................... 9,348,000 9,464,000
Broadcasting equipment................................................... 30,246,000 32,454,000
Furniture and fixtures................................................... 2,798,000 3,121,000
Vehicles and other....................................................... 1,696,000 1,831,000
------------ ------------
45,926,000 48,708,000
Less -- Accumulated depreciation and amortization........................ (33,753,000) (36,478,000)
------------ ------------
Net property and equipment.......................................... 12,173,000 12,230,000
------------ ------------
Intangible Assets, net........................................................ 81,482,000 77,376,000
------------ ------------
$107,452,000 $105,821,000
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current maturities of long-term debt..................................... $ 4,000,000 $ --
Accounts payable......................................................... 650,000 905,000
Accrued expenses......................................................... 2,510,000 2,413,000
Accrued interest......................................................... 1,361,000 1,742,000
Film contract obligations................................................ 1,214,000 1,832,000
Deferred revenue......................................................... -- 140,000
Taxes payable............................................................ 141,000 65,000
------------ ------------
Total current liabilities........................................... 9,876,000 7,097,000
Long-Term Debt................................................................ 191,048,000 197,348,000
Film Contract Obligations, less current portion............................... 981,000 1,303,000
Retiree Benefits Payable...................................................... 278,000 270,000
Deferred Revenue, less current portion........................................ -- 552,000
Other Noncurrent Liabilities.................................................. 576,000 1,193,000
------------ ------------
Total liabilities................................................... 202,759,000 207,763,000
------------ ------------
Stockholder's Investment:
Preferred stock, Series A, B, C and D, $.001 par value, 500 shares
authorized, issued and outstanding for each series (Note 5)............ 66,500,000 66,500,000
Common stock, $.001 par value, 2,000 shares authorized, issued and
outstanding (Note 6)................................................... -- --
Additional paid-in capital............................................... 35,837,000 35,837,000
Deficit.................................................................. (197,644,000) (204,279,000)
------------ ------------
Total stockholder's investment...................................... (95,307,000) (101,942,000)
------------ ------------
$107,452,000 $105,821,000
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-42
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 26, 1993, DECEMBER 25, 1994 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Broadcast Operating Revenues:
Local................................................... $ 28,214,000 $ 30,091,000 $ 31,575,000
National................................................ 17,730,000 19,391,000 20,617,000
Political............................................... 403,000 3,536,000 379,000
Network programming..................................... 3,163,000 3,094,000 4,589,000
Barter.................................................. 569,000 686,000 903,000
Other................................................... 1,273,000 941,000 990,000
------------ ------------ ------------
51,352,000 57,739,000 59,053,000
Less --
Agency commissions................................. 5,961,000 6,907,000 6,903,000
Representatives' commissions....................... 987,000 1,302,000 824,000
------------ ------------ ------------
Net broadcast revenue......................... 44,404,000 49,530,000 51,326,000
------------ ------------ ------------
Broadcast Operating Expenses:
Engineering............................................. 2,441,000 2,739,000 2,880,000
Programming............................................. 4,906,000 5,318,000 5,485,000
News.................................................... 5,663,000 6,427,000 6,901,000
Promotion............................................... 573,000 410,000 537,000
Sales................................................... 4,497,000 4,603,000 4,901,000
General and administrative.............................. 4,852,000 5,223,000 5,611,000
Amortization of intangibles............................. 5,316,000 4,160,000 4,106,000
Amortization of interest rate caps...................... 390,000 -- --
Depreciation............................................ 2,811,000 2,338,000 2,719,000
Corporate expense....................................... 1,443,000 1,699,000 1,844,000
Long-term incentive..................................... 44,000 196,000 616,000
Barter.................................................. 495,000 877,000 903,000
Other................................................... 130,000 115,000 120,000
------------ ------------ ------------
Total broadcast operating expenses............ 33,561,000 34,105,000 36,623,000
------------ ------------ ------------
Broadcast Operating Profit................................... 10,843,000 15,425,000 14,703,000
------------ ------------ ------------
Other (Expense) Income:
Interest income......................................... 30,000 51,000 61,000
Interest expense........................................ (15,212,000) (17,042,000) (20,898,000)
Other................................................... -- -- (354,000)
------------ ------------ ------------
Total other expense........................... (15,182,000) (16,991,000) (21,191,000)
------------ ------------ ------------
Loss Before Income Taxes..................................... (4,339,000) (1,566,000) (6,488,000)
Income Taxes, State.......................................... 278,000 79,000 147,000
------------ ------------ ------------
Net Loss..................................................... $ (4,617,000) $ (1,645,000) $ (6,635,000)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-43
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S INVESTMENT
FOR THE YEARS ENDED DECEMBER 26, 1993, DECEMBER 25, 1994 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL
--------------- -------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
------ ------ ------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 27, 1992.................... 2,000 $ -- 2,000 $66,500,000 $ 35,837,000 $(191,382,000)
Net loss...................................... -- -- -- -- -- (4,617,000)
------ ------ ------ ----------- ------------ -------------
Balance, December 26, 1993.................... 2,000 $ -- 2,000 $66,500,000 $ 35,837,000 $(195,999,000)
Net loss...................................... -- -- -- -- -- (1,645,000)
------ ------ ------ ----------- ------------ -------------
Balance, December 25, 1994.................... 2,000 $ -- 2,000 $66,500,000 $ 35,837,000 $(197,644,000)
Net loss...................................... -- -- -- -- -- (6,635,000)
------ ------ ------ ----------- ------------ -------------
Balance, December 31, 1995.................... 2,000 $ -- 2,000 $66,500,000 $ 35,837,000 $(204,279,000)
------ ------ ------ ----------- ------------ -------------
------ ------ ------ ----------- ------------ -------------
<CAPTION>
TOTAL
-------------
<S> <C>
Balance, December 27, 1992.................... $ (89,045,000)
Net loss...................................... (4,617,000)
-------------
Balance, December 26, 1993.................... $ (93,662,000)
Net loss...................................... (1,645,000)
-------------
Balance, December 25, 1994.................... $ (95,307,000)
Net loss...................................... (6,635,000)
-------------
Balance, December 31, 1995.................... $(101,942,000)
-------------
-------------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-44
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 26, 1993, DECEMBER 25, 1994 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss.................................................... $(4,617,000) $(1,645,000) $(6,635,000)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation........................................... 2,811,000 2,338,000 2,719,000
Amortization of intangibles............................ 5,316,000 4,160,000 4,106,000
Amortization of interest rate caps..................... 390,000 -- --
Amortization of film contract rights................... 1,743,000 1,757,000 1,684,000
Net trade/barter (revenue) expense..................... (74,000) 191,000 --
(Gain) loss on sale of assets.......................... 17,000 30,000 (24,000)
(Increase) decrease in assets:
Accounts receivable, net.......................... (520,000) (430,000) (402,000)
Other assets...................................... 17,000 101,000 37,000
Increase (decrease) in liabilities:
Accounts payable and accrued expenses............. 829,000 (678,000) 180,000
Accrued interest.................................. (55,000) 279,000 381,000
Taxes payable..................................... (172,000) 12,000 (76,000)
Increase deferred revenue......................... -- -- 692,000
Other liabilities................................. 227,000 233,000 609,000
Payments for film contract obligations............ (1,709,000) (1,555,000) (1,639,000)
----------- ----------- -----------
Net cash provided by operating activities.... 4,203,000 4,793,000 1,632,000
----------- ----------- -----------
Cash Flows From Investing Activities:
Capital expenditures........................................ (2,217,000) (1,559,000) (2,748,000)
Proceeds from sale of assets................................ 22,000 28,000 37,000
----------- ----------- -----------
Net cash used in investing activities........ (2,195,000) (1,531,000) (2,711,000)
----------- ----------- -----------
Cash Flows From Financing Activities:
Payments on long-term debt.................................. (3,250,000) (3,875,000) (2,000,000)
Proceeds (payments) from borrowings on line of credit,
net....................................................... 900,000 (900,000) 4,300,000
----------- ----------- -----------
Net cash provided by (used in) financing
activities................................. (2,350,000) (4,775,000) 2,300,000
----------- ----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents............. (342,000) (1,513,000) 1,221,000
Cash and Cash Equivalents, Beginning of Year..................... 2,736,000 2,394,000 881,000
----------- ----------- -----------
Cash and Cash Equivalents, End of Year........................... $ 2,394,000 $ 881,000 $ 2,102,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-45
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF COMPANY
Paul Brissette, Jr. (Brissette) agreed to purchase all the outstanding
shares of stock of Forward Television Corporation II (FTVC or predecessor)
subject to the indebtedness of FTVC. The acquisition was consummated on February
13, 1992. The basis in assets and liabilities were carried over at the time of
this transaction. Accordingly, Brissette changed the name of the corporation to
Brissette Broadcasting Corporation (Brissette Broadcasting) and includes
Brissette TV of Madison, Inc. (WMTV); Brissette TV of Lansing, Inc. (WILX);
Brissette TV of Odessa, Inc. (KOSA); Brissette TV of Peoria, Inc. (WHOI);
Brissette TV of Springfield, Inc. (WWLP); Brissette TV of Wausau, Inc. (WSAW);
Brissette TV of Wichita Falls, Inc. (KAUZ); and Brissette TV of Wheeling, Inc.
(WTRF) as wholly owned subsidiaries.
The accompanying consolidated financial statements have been prepared
assuming that Brissette Broadcasting will continue as a going concern. Brissette
Broadcasting is heavily dependent on General Electric Capital Corporation (GECC)
for the continuation of its ongoing operations, as GECC is the debt holder and
preferred stockholder (see Notes 4 and 5).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Brissette
Broadcasting and its subsidiaries. Significant intercompany accounts and
transactions have been eliminated.
FISCAL YEAR
Brissette Broadcasting utilizes a 52-53 week fiscal year ending the last
Sunday in December to coincide with the normal broadcasting industry year-end.
Fiscal 1995 consisted of 53 weeks and fiscal 1994 and 1993 consisted of 52
weeks.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
BROADCAST CONTRACT RIGHTS
In accordance with Statement of Financial Accounting Standards No. 63 (SFAS
No. 63), broadcast contract rights are recorded at full contract price when the
license period begins and all of the following conditions have been met: (a) the
cost of each program is known or reasonably determinable, (b) the program
material has been accepted in accordance with the conditions of the license
agreement and (c) the program is available for its first showing or telecast.
Contractual agreements define the life of the license and the number of showings
available. Broadcast contract rights are amortized using the straight-line
method over the life of the contract. The contract rights estimated to be used
within one year are included in current assets.
Commitments for broadcast contract rights that have been executed, but
which have not been recorded in the accompanying consolidated financial
statements (because they do not meet the criteria prescribed in SFAS No. 63),
were approximately $1,313,000 and $1,371,000 as of December 25, 1994, and
December 31, 1995, respectively.
F-46
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
BARTER TRANSACTIONS
Barter transactions, which represent the exchange of advertising time for
goods or services, are recorded at the estimated fair value of the products or
services received. Barter revenue is recognized when commercials are broadcast
and expenses are recognized when the related products or services are received.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. The cost of property and
equipment acquired in conjunction with the acquisition, was carried over from
the predecessor. Depreciation is computed on the straight-line method over the
expected useful lives of the respective assets as follows:
<TABLE>
<CAPTION>
ESTIMATED USEFUL LIFE
------------------------
<S> <C>
Buildings.................................................... 27 1/2 - 39 years
Land improvements............................................ 15 years
Broadcasting equipment....................................... 5 - 15 years
Furniture and fixtures....................................... 5 - 7 years
Vehicles..................................................... 5 years
Leasehold improvements....................................... Term of lease
</TABLE>
INTANGIBLE ASSETS
Intangible assets include goodwill, network affiliation rights,
organization and financing costs, noncompete agreements, Federal Communications
Commission (FCC) licenses and other agreements and licenses. Amortization is
computed on a straight-line basis over the estimated useful lives of the assets.
Should events or circumstances occur subsequent to the acquisition of a station
which bring into question the realizable value or impairment of the related
goodwill and intangibles, Brissette Broadcasting will evaluate the remaining
useful life and balance of goodwill and intangibles and make appropriate
adjustments. Brissette Broadcasting's principal consideration in determining
impairment include the strategic benefit to Brissette Broadcasting of the
particular station and the current and expected future operating income and cash
flow levels of that particular station.
Intangible assets as of December 25, 1994 and December 31, 1995, consisted
of the following:
<TABLE>
<CAPTION>
COST BASIS
ESTIMATED ----------------------------
USEFUL LIFE 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Goodwill........................................... 40 years $ 85,301,000 $ 85,301,000
Network affiliation rights......................... 10-40 years 22,741,000 16,024,000
Organization and financing costs................... 5-10 years 18,942,000 18,446,000
Noncompete agreements.............................. 5 years 11,445,000 --
FCC licenses....................................... 10-40 years 1,659,000 1,659,000
Other.............................................. 5-40 years 3,252,000 2,995,000
------------ ------------
Total intangibles............................. 143,340,000 124,425,000
Accumulated amortization...................... (61,858,000) (47,049,000)
------------ ------------
$ 81,482,000 $ 77,376,000
------------ ------------
------------ ------------
</TABLE>
REVENUE RECOGNITION
Revenue related to the sale of advertising and contracted time is
recognized at the time of broadcast. Income related to production for third
parties is recognized when the production of the television commercials,
programs or sound recording has been completed and delivered.
F-47
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DEFERRED REVENUE
During 1995, Brissette Broadcasting changed national sales representatives.
In connection with this change, the new representatives paid Brissette
Broadcasting a one time fee of $700,000 for their undertaking to buyout whatever
contract rights the previous representative may have had at each station.
Amounts were allocated to the stations as stipulated in the contract. These
amounts are recorded as deferred revenue and will be amortized over five years
which is the term of the representatives agreement.
CASH EQUIVALENTS
Brissette Broadcasting considers all short-term investments purchased with
an original maturity of three months or less to be cash equivalents.
3. INTEREST RATE CAPS
The Company had interest rate cap agreements with financial institutions
which provided for payments to Brissette Broadcasting in the event that actual
market interest rates exceeded the base London Interbank Offered Rate (LIBOR) or
the prime interest rate, as defined. There are no such agreements outstanding as
of December 26, 1993, December 25, 1994 and December 31, 1995.
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Revolving Credit Note..................................... $ -- $ 4,300,000
Term Note................................................. 195,048,000 193,048,000
Less -- Current maturities................................ 4,000,000 --
------------ ------------
$191,048,000 $197,348,000
------------ ------------
------------ ------------
</TABLE>
TERM NOTE
Brissette Broadcasting has a term note agreement with GECC. The agreement,
as amended, requires a payment equal to the remaining balance plus accrued and
unpaid interest due on January 2, 1997. Additionally, Brissette Broadcasting
shall pay interest, at an annual rate equal to the prime rate plus 1.50%, to
GECC, monthly in arrears on the last day of each month.
The Term Note also stipulates that any net proceeds received from any sale
or disposition of assets or properties of Brissette Broadcasting or any of its
subsidiaries other than in the ordinary course of business, or any net proceeds
from the issuance of any stock of Brissette Broadcasting or any subsidiary,
shall be remitted to GECC and shall be applied to the principal installments due
under the Term Note in the inverse order of maturity and be deemed a mandatory
prepayment of the Term Loan; provided, however, that Brissette Broadcasting or
any of its subsidiaries shall be entitled to deduct or hold back from any such
net proceeds to be remitted to GECC an amount of cash sufficient to pay all
federal, state or local income (or similar) taxes applicable to such sale or
disposition of assets or properties and an amount of cash sufficient to pay the
long-term incentive agreement payment if due and payable under the Employment
Agreement (see Note 12).
The Term Note consists of several covenants, more fully defined in the
agreement, including consolidated debt to cash flow ratio maximum of 8.1 to 1.0
for the year ended December 31, 1995, cash flow to debt service requirement of
1.0 to 1.0 and a stipulation that consolidated cash flow plus corporate expenses
must be equal to or greater than $23,849,000 for the fiscal year ended December
31, 1995.
In 1995, Brissette Broadcasting was not in compliance with certain of these
covenants and has obtained a waiver by letter dated May 5, 1995, from GECC.
Brissette Broadcasting expects they will
F-48
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
not be in compliance with certain of these covenants in 1996, therefore, the
agreement was amended as of January 1, 1996 to waive these covenants.
Brissette Broadcasting expects that cash flow from operations will be
sufficient to meet required interest payments under the term loan agreement
through 1996. However, Brissette Broadcasting does not expect that cash flow
from operations will be sufficient to meet the principal payment due on January
2, 1997 and intends to either refinance its debt or recapitalize Brissette
Broadcasting before the payment is due.
REVOLVING CREDIT NOTE
Brissette Broadcasting has a revolving credit agreement with GECC whereby
GECC will provide secured revolving credit advances to Brissette Broadcasting of
up to $8,000,000 in aggregate principal amount outstanding at any one time which
Brissette Broadcasting will use for working capital and other needs of Brissette
Broadcasting and its subsidiaries. All amounts outstanding shall become due
January 2, 1997. Additionally, Brissette Broadcasting shall pay interest, at an
annual rate equal to the prime rate plus 1.50%, to GECC, monthly in arrears on
the last day of each month. There was $4,300,000 and $0 amounts outstanding
under the revolving credit agreement as of December 31, 1995, and December 25,
1994, respectively.
As a requirement of the revolving credit agreement, Brissette Broadcasting
shall repay the aggregate unpaid principal amount of all revolving credit
advances outstanding such that for a period of 30 consecutive days in each
fiscal year Brissette Broadcasting will have no revolving credit advances
outstanding. In 1995, Brissette Broadcasting was not in compliance with this
covenant and has obtained a waiver by letter dated May 5, 1995, from GECC.
So long as any event of default shall be continuing, the interest rate
applicable to the Term Note and the Revolving Credit Note shall be increased by
2% per annum above the rate otherwise applicable.
COLLATERAL
As collateral, Brissette Broadcasting pledged the securities of Brissette
Broadcasting and the certificates representing the pledged securities and all
dividends, distributions, cash instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the pledged securities of Brissette Broadcasting and
all additional shares of capital stock of any subsidiary of Brissette
Broadcasting acquired in any manner and all stock owned by Brissette
Broadcasting.
5. PREFERRED STOCK
The amended and restated certificate of incorporation of Brissette
Broadcasting stipulates that in the event of any liquidation, dissolution or
winding up of Brissette Broadcasting, whether voluntary or involuntary, the
holders of preferred stock then outstanding shall be entitled to be paid out of
the assets of Brissette Broadcasting available for distribution to its
stockholders, whether such assets are capital, surplus or earnings, before any
payment or declaration and setting apart for payment of any amount shall be made
in respect of any shares of common stock, (a) an amount equal to $33,250 per
share of Series A participating preferred stock, (b) an amount equal to $33,250
per share of Series B participating preferred stock, (c) an amount equal to
$33,250 per share of Series C participating preferred stock and (d) an amount
equal to $33,250 per share of Series D participating preferred stock. The total
value of the preferred stock is $66,500,000. The holders of preferred stock
shall be entitled to participate with the holders of common stock with respect
to any cash, stock or other dividends when and as declared by Brissette
Broadcasting's Board of Directors in an amount allocable to the preferred stock
equal to 79% of any such dividend, and the holders of Common stock shall be
entitled to an amount equal to the remaining 21% of any such dividend.
F-49
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Additionally, the loan agreement states that Brissette Broadcasting shall
not have any right to redeem, or any obligation to redeem or otherwise acquire,
any shares of preferred stock. Brissette Broadcasting may not voluntarily
repurchase any shares of preferred stock unless such repurchase is approved by a
vote of the holders of at least 80% of the aggregate voting power of all
stockholders and is otherwise permitted by applicable law.
STOCK VOTING RIGHTS
The holders of common stock and preferred stock shall be entitled to vote
together as a single class on the following matters submitted or required to be
submitted to Brissette Broadcasting's stockholders:
a. Any action to (1) institute proceedings seeking the liquidation,
reorganization, dissolution or other relief with respect to Brissette
Broadcasting or its debts under any federal, state or foreign bankruptcy,
insolvency or other similar law now or hereafter in effect, or (2) consent
to the appointment of a receiver, liquidator, assignee, trustee, custodian
sequestrator or other similar official over BBC or a substantial part of
its property; and
b. Any action to (1) create any class or series of stock ranking prior
to or on a parity with or junior to the Preferred Stock (other than Common
Stock) either as to dividends or upon liquidation, (2) amend, alter or
repeal any of the provisions of Brissette Broadcasting's Certificate of
Incorporation or bylaws so as to affect adversely the preferences, special
rights or powers of the preferred stock, or (3) consolidate or merge with
or into any other corporation (other than a merger of a subsidiary of
Brissette Broadcasting into Brissette Broadcasting whereby Brissette
Broadcasting is the surviving corporation), or liquidate, wind up or
dissolve itself, or convey, sell, assign, transfer or otherwise dispose of,
all or substantially all of its assets.
On matters referred to above, each holder of common stock shall be entitled
to one vote per share of common stock held, and such holders in the aggregate
will have 21% of the aggregate voting power of all stockholders. On the matters
referred to above, the holders of preferred stock shall be entitled to an
aggregate number of votes equal to 3.762 multiplied by the number of shares of
common stock then outstanding, which shall be allocated ratably among the
holders of preferred stock in proportion to the aggregate of the liquidation
preferences specified above with respect to the shares of preferred stock held
by each such holder. Such votes shall entitle the holders of the preferred stock
in the aggregate 79% of the aggregate voting power of all stockholders on such
matters.
All other matters submitted or required to be submitted to Brissette
Broadcasting's stockholders for a vote shall be voted on solely by the holders
of the common stock. Notwithstanding the foregoing, at such time as the holders
of the preferred stock obtain approval from the FCC or its successor (the FCC)
to control Brissette Broadcasting or to exercise any such voting rights, the
holders of preferred stock shall automatically be entitled to vote together with
the holders of the common stock on all matters submitted or required to be
submitted to Brissette Broadcasting's stockholders for a vote in an amount
allocable to the holders of preferred stock equal to 79% of the aggregate voting
power of all stockholders as provided above.
6. COMMON STOCK
In connection with the closing of the amended and restated loan agreement
dated March 6, 1992, Paul Brissette was designated as a sole shareholder of the
common stock of Brissette Broadcasting with 2,000 shares at a par value of $.001
outstanding.
7. INCOME TAXES
Deferred taxes arise from temporary differences in the recognition of
income and expense for income tax and financial statement purposes and result
principally from depreciation and amortization
F-50
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expense as well as net operating loss carryforwards. As of December 31, 1995,
Brissette Broadcasting has a deferred tax asset of approximately $1,292,000 that
is fully reserved for as realization is uncertain.
Brissette Broadcasting files a consolidated federal tax return. Any
applicable income taxes are not allocated to individual stations. Stations are
taxable entities in the states in which they conduct business. The taxes
reflected in the December 31, 1995, financial statements reflect taxes due to
those states, if applicable.
As of December 25, 1994, and December 31, 1995, Brissette Broadcasting has
a net operating tax loss carryforward of approximately $4,959,000 and
$5,574,000, respectively, which begins to expire in 2007. Additionally, there
are other net operating loss carryforwards available which can be utilized upon
the sale of the assets of Brissette Broadcasting.
8. COMMITMENTS AND CONTINGENCIES
LEASES
Future minimum payments under noncancellable operating leases having terms
greater than one year, as of December 31, 1995, are as follows:
<TABLE>
<S> <C>
1996................................................................... $208,000
1997................................................................... 165,000
1998................................................................... 133,000
1999................................................................... 106,000
2000................................................................... 59,000
Thereafter............................................................. 186,000
--------
$857,000
--------
--------
</TABLE>
The operating leases consist of broadcasting facilities and equipment with
remaining terms ranging from one to fifteen years. Certain terms of the
operating leases include renewal provisions which may be exercised at the option
of Brissette Broadcasting.
Aggregate rent expense incurred under operating leases was approximately
$74,000, $142,000 and $187,000 in 1993, 1994 and 1995, respectively.
FILM CONTRACT RIGHTS AND OBLIGATIONS
Future minimum payments for film contract obligations, including those
mentioned in footnote 2, are as follows:
<TABLE>
<S> <C>
1996................................................................. $2,000,000
1997................................................................. 1,323,000
1998................................................................. 818,000
1999................................................................. 364,000
----------
$4,505,000
----------
----------
</TABLE>
The fair value of the film contract obligations at December 31, 1995, is
approximately $3,775,000. This amount was estimated by computing the net present
value of the above-mentioned obligations utilizing a 10.0% discount rate.
LITIGATION
Brissette Broadcasting is involved in various litigation matters arising in
the normal course of business. It is the opinion of management that the ultimate
resolution of such litigation will not have a
F-51
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
material adverse effect on the consolidated financial position of Brissette
Broadcasting or results of operations.
9. DEFERRED SAVINGS AND PROFIT-SHARING PLAN
Brissette Broadcasting maintains a 401(k) retirement plan. Employees must
have attained age 21 and have completed one year of consecutive service to
participate in the plan. Employees may contribute up to 15% of their salaries in
accordance with IRS limitations. On a discretionary basis, Brissette
Broadcasting matches employee contributions at a rate up to 50% (up to 6%) of
the employee's salary. Brissette Broadcasting's contribution to the plan totaled
approximately $55,000, $225,000 and $229,000 for 1993, 1994 and 1995,
respectively.
10. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year was as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Interest.................................... $15,254,000 $16,764,000 $20,516,000
Income taxes................................ 321,000 536,000 313,000
----------- ----------- -----------
$15,575,000 $17,300,000 $20,829,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
11. RELATED-PARTY TRANSACTIONS
Brissette Broadcasting recognized income of $411,000, $402,000 and $68,000
in 1993, 1994 and 1995, respectively, for management fees for expenses related
to payroll, rent and other corporate expenses from WWAY (Wilmington) and WHBQ
(Memphis). These stations are related through common management. Brissette
Broadcasting discontinued providing management services to WHBQ in 1994 and WWAY
in 1995.
During fiscal 1993, 1994 and 1995, Brissette Broadcasting paid
approximately $50,000, $85,000 and $138,000, respectively, to Mr. Greg
Brissette, son of the sole common shareholder, for certain sales related
consultation to the stations.
12. EMPLOYMENT AGREEMENT
As part of the corporate restructuring, Brissette Broadcasting entered into
an employment agreement dated March 6, 1992, with Paul Brissette whereas
Brissette Broadcasting continues to employ Brissette as President and Chief
Operating Officer. The employment agreement includes a long-term compensation
component, which is payable to Brissette on December 31, 1996, or sooner if
Brissette's employment ceases or is terminated or there is a sale or disposal of
any station.
The compensation interest is based on (a) gross proceeds received directly
or indirectly from the sale or disposition of any station, the sale of all or
substantially all of the assets related to any station or by merger,
reorganization, consolidation or otherwise; or (b) an increase in operating
profit of a station. Additionally, there are other severance and employee
benefits included in the employment agreement.
During 1995, Brissette Broadcasting entered into incentive compensation
agreements with certain officers and employees of Brissette Broadcasting. The
incentive compensation is a one-time bonus, provided that net income increases
an average of 6% per year, commencing as of the 1995 fiscal year, compounded
through and including the 1999 fiscal year. Payment shall be made at the end of
fiscal year 1999. A pro rata share will be paid to the employee if termination
occurs prior to the end of fiscal year 1999.
F-52
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 1993, 1994 and 1995 expense related to these employment agreements of
$44,000, $196,000 and $616,000, respectively, is included in long-term incentive
expense on the consolidated statements of operations.
13. POTENTIAL SALE AGREEMENT
During 1995, Brissette Broadcasting signed a stock purchase agreement which
called for the sale of all issued and outstanding shares of capital stock of
Brissette Broadcasting to Benedek Broadcasting Corporation (Benedek
Broadcasting) in exchange for cash and preferred stock. The total purchase price
of approximately $270,000,000 may be adjusted based on targeted working capital
at the closing date. The sale is contingent upon Benedek Broadcasting obtaining
financing and FCC approval.
Brissette Broadcasting also entered into management continuity agreements
with certain employees in order to provide them a severance benefit that would
become effective on the date of a change in ownership. The severance benefit, of
approximately $887,000, is based on annual wages and will be paid to the station
management employees if they are terminated within one year subsequent to the
change in ownership. Corporate employees will receive a severance benefit
regardless if they are terminated or not. These amounts are not accrued for in
the December 31, 1995 financial statements.
F-53
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 26, 1995 AND MARCH 31, 1996
<TABLE>
<CAPTION>
1995 1996
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................ $ 1,733,000 $ 1,534,000
Receivables, less allowances of $169,000 and $129,000 in 1995 and 1996,
respectively........................................................... 9,185,000 9,259,000
Film contract rights..................................................... 1,133,000 1,443,000
Prepaid expenses and other current assets................................ 850,000 518,000
------------ ------------
Total current assets................................................ 12,901,000 12,754,000
------------ ------------
Film contract rights.......................................................... 1,355,000 1,482,000
------------ ------------
Property and Equipment:
Land..................................................................... 1,838,000 1,838,000
Buildings and improvements............................................... 9,360,000 9,465,000
Broadcasting equipment................................................... 30,506,000 32,683,000
Furniture and fixtures................................................... 2,807,000 3,146,000
Vehicles and other....................................................... 1,745,000 1,965,000
------------ ------------
46,256,000 49,097,000
Less -- Accumulated depreciation and amortization............................. (34,299,000) (37,085,000)
------------ ------------
Net property and equipment............................................... 11,957,000 12,012,000
------------ ------------
Intangible assets, net........................................................ 80,464,000 76,349,000
------------ ------------
$106,677,000 $102,597,000
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' INVESTMENTS
Current Liabilities:
Current maturities of long-term debt..................................... $ -- $197,348,000
Accounts payable......................................................... 578,000 652,000
Accrued expenses......................................................... 2,515,000 2,561,000
Accrued interest......................................................... 1,487,000 1,657,000
Film contract obligations................................................ 1,173,000 1,631,000
Deferred revenue......................................................... -- 136,000
Taxes payable............................................................ 172,000 36,000
------------ ------------
Total current liabilities........................................... 5,925,000 204,021,000
Long-term debt................................................................ 196,048,000 --
Film contract obligations, less current portion............................... 1,133,000 1,005,000
Retiree Benefits payable...................................................... 278,000 267,000
Deferred Revenue, less current portion........................................ -- 530,000
Other noncurrent liabilities.................................................. 800,000 1,370,000
------------ ------------
Total liabilities................................................... 204,184,000 207,193,000
------------ ------------
Stockholder's Investment:
Preferred stock, Series A, B, C and D, $.001 par value, 500 shares
authorized, issued and outstanding for each series (Note 4)............ 66,500,000 66,500,000
Common stock, $.001 par value, 2,000 shares authorized, issued and
outstanding (Note 5)................................................... -- --
Additional paid-in capital............................................... 35,837,000 35,837,000
Deficit.................................................................. (199,844,000) (206,933,000)
------------ ------------
Total stockholder's investment...................................... (97,507,000) (104,596,000)
------------ ------------
$106,677,000 $102,597,000
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to the unaudited consolidated financial statements
are an integral part of these balance sheets.
F-54
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 26, 1995 AND MARCH 31, 1996
<TABLE>
<CAPTION>
1995 1996
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Broadcast Operating Revenues:
Local..................................................................... $ 7,002,000 $ 7,230,000
National.................................................................. 4,813,000 4,790,000
Political................................................................. 57,000 302,000
Network programming....................................................... 1,043,000 1,127,000
Barter.................................................................... 139,000 170,000
Other..................................................................... 261,000 290,000
------------ ------------
13,315,000 13,909,000
Less --
Agency commissions................................................... 1,546,000 1,651,000
Representatives' commissions......................................... 167,000 288,000
------------ ------------
Net broadcast revenue........................................... 11,602,000 11,970,000
------------ ------------
Broadcast Operating Expenses:
Engineering............................................................... 681,000 738,000
Programming............................................................... 1,352,000 1,478,000
News...................................................................... 1,597,000 1,835,000
Promotion................................................................. 101,000 130,000
Sales..................................................................... 1,120,000 1,302,000
General and administrative................................................ 1,345,000 1,450,000
Amortization of intangibles............................................... 1,018,000 1,027,000
Depreciation.............................................................. 552,000 623,000
Corporate expense......................................................... 464,000 479,000
Long-term incentive....................................................... 223,000 177,000
Barter.................................................................... 165,000 154,000
Other..................................................................... 20,000 22,000
------------ ------------
Total broadcast operating expenses.............................. 8,638,000 9,415,000
------------ ------------
Broadcast Operating Profit..................................................... 2,964,000 2,555,000
------------ ------------
Other (Expense) Income:
Interest income........................................................... 15,000 13,000
Interest expense.......................................................... (5,024,000) (4,906,000)
Other..................................................................... -- (213,000)
------------ ------------
Total other expense............................................. (5,009,000) (5,106,000)
------------ ------------
Loss Before Income Taxes....................................................... (2,045,000) (2,551,000)
Income Taxes, state............................................................ 155,000 103,000
------------ ------------
Net Loss....................................................................... $ (2,200,000) $ (2,654,000)
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to the unaudited consolidated financial statements
are an integral part of these statements.
F-55
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 26, 1995 AND MARCH 31, 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss..................................................................... $(2,200,000) $(2,654,000)
Adjustments to reconcile net loss to net cash provided by operating
activities --
Depreciation............................................................ 552,000 623,000
Amortization of intangibles............................................. 1,018,000 1,027,000
Amortization of film contract rights.................................... 400,000 483,000
Net trade/barter expense................................................ 26,000 (16,000)
(Gain) loss on sale of assets........................................... -- --
(Increase) decrease in assets --
Accounts receivable, net........................................... 956,000 1,284,000
Other assets....................................................... (468,000) (324,000)
Increase (decrease) in liabilities --
Accounts payable and accrued expenses.............................. (87,000) (108,000)
Accrued interest................................................... 126,000 (85,000)
Taxes payable...................................................... 31,000 (29,000)
Other liabilities.................................................. 224,000 148,000
Payments for film contract obligations............................. (399,000) (512,000)
----------- -----------
Net cash provided by (used by) operating activities........... 179,000 (163,000)
----------- -----------
Cash Flows from Investing Activities:
Capital expenditures......................................................... (327,000) (405,000)
Proceeds from sale of assets................................................. -- --
----------- -----------
Net cash used in investing activities......................... (327,000) (405,000)
----------- -----------
Cash Flows from Financing Activities:
Payments on long-term debt................................................... -- --
Proceeds (payments) from borrowings on line of credit, net................... 1,000,000 --
----------- -----------
Net cash provided by financing activities..................... 1,000,000 --
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............................. 852,000 (568,000)
CASH AND CASH EQUIVALENTS, beginning of year...................................... 881,000 2,102,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of year............................................ $ 1,733,000 $ 1,534,000
----------- -----------
----------- -----------
</TABLE>
The accompanying notes to the unaudited consolidated financial statements
are an integral part of these statements.
F-56
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S INVESTMENT
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 26, 1995 AND MARCH 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL
--------------- -------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 25, 1994............ 2,000 $ -- 2,000 $66,500,000 $35,837,000 $(197,644,000) $ (95,307,000)
3/26/95 Net loss (unaudited)...... (2,200,000) (2,200,000)
------ ------ ------ ----------- ----------- ------------- -------------
BALANCE, March 26, 1995 (unaudited)... 2,000 $ -- 2,000 $66,500,000 $35,837,000 $(199,844,000) $ (97,507,000)
BALANCE, December 31, 1995............ 2,000 $ -- 2,000 $66,500,000 $35,837,000 $(204,279,000) $(101,942,000)
3/31/96 Net loss (unaudited)...... (2,654,000) (2,654,000)
------ ------ ------ ----------- ----------- ------------- -------------
BALANCE, March 31, 1996 (unaudited)... 2,000 $ -- 2,000 $66,500,000 $35,837,000 $(206,933,000) $(104,596,000)
------ ------ ------ ----------- ----------- ------------- -------------
------ ------ ------ ----------- ----------- ------------- -------------
</TABLE>
The accompanying notes to the unaudited consolidated financial statements
are an integral part of these statements.
F-57
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 26, 1995 AND MARCH 31, 1996
1. DESCRIPTION OF COMPANY
Paul Brissette, Jr. (Brissette) agreed to purchase all the outstanding
shares of stock of Forward Television Corporation II (FTVC or predecessor)
subject to the indebtedness of FTVC. The acquisition was consummated on February
13, 1992. The basis in assets and liabilities were carried over at the time of
this transaction. Accordingly, Brissette changed the name of the corporation to
Brissette Broadcasting Corporation (Brissette Broadcasting) and includes
Brissette TV of Madison, Inc. (WMTV); Brissette TV of Lansing, Inc. (WILX);
Brissette TV of Odessa, Inc. (KOSA); Brissette TV of Peoria, Inc. (WHOI);
Brissette TV of Springfield, Inc. (WWLP); Brissette TV of Wausau, Inc. (WSAW);
Brissette TV of Wichita Falls, Inc. (KAUZ); and Brissette TV of Wheeling, Inc.
(WTRF) as wholly owned subsidiaries.
The accompanying unaudited consolidated financial statements have been
prepared assuming that Brissette Broadcasting will continue as a going concern.
Brissette Broadcasting is heavily dependent on General Electric Capital
Corporation (GECC) for the continuation of its ongoing operations, as GECC is
the debt holder and preferred stockholder (see Notes 3 and 4).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The unaudited consolidated financial statements include the accounts of
Brissette Broadcasting and its subsidiaries. Significant intercompany accounts
and transactions have been eliminated.
FISCAL YEAR
Brissette Broadcasting determines their month-end dates based on a 4-4-5
week schedule, which does not coincide with the normal broadcasting industry
month-end.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
BROADCAST CONTRACT RIGHTS
In accordance with Statement of Financial Accounting Standards No. 63 (SFAS
No. 63), broadcast contract rights are recorded at full contract price when the
license period begins and all of the following conditions have been met: (a) the
cost of each program is known or reasonably determinable, (b) the program
material has been accepted in accordance with the conditions of the license
agreement and (c) the program is available for its first showing or telecast.
Contractual agreements define the life of the license and the number of showings
available. Broadcast contract rights are amortized using the straight-line
method over the life of the contract. The contract rights estimated to be used
within one year are included in current assets.
Commitments for broadcast contract rights that have been executed, but
which have not been recorded in the accompanying consolidated financial
statements (because they do not meet the criteria prescribed in SFAS No. 63),
were approximately $1,172,000 and $1,613,000 as of March 26, 1995, and March 31,
1996, respectively.
F-58
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 26, 1995 AND MARCH 31, 1996
BARTER TRANSACTIONS
Barter transactions, which represent the exchange of advertising time for
goods or services, are recorded at the estimated fair value of the products or
services received. Barter revenue is recognized when commercials are broadcast
and expenses are recognized when the related products or services are received.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. The cost of property and
equipment acquired in conjunction with the acquisition, was carried over from
the predecessor. Depreciation is computed on the straight-line method over the
expected useful lives of the respective assets as follows:
<TABLE>
<CAPTION>
ESTIMATED USEFUL LIFE
------------------------
<S> <C>
Buildings.................................................... 27 1/2 - 39 years
Land improvements............................................ 15 years
Broadcasting equipment....................................... 5 - 15 years
Furniture and fixtures....................................... 5 - 7 years
Vehicles..................................................... 5 years
Leasehold improvements....................................... Term of lease
</TABLE>
INTANGIBLE ASSETS
Intangible assets include goodwill, network affiliation rights,
organization and financing costs, noncompete agreements, Federal Communications
Commission (FCC) licenses and other agreements and licenses. Amortization is
computed on a straight-line basis over the estimated useful lives of the assets.
Should events or circumstances occur subsequent to the acquisition of a station
which bring into question the realizable value or impairment of the related
goodwill and intangibles, Brissette Broadcasting will evaluate the remaining
useful life and balance of goodwill and intangibles and make appropriate
adjustments. Brissette Broadcasting's principal considerations in determining
impairment include the strategic benefit to Brissette Broadcasting of the
particular station and the current and expected future operating income and cash
flow levels of that particular station.
Intangible assets as of March 26, 1995 and March 31, 1996, consisted of the
following:
<TABLE>
<CAPTION>
COST BASIS
ESTIMATED ----------------------------
USEFUL LIFE 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Goodwill............................................ 40 years $ 85,301,000 $ 85,301,000
Network affiliation rights.......................... 10-40 years 22,740,000 16,024,000
Organization and financing costs.................... 5-10 years 18,942,000 18,446,000
Noncompete agreements............................... 5 years 11,445,000 --
FCC licenses........................................ 10-40 years 1,659,000 1,659,000
Other............................................... 5-40 years 3,252,000 2,995,000
------------ ------------
Total intangibles.............................. 143,339,000 124,425,000
Accumulated amortization....................... (62,875,000) (48,076,000)
------------ ------------
$ 80,464,000 $ 76,349,000
------------ ------------
------------ ------------
</TABLE>
REVENUE RECOGNITION
Revenue related to the sale of advertising and contracted time is
recognized at the time of broadcast. Income related to production for third
parties is recognized when the production of the television commercials,
programs or sound recording has been completed and delivered.
F-59
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 26, 1995 AND MARCH 31, 1996
DEFERRED REVENUE
During December 1995, Brissette Broadcasting changed national sales
representatives. In connection with this change, the new representatives paid
Brissette Broadcasting a one time fee of $700,000 for their undertaking to
buyout whatever contract rights the previous representative may have had at each
station. Amounts were allocated to the stations as stipulated in the contract.
These amounts are recorded as deferred revenue and will be amortized over five
years which is the term of the representatives agreement.
CASH EQUIVALENTS
Brissette Broadcasting considers all short-term investments purchased with
an original maturity of three months or less to be cash equivalents.
3. LONG-TERM DEBT
<TABLE>
<CAPTION>
MARCH 26, MARCH 31,
1995 1996
------------- ------------
<S> <C> <C>
Revolving Credit Note.................................... $ 2,000,000 $ 4,300,000
Term Note................................................ 194,048,000 193,048,000
Less -- Current maturities............................... -- (197,348,000)
------------- ------------
$ 196,048,000 $ --
------------- ------------
------------- ------------
</TABLE>
TERM NOTE
Brissette Broadcasting has a term note agreement with GECC. The agreement,
as amended, requires a payment equal to the remaining balance plus accrued and
unpaid interest due on January 2, 1997. Additionally, Brissette Broadcasting
shall pay interest, at an annual rate equal to the prime rate plus 1.50%, to
GECC, monthly in arrears on the last day of each month.
The Term Note also stipulates that any net proceeds received from any sale
or disposition of assets or properties of Brissette Broadcasting or any of its
subsidiaries other than in the ordinary course of business, or any net proceeds
from the issuance of any stock of Brissette Broadcasting or any subsidiary,
shall be remitted to GECC and shall be applied to the principal installments due
under the Term Note in the inverse order of maturity and be deemed a mandatory
prepayment of the Term Loan; provided, however, that Brissette Broadcasting or
any of its subsidiaries shall be entitled to deduct or hold back from any such
net proceeds to be remitted to GECC an amount of cash sufficient to pay all
federal, state or local income (or similar) taxes applicable to such sale or
disposition of assets or properties and an amount of cash sufficient to pay the
long-term incentive agreement payment if due and payable under the Employment
Agreement (see Note 11).
The Term Note consists of several covenants, more fully defined in the
agreement, including consolidated debt to cash flow ratio maximum of 7.6 to 1.0,
and cash flow to debt service requirement of at least 1.0 to 1.0 for the
thirteen week period ended March 31, 1996, and a stipulation that consolidated
cash flow plus corporate expenses must be equal to or greater than $25,066,000
for the fiscal year ended December 29, 1996.
In 1995, Brissette Broadcasting was not in compliance with certain of these
covenants and has obtained a waiver by letter dated May 5, 1995, from GECC.
Additionally, Brissette Broadcasting is not or expects they will not be in
compliance with certain of these covenants in 1996. The agreement was amended as
of January 1, 1996 to waive these covenants.
Brissette Broadcasting expects that cash flow from operations will be
sufficient to meet required interest payments under the term loan agreement
through 1996. However, Brissette Broadcasting does not expect that cash flow
from operations will be sufficient to meet the principal payment due on
F-60
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 26, 1995 AND MARCH 31, 1996
January 2, 1997 and intends to either refinance its debt or recapitalize
Brissette Broadcasting before the payment is due.
REVOLVING CREDIT NOTE
Brissette Broadcasting has a revolving credit agreement with GECC whereby
GECC will provide secured revolving credit advances to Brissette Broadcasting of
up to $8,000,000 in aggregate principal amount outstanding at any one time which
Brissette Broadcasting will use for working capital and other needs of Brissette
Broadcasting and its subsidiaries. All amounts outstanding shall become due
January 2, 1997. Additionally, Brissette Broadcasting shall pay interest, at an
annual rate equal to the prime rate plus 1.50%, to GECC, monthly in arrears on
the last day of each month. There was $4,300,000 and $2,000,000 amounts
outstanding under the revolving credit agreement as of March 26, 1995, and March
31, 1996, respectively. Subsequent to March 31, 1996, Brissette Broadcasting
increased the amounts outstanding under the revolving credit agreement to
$5,500,000.
As a requirement of the revolving credit agreement, Brissette Broadcasting
shall repay the aggregate unpaid principal amount of all revolving credit
advances outstanding such that for a period of 30 consecutive days in each
fiscal year Brissette Broadcasting will have no revolving credit advances
outstanding. In 1995, Brissette Broadcasting was not in compliance with this
covenant and has obtained a waiver by letter dated May 5, 1995, from GECC.
Additionally, Brissette Broadcasting was not in compliance with this covenant in
1996 and obtained a waiver dated March 6, 1996, from the GECC.
So long as any event of default shall be continuing, the interest rate
applicable to the Term Note and the Revolving Credit Note shall be increased by
2% per annum above the rate otherwise applicable.
COLLATERAL
As collateral, Brissette Broadcasting pledged the securities of Brissette
Broadcasting and the certificates representing the pledged securities and all
dividends, distributions, cash instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the pledged securities of Brissette Broadcasting and
all additional shares of capital stock of any subsidiary of Brissette
Broadcasting acquired in any manner and all stock owned by Brissette
Broadcasting.
4. PREFERRED STOCK
The amended and restated certificate of incorporation of Brissette
Broadcasting stipulates that in the event of any liquidation, dissolution or
winding up of Brissette Broadcasting, whether voluntary or involuntary, the
holders of preferred stock then outstanding shall be entitled to be paid out of
the assets of Brissette Broadcasting available for distribution to its
stockholders, whether such assets are capital, surplus or earnings, before any
payment or declaration and setting apart for payment of any amount shall be made
in respect of any shares of common stock, (a) an amount equal to $33,250 per
share of Series A participating preferred stock, (b) an amount equal to $33,250
per share of Series B participating preferred stock, (c) an amount equal to
$33,250 per share of Series C participating preferred stock and (d) an amount
equal to $33,250 per share of Series D participating preferred stock. The total
value of the preferred stock is $66,500,000. The holders of preferred stock
shall be entitled to participate with the holders of common stock with respect
to any cash, stock or other dividends when and as declared by Brissette
Broadcasting's Board of Directors in an amount allocable to the preferred stock
equal to 79% of any such dividend, and the holders of Common stock shall be
entitled to an amount equal to the remaining 21% of any such dividend.
F-61
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 26, 1995 AND MARCH 31, 1996
Additionally, the loan agreement states that Brissette Broadcasting shall
not have any right to redeem, or any obligation to redeem or otherwise acquire,
any shares of preferred stock. Brissette Broadcasting may not voluntarily
repurchase any shares of preferred stock unless such repurchase is approved by a
vote of the holders of at least 80% of the aggregate voting power of all
stockholders and is otherwise permitted by applicable law.
STOCK VOTING RIGHTS
The holders of common stock and preferred stock shall be entitled to vote
together as a single class on the following matters submitted or required to be
submitted to Brissette Broadcasting's stockholders:
a. Any action to (1) institute proceedings seeking the liquidation,
reorganization, dissolution or other relief with respect to Brissette
Broadcasting or its debts under any federal, state or foreign bankruptcy,
insolvency or other similar law now or hereafter in effect, or (2) consent
to the appointment of a receiver, liquidator, assignee, trustee, custodian
sequestrator or other similar official over BBC or a substantial part of
its property; and
b. Any action to (1) create any class or series of stock ranking prior
to or on a parity with or junior to the Preferred Stock (other than Common
Stock) either as to dividends or upon liquidation, (2) amend, alter or
repeal any of the provisions of Brissette Broadcasting's Certificate of
Incorporation or bylaws so as to affect adversely the preferences, special
rights or powers of the preferred stock, or (3) consolidate or merge with
or into any other corporation (other than a merger of a subsidiary of
Brissette Broadcasting into Brissette Broadcasting whereby Brissette
Broadcasting is the surviving corporation), or liquidate, wind up or
dissolve itself, or convey, sell, assign, transfer or otherwise dispose of,
all or substantially all of its assets.
On matters referred to above, each holder of common stock shall be entitled
to one vote per share of common stock held, and such holders in the aggregate
will have 21% of the aggregate voting power of all stockholders. On the matters
referred to above, the holders of preferred stock shall be entitled to an
aggregate number of votes equal to 3.762 multiplied by the number of shares of
common stock then outstanding, which shall be allocated ratably among the
holders of preferred stock in proportion to the aggregate of the liquidation
preferences specified above with respect to the shares of preferred stock held
by each such holder. Such votes shall entitle the holders of the preferred stock
in the aggregate 79% of the aggregate voting power of all stockholders on such
matters.
All other matters submitted or required to be submitted to Brissette
Broadcasting's stockholders for a vote shall be voted on solely by the holders
of the common stock. Notwithstanding the foregoing, at such time as the holders
of the preferred stock obtain approval from the FCC or its successor (the FCC)
to control Brissette Broadcasting or to exercise any such voting rights, the
holders of preferred stock shall automatically be entitled to vote together with
the holders of the common stock on all matters submitted or required to be
submitted to Brissette Broadcasting's stockholders for a vote in an amount
allocable to the holders of preferred stock equal to 79% of the aggregate voting
power of all stockholders as provided above.
5. COMMON STOCK
In connection with the closing of the amended and restated loan agreement
dated March 6, 1992, Paul Brissette was designated as a sole shareholder of the
common stock of Brissette Broadcasting with 2,000 shares at a par value of $.001
outstanding.
F-62
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 26, 1995 AND MARCH 31, 1996
6. INCOME TAXES
Deferred taxes arise from temporary differences in the recognition of
income and expense for income tax and financial statement purposes and result
principally from depreciation and amortization expense as well as net operating
loss carryforwards. As of March 31, 1996, Brissette Broadcasting has a deferred
tax asset of approximately $1,292,000 that is fully reserved for as realization
is uncertain.
Brissette Broadcasting files a consolidated federal tax return. Any
applicable income taxes are not allocated to individual stations. Stations are
taxable entities in the states in which they conduct business. The taxes
reflected in the March 31, 1996, financial statements reflect taxes due to those
states, if applicable.
As of March 26, 1995, and March 31, 1996, Brissette Broadcasting has a net
operating tax loss carryforward of approximately $5,139,000 and $5,574,000,
respectively, which begins to expire in 2007. Additionally, there are other net
operating loss carryforwards available which can be utilized upon the sale of
the assets of Brissette Broadcasting.
7. COMMITMENTS AND CONTINGENCIES
LEASES
Future minimum payments under noncancellable operating leases having terms
greater than one year, as of March 31, 1996, are as follows:
<TABLE>
<S> <C>
For the 39 weeks ending 12/29/96....................................... $196,000
1997................................................................... 180,000
1998................................................................... 147,000
1999................................................................... 115,000
2000................................................................... 68,000
Thereafter............................................................. 155,000
--------
$861,000
--------
--------
</TABLE>
The operating leases consist of broadcasting facilities and equipment with
remaining terms ranging from one to fifteen years. Certain terms of the
operating leases include renewal provisions which may be exercised at the option
of Brissette Broadcasting.
Aggregate rent expense incurred under operating leases was approximately
$37,000 and $65,000 in the thirteen week periods ended March 26, 1995 and March
31, 1996, respectively.
FILM CONTRACT RIGHTS AND OBLIGATIONS
Future minimum payments for film contract obligations, including those
mentioned in footnote 2, are as follows:
<TABLE>
<S> <C>
For the 39 weeks ending December 29, 1996............................ $1,574,000
1997................................................................. 1,469,000
1998................................................................. 831,000
1999................................................................. 375,000
----------
$4,249,000
----------
----------
</TABLE>
The fair value of the film contract obligations at March 31, 1996, is
approximately $3,868,000. This amount was estimated by computing the net present
value of the above-mentioned obligations utilizing a 10.0% discount rate.
F-63
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 26, 1995 AND MARCH 31, 1996
LITIGATION
Brissette Broadcasting is involved in various litigation matters arising in
the normal course of business. It is the opinion of management that the ultimate
resolution of such litigation will not have a material adverse effect on the
consolidated financial position of Brissette Broadcasting or results of
operations.
8. DEFERRED SAVINGS AND PROFIT-SHARING PLAN
Brissette Broadcasting maintains a 401(k) retirement plan. Employees must
have attained age 21 and have completed one year of consecutive service to
participate in the plan. Employees may contribute up to 15% of their salaries in
accordance with IRS limitations. On a discretionary basis, Brissette
Broadcasting matches employee contributions at a rate up to 50% (up to 6%) of
the employee's salary. Brissette Broadcasting's contribution to the plan totaled
approximately $54,000, and $66,000 for the thirteen week periods ended March 26,
1995 and March 31, 1996, respectively.
9. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the thirteen week periods ended March 26, 1995 and March
31, 1996 was as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Interest............................................. $4,898,000 $4,991,000
Income taxes......................................... 190,000 132,000
---------- ----------
$5,088,000 $5,123,000
---------- ----------
---------- ----------
</TABLE>
10. RELATED-PARTY TRANSACTIONS
Brissette Broadcasting recognized income of $51,000 and $0 for the thirteen
week periods ended March 26, 1995 and March 31, 1996, respectively, for
management fees for expenses related to payroll, rent and other corporate
expenses from WWAY (Wilmington). This station is related through common
management. Brissette Broadcasting discontinued providing management services to
WWAY in 1995.
During the thirteen week periods ended March 26, 1995 and March 31, 1996,
Brissette Broadcasting paid approximately $30,000 and $31,000, respectively, to
Mr. Greg Brissette, son of the sole common shareholder, for certain sales
related consultation to the stations.
11. EMPLOYMENT AGREEMENT
As part of the corporate restructuring, Brissette Broadcasting entered into
an employment agreement dated March 6, 1992, with Paul Brissette whereas
Brissette Broadcasting continues to employ Brissette as President and Chief
Operating Officer. The employment agreement includes a long-term compensation
component, which is payable to Brissette on December 31, 1996, or sooner if
Brissette's employment ceases or is terminated or there is a sale or disposal of
any station.
The compensation interest is based on (a) gross proceeds received directly
or indirectly from the sale or disposition of any station, the sale of all or
substantially all of the assets related to any station or by merger,
reorganization, consolidation or otherwise; or (b) an increase in operating
profit of a station. Additionally, there are other severance and employee
benefits included in the employment agreement.
During December 1995, Brissette Broadcasting entered into incentive
compensation agreements with certain officers and employees of Brissette
Broadcasting. The incentive compensation is a one-time bonus, provided that net
income increases an average of 6% per year, commencing as of the
F-64
<PAGE>
<PAGE>
BRISSETTE BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 26, 1995 AND MARCH 31, 1996
1995 fiscal year, compounded through and including the 1999 fiscal year. Payment
shall be made at the end of fiscal year 1999. A pro rata share will be paid to
the employee if termination occurs prior to the end of fiscal year 1999.
For the thirteen week periods ended March 26, 1995 and March 31, 1996, the
expense related to these employment agreements was $223,000 and $177,000,
respectively and is included in long-term incentive expense on the consolidated
statements of operations.
12. POTENTIAL SALE AGREEMENT
During 1995, Brissette Broadcasting signed a stock purchase agreement which
called for the sale of all issued and outstanding shares of capital stock of
Brissette Broadcasting to Benedek Broadcasting Corporation (Benedek
Broadcasting) in exchange for cash and preferred stock. The total purchase price
of approximately $270,000,000 may be adjusted based on targeted working capital
at the closing date. The sale is contingent upon Benedek Broadcasting obtaining
financing and FCC approval.
Brissette Broadcasting also entered into management continuity agreements
with certain employees in order to provide them a severance benefit that would
become effective on the date of a change in ownership. The severance benefit, of
approximately $887,000, is based on annual wages and will be paid to the station
management employees if they are terminated within one year subsequent to the
change in ownership. Corporate employees will receive a severance benefit
regardless if they are terminated or not. These amounts are not accrued for in
the March 31, 1996 financial statements.
F-65
<PAGE>
<PAGE>
_____________________________________ _____________________________________
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information............................... 3
Certain Definitions................................. 5
Market and Industry Data............................ 6
Summary............................................. 7
Risk Factors........................................ 26
The Acquisitions.................................... 34
The Financing Plan.................................. 35
Use of Proceeds..................................... 35
Capitalization...................................... 36
Pro Forma Financial Statements...................... 37
Selected Financial Data............................. 44
Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 46
The Exchange Offer.................................. 55
Business............................................ 63
Management.......................................... 97
Stock Ownership..................................... 100
Description of Indebtedness......................... 100
Description of the Exchangeable Preferred Stock and
Exchange Debentures............................... 103
Description of the Warrants......................... 140
Description of Capital Stock........................ 144
Book-Entry System; Delivery and Form................ 148
Certain Federal Income Tax Consequences ............ 149
Plan of Distribution................................ 157
Legal Matters....................................... 157
Experts............................................. 157
Index to Financial Statements....................... F-1
</TABLE>
UNTIL , 1996 ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
OFFER TO EXCHANGE
ALL OUTSTANDING
15.0% EXCHANGEABLE REDEEMABLE
SENIOR PREFERRED STOCK
DUE 2007
FOR
15.0% EXCHANGEABLE REDEEMABLE
SENIOR PREFERRED STOCK
DUE 2007
OF
BENEDEK COMMUNICATIONS
CORPORATION
------------------
PROSPECTUS
------------------
_____________________________________ _____________________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's authority to indemnify its officers and directors is
governed by the provisions of Section 145 of the General Corporation Law of the
State of Delaware (the 'GCL') and by the Certificate of Incorporation of the
Registrant. The Certificate of Incorporation of the Registrant provides that the
Registrant shall, to the fullest extent permitted by Section 145 of the GCL, (i)
indemnify any and all persons whom it shall have power to indemnify under said
section from and against any and all of the expenses, liabilities or other
matters referred to in or covered by said section, and (ii) advance expenses to
any and all said persons, and that such indemnification and advances shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in their official capacities and as to
action in another capacity while holding such offices, and shall continue as to
persons who have ceased to be directors, officers, employees or agents and shall
inure to the benefit of the heirs, executors and administrators of such person.
In addition, the Certificate of Incorporation of the Registrant provides for the
elimination of personal liability of directors of the Registrant to the
Registrant or its stockholders for monetary damages for breach of fiduciary duty
as a director, to the fullest extent permitted by the GCL, as amended and
supplemented.
The Registrant has entered into indemnification agreements with each of its
directors and executive officers whereby the Registrant will, in general,
indemnify such directors and executive officers, to the extent permitted by the
Registrant's Certificate of Incorporation or the laws of the State of Delaware,
against any expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement incurred in connection with any actual or threatened action
or proceeding to which such director or officer is made or threatened to be made
a party by reason of the fact that such person is or was a director or officer
of the Registrant.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
3.1 -- Certificate of Incorporation of the Registrant, incorporated by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-4, File No. 333-09529, filed on August 2, 1996 (the 'S-4
Registration Statement').
3.2 -- By-laws of the Registrant, incorporated by reference to Exhibit 3.2 to the S-4 Registration Statement.
3.3 -- Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other
Special Rights of 15.0% Exchangeable Redeemable Senior Preferred Stock Due 2007 and Qualifications,
Limitations and Restrictions thereof, incorporated by reference to Exhibit 3.3 to the S-4 Registration
Statement.
3.4 -- Certificate of Designation, Preferences and Relative, Participating, Optional and Other Special Rights of
Series C Junior Discount Preferred Stock and Qualifications, Limitations and Restrictions thereof,
incorporated by reference to Exhibit 3.4 to the S-4 Registration Statement.
4.1 -- Indenture dated as of May 15, 1996 between the Registrant and United States Trust Company of New York,
relating to the 13 1/4% Senior Subordinated Discount Notes due 2006, incorporated by reference to Exhibit
4.1 to the S-4 Registration Statement.
4.2 -- Form of 13 1/4% Senior Subordinated Discount Note due 2006 (included in Exhibit 4.1 hereof), incorporated
by reference to Exhibit 4.2 to the S-4 Registration Statement.
4.3 -- Indenture dated as of March 1, 1995 between Benedek Broadcasting Corporation ('Benedek Broadcasting') and
The Bank of New York, relating to the 11 7/8% Senior Secured Notes due 2005 of Benedek Broadcasting,
incorporated by reference to Exhibit 4.3 to the S-4 Registration Statement.
4.4 -- Form of 11 7/8% Senior Secured Note due 2005 of Benedek Broadcasting (included in Exhibit 4.3 hereof),
incorporated by reference to Exhibit 4.4 to the S-4 Registration Statement.
</TABLE>
II-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
4.5 -- Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other
Special Rights of 15.0% Exchangeable Redeemable Senior Preferred Stock Due 2007 and Qualifications,
Limitations and Restrictions thereof (filed as Exhibit 3.3 hereof), incorporated by reference to Exhibit
4.5 to the S-4 Registration Statement.
4.6 -- Certificate of Designation, Preferences and Relative, Participating, Optional and Other Special Rights of
Series C Junior Discount Preferred Stock and Qualifications, Limitations and Restrictions thereof (filed
as Exhibit 3.4 hereof), incorporated by reference to Exhibit 4.6 to the S-4 Registration Statement.
4.7 -- Warrant Agreement dated as of June 5, 1996 between the Registrant and IBJ Schroder Bank & Trust Company
with respect to Class A Common Stock of the Registrant, incorporated by reference to Exhibit 4.7 to the
S-4 Registration Statement.
*5 -- Opinion of Shack & Siegel, P.C., counsel for Registrant.
10.1 -- Purchase Agreement dated May 30, 1996 between the Registrant and Goldman, Sachs & Co., incorporated by
reference to Exhibit 10.1 to the S-4 Registration Statement.
10.2 -- Exchange and Registration Rights Agreement dated May 30, 1996 between the Registrant and Goldman, Sachs &
Co. with respect to the 13 1/4% Senior Subordinated Discount Notes of the Registrant, incorporated by
reference to Exhibit 10.2 to the S-4 Registration Statement.
10.3 -- Placement Agreement dated June 5, 1996 among the Registrant, Goldman, Sachs & Co. and BT Securities
Corporation, incorporated by reference to Exhibit 10.3 to the S-4 Registration Statement.
10.4 -- Exchange and Registration Rights Agreement dated June 5, 1996 among the Registrant, Goldman, Sachs & Co.
and BT Securities Corporation with respect to the 15.0% Exchangeable Redeemable Senior Preferred Stock
due 2007 of the Registrant, incorporated by reference to Exhibit 10.4 to the S-4 Registration Statement.
10.5 -- Warrant Agreement dated as of June 5, 1996 between the Registrant and IBJ Schroder Bank & Trust Company
(filed as Exhibit 4.7 hereof), incorporated by reference to Exhibit 10.5 to the S-4 Registration
Statement.
10.6 -- Contingent Warrant Escrow Agreement dated June 5, 1996 between the Registrant and IBJ Schroder Bank &
Trust Company, incorporated by reference to Exhibit 10.6 to the S-4 Registration Statement.
10.7 -- Common Stock Registration Rights Agreement dated as of June 5, 1996 among the Registrant, Goldman, Sachs
& Co. and BT Securities Corporation, incorporated by reference to Exhibit 10.7 to the S-4 Registration
Statement.
10.8 -- Credit Agreement dated as of June 6, 1996 among the Registrant, Benedek Broadcasting, the Lenders listed
therein, Pearl Street L.P., Goldman, Sachs & Co. and Canadian Imperial Bank of Commerce, New York Agency,
incorporated by reference to Exhibit 10.8 to the S-4 Registration Statement.
10.9 -- Guaranty dated as of June 6, 1996 by the Registrant in favor of Canadian Imperial Bank of Commerce, New
York Agency, incorporated by reference to Exhibit 10.9 to the S-4 Registration Statement.
10.10 -- Pledge Agreement dated as of June 6, 1996 between the Registrant and Canadian Imperial Bank of Commerce,
New York Agency, incorporated by reference to Exhibit 10.10 to the S-4 Registration Statement.
10.11 -- Security Agreement dated as of June 6, 1996 between the Registrant and Canadian Imperial Bank of
Commerce, New York Agency, incorporated by reference to Exhibit 10.11 to the S-4 Registration Statement.
10.12 -- Collateral Account Agreement dated as of June 6, 1996 between the Registrant and Canadian Imperial Bank
of Commerce, New York Agency, incorporated by reference to Exhibit 10.12 to the S-4 Registration
Statement.
10.13 -- Third Party Account Agreement dated as of June 6, 1996 among the Registrant, AMCORE Bank, N.A., Rockford
and Canadian Imperial Bank of Commerce, New York Agency, incorporated by reference to Exhibit 10.13 to
the S-4 Registration Statement.
10.14 -- Form of Indemnity Agreement between the Registrant and each of its executive officers and directors,
incorporated by reference to Exhibit 10.14 to the S-4 Registration Statement.
*10.15 -- Option Agreement dated as of June 6, 1996 between the Registrant and K. James Yager.
12.1 -- Statement of computation of ratio of earnings to fixed charges.
21 -- Subsidiaries of the Registrant.
*23.1 -- Consent of Shack & Siegel, P.C. (included in Exhibit 5 hereof).
23.2 -- Consent of McGladrey & Pullen, LLP with respect to the Registrant.
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
23.3 -- Consent of Arthur Andersen LLP with respect to the TV Division of Stauffer Communications, Inc.
23.4 -- Consent of Arthur Andersen LLP with respect to Brissette Broadcasting Corporation.
24.1 -- Power of Attorney of the Registrant (included on page II-4 hereof).
99.1 -- Form of Letter of Transmittal relating to the 15.0% Exchangeable Redeemable Senior Preferred Stock due
2007.
99.2 -- Form of Notice of Guaranteed Delivery relating to the 15.0% Exchangeable Redeemable Senior Preferred
Stock due 2007.
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees relating to the
15.0% Exchangeable Redeemable Senior Preferred Stock due 2007.
99.4 -- Form of Letter to Clients relating to the 15.0% Exchangeable Redeemable Senior Preferred Stock due 2007.
</TABLE>
- ------------
* To be filed by amendment.
(b) Financial Statement Schedules:
The following consolidated financial statement schedule is included in Part
II of this Registration Statement and should be read in conjunction with the
consolidated financial statements and notes thereto:
Independent Auditors Report
Schedule II -- Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on August 12, 1996.
BENEDEK COMMUNICATIONS CORPORATION
(Registrant)
By: /s/ RONALD L. LINDWALL
----------------------------------
RONALD L. LINDWALL,
SENIOR VICE PRESIDENT-FINANCE, CHIEF
FINANCIAL OFFICER AND TREASURER
POWER OF ATTORNEY
Each person whose signature to this Registration Statement appears below
hereby appoints K. James Yager and Ronald L. Lindwall, and each of them acting
singly, as his attorney-in-fact to sign in his behalf individually and in the
capacity as stated below and to file all amendments and post-effective
amendments to the Registration Statement, which amendment or amendments may make
such changes and additions to the Registration Statement as such
attorney-in-fact may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ A. RICHARD BENEDEK Chairman, Chief Executive Officer (Principal August 12, 1996
- ------------------------------------------ Executive Officer) and Director
A. RICHARD BENEDEK
/s/ K. JAMES YAGER President and Director August 12, 1996
- ------------------------------------------
K. JAMES YAGER
/s/ RONALD L. LINDWALL Senior Vice President-Finance, Chief August 12, 1996
- ------------------------------------------ Financial Officer, Treasurer (Principal
RONALD L. LINDWALL Financial and Principal Accounting
Officer) and Director
/s/ JAY KRIEGEL Director August 12, 1996
- ------------------------------------------
JAY KRIEGEL
/s/ PAUL S. GOODMAN Director August 12, 1996
- ------------------------------------------
PAUL S. GOODMAN
</TABLE>
II-4
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
Independent Auditors Report................................................................................ S-2
Schedule II -- Valuation and Qualifying Accounts........................................................... S-3
</TABLE>
S-1
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
Rockford, Illinois
Our audit of the consolidated financial statements of Benedek Broadcasting
Corporation and subsidiary included Schedule II contained herein, for the years
ended December 31, 1993, 1994 and 1995.
In our opinion this schedule presents fairly the information required to be
set forth therein in conformity with generally accepted accounting principles.
MCGLADREY & PULLEN, LLP
Rockford, Illinois
February 9, 1996
S-2
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND DEDUCTIONS END OF
OF PERIOD EXPENSES DESCRIBED(1) PERIOD
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Deducted from asset account -- allowance for doubtful
accounts:
Year ended December 31, 1993............................. $153,137 $253,437 $314,796 $ 91,778
Year ended December 31, 1994............................. 91,778 130,622 122,132 100,268
Year ended December 31, 1995............................. 100,268 201,382 52,627 249,023
</TABLE>
- ------------
(1) Uncollectable accounts written off, net of recoveries.
S-3
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NO. DESCRIPTION NUMBERING SYSTEM
- ------- ----------- -------------------
<C> <S> <C>
3.1 -- Certificate of Incorporation of the Registrant, incorporated by reference to Exhibit
3.1 to the Registrant's Registration Statement on Form S-4, File No. 333-09529,
filed on August 2, 1996 (the 'S-4 Registration Statement').
3.2 -- By-laws of the Registrant, incorporated by reference to Exhibit 3.2 to the S-4
Registration Statement.
3.3 -- Certificate of Designation of the Powers, Preferences and Relative, Participating,
Optional and Other Special Rights of 15.0% Exchangeable Redeemable Senior Preferred
Stock Due 2007 and Qualifications, Limitations and Restrictions thereof,
incorporated by reference to Exhibit 3.3 to the S-4 Registration Statement.
3.4 -- Certificate of Designation, Preferences and Relative, Participating, Optional and
Other Special Rights of Series C Junior Discount Preferred Stock and Qualifications,
Limitations and Restrictions thereof, incorporated by reference to Exhibit 3.4 to
the S-4 Registration Statement.
4.1 -- Indenture dated as of May 15, 1996 between the Registrant and United States Trust
Company of New York, relating to the 13 1/4% Senior Subordinated Discount Notes due
2006, incorporated by reference to Exhibit 4.1 to the S-4 Registration Statement.
4.2 -- Form of 13 1/4% Senior Subordinated Discount Note due 2006 (included in Exhibit 4.1
hereof), incorporated by reference to Exhibit 4.2 to the S-4 Registration Statement.
4.3 -- Indenture dated as of March 1, 1995 between Benedek Broadcasting Corporation
('Benedek Broadcasting') and The Bank of New York, relating to the 11 7/8% Senior
Secured Notes due 2005 of Benedek Broadcasting, incorporated by reference to Exhibit
4.3 to the S-4 Registration Statement.
4.4 -- Form of 11 7/8% Senior Secured Note due 2005 of Benedek Broadcasting (included in
Exhibit 4.3 hereof), incorporated by reference to Exhibit 4.4 to the S-4
Registration Statement.
4.5 -- Certificate of Designation of the Powers, Preferences and Relative, Participating,
Optional and Other Special Rights of 15.0% Exchangeable Redeemable Senior Preferred
Stock Due 2007 and Qualifications, Limitations and Restrictions thereof (filed as
Exhibit 3.3 hereof), incorporated by reference to Exhibit 4.5 to the S-4
Registration Statement.
4.6 -- Certificate of Designation, Preferences and Relative, Participating, Optional and
Other Special Rights of Series C Junior Discount Preferred Stock and Qualifications,
Limitations and Restrictions thereof (filed as Exhibit 3.4 hereof), incorporated by
reference to Exhibit 4.6 to the S-4 Registration Statement.
4.7 -- Warrant Agreement dated as of June 5, 1996 between the Registrant and IBJ Schroder
Bank & Trust Company with respect to Class A Common Stock of the Registrant,
incorporated by reference to Exhibit 4.7 to the S-4 Registration Statement.
*5 -- Opinion of Shack & Siegel, P.C., counsel for Registrant.
10.1 -- Purchase Agreement dated May 30, 1996 between the Registrant and Goldman, Sachs &
Co., incorporated by reference to Exhibit 10.1 to the S-4 Registration Statement.
10.2 -- Exchange and Registration Rights Agreement dated May 30, 1996 between the Registrant
and Goldman, Sachs & Co. with respect to the 13 1/4% Senior Subordinated Discount
Notes of the Registrant, incorporated by reference to Exhibit 10.2 to the S-4
Registration Statement.
10.3 -- Placement Agreement dated June 5, 1996 among the Registrant, Goldman, Sachs & Co.
and BT Securities Corporation, incorporated by reference to Exhibit 10.3 to the S-4
Registration Statement.
10.4 -- Exchange and Registration Rights Agreement dated June 5, 1996 among the Registrant,
Goldman, Sachs & Co. and BT Securities Corporation with respect to the 15.0%
Exchangeable Redeemable Senior Preferred Stock due 2007 of the Registrant,
incorporated by reference to Exhibit 10.4 to the S-4 Registration Statement.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NO. DESCRIPTION NUMBERING SYSTEM
- ------- ----------- -------------------
<C> <S> <C>
10.5 -- Warrant Agreement dated as of June 5, 1996 between the Registrant and IBJ Schroder
Bank & Trust Company (filed as Exhibit 4.7 hereof), incorporated by reference to
Exhibit 10.5 to the S-4 Registration Statement.
10.6 -- Contingent Warrant Escrow Agreement dated June 5, 1996 between the Registrant and
IBJ Schroder Bank & Trust Company, incorporated by reference to Exhibit 10.6 to the
S-4 Registration Statement.
10.7 -- Common Stock Registration Rights Agreement dated as of June 5, 1996 among the
Registrant, Goldman, Sachs & Co. and BT Securities Corporation, incorporated by
reference to Exhibit 10.7 to the S-4 Registration Statement.
10.8 -- Credit Agreement dated as of June 6, 1996 among the Registrant, Benedek
Broadcasting, the Lenders listed therein, Pearl Street L.P., Goldman, Sachs & Co.
and Canadian Imperial Bank of Commerce, New York Agency, incorporated by reference
to Exhibit 10.8 to the S-4 Registration Statement.
10.9 -- Guaranty dated as of June 6, 1996 by the Registrant in favor of Canadian Imperial
Bank of Commerce, New York Agency, incorporated by reference to Exhibit 10.9 to the
S-4 Registration Statement.
10.10 -- Pledge Agreement dated as of June 6, 1996 between the Registrant and Canadian
Imperial Bank of Commerce, New York Agency, incorporated by reference to Exhibit
10.10 to the S-4 Registration Statement.
10.11 -- Security Agreement dated as of June 6, 1996 between the Registrant and Canadian
Imperial Bank of Commerce, New York Agency, incorporated by reference to Exhibit
10.11 to the S-4 Registration Statement.
10.12 -- Collateral Account Agreement dated as of June 6, 1996 between the Registrant and
Canadian Imperial Bank of Commerce, New York Agency, incorporated by reference to
Exhibit 10.12 to the S-4 Registration Statement.
10.13 -- Third Party Account Agreement dated as of June 6, 1996 among the Registrant, AMCORE
Bank, N.A., Rockford and Canadian Imperial Bank of Commerce, New York Agency,
incorporated by reference to Exhibit 10.13 to the S-4 Registration Statement.
10.14 -- Form of Indemnity Agreement between the Registrant and each of its executive
officers and directors, incorporated by reference to Exhibit 10.14 to the S-4
Registration Statement.
*10.15 -- Option Agreement dated as of June 6, 1996 between the Registrant and K. James Yager.
12.1 -- Statement of computation of ratio of earnings to fixed charges.
21 -- Subsidiaries of the Registrant.
*23.1 -- Consent of Shack & Siegel, P.C. (included in Exhibit 5 hereof).
23.2 -- Consent of McGladrey & Pullen, LLP with respect to the Registrant.
23.3 -- Consent of Arthur Andersen LLP with respect to the TV Division of Stauffer
Communications, Inc.
23.4 -- Consent of Arthur Andersen LLP with respect to Brissette Broadcasting Corporation.
24.1 -- Power of Attorney of the Registrant (included on page II-4 hereof).
99.1 -- Form of Letter of Transmittal relating to the 15.0% Exchangeable Redeemable Senior
Preferred Stock due 2007.
99.2 -- Form of Notice of Guaranteed Delivery relating to the 15.0% Exchangeable Redeemable
Senior Preferred Stock due 2007.
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees relating to the 15.0% Exchangeable Redeemable Senior Preferred Stock due
2007.
99.4 -- Form of Letter to Clients relating to the 15.0% Exchangeable Redeemable Senior
Preferred Stock due 2007.
</TABLE>
- ------------
* To be filed by amendment.
STATEMENT OF DIFFERENCES
The service mark symbol shall be expressed as... SM
<PAGE>
<PAGE>
EXHIBIT 12.1
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDENDS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
HISTORICAL
Net income (loss) before extraordinary item
and income taxes per statement of
operations................................. $(8,143,421) $(5,605,078) $(5,034,414) $ 2,044,359 $ (811,644)
Add:
Interest on indebtedness................ 14,022,008 14,399,727 14,209,747 11,358,588 15,191,457
Amortization on deferred loan costs..... 192,177 192,177 309,160 1,450,776 680,243
Portion of rents representative of the
interest factor....................... 169,667 158,667 151,533 152,790 208,667
----------- ----------- ----------- ----------- -----------
Income as adjusted................. 6,240,431 9,145,493 9,636,026 15,006,513 15,268,723
----------- ----------- ----------- ----------- -----------
Fixed charges:
Interest on indebtedness................ 14,022,008 14,399,727 14,209,747 11,358,588 15,191,457
Amortization on deferred loan costs..... 192,177 192,177 309,160 1,450,776 680,243
Portion of rents representative of the
interest factor....................... 169,667 158,667 151,533 152,790 208,667
----------- ----------- ----------- ----------- -----------
Fixed charges...................... 14,383,852 14,750,571 14,670,440 12,962,154 16,080,367
----------- ----------- ----------- ----------- -----------
Ratio of earnings to fixed charges........... N/A N/A N/A 1.2X N/A
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
(Deficiency)................................. $(8,143,421) $(5,605,078) $(5,034,414) N/A $ (811,644)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31,
1996
-----------
<S> <C>
HISTORICAL
Net income (loss) before extraordinary item
and income taxes per statement of
operations................................. $(1,742,573)
Add:
Interest on indebtedness................ 4,026,253
Amortization on deferred loan costs..... 100,457
Portion of rents representative of the
interest factor....................... 57,175
-----------
Income as adjusted................. 2,441,312
-----------
Fixed charges:
Interest on indebtedness................ 4,026,253
Amortization on deferred loan costs..... 100,457
Portion of rents representative of the
interest factor....................... 57,175
-----------
Fixed charges...................... 4,183,885
-----------
Ratio of earnings to fixed charges........... N/A
-----------
-----------
(Deficiency)................................. $(1,742,573)
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
<S> <C> <C>
PRO FORMA FOR ACQUISITIONS AND FINANCING
Net income (loss) before extraordinary item and income taxes per
statement of operations............................................... $ (18,109,000) $ (7,724,000)
Add:
Interest on indebtedness........................................... 39,561,000 9,820,000
Amortization on deferred loan costs................................ 1,487,000 357,000
Portion of rents representative of the interest factor............. 371,000 107,000
----------------- ------------------
Income as adjusted............................................ 23,310,000 2,560,000
----------------- ------------------
Preferred dividend requirements......................................... 13,191,000 3,141,000
Fixed charges:
Interest on indebtedness........................................... 39,561,000 9,820,000
Amortization on deferred loan costs................................ 1,487,000 357,000
Portion of rents representative of the interest factor............. 371,000 107,000
----------------- ------------------
Fixed charges and preferred dividends......................... 54,610,000 13,425,000
----------------- ------------------
Ratio of earnings to fixed charges and preferred dividends.............. N/A N/A
----------------- ------------------
----------------- ------------------
(Deficiency)............................................................ $ (31,300,000) $(10,865,000)
----------------- ------------------
----------------- ------------------
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARY INCORPORATION
- ---------- ---------------
<S> <C>
Benedek Broadcasting Corporation................................................................... Delaware
Benedek License Corporation........................................................................ Delaware
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in this Registration Statement on Form S-4 of: (i)
our report, dated April 10, 1996, on the balance sheet of Benedek Communications
Corporation and (ii) our report dated February 9, 1996, except for Note L as to
which the date is June 6, 1996, on the financial statements of Benedek
Broadcasting Corporation. We also consent to the reference to our firm under the
caption 'Experts' in the Prospectus.
MCGLADREY & PULLEN, LLP
Rockford, Illinois
August 7, 1996
<PAGE>
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
on the TV Division of Stauffer Communications, Inc. (and to all references to
our Firm) included in or made a part of this Registration Statement for Benedek
Communications Corporation filed on Form S-4.
ARTHUR ANDERSEN LLP
Kansas City, Missouri
August 7, 1996
<PAGE>
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated March 8, 1996 (and to all references to our Firm), included in or made a
part of this Registration Statement for Benedek Communications Corporation filed
on Form S-4 dated August 13, 1996.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 7, 1996
<PAGE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
BENEDEK COMMUNICATIONS CORPORATION
OFFER TO EXCHANGE ITS SHARES OF
15.0% EXCHANGEABLE REDEEMABLE SENIOR PREFERRED STOCK DUE 2007, WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING SHARES OF
15.0% EXCHANGEABLE REDEEMABLE SENIOR PREFERRED STOCK DUE 2007
PURSUANT TO THE PROSPECTUS DATED , 1996
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1996, UNLESS EXTENDED (THE 'EXPIRATION DATE'). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON ON THE EXPIRATION DATE.
Delivery to: IBJ Schroder Bank & Trust Company, Exchange Agent
By Mail:
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
Attention: Reorganization Operations Dept.
By Facsimile:
IBJ Schroder Bank & Trust Company
Attention: Reorganization Operations Dept.
(212) 858-2611
By Hand/Overnight Delivery:
One State Street
New York, NY 10004
Attention: Securities Transfer Window, Subcellar One
For Information Call: (212) 858-2103
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute valid delivery.
The undersigned acknowledges that he or she has received the Prospectus,
dated , 1996 (the 'Prospectus'), of Benedek Communications
Corporation, a Delaware corporation (the 'Company'), and this Letter of
Transmittal (the 'Letter'), which together constitute the Company's offer (the
'Exchange Offer') to exchange shares of its 15.0% Exchangeable Redeemable Senior
Preferred Stock due 2007 (the 'Exchange Securities'), which have been registered
under the Securities Act of 1933, as amended (the 'Securities Act'), for an
equal number of outstanding shares of its 15.0% Exchangeable Redeemable Senior
Preferred Stock due 2007 (the 'Existing Exchangeable Preferred Stock') from the
holders thereof.
For each share of Existing Exchangeable Preferred Stock accepted for
exchange, the holder of such Existing Exchangeable Preferred Stock will receive
an Exchange Security. If by December 31, 1996, neither the Exchange Offer has
been consummated nor a shelf registration statement with respect to the Existing
Exchangeable Preferred Stock has been declared effective, additional cash
dividends will accrue on each share of Existing Exchangeable Preferred Stock,
from and including January 1, 1997 until but excluding the earlier of the date
of consummation of the Exchange Offer and the effective date of a shelf
registration statement at a rate of 0.50% per annum. Holders of shares of
Existing Exchangeable Preferred Stock accepted for exchange will be deemed to
have waived the right to receive any other payments or accrued dividends on the
Existing Exchangeable Preferred Stock. The Company reserves the right, at any
time or from time to time, to extend the Exchange Offer at its discretion, in
which event the term 'Expiration Date' shall mean the latest time and date to
which the Exchange Offer is extended. The Company shall notify holders of shares
of Existing Exchangeable Preferred
<PAGE>
<PAGE>
Stock of any extension by means of a press release or other public announcement
prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
This Letter is to be completed by a holder of shares of Existing
Exchangeable Preferred Stock either if certificates are to be forwarded herewith
or if a tender of certificates for Existing Exchangeable Preferred Stock, if
available, is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depositary Trust Company (the 'Book-Entry Transfer
Facility') pursuant to the procedures set forth in 'The Exchange
Offer -- Book-Entry Transfer' section of the Prospectus. Holders of shares of
Existing Exchangeable Preferred Stock whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their Existing Exchangeable Preferred Stock into the
Exchange Agent's account at the Book-Entry Transfer Facility (a 'Book-Entry
Confirmation') and all other documents required by this Letter to the Exchange
Agent on or prior to the Expiration Date, must tender their shares of Existing
Exchangeable Preferred Stock according to the guaranteed delivery procedures set
forth in 'The Exchange Offer -- Guaranteed Delivery Procedures' section of the
Prospectus. (See Instruction 1). Delivery of documents to the Book-Entry
Transfer Facility does not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
2
<PAGE>
<PAGE>
List below the shares of Existing Exchangeable Preferred Stock to which
this Letter relates. If the space provided below is inadequate, the certificate
numbers and number of shares of Existing Exchangeable Preferred Stock should be
listed on a separate signed schedule affixed hereto.
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF EXISTING EXCHANGEABLE PREFERRED STOCK 1 2 3
AGGREGATE
NUMBER
OF SHARES
OF EXISTING NUMBER
EXCHANGEABLE OF
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE* PREFERRED SHARES
(PLEASE FILL IN, IF BLANK) NUMBER(S) STOCK TENDERED**
Total
*Need not be completed if shares of Existing Exchangeable Preferred Stock are being tendered by book-entry transfer.
**Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL shares of Existing
Exchangeable Preferred Stock represented by the number of shares of Existing Exchangeable Preferred Stock indicated
in column 2. See Instruction 2. Existing Exchangeable Preferred Stock tendered hereby must be in denominations of
100 shares and any integral multiple thereof. See Instruction 1.
</TABLE>
[ ] CHECK HERE IF TENDERED SHARES OF EXISTING EXCHANGEABLE PREFERRED STOCK
ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT
MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution __________________________________________
Account Number ________________ Transaction Code Number ________________
[ ] CHECK HERE IF TENDERED SHARES OF EXISTING EXCHANGEABLE PREFERRED STOCK
ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY
PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ________________________________________
Window Ticket Number (if any) __________________________________________
Date of Execution of Notice of Guaranteed Delivery _____________________
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number ________________ Transaction Code Number ________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name ___________________________________________________________________
Address ________________________________________________________________
________________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Securities. If the undersigned is a broker-dealer that will receive
Exchange Securities for its own account in exchange for shares of Existing
Exchangeable Preferred Stock that were acquired as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
Prospectus in connection with any resale of such Exchange Securities; however,
by so acknowledging and by delivering a Prospectus, the undersigned will not be
deemed to admit that it is an 'underwriter' within the meaning of the Securities
Act.
3
<PAGE>
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Under the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the number of shares of Existing
Exchangeable Preferred Stock indicated above. Subject to, and effective upon,
the acceptance for exchange of the Existing Exchangeable Preferred Stock
tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon
the order of, the Company all right, title and interest in and to such shares of
Existing Exchangeable Preferred Stock as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the shares of
Existing Exchangeable Preferred Stock tendered hereby and that the Company will
acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim when
the same are accepted by the Company. The undersigned hereby further represents
that any Exchange Securities acquired in exchange for shares of Existing
Exchangeable Preferred Stock tendered hereby will have been acquired in the
ordinary course of business of the person receiving such Exchange Securities,
whether or not such person is the undersigned, that neither the holder of such
shares of Existing Exchangeable Preferred Stock nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such Exchange Securities and that neither the holder of such shares of
Existing Exchangeable Preferred Stock nor any such other person is an
'affiliate,' as defined in Rule 405 under the Securities Act, of the Company.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the 'SEC') in letters issued to third parties that the Exchange
Securities issued in exchange for shares of Existing Exchangeable Preferred
Stock pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that is an
'affiliate' of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Securities are
acquired in the ordinary course of such holder's business, such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Securities and such holder is not engaged in and does not
intend to engage in a distribution of such Exchange Securities. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for shares of Existing Exchangeable
Preferred Stock that were acquired as a result of market-making activities or
other trading activities, it acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Securities; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an 'underwriter' within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the shares of Existing Exchangeable Preferred
Stock tendered hereby. All authority conferred or agreed to be conferred in this
Letter and every obligation of the undersigned hereunder shall be binding upon
the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned. This
tender may be withdrawn only in accordance with the procedures set forth in 'The
Exchange Offer -- Withdrawal Rights' section of the Prospectus.
Unless otherwise indicated under the box entitled 'Special Issuance
Instructions' below, please deliver the Exchange Securities (and, if applicable,
substitute certificates representing shares of Existing Exchangeable Preferred
Stock for any shares of Existing Exchangeable Preferred Stock not exchanged) in
the name of the undersigned or, in the case of a book-entry delivery of shares
of Existing Exchangeable Preferred Stock, please credit the account indicated
above maintained at the Book-Entry Transfer Facility. Similarly, unless
otherwise indicated under the box entitled 'Special Delivery Instructions'
below, please send the Exchange Securities (and, if applicable, substitute
certificates representing shares of Existing Exchangeable Preferred Stock for
any shares of Existing Exchangeable
4
<PAGE>
<PAGE>
Preferred Stock not exchanged) to the undersigned at the address shown above in
the box entitled 'Description of Existing Exchangeable Preferred Stock.'
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED 'DESCRIPTION OF EXISTING
EXCHANGEABLE PREFERRED STOCK' ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO
HAVE TENDERED THE SHARES OF EXISTING EXCHANGEABLE PREFERRED STOCK AS SET FORTH
IN SUCH BOX ABOVE.
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for shares of Existing Exchangeable
Preferred Stock not exchanged and/or Exchange Securities are to be issued
in the name of and sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter below, or if shares of Existing
Exchangeable Preferred Stock delivered by book-entry transfer which are
not accepted for exchange are to be returned by credit to an account
maintained at the Book-Entry Transfer Facility other than the account
indicated above.
Issue Exchange Securities and/or shares of Existing Exchangeable Preferred
Stock to:
Name(s) __________________________________________________________________
(PLEASE TYPE OR PRINT)
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
Address __________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
[ ] Credit unexchanged shares of Existing Exchangeable Preferred Stock
delivered by book-entry transfer to the Book-Entry Transfer Facility
account set forth below.
__________________________________________________________________________
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for shares of Existing Exchangeable
Preferred Stock not exchanged and/or Exchange Securities are to be sent to
someone other than the person or persons whose signature(s) appear(s) on
this Letter below or to such person or persons at an address other than
shown in the box entitled 'Description of Existing Exchangeable Preferred
Stock' on this Letter above.
Mail Exchange Securities and/or shares of Existing Exchangeable Preferred
Stock to:
Name(s) __________________________________________________________________
(PLEASE TYPE OR PRINT)
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
Address __________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
(ZIP CODE)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE
CERTIFICATES FOR SHARES OF EXISTING EXCHANGEABLE PREFERRED STOCK OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
5
<PAGE>
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 BELOW)
Dated ____________________________________________________________, 1996
X ______________________________, ______________________________, 1996
X ______________________________, ______________________________, 1996
SIGNATURE(S) OF OWNER(S) DATE
Area Code and Telephone Number _________________________________________
If a holder is tendering any shares of Existing Exchangeable
Preferred Stock, this Letter must be signed by the registered holder(s) as
the name(s) appear(s) on the certificate(s) for the shares of Existing
Exchangeable Preferred Stock or by any person(s) authorized to become
registered holder(s) by endorsements and documents transmitted herewith. If
signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, please set forth full title. (See Instruction 3).
Name(s)_______________________________________________________
______________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity _____________________________________________________
______________________________________________________________
Address ______________________________________________________
______________________________________________________________
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed
by an Eligible Institution ___________________________________
(AUTHORIZED SIGNATURE)
______________________________________________________________
(TITLE)
______________________________________________________________
(NAME AND FIRM)
Dated __________________________________________________, 1996
6
<PAGE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE
15.0% EXCHANGEABLE REDEEMABLE SENIOR PREFERRED STOCK DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, IN EXCHANGE FOR THE 15.0% EXCHANGEABLE REDEEMABLE SENIOR PREFERRED
STOCK
DUE 2007 OF BENEDEK COMMUNICATIONS CORPORATION
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This letter is to be completed by stockholders either if certificates are
to be forwarded herewith or if tenders are to be made pursuant to the procedures
for delivery by book-entry transfer set forth in 'The Exchange
Offer -- Book-Entry Transfer' section of the Prospectus. Certificates for all
physically tendered shares of Existing Exchangeable Preferred Stock, or
Book-Entry Confirmation, as the case may be, as well as a properly completed and
duly executed Letter (or manually signed facsimile hereof) and any other
documents required by this Letter, must be received by the Exchange Agent at the
address set forth herein on or prior to the Expiration Date, or the tendering
holder must comply with the guaranteed delivery procedures set forth below.
Existing Exchangeable Preferred Stock tendered hereby must be in denominations
of 100 shares and any integral multiple thereof.
Stockholders whose certificates for shares of Existing Exchangeable
Preferred Stock are not immediately available or who cannot deliver their
certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date, or who cannot complete the procedure for book-entry
transfer on a timely basis, may tender their shares of Existing Exchangeable
Preferred Stock pursuant to the guaranteed delivery procedures set forth in 'The
Exchange Offer -- Guaranteed Delivery Procedures' section of the Prospectus.
Pursuant to such procedures, (i) such tender must be made through an Eligible
Institution (as defined), (ii) prior to the Expiration Date, the Exchange Agent
must receive from such Eligible Institution a properly completed and duly
executed Letter (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of shares of Existing Exchangeable Preferred Stock and the amount of
shares of Existing Exchangeable Preferred Stock tendered, stating that the
tender is being made thereby and guaranteeing that within five New York Stock
Exchange ('NYSE') trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered shares of
Existing Exchangeable Preferred Stock, in proper form for transfer, or a
Book-Entry Confirmation, and any other documents required by the Letter will be
deposited by the Eligible Institution with the Exchange Agent and (iii) the
certificates for all physically tendered shares of Existing Exchangeable
Preferred Stock, in proper form for transfer, or Book-Entry Confirmation, as the
case may be, and all other documents required by this Letter, are received by
the Exchange Agent within five NYSE trading days after the date of execution of
the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the shares of Existing Exchangeable
Preferred Stock and all other required documents is at the election and risk of
the tendering holders, but the delivery will be deemed made only when actually
received or confirmed by the Exchange Agent. If shares of Existing Exchangeable
Preferred Stock are sent by mail, it is suggested that the mailing be made
sufficiently in advance of the Expiration Date to permit the delivery to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
See 'The Exchange Offer' section in the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the shares of Existing Exchangeable Preferred Stock
evidenced by a submitted certificate are to be tendered, the tendering holder(s)
should fill in the aggregate number of shares of Existing Exchangeable Preferred
Stock to be tendered in the box above entitled 'Description of Existing
Exchangeable Preferred Stock -- Number of Shares Tendered.' A reissued
certificate representing the balance of nontendered shares of Existing
Exchangeable Preferred Stock will be sent to such tendering holder, unless
otherwise provided in the appropriate box on this Letter, promptly after the
Expiration Date. All of the shares of Existing Exchangeable Preferred Stock
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
7
<PAGE>
<PAGE>
3. SIGNATURES ON THIS LETTER; STOCK POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the shares of Existing
Exchangeable Preferred Stock tendered hereby, the signature must correspond
exactly with the name as written on the face of the certificates without any
change whatsoever.
If any tendered shares of Existing Exchangeable Preferred Stock are owned
of record by two or more joint owners, all such owners must sign this Letter.
If any tendered shares of Existing Exchangeable Preferred Stock are
registered in different names on several certificates, it will be necessary to
complete, sign and submit as many separate copies of this Letter as there are
different registrations of certificates.
When this Letter is signed by the registered holder or holders of the
shares of Existing Exchangeable Preferred Stock specified herein and tendered
hereby, no endorsements of certificates or separate stock powers are required.
If, however, the Exchange Securities are to be issued, or any untendered shares
of Existing Exchangeable Preferred Stock are to be reissued, to a person other
than the registered holder, then endorsements of any certificates transmitted
hereby or separate stock powers are required. Signatures on such certificate(s)
must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or stock powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be submitted.
Endorsements on certificates for shares of Existing Exchangeable Preferred
Stock or signatures on stock powers required by this Instruction 3 must be
guaranteed by a firm which is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
by a commercial bank or trust company having an office or correspondent in the
United States or by such other Eligible Institution within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended (collectively
'Eligible Institutions').
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the shares of Existing Exchangeable Preferred Stock are
tendered: (i) by a registered holder of shares of Existing Exchangeable
Preferred Stock (which term, for purposes of the Exchange Offer, includes any
participant in the Book-Entry Transfer Facility system whose name appears on a
security position listing as the holder of such shares of Existing Exchangeable
Preferred Stock) tendered who has not completed the box entitled 'Special
Issuance Instructions' or 'Special Delivery Instructions' on this Letter or (ii)
for the account of an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of shares of Existing Exchangeable Preferred Stock should
indicate in the applicable box the name and address to which Exchange Securities
issued pursuant to the Exchange Offer and/or substitute certificates evidencing
shares of Existing Exchangeable Preferred Stock not exchanged are to be issued
or sent, if different from the name or address of the person signing this
Letter. In the case of issuance in a different name, the employer identification
or social security number of the person named must also be indicated.
Stockholders tendering shares of Existing Exchangeable Preferred Stock by
book-entry transfer may request that shares of Existing Exchangeable Preferred
Stock not exchanged be credited to such account maintained at the Book-Entry
Transfer Facility as such stockholder may designate herein. If no such
instructions are given, such shares of Existing Exchangeable Preferred Stock not
exchanged will be returned to the name and address of the person signing this
Letter.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose
shares of Existing Exchangeable Preferred Stock are accepted for exchange must
provide the Company (as payor) with such holder's correct Taxpayer
Identification Number ('TIN') on Substitute Form W-9 below, which in the case of
a tendering holder who is an individual, is his or her social security number.
If the Company
8
<PAGE>
<PAGE>
is not provided with the current TIN or an adequate basis for an exemption, such
tendering holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, delivery to such tendering holder of Exchange Securities
may be subject to backup withholding in an amount equal to 31% of all reportable
payments made after the exchange. If withholding results in an overpayment of
taxes, a refund may be obtained.
Exempt holders of shares of Existing Exchangeable Preferred Stock
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. See the
enclosed Guidelines of Certification of Taxpayer Identification Number on
Substitute Form W-9 (the 'W-9 Guidelines') for additional instructions.
To prevent backup withholding, each tendering holder of shares of Existing
Exchangeable Preferred Stock must provide its correct TIN by completing the
Substitute Form W-9 set forth below, certifying that the TIN provided is correct
(or that such holder is awaiting a TIN) and that (i) the holder is exempt from
backup withholding, (ii) the holder has not been notified by the Internal
Revenue Service that such holder is subject to a backup withholding as a result
of a failure to report all interest or dividends or (iii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to backup
withholding. If the tendering holder of shares of Existing Exchangeable
Preferred Stock is a nonresident alien or foreign entity not subject to backup
withholding, such holder must provide the Company with a completed Form W-8,
Certificate of Foreign Status. These forms may be obtained from the Exchange
Agent. If the shares of Existing Exchangeable Preferred Stock are in more than
one name or are not in the name of the actual owner, such holder should consult
the W-9 Guidelines for information on which TIN to report. If such holder does
not have a TIN, such holder should consult the W-9 Guidelines for instructions
on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and
write 'applied for' in lieu of its TIN. Note: Checking this box and writing
'applied for' on the form means that such holder has already applied for a TIN
or that such holder intends to apply for one in the near future. If such holder
does not provide its TIN to the Company within 60 days, backup withholding will
begin and continue until such holder furnishes its TIN to the Company.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of shares of Existing Exchangeable Preferred Stock to it or its order pursuant
to the Exchange Order. If however, Exchange Securities and/or substitute shares
of Existing Exchangeable Preferred Stock not exchanged are to be delivered to,
or are to be registered or issued in the name of, any person other than the
registered holder of the shares of Existing Exchangeable Preferred Stock
tendered hereby, or if tendered shares of Existing Exchangeable Preferred Stock
are registered in the name of any person other than the person signing this
Letter, or if a transfer tax is imposed for any reason other than the transfer
of shares of Existing Exchangeable Preferred Stock to the Company or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the shares of Existing Exchangeable
Preferred Stock specified in this Letter.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of shares of Existing Exchangeable Preferred
Stock, by execution of this Letter, shall waive any right to receive notice of
the acceptance of their shares of Existing Exchangeable Preferred Stock for
exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of
shares of Existing Exchangeable Preferred Stock nor shall any of them incur any
liability for failure to give any such notice.
9
<PAGE>
<PAGE>
9. MUTILATED, LOST, STOLEN OR DESTROYED SHARES OF EXISTING EXCHANGEABLE
PREFERRED STOCK.
Any holder whose shares of Existing Exchangeable Preferred Stock have been
mutilated, lost, stolen or destroyed should contact the Exchange Agent at the
address indicated above for further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
10
<PAGE>
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: BENEDEK COMMUNICATIONS CORPORATION
<TABLE>
<S> <C> <C> <C>
PART 1--PLEASE PROVIDE YOUR TIN TIN:___________________________
IN THE BOX AT RIGHT AND Social Security Number
CERTIFY BY SIGNING AND or
DATING BELOW Employer Identification
Number
SUBSTITUTE PART 2 -- TIN Applied For [ ]
FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
CERTIFICATION:
UNDER THE PENALTIES OF PERJURY,
I CERTIFY THAT:
PAYOR'S REQUEST (1) the number shown on this form is my correct Taxpayer Identification Number (or
FOR TAXPAYER I am waiting for a number to be issued to me),
IDENTIFICATION NUMBER
('TIN') AND CERTIFICATION (2) I am not subject to backup withholding either because:
(a) I am exempt from backup withholding, or
(b) I have not been notified by the Internal Revenue Service (the 'IRS') that I
am subject to backup withholding as a result of a failure to report all
interest or dividends, or
(c) the IRS has notified me that I am no longer subject to backup withholding,
and
(3) any other information provided on this form is true and correct.
SIGNATURE ____________________________________________________ DATE _______________
You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to
backup withholding because of underreporting of interest or dividends on your tax return and you have not been notified
by the IRS that you are no longer subject to backup withholding.
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administrative Office or (b) I intend to mail
or delivery an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide the number.
SIGNATURE ______________________________________________ DATE __________________
11
<PAGE>
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY FOR
BENEDEK COMMUNICATIONS CORPORATION
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer relating to the 15.0% Exchangeable Redeemable Senior Preferred
Stock due 2007 of Benedek Communications Corporation (the 'Company') made
pursuant to the Prospectus, dated , 1996 (the 'Prospectus'), if
certificates for shares of Existing Exchangeable Preferred Stock of the Company
are not immediately available or if the procedure for book-entry transfer cannot
be completed on a timely basis or time will not permit all required documents to
reach the Company prior to 5:00 p.m., New York City time, on the Expiration Date
of the Exchange Offer. Such form may be delivered or transmitted by mail,
facsimile transmission, hand or overnight delivery to IBJ Schroder Bank & Trust
Company (the 'Exchange Agent') as set forth below. In addition, in order to
utilize the guaranteed delivery procedure to tender shares of Existing
Exchangeable Preferred Stock pursuant to the Exchange Offer, a completed, signed
and dated Letter of Transmittal relating to the shares of Existing Exchangeable
Preferred Stock (or facsimile thereof) must also be received by the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
Capitalized terms not defined herein are defined in the Prospectus.
Delivery to: IBJ Schroder Bank & Trust Company, Exchange Agent
By Mail:
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
Attention: Reorganization Operations Dept.
By Facsimile:
IBJ Schroder Bank & Trust Company
Attention: Reorganization Operations Dept.
(212) 858-2611
By Hand/Overnight Delivery:
One State Street
New York, NY 10004
Attention: Securities Transfer Window, Subcellar One
For Information Call: (212) 858-2103
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute valid delivery.
<PAGE>
<PAGE>
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the number of shares of Existing Exchangeable Preferred Stock set forth
below, pursuant to the guaranteed delivery procedure described in 'The Exchange
Offer -- Guaranteed Delivery Procedures' section of the Prospectus.
<TABLE>
<S> <C>
Number of Shares of Existing Exchangeable Preferred Stock Tendered:*
__________________________________
Certificate Nos. (if available):
If shares of Existing Exchangeable Preferred Stock will
__________________________________ be delivered by book-entry transfer to The Depositary
Trust Company, provide account number.
Total Number of Shares Represented
by Existing Exchangeable Preferred Stock
Certificate(s):
___________________________________ Account Number _________________________________________
</TABLE>
- ------------
* Must be in denominations of 100 shares and any integral multiple thereof.
2
<PAGE>
<PAGE>
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE DEATH
OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
PLEASE SIGN HERE
<TABLE>
<S> <C>
X_______________________________________________________ _______________________
X_______________________________________________________ _______________________
Signature(s) of Owner(s) Date
or Authorized Signatory
</TABLE>
Area Code and Telephone Number: ___________________________________________
Must be signed by the holder(s) of the shares of Existing Exchangeable
Preferred Stock as their name(s) appear(s) on certificates for shares of
Existing Exchangeable Preferred Stock or on a security position listing, or by
person(s) authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
PLEASE PRINT NAME(S), CAPACITY AND ADDRESS(ES)
<TABLE>
<S> <C>
Name(s): ______________________________________________________________
______________________________________________________________
______________________________________________________________
Capacity: ______________________________________________________________
______________________________________________________________
______________________________________________________________
Address(es): ______________________________________________________________
______________________________________________________________
______________________________________________________________
</TABLE>
3
<PAGE>
<PAGE>
GUARANTEE
The undersigned, an Eligible Institution within the meaning of Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, hereby guarantees that
the certificates representing the number of shares of Existing Exchangeable
Preferred Stock tendered hereby in proper form for transfer, or timely
confirmation of the book-entry transfer of such shares of Existing Exchangeable
Preferred Stock into the Exchange Agent's account at The Depositary Trust
Company pursuant to the procedures set forth in 'The Exchange
Offer -- Guaranteed Delivery Procedures' section of the Prospectus, together
with a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) with any required signature guarantee and any other
documents required by the Letter of Transmittal, will be received by the
Exchange Agent at the address set forth above, no later than five New York Stock
Exchange trading days after the date of execution hereof.
_____________________________________ _________________________________________
Name of Firm Authorized Signature
_____________________________________ _________________________________________
Address Title
_____________________________________ Name: ___________________________________
Zip Code (Please Type or Print)
Area Code and Tel. No.: _____________ Dated: __________________________________
NOTE: DO NOT SEND CERTIFICATES FOR SHARES OF EXISTING EXCHANGEABLE PREFERRED
STOCK WITH THIS FORM. CERTIFICATES FOR SHARES OF EXISTING EXCHANGEABLE
PREFERRED STOCK SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
4
<PAGE>
<PAGE>
EXHIBIT 99.3
BENEDEK COMMUNICATIONS CORPORATION
OFFER TO EXCHANGE ITS SHARES OF
15.0% EXCHANGEABLE REDEEMABLE SENIOR PREFERRED STOCK DUE 2007, WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING SHARES OF
15.0% EXCHANGEABLE REDEEMABLE SENIOR PREFERRED STOCK DUE 2007
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Benedek Communications Corporation (the 'Company') is offering, upon and
subject to the terms and conditions set forth in the Prospectus, dated
, 1996 (the 'Prospectus'), and the enclosed Letter of Transmittal
(the 'Letter of Transmittal'), to exchange (the 'Exchange Offer') shares of its
15.0% Exchangeable Redeemable Senior Preferred Stock due 2007, which have been
registered under the Securities Act of 1933, as amended, for an equal number of
outstanding shares of its 15.0% Exchangeable Redeemable Senior Preferred Stock
due 2007 (the 'Existing Exchangeable Preferred Stock'). The Exchange Offer is
being made in order to satisfy certain obligations of the Company contained in
the Exchange and Registration Rights Agreement dated June 5, 1996, among the
Company, Goldman, Sachs & Co. and BT Securities Corporation.
We are requesting that you contact your clients for whom you hold shares of
Existing Exchangeable Preferred Stock, regarding the Exchange Offer. For your
information and for forwarding to your clients for whom you hold shares of
Existing Exchangeable Preferred Stock registered in your name or in the name of
your nominee, or who hold shares of Existing Exchangeable Preferred Stock
registered in their own names, we are enclosing the following documents:
1. Prospectus dated , 1996;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for shares of Existing Exchangeable Preferred Stock
are not immediately available or time will not permit all required
documents to reach the Exchange Agent prior to the Expiration Date (as
defined below) or if the procedure for book-entry transfer cannot be
completed on a timely basis;
4. A form of letter which may be sent to your clients for whose
account you hold shares of Existing Exchangeable Preferred Stock registered
in your name or the name of your nominee, with space provided for obtaining
such clients' instructions with regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to IBJ Schroder Bank & Trust Company,
the Exchange Agent for the Existing Exchangeable Preferred Stock.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON , 1996, UNLESS EXTENDED BY THE COMPANY
(THE 'EXPIRATION DATE'). THE SHARES OF EXISTING EXCHANGEABLE PREFERRED STOCK
TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE
EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the shares of Existing Exchangeable
Preferred Stock should be delivered to the Exchange Agent, all in accordance
with the instructions set forth in the Letter of Transmittal and the Prospectus.
If holders of shares of Existing Exchangeable Preferred Stock wish to
tender, but it is impracticable for them to forward their certificates for
shares of Existing Exchangeable Preferred Stock prior to the expiration of the
Exchange Offer or to comply with the book-entry transfer procedures on a timely
<PAGE>
<PAGE>
basis, a tender may be effected by following the guaranteed delivery procedures
described in the Prospectus under 'The Exchange Offer -- Guaranteed Delivery
Procedures.'
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of shares of Existing Exchangeable Preferred Stock held by
them as nominee or in a fiduciary capacity. The Company will pay or cause to be
paid all transfer taxes applicable to the exchange of shares of Existing
Exchangeable Preferred Stock pursuant to the Exchange Offer, except as set forth
in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to IBJ
Schroder Bank & Trust Company, the Exchange Agent for the Existing Exchangeable
Preferred Stock, at its address and telephone number set forth in the front of
the Letter of Transmittal.
Very truly yours,
Benedek Communications Corporation
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENTS OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
2
<PAGE>
<PAGE>
EXHIBIT 99.4
BENEDEK COMMUNICATIONS CORPORATION
OFFER TO EXCHANGE ITS SHARES OF
15.0% EXCHANGEABLE REDEEMABLE SENIOR PREFERRED STOCK DUE 2007, WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING SHARES OF
15.0% EXCHANGEABLE REDEEMABLE SENIOR PREFERRED STOCK DUE 2007
To Our Clients:
Enclosed for your consideration is a Prospectus, dated , 1996
(the 'Prospectus'), and the related Letter of Transmittal (the 'Letter of
Transmittal'), relating to the offer (the 'Exchange Offer') of Benedek
Communications Corporation (the 'Company') to exchange shares of its 15.0%
Exchangeable Redeemable Senior Preferred Stock due 2007, which have been
registered under the Securities Act of 1933, as amended, for an equal number of
outstanding shares of its Exchangeable Redeemable Senior Preferred Stock due
2007 (the 'Existing Exchangeable Preferred Stock'), upon the terms and subject
to the conditions described in the Prospectus. The Exchange Offer is being made
in order to satisfy certain obligations of the Company contained in the Exchange
and Registration Rights Agreement dated June 5, 1996, among the Company,
Goldman, Sachs & Co. and BT Securities Corporation.
This material is being forwarded to you as the beneficial owner of shares
of Existing Exchangeable Preferred Stock carried by us in your account but not
registered in your name. A TENDER OF SUCH SHARES OF EXISTING EXCHANGEABLE
PREFERRED STOCK MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf shares of Existing Exchangeable Preferred Stock held by us for your
account, pursuant to the terms and conditions set forth in the enclosed
Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender shares of Existing Exchangeable Preferred Stock on
your behalf in accordance with the provisions of the Exchange Offer. The
Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1996, unless extended by the Company. Any shares of Existing Exchangeable
Preferred Stock tendered pursuant to the Exchange Offer may be withdrawn at any
time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all shares of Existing
Exchangeable Preferred Stock.
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus in the section captioned 'The Exchange Offer -- Certain
Conditions to the Exchange Offer.'
3. Any transfer taxes incident to the transfer of shares of Existing
Exchangeable Preferred Stock from the holder to the Company will be paid by
the Company, except as otherwise provided in the Instructions in the Letter
of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on
, 1996, unless extended by the Company.
If you wish to have us tender your shares of Existing Exchangeable
Preferred Stock, please so instruct us by completing, executing and returning to
us the instruction form on the back of this letter. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR INFORMATION ONLY AND MAY NOT BE USED DIRECTLY BY YOU TO
TENDER SHARES OF EXISTING EXCHANGEABLE PREFERRED STOCK.
<PAGE>
<PAGE>
INSTRUCTIONS WITH RESPECT TO
EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Benedek
Communications Corporation with respect to its shares of Existing Exchangeable
Preferred Stock.
This will instruct you to tender shares of Existing Exchangeable Preferred
Stock held by you for the account of the undersigned, upon and subject to the
terms and conditions set forth in the Prospectus and related Letter of
Transmittal.
Please tender shares of Existing Exchangeable Preferred Stock held by you
for my account as indicated below:
<TABLE>
Aggregate Number of Shares of
Existing Exchangeable Preferred Stock
-------------------------------------
<S> <C>
15.0% Exchangeable Redeemable Senior Preferred ____________________________________________
Stock due 2007
[ ] Please do not tender any shares of Existing
Exchangeable Preferred Stock held by you for my
account.
____________________________________________
Dated: ________________________________________, 1996
____________________________________________
Signature(s)
____________________________________________
____________________________________________
Please print name(s) here
____________________________________________
____________________________________________
Address(es)
____________________________________________
____________________________________________
Area Code and Telephone Number
____________________________________________
____________________________________________
Tax Identification or Social Security No(s).
</TABLE>
None of the shares of Existing Exchangeable Preferred Stock held by us for
your account will be tendered unless we recieve written instructions from you to
do so. Unless a specific contrary instruction is given in the space provided,
your signature(s) hereon shall constitute an instruction to us to tender all the
shares of Existing Exchangeable Preferred Stock held by us for your account.
2
<PAGE>
