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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMMISSION FILE NUMBERS:
BENEDEK BROADCASTING CORPORATION 33-78792
BENEDEK COMMUNICATIONS CORPORATION 333-09529
------------------------
BENEDEK BROADCASTING CORPORATION
and
BENEDEK COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
--------------
<TABLE>
<S> <C> <C>
Delaware Benedek Broadcasting Corporation 13-2982954
Delaware Benedek Communications Corporation 36-4076007
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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SUBSIDIARY GUARANTOR REGISTRANT
<TABLE>
<S> <C> <C>
BENEDEK LICENSE CORPORATION DELAWARE 36-4081877
(EXACT NAME OF SUBSIDIARY GUARANTOR (STATE OF FORMATION) (I.R.S EMPLOYER IDENTIFICATION
AS SPECIFIED IN ITS CERTIFICATE OF INCORPORATION) NUMBER)
</TABLE>
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100 PARK AVENUE 61101
ROCKFORD, ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 815-987-5350
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED:
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<S> <C>
NONE NONE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) have been subject to such filing
requirements for the past 90 days. Yes X No
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100% of the voting common stock of Benedek Communications Corporation is
owned by affiliates. 100% of the voting common stock of Benedek Broadcasting
Corporation is owned by Benedek Communications Corporation. None of the voting
common stock of either registrant is held by non-affiliates.
Indicate the number of shares outstanding of each of Benedek Broadcasting
Corporation's classes of common stock as of the latest practicable date: At
March 1, 1999, there were outstanding 148.85 shares of common stock, without par
value.
Indicate the number of shares outstanding of each of Benedek Communications
Corporation's classes of common stock, as of the latest practicable date: At
March 1, 1999, there were outstanding 7,400,000 shares of Class B common stock,
$0.01 par value, and no shares of Class A common stock, $0.01 par value.
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BENEDEK BROADCASTING CORPORATION AND
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-K
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Item
Number Page
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<S> <C>
PART I
Item 1. Business........................................................................... 1
Item 2. Properties......................................................................... 30
Item 3. Legal Proceedings.................................................................. 33
Item 4. Submission of Matters to a Vote of Security Holders................................ 33
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.............. 34
Item 6. Selected Consolidated Financial Data............................................... 34
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 36
Item 8. Financial Statements and Supplementary Data........................................ 46
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure......................................................................... 46
PART III
Item 10. Directors and Executive Officers of the Company.................................... 47
Item 11. Executive Compensation............................................................. 49
Item 12. Security Ownership of Certain Beneficial Owners and Management..................... 51
Item 13. Certain Relationships and Related Transactions..................................... 51
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.................... 52
Signatures.................................................................................... 57
</TABLE>
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PART I
ITEM 1. BUSINESS.
This Annual Report on Form 10-K contains forward-looking statements that
involve risks and uncertainties. Wherever possible, the Company (as defined) has
identified these forward looking statements by words such as "anticipates,"
"believes," "estimates," "expects" and similar expressions. Actual results could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including changes in national and regional
economies, competition in the television business, pricing fluctuations in local
and national advertising, program ratings and changes in programming cost, among
other factors. The Company assumes no obligation to update publicly any forward
looking statements, whether as a result of new information, future events or
otherwise. Discussions containing such forward looking statements may be found
in the materials set forth under "Item 1. Business," "Item 3. Legal Proceedings"
and "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained herein.
Except as otherwise provided, the financial data set forth below is derived
from the historical financial statements of Benedek Communications Corporation
and its wholly-owned subsidiary, Benedek Broadcasting Corporation, prepared in
accordance with generally accepted accounting principles. Unless the context
requires otherwise, references to the "Company" refer to Benedek Communications
Corporation and Benedek Broadcasting Corporation and its wholly-owned
subsidiaries, Benedek License Corporation ("BLC"), The WMTV Trust and its
Subsidiary, WMTV License Co., LLC ("WMTV LLC") and Benedek Cable, Inc., a
non-recourse subsidiary. Benedek Communications Corporation is a holding company
with minimal separate operations from its operating subsidiary, Benedek
Broadcasting Corporation. Separate consolidated financial information has been
provided for each entity and, where appropriate, separate disclosures. Such
historical financial data includes the results of operations of the five
television stations acquired from Stauffer Communications, Inc. and the eight
television stations acquired as a result of the acquisition of all of the
capital stock of Brissette Broadcasting Corporation (the " Acquisitions") on
June 6, 1996. As used herein, "Same Station" data refers to the historical
results of operations of all the Stations (as defined) currently owned by the
Company as if such Stations were owned by the Company throughout the periods
with pro forma adjustments only for corporate expenses, depreciation and
amortization.
As used herein, "Adjusted EBITDA" is defined as operating income, excluding
net income of non-recourse subsidiaries (as defined in the Company's Credit
Agreement), before financial income as derived from the consolidated statements
of operations plus depreciation and amortization, amortization of program
broadcast rights and noncash compensation less payments for program broadcast
rights. As used herein, "broadcast cash flow" is defined as Adjusted EBITDA plus
corporate expenses. Adjusted EBITDA and broadcast cash flow are measures used by
certain investors to measure a company's ability to service debt. Adjusted
EBITDA and broadcast cash flow should not be considered as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
GENERAL
The Company owns 23 network-affiliated television stations (the "Stations")
in the United States. The Stations are diverse in geographic 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, four are affiliated with NBC, and one is affiliated
with Fox. Additionally, the Company has
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entered into agreements with The Warner Bros. Television Network to develop a
local cable affiliate called the "WeB" in each of the Company's 20 markets which
are outside of the 100 largest in the U.S., as measured by A. C. Nielsen Company
("Nielsen").
The Stations are located in markets ranked in size from 84 to 199 out of
the 211 markets surveyed by Nielsen. The Company's broadcast signals reach
approximately 2.9 million households, representing more than 20% of all
television households in the markets above 100. The Company believes that
broadcast television stations in small to medium-sized markets offer an
opportunity to generate attractive and stable Adjusted EBITDA 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. The Company
believes that network affiliations with one of the four established networks
provide each of its Stations an established audience and reputation for national
news, sports and entertainment programming. With the established audiences
provided by network affiliations, management seeks to enhance the ratings of its
local news and non-network programming and increase revenues while maintaining
strict cost control.
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 U.S.
households is likely to accelerate this trend. The Company's growth strategy is
to become one of the leading group owners of small to medium-sized market
television stations in the United States. In connection therewith, in June 1996
the Company acquired five network-affiliated television stations from Stauffer
Communications, Inc. and all of the capital stock of Brissette Broadcasting
Corporation, which owned eight network-affiliated television stations. The
Company believes that the Acquisitions have created economics of scale which (i)
have improved its ability to negotiate more favorable arrangements with program
suppliers, national sales representation firms, equipment vendors and television
networks, (ii) enabled it to exploit joint programming opportunities for
regional news and sports programming and (iii) enhanced its ability to attract
and retain strong Station management and on-air talent.
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 the production of 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 and
ongoing community involvement allows the 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 Stations
broadcast in time periods adjacent to regularly scheduled local newscasts and
local news specials.
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The Company has focused on maintaining and building each 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 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
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 Station's local
identity.
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 syndicated
programs airing during the hour preceding network prime time are "Wheel of
Fortune", "Jeopardy", and "Seinfeld." In early fringe and daytime periods
(generally, 9:00 am to 5:00 pm), the three most highly-rated syndicated programs
are the "The Oprah Winfrey Show," "The Jerry Springer Show" and "Judge Judy."
The Company broadcasts "Wheel of Fortune" on 13 of the Stations, "Jeopardy" on
nine of the Stations, "Seinfeld" on five of the Stations, "The Oprah Winfrey
Show" on eight of the Stations, "The Jerry Springer Show" on two of the
Stations, and "Judge Judy" on six of the Stations. Additionally, the Company
broadcasts other highly-rated first run syndicated programs on several of the
Stations including "Live with Regis & Kathie Lee," "Montel Williams," "The Rosie
O'Donnell Show" and "Sally Jessy Raphael." A number of the Stations also
broadcast other highly-rated off-network syndicated programs including "Home
Improvement" and "Frasier."
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, cash program expense as a
percentage of net revenues for the Stations was 3.4%, 4.7% and 4.6% in 1996,
1997 and 1998, respectively, as compared to approximately 6.9% for all
network-affiliated stations in 1997.
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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 Adjusted EBITDA.
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 53.5% of the Company's gross revenues in 1998 were generated from
local and regional advertisers.
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. Management of the Company believes that
controlling costs is an essential factor in achieving and maintaining
profitability. The Company intends to continue to identify opportunities to
increase Adjusted EBITDA through its ongoing strategic planning and budgeting
process.
FUTURE ACQUISITIONS AND OPPORTUNITIES. The Company has a long-term strategy
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. The Company has
entered into an Asset Exchange Agreement with The Ackerley Group, Inc. of
Seattle, Washington to swap the assets of KCOY-TV in Santa Maria, California for
those of KKTV, the Ackerley station in Colorado Springs, Colorado. The swap also
includes additional cash consideration payable by the Company. The exchange is
subject to the approval of the Federal Communications Commission (the "FCC").
The transaction is expected to be completed in the second quarter of 1999.
KKTV, Channel 11, is a CBS affiliate and the dominant station in the
nation's 94th largest market. The station broadcasts the market's top-rated
local news, "Oprah Winfrey", "Wheel of Fortune", "Jeopardy", and is home to the
NFL's Denver Broncos.
BACKGROUND OF THE COMPANY
Benedek Communications Corporation was incorporated under the laws of the
State of Delaware on April 10, 1996. Benedek Broadcasting Corporation was
incorporated under the laws of the State of Delaware on January 22, 1979.
Benedek Broadcasting Corporation is a wholly-owned subsidiary of Benedek
Communications Corporation. The principal executive offices of the Company are
located at 100 Park Avenue, Rockford, Illinois 61101. The telephone number at
the executive offices is (815) 987-5350.
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THE STATIONS
The following table sets forth certain information for each of the
stations and the markets they serve.
<TABLE>
<CAPTION>
Number of
Commercial
Broadcast Station
Market Call Network Stations in Rank In Station Cable
Market Area Rank (a) Letters Channel(b) Affiliation Market (a) Market (c) Rating(c) Penetration (a)
----------- -------- -------- ---------- ----------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Madison, Wisconsin 84 WMTV-TV 15 NBC 4 2 4 63%
Youngstown, Ohio 97 WYTV-TV 33 ABC 4 3 4 73%
Springfield and Holyoke,
Massachusetts 104 WWLP-TV 22 NBC 2 1 6 82%
Lansing, Michigan 106 WILX-TV 10 NBC 4 2 4 67%
Peoria and Bloomington, Illinois 110 WHOI-TV 19 ABC 4 3 3 70%
Santa Barbara, Santa Maria and 116 KCOY-TV 12 CBS 6 2 3 82%
San Luis Obispo, California (d)
Rockford, Illinois 134 WIFR-TV 23 CBS 4 1 5 70%
Duluth, Minnesota and Superior,
Wisconsin 135 KDLH-TV 3 CBS 3 1 5 52%
Wausau and Rhinelander, Wisconsin 136 WSAW-TV 7 CBS 3 1 7 53%
Wheeling, West Virginia and 138 WTRF-TV 7 CBS 2 2 6 78%
Steubenville, Ohio
Topeka, Kansas 140 WIBW-TV 13 CBS 4 1 6 71%
Wichita Falls, Texas and Lawton,
Oklahoma 141 KAUZ-TV 6 CBS 5 1 5 68%
Columbia and Jefferson City,
Missouri 145 KMIZ-TV 17 ABC 5 3 3 60%
145 KO2NQ(d) 2(e) FOX 5(e) 4(e) N/A 60%
145 K11TB(d) 11(e) FOX 5(e) 4(e) N/A 60%
Odessa and Midland, Texas 151 KOSA-TV 7 CBS 4 2 4 72%
Quincy, Illinois, Hannibal,
Missouri and Keokuk, Iowa 162 KHQA-TV 7 CBS 2 1 7 62%
Dothan, Alabama 172 WTVY-TV 4 CBS 3 1 8 70%
Panama City, Florida 157 WTVY-TV 4 CBS 4 3 4 65%
Harrisonburg, Virginia 180 WHSV-TV 3 ABC 1 1 6 74%
Bowling Green, Kentucky 182 WBKO-TV 13 ABC 2 1 8 55%
Meridian, Mississippi 183 WTOK-TV 11 ABC 3 1 8 53%
Parkersburg, West Virginia 186 WTAP-TV 15 NBC 1 1 9 76%
Cheyenne, Wyoming and
Scottsbluff, Nebraska 196 KGWN-TV 5 CBS 3 1(i) 5(i) 72%(i)
196 KSTF-TV(f) 10 CBS (h) (i) (i) (i)
196 KTVS-TV(f) 3 CBS (h) (i) (i) (i)
Casper and Riverton, Wyoming 199 KGWC-TV 14 CBS 4 2(j) 3(j) 63%(j)
199 KGWL-TV(g) 5 CBS (h) (j) (j) (j)
199 KGWR-TV(g) 13 CBS (h) (j) (j) (j)
</TABLE>
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(a) Based on data complied from the November 1998 Nielsen surveys.
(b) 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.
(c) Station Rank/Rating in Market is a Station's rank/rating in the market
among all commercial stations in a Station's market, measured by such
Station's average rating Sunday through Saturday, 6:00 am to 2:00 am during
the February 1998, May 1998, July 1998, and November 1998 Nielsen surveys.
(d) The Company has entered into an agreement to exchange the broadcast assets
of KCOY-TV for the assets of KKTV in Colorado Springs. See Business-KCOY-TV
(CBS) and Management's Discussion and Analysis of Financial Condition and
Results of Operations-Recent Developments.
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(e) KO2NQ and K11TB are low-power broadcast television stations operated by
KMIZ-TV and distributed primarily via cable television. These two Stations
began operating in September 1997 as a single entity operating from one
facility and offering an identical programming schedule. Additionally, such
Stations are treated as one station for purposes of determining the number
of commercial stations in the market and rank in the market.
(f) Satellite station of KGWN-TV.
(g) Satellite station of KGWC-TV.
(h) Satellite stations are not considered distinct stations in this market for
Nielsen purposes.
(i) Station Rank, Station Rating 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.
(j) Station Rank, Station Rating 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.
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 84th largest market
in 1998. Madison, the Wisconsin state capital, is located in south-central
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 84th in the
United States, with approximately 316,170 television households and a population
of approximately 789,000. This market has a cable penetration rate of 63%.
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. In addition, a UPN affiliate broadcasting on a UHF channel is
scheduled to begin operations on April 1, 1999.
Station Performance. According to the 1998 Nielsen ratings reports, WMTV-TV
was ranked number two in its market with 4 rating and a 15% share of households
viewing television. WMTV-TV is currently the number two ranked news station in
the Madison market. Since being acquired in June 1996 by the Company, the
Station has expanded its weekday morning newscast from 30 to 90 minutes and
added a weekly local sports program on Sunday evening. Currently, the Station
airs 19 hours and five minutes of local news programming per week as opposed to
13 hours and 35 minutes it broadcasts each week prior to being acquired by the
Company. WMTV-TV's special value-added local sales efforts in 1998 included
"Neighborhood WeatherNet," placing fully-automated weather monitoring systems at
local schools, "Kids Matter," a program promoting the accomplishments of
children, "Help-A-Thons," special events mobilizing the community towards a
common cause, and "Share Your Holiday," Madison's largest annual food drive.
Further, the Station provides extensive local coverage of University of
Wisconsin and other Big Ten conference basketball and football games. Since
being acquired by the Company, the Station has added "Jeopardy" to its
syndicated programming schedule. WMTV-TV first run syndicated programming also
includes "Wheel of Fortune," "Live with Regis & Kathie Lee," "Hollywood Squares"
and "Donny and Marie."
Recent Developments. On October 31, 1998, the license for Station WMTV-TV,
Madison, Wisconsin, was assigned to WMTV LLC, a Delaware limited liability
company in which the sole member is the WMTV Trust, Philip A. Jones, Trustee.
This assignment was made to comply with the FCC's duopoly rule. The Company is
the beneficial owner of the trust. However, the Trustee has the sole right to
manage the day-to-day affairs of WMTV-TV during the term of the trust.
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WYTV-TV (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
Chevrolet Division of General Motors Corporation, the Delphi Packard Electric
Corporation (Division of General Motors Corporation), St. Elizabeth's Medical
Center, Forum Health Care System and LTV Steel Tubular Products Division of
Republic Steel Works. This area is also the home of Youngstown State University
with approximately 12,000 students.
Station History and Characteristics. WYTV-TV was originally licensed in
1953 to serve Youngstown, Ohio. The Youngstown market is ranked 97th in the
United States, with approximately 273,490 television households and a population
of approximately 725,000. This market has a cable penetration rate of 73%.
WYTV-TV is broadcast on UHF channel 33 and is an ABC affiliate. The Company
acquired WYTV-TV in 1983. The other local stations with which WYTV-TV competes
include three UHF stations, one an NBC affiliate, one a CBS affiliate, and a
newly-launched low power Fox affiliate.
Station Performance. According to the 1998 Nielsen ratings reports, WYTV-TV
was ranked number three in its market with a 4 rating and a 13% share of
households viewing television. WYTV-TV currently is the number three ranked news
station in this market and broadcasts 7 hours of local news programming per
week. WYTV-TV's special value-added local sales efforts in 1998 included
"LiveLine," a program focusing on issues ranging from health care to legal
concerns, "Class of 1999" a project encouraging quality in the classroom, and
"WeatherSchool," an educational project undertaken with area schools to build
interest in weather and science. WYTV-TV's first run and off-network syndicated
programming includes "Wheel of Fortune," "Jeopardy," "Friends," "Judge Judy" and
"The Rosie O'Donnell Show."
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 23,000,
Amherst College, Smith College and Mount Holyoke College. Springfield is also
the home of 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 104th
largest market in the United States, with approximately 242,120 television
households and a population of approximately 666,000. This market has a cable
penetration rate of 82%. WWLP-TV is broadcast on UHF channel 22 and is an NBC
affiliate. The Company acquired WWLP-TV in June 1996. The only other commercial
television station in this market is an ABC affiliate which also broadcasts on a
UHF channel. WWLP-TV also competes to some extent 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 1998 Nielsen ratings reports, WWLP-TV
was ranked number one in its market with a 6 rating and 21% share of households
viewing television. WWLP-TV is the number one ranked news station in this market
and currently broadcasts 24 hours of local news programming per week. WWLP-TV's
special value-added local sales efforts in 1998 included "As Schools Match
Wits," the nation's longest running locally produced quiz show in which area
high school students compete academically, participation in the Easter Seals and
Children's Miracle Network Telethons, and various community projects run in
conjunction with organizations such as The Ronald McDonald House, The Girl
Scouts, Alzheimer's Association, and The United Way. WWLP-TV's first run
syndicated programming includes "Wheel of Fortune," "Jeopardy" and "Live with
Regis & Kathie Lee."
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WILX-TV (NBC) LANSING, MICHIGAN
Market Description. The Lansing DMA consists of five counties in
south-central 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. Moreover,
General Motors, KieKert AG and Swedish Plannja HardTeck all plan on constructing
new plants in the Lansing area. New businesses to the area include Circuit City
and Walmart. 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 237,130 television households and a population of
approximately 638,000. This market has a cable penetration rate of 67%. 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 1998 Nielsen ratings reports, WILX-TV
was ranked number two 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. Since being acquired in June 1996 by the Company, the
Station has expanded its weekday morning newscast from 60 to 90 minutes.
Currently, the Station airs 19 hours and 10 minutes of local news programming
per week as opposed to 18 hours and 40 minutes it broadcasts each week prior to
being acquired by the Company. Additionally, WILX-TV airs the only weekend
morning newscast in its market. WILX-TV's special value-added local sales
efforts in 1998 included "Kids Count," a campaign to reach mentors for children,
"Route 10," a series of human interest reports from Mid-Michigan and a project
saluting successes in the educational arena. Since being acquired by the
Company, the Station has added "Caroline in the City" and "Third Rock from the
Sun" to its syndicated programming scheduled, both scheduled to debut in the
Fall of 1999. WILX-TV's first run and off-network syndicated programming also
includes "Wheel of Fortune," "Jeopardy," "Seinfeld," "Sally Jessy Raphael" and
"Live with Regis & Kathie Lee." In addition, the Station produces two local
sports shows, "Spartan Sports Zone" and "Staudt on Sports."
WHOI-TV (ABC) PEORIA AND BLOOMINGTON, ILLINOIS
Market Description. The Peoria-Bloomington DMA consists of 9 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. Peoria is the home of world headquarters for Caterpillar, Inc.,
State Farm Insurance and Mitsubishi's only U.S. assembly plant. Other prominent
employers are St. 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 110th in
the United States, with approximately 229,480 television households and a
population of approximately 600,000. This market has a cable penetration rate of
70%. 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 1998 Nielsen ratings reports, WHOI-TV
was ranked number three in its market with a 3 rating and a 12% share of
households viewing television. WHOI-TV currently is the number three ranked news
station in this market. Since being acquired in June 1996 by the Company, the
Station has added a weekday newscast at 5:00 pm and currently airs 11 hours and
10 minutes of local news programming per week. WHOI-TV's special value-added
local sales efforts in 1998 included "Foodshare Canathon," a community food
drive, "Touch-A-Topic," a free phone service allowing viewers
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access to hundreds of useful topics and "First Warn," providing weather
information on a 24-hour basis. In addition, WHOI-TV sponsors community events
such as "The Peoria Art Guild Fine Art Fair," "The John Keets March for AIDS
Research and Education" and "The Jingle Bell Run for Arthritis." WHOI-TV's first
run and off-network syndicated programming includes "Home Improvement," "Live
with Regis & Kathie Lee," "Entertainment Tonight" and "Montel Williams."
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 2 counties on the south-central 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. 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 116th in the United States, with approximately
220,540 television households and a population of approximately 630,000. This
market has a cable penetration rate of 82%. KCOY-TV is broadcast on VHF channel
12 and is a CBS affiliate. There are five other commercial stations in this
market, ABC and NBC affiliates which broadcast on VHF channels and Fox,
Univision, and PAX affiliates which are broadcast on UHF channels. Until
recently, KCOY-TV was negatively impacted by the cable television retransmission
in Santa Barbara of KCBS-TV, Los Angeles, California. However, in September
1995, KCOY-TV was granted nonduplication protection against KCBS-TV and is now
the only CBS affiliate whose programming is available on the Santa Barbara cable
system.
Station Performance. According to the 1998 Nielsen ratings reports, KCOY-TV
was ranked number two in its market with a 3 rating and a 11% share of
households viewing television. KCOY-TV currently is the number three ranked news
station in this market. Since being acquired in June 1996 by the Company, the
Station has added an hour-long weekday morning newscast and a weekday newscast
at 5:00 pm. Currently, the Station airs 22 hours of local news programming per
week as opposed to 11 hours and 35 minutes it broadcast each week prior to being
acquired by the Company. KCOY-TV's special value-added local sales efforts in
1998 included "Health and Fitness Drive," a campaign to promote health and
fitness in the community, "Santa Maria Symphony Drive," a project to create
awareness and support of the arts, "WeatherNet," placing fully-automated weather
monitoring systems at local schools and "The Crystal Apple Awards," saluting
area teachers. Further, KCOY-TV sponsors local events such as the "The Santa
Barbara Autumn Arts & Wine Festival" and "Danish Days." KCOY-TV's first run
syndicated programming includes "Montel Williams," "Hollywood Squares,"
"Entertainment Tonight" and "Real TV."
Recent Developments. On December 30,1998, the Company entered into an Asset
Exchange Agreement with The Ackerley Group pursuant to which it will exchange
the television broadcast assets of KCOY-TV, in Santa Maria, California for the
television broadcast assets of KKTV, Ackerley's station in Colorado Springs,
Colorado. Both KCOY-TV and KKTV are CBS affiliates. The exchange remains subject
to FCC approval. It is anticipated that the exchange will be completed in the
second quarter of 1999.
The proposed transaction will include a $9,000,000 payment by the Company
to Ackerley at the closing. The parties also entered into a time brokerage
agreement for each station, which became effective January 1, 1999. The time
brokerage agreements provide each buyer a presence at and certain approval
rights regarding activities of the station it is acquiring. The transaction will
be structured, to the extent feasible, as a tax-free exchange pursuant to
Section 1031 of the Internal Revenue Code. In addition, the Company has a high
tax basis in the KCOY-TV assets since they were acquired in an asset acquisition
in 1996. As a result of the foregoing, the Company does not expect to incur any
material tax liability as a result of the exchange.
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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 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 134th
largest market in the United States, with approximately 167,170 television
households and a population of approximately 438,000. This market has a cable
penetration rate of 70%. 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 1998 Nielsen ratings reports, WIFR-TV
was ranked number one in its market with a 5 rating and a 18% share of
households viewing television. WIFR-TV currently is the number two ranked news
station in this market. The Station has recently expanded its weekday morning
newscast from 90 to 120 minutes and airs 23 hours of local news programming per
week. WIFR-TV's special value-added local sales efforts in 1998 included a
summer long promotion called "Celebrate Rockford," and a "Watch & Win"
sweepstakes. WIFR-TV also broadcasts an annual telethon in prime-time to raise
money for a local homeless shelter. Further, WIFR-TV is a major sponsor of such
community events as "The Golden Apple Awards," "First Night Rockford" and "On
the Waterfront." WIFR-TV is also the market's Big Ten Football and Basketball
network station. WIFR-TV's first run syndicated programming includes "The Oprah
Winfrey Show," "Judge Judy" and "Donny and Marie."
KDLH-TV (CBS) DULUTH, MINNESOTA AND SUPERIOR, WISCONSIN
Market Description. The Duluth-Superior DMA consists of 12 counties, six 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, Missabe & Iron 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
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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 135th in the United States, with approximately
166,860 television households and a population of approximately 431,000. This
market has a cable penetration rate of 52%. 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 1998 Nielsen ratings reports, KDLH-TV
was ranked number one in its market with a 5 rating and a 18% share of
households viewing television. KDLH-TV currently is the number three ranked news
station in this market and broadcasts 14 hours of local news programming per
week. KDLH-TV's special valued-added local sales efforts in 1998 included "Our
Town," programs providing one week salutes to area communities, "Zoo Year's
Eve," an annual family event held at the Lake Superior Zoo, and exclusive
television sponsorship of the "Duluth Bayfront Blues Fest" which had attendance
of approximately 75,000 people. KDLH-TV also presents annual exclusive coverage
of area high school hockey tournaments, as well as the "American Birkebeiner",
the largest nordic ski race in the United States. KDLH-TV's first run and
off-network syndicated programming includes "Seinfeld," "Montel Williams,"
"Judge Judy" and "Frasier."
WSAW-TV (CBS) WAUSAU AND RHINELANDER, WISCONSIN
Market Description. The Wausau-Rhinelander DMA consists of 11 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 insurance, tourism, farming, manufacturing and service sectors. The
area continues to be one of the nation's leading producers of cheese and
ginseng. Prominent corporations with facilities in the greater Wausau area
include Wausau Insurance Companies, Sentry Insurance, Church Mutual Insurance,
Kolbe & Kolbe Millwork, Inc., Weyerhauser Co., Harley-Davidson, 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 136th
in the United States, with approximately 162,870 television households and a
population of approximately 438,000. This market has a cable penetration rate of
53%. 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 1998 Nielsen ratings reports, WSAW-TV
was ranked number one in its market with a 7 rating and a 25% share of
households viewing television. WSAW-TV currently is the number one ranked news
station in the market. Since being acquired in June 1996 by the Company, the
Station has added an hour-long weekday morning newscast and a weekday newscast
at 5:00 pm. Currently, the Station airs 22 hours and 45 minutes of local news
programming per week as opposed to 16 hours and 45 minutes it broadcast each
week prior to being acquired by the Company. WSAW-TV's special value-added local
sales efforts in 1998 included "WeatherSchool," an educational project
undertaken with area schools to build interest in weather and science,
"WeatherNet," placing fully-automated weather monitoring systems at local
schools and "Behind The Headlines," a weekly news magazine designed to inform
and educate viewers about current local issues. WSAW-TV's first run and
off-network syndicated programming includes "Home Improvement," "Montel
Williams" and "Martha Stewart Living."
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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 tourism, manufacturing, services
and advanced technology sectors. Prominent corporations with facilities in this
region include Wheeling-Pittsburgh Steel Corporation, Weirton Steel Corporation,
TIMET, Bayer, 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 157,190
television households and a population of approximately 409,000. This market has
a cable penetration rate of 78%. 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 1998 Nielsen ratings reports, WTRF-TV
was ranked number two in its market with a 6 rating and an 18% share of
households viewing television. WTRF-TV currently is the number two ranked news
station in this market. The Company acquired WTRF-TV in June 1996. Currently,
the Station airs 24 hours and 53 minutes of local news programming per week as
opposed to 19 hours and 53 minutes it broadcast prior to being acquired by the
Company. WTRF-TV's special value-added local sales efforts in 1998 included
"HealthLine," a live program offering information and seminars to seniors and
"Best of the Class," a program recognizing accomplished students. In addition,
the Station produces "Call It Home," one week salutes to area communities and
"The Santa Claus Program," which provides children the opportunity to write
letters to Santa c/o WTRF-TV as part of a long-running holiday event. WTRF-TV's
first run and off-network syndicated programming includes "Home Improvement,"
"Live with Regis & Kathie Lee," Montel Williams," "Judge Judy," "Frasier" and
"Hollywood Squares."
WIBW-TV (CBS) TOPEKA, KANSAS
Market Description. The Topeka DMA consists of 15 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 Shoe
Source, 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 156,040 television households and a population of
414,000. This market has a cable penetration rate of 71%. WIBW-TV is broadcast
on VHF channel 13 and is a CBS affiliate. The Company acquired WIBW-TV in June
1996. There are three other commercial stations in the market, two of which are
affiliates of ABC and NBC broadcasting on UHF channels with smaller broadcast
coverage than WIBW-TV and a Fox affiliate which broadcasts on a low power
frequency.
Station Performance. According to the 1998 Nielsen ratings reports, WIBW-TV
was ranked number one in its market with a 6 rating and a 22% share of
households viewing television. WIBW-TV currently is the number one ranked news
station in this market. Currently the Station airs 14 hours of local news
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programming per week, more than any station in the market. The Station also
broadcasts the market's only noon news. WIBW-TV's special value-added local
sales efforts in 1998 included "WeatherSchool," an educational project
undertaken with area schools to build interest in weather and science,
"WeatherNet," placing fully-automated weather monitoring systems at local
schools, and participation in such events as "The MDA Telethon," "The Great
Topeka Duck Race," "The Spirit of Kansas Festival" and "The Bridal Fair."
Further, WIBW-TV produces the long-running quiz show "High-Q" and presents the
annual "WIBW Christmas Parade." WIBW-TV's first run syndicated programming
includes "Wheel of Fortune," "Montel Williams" and "Hollywood Squares."
Additionally, beginning in the fall of 1999, the Station will add "Live with
Regis & Kathie Lee" to its first run syndicated programming schedule.
KAUZ-TV (CBS) WICHITA FALLS, TEXAS AND LAWTON, OKLAHOMA
Market Description. The Wichita Falls-Lawton DMA consists of 17 counties,
11 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 Tool Division of Stanley
Works, 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.
Station History and Characteristics. KAUZ-TV was originally licensed in
1953 to serve the Wichita Falls area. The Wichita Falls-Lawton market is ranked
141st in the United States, with approximately 154,580 television households and
a population of approximately 418,000. This market has a cable penetration rate
of 68%. KAUZ-TV is broadcast on VHF channel 6 and is a CBS affiliate. KAUZ-TV
competes with four other commercial stations in this market, ABC and NBC
affiliates which broadcast on VHF channels and Fox and UPN affiliates which
broadcast on UHF channels.
Station Performance. According to the 1998 Nielsen ratings reports, KAUZ-TV
was ranked number one in its market with a 5 rating and a 16% share of
households viewing television. KAUZ-TV currently is the number three ranked news
station in this market. KAUZ-TV's special value-added local sales efforts in
1998 included "Safe Kids Safari," an event promoting and teaching child safety,
"The Texoma Farm and Ranch Show," a program presenting the latest agricultural
products and services and "Race For The Cure," an annual event to benefit cancer
research. In addition, KAUZ-TV presents "Friday Night High School Football
Update" and a local sports program focusing on Midwestern State University
Football. Since being acquired in June 1996 by the Company, the Station has
added "Jeopardy" and "Sally Jessy Raphael" to its first run syndicated
programming schedule. KAUZ-TV's first run syndicated programming also includes
"Wheel of Fortune," "The Oprah Winfrey Show" and "Judge Mills Lane."
KMIZ-TV (ABC) COLUMBIA AND JEFFERSON CITY, MISSOURI
KO2NQ (FOX) COLUMBIA, MISSOURI
K11TB (FOX) JEFFERSON CITY, MISSOURI
Market Description. The Columbia-Jefferson City DMA consists of 14 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, 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.
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In addition, the Fort Leonard Wood United States Army Base and the Whitman
United States Air Force Base are located within this market.
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 145th in the United States, with
approximately 150,850 television households and a population of approximately
395,000. This market has a cable penetration rate of 60%. KMIZ-TV is broadcast
on UHF channel 17 and is an ABC affiliate. There are four other stations in the
market, affiliates of CBS and NBC which broadcast on VHF channels, an
independent which broadcasts on a UHF channel, and the Benedek-owned low-power
Fox affiliate (see below).
Station Performance. According to the 1998 Nielsen ratings reports, KMIZ-TV
was ranked number three in its market with a 3 rating and a 10% share of
households viewing television. KMIZ-TV currently is the number three ranked news
station in this market. Since being acquired in June 1996 by the Company, the
Station has added a weekday 5:00 pm newscast, a weekday morning newscast from
6:00 am to 7:00 am, and a weekday re-broadcast of its 10:00 pm newscast.
Currently, the Station airs 20 hours and 27 minutes of local news programming
per week as opposed to 8 hours and 51 minutes it broadcast each week prior to
being acquired by the Company. KMIZ-TV's special value-added local sales efforts
in 1998 included "Missouri 2000," a station promotion highlighting the turn of
the century and the "Fire in the Sky" Fourth of July fireworks celebration. In
addition, the Station is involved in numerous events benefitting area charities
such as The American Heart Association, Central Missouri Food Bank, The Boys and
Girls Clubs of Columbia and The March of Dimes. Since being acquired by the
Company, the Station has added "The Rosie O'Donnell Show" to its first run
syndicated programming schedule. KMIZ-TV's first run and off-network syndicated
programming also includes "Frasier," "Seinfeld" and "Live with Regis & Kathie
Lee."
During August 1997, the Company completed the purchase of the television
broadcasting licenses and certain equipment of two low-power television stations
located in Columbia and Jefferson City, Missouri for a purchase price of $0.2
million. One-half of the purchase price was paid at closing with the remainder
due in two installments during 1998 and 1999. Concurrently with such purchase,
the Company entered into network affiliation agreements for such Stations with
the Fox Television Network. These two Stations began operating in September 1997
as a single entity operating from one facility and offering an identical
programming schedule. KO2NQ is broadcast on VHF channel 2 and K11TB is broadcast
on VHF channel 11. However, these Stations are jointly known as "Fox 11" based
on their channel position on most area cable systems which provide the primary
means of distribution. This market has a cable penetration rate of 60%.
Additionally, for purposes of all Nielsen statistics, these Stations are treated
as one entity known as KQFX-TV. KQFX-TV's first run and off-network programming
includes "Home Improvement," "Mad About You," "Hard Copy," "Judge Judy" and
"Star Trek: The Next Generation."
KOSA-TV (CBS) ODESSA AND MIDLAND, TEXAS
Market Description. The Odessa-Midland DMA consists of 19 counties, 18 of
which are in southwestern Texas and one of which is in southeastern New Mexico.
Odessa and Midland are only 20 miles apart and each has a population of almost
100,000 residents. The two cities are approximately 300 miles east of El Paso,
Texas and 350 miles west of the Dallas/Fort Worth metroplex. Located in an area
known as the Permian Basin, the Odessa/Midland economy is historically based on
the oil and gas industry. The area has recently diversified into manufacturing
and industrial services, although ties to the petroleum industry remain very
significant. Some of the major employers in the area include Phillips Petroleum,
Exxon, Shell Oil, EVI Highland Pump, Pioneer Oil and Gas, Huntsman, Ref-Chem,
Texas Instruments and Medical Center Hospital. The City of Odessa is also home
to the University of Texas of the Permian Basin, Texas Tech University Health
Sciences Center and Odessa College, with an aggregate enrollment of
approximately 7,000.
Station History and Characteristics. KOSA-TV signed on January 1, 1956 with
Odessa as its city of license. The Odessa/Midland DMA is ranked 151st in the
United States with approximately 134,860 television households and a population
in excess of 383,000. This market has a cable penetration rate of
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72%. KOSA-TV is broadcast on VHF channel 7 and is a CBS affiliate. The Company
acquired KOSA-TV in June 1996. There are three other stations in the market, the
ABC and NBC affiliates which broadcast on VHF channels and a Fox affiliate which
broadcasts on a UHF channel.
Station Performance. According to the 1998 Nielsen ratings reports, KOSA-TV
was ranked number two in its market with a 4 rating and a 14% share of
households viewing television. KOSA-TV currently is the number three ranked news
station in the market and broadcasts 11 hours and 30 minutes of local news
programming each week. The Station expanded weekend news coverage in 1998 and is
home to the market's only weekday noon news. Further, KOSA-TV plans to add a 30
minute quarterly community affairs program in 1999. KOSA-TV's special
value-added local sale efforts in 1998 included "Public Servant of the Week,"
"Market Watch," "Family Focus," "Your Family's Health," "Crime Stoppers" and
"Ask the Expert." In addition, KOSA-TV participated in community events such as
"The Permian Basin Fair," "Air Show 98" and "Heritage Holidays." KOSA-TV's first
run syndicated programming includes "Live With Regis & Kathie Lee," "Montel
Williams" and "Entertainment Tonight."
KHQA-TV (CBS) QUINCY, ILLINOIS, HANNIBAL, MISSOURI AND KEOKUK, IOWA
Market Description. The Quincy-Hannibal-Keokuk DMA consists of 17 counties,
eight of which are in western Illinois, eight 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. Keokuk, Iowa is also
located along the Mississippi River approximately 40 miles north of the
Quincy-Hannibal area. The local 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
Dupont, Moormans Manufacturing, Quincy Soybean Co., Archer Daniels Midland,
American Cyanamid Company, Pillsbury, Inc., Harris Broadcasting Corporation,
Buckhorn Rubber Products, Knaphelde Inc. and Dot Foods.
Station History and Characteristics. KHQA-TV was originally licensed in
1953 to serve the greater Quincy, Illinois-Hannibal, Missouri - Keokuk, Iowa
market. The Quincy-Hannibal-Keokuk market is ranked 162nd in the United States,
with approximately 111,820 television households and a population of
approximately 309,000. This market has a cable penetration rate of 62%. 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, an NBC affiliate
carried on a VHF channel. In January 1998, KHQA-TV relocated to a new 18,000
square foot state-of-the-art digital television facility in Quincy, Illinois.
Station Performance. According to the 1998 Nielsen ratings reports, KHQA-TV
was ranked number one in its market with a 7 rating and a 22% share of
households viewing television. KHQA-TV currently is the number two ranked news
station in this market and broadcasts 20 hours of local news programming each
week, including an expanded morning news program. KHQA-TV's special value-added
local sales efforts in 1998 included "7 Who Care," a program saluting area
volunteers, "Kids Who Care," a campaign to teach and promote child safety. The
Station plans to broadcast the First Annual "Tri States Women's Show" in 1999.
KHQA-TV's first run and off-network syndicated programming includes "Wheel of
Fortune," "Jeopardy," "Seinfeld," "The Oprah Winfrey Show" and "The Rosie
O'Donnell Show."
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 DMA's. The Dothan DMA consists of seven counties, five of which
are in southeastern Alabama and two of which are in southwestern Georgia. Dothan
is located approximately 90 miles southeast of Montgomery, Alabama and 80 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
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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.
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 Champion Paper Company and Stone Container Corporation, as well as more
than 100 other manufacturers. The Panama City DMA is the site of the Tyndall
United States Air Force Base and the Coastal Systems Station of the United
States Navy. 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 DMA's of
Dothan, Alabama and Panama City, Florida. The Dothan market is ranked 172nd in
the United States, with approximately 89,750 television households and a
population of approximately 230,000, while the Panama City market is ranked
157th with approximately 119,900 television households and a population of
approximately 303,000. The Dothan market has a cable penetration rate of 69% and
the Panama City market has a cable penetration rate of 65%. If combined, these
two markets would rank as the 121st 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 1998 Nielsen ratings reports, WTVY-TV
was ranked number one in the Dothan market with a 8 rating and a 27% share of
households viewing television. It was also ranked third in the Panama City
market with a 4 rating and a 12% share of households viewing television. WTVY-TV
currently is the number one ranked news station in the Dothan market and
broadcasts 19 hours of local news programming each week. WTVY-TV's special
value-added local sales efforts in 1998 included "Hometown Salutes," saluting
area communities, "LiveLine," live call-in programs focusing on issues such as
health, "Energy for Education," a campaign to recognize superior students and
teachers and "WeatherSchool," an educational project undertaken with area
schools to build interest in weather and science. WTVY-TV's first run syndicated
programming includes "Wheel of Fortune," "Live with Regis & Kathie Lee," "The
Oprah Winfrey Show" and "Donny and Marie."
WHSV-TV (ABC) HARRISONBURG, VIRGINIA
Market Description. The Harrisonburg DMA consists of three counties, two of
which are in northwestern Virginia and one 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 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 12,000 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 180th in the United States, with
approximately 77,790 television households and a population of approximately
196,000. This market has a cable penetration rate of 74%. 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
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in surrounding urban areas results in a competitive advantage for WHSV-TV in
attracting advertising revenues.
Station Performance. According to the 1998 Nielsen ratings reports, WHSV-TV
had a 6 rating and a 22% share of households viewing television. WHSV-TV
currently broadcasts 15 hours and 20 minutes of local news programming each
week. WHSV-TV's special value-added local sales efforts in 1998 included "Toy
Convoy 98" an annual holiday toy drive, "Children First," a campaign to raise
awareness of children's needs and issues and "WeatherSchool," an educational
project undertaken with area schools to build interest in weather and science.
In addition, WHSV-TV supports "Celebrate Smart," a project to combat drunk
driving, and "First Night Harrisonburg," an annual New Year's celebration.
WHSV-TV's first run and off- network syndicated programming includes "Wheel of
Fortune," "Jeopardy," "Home Improvement," "The Oprah Winfrey Show," "Live with
Regis & Kathie Lee" and "Hollywood Squares."
Recent Developments. The Company has entered into an agreement with the
Harrisonburg Redevelopment and Housing Authority to lease a studio and office
building currently being constructed according to Company specifications in
downtown Harrisonburg. The building is approximately an 18,000 square foot
structure that is expected to be completed during the second quarter 1999. The
lease includes tax incentives and reduced financing costs and an irrevocable
option to purchase the building and land. The term of the lease will be 20 years
from completion of construction.
WBKO-TV (ABC) BOWLING GREEN, KENTUCKY
Market Description. The Bowling Green DMA consists of seven counties in
south-central 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,
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 south-central Kentucky. The Bowling Green market is ranked 182nd
in the United States, with approximately 72,200 television households and a
population of approximately 185,000. This market has a cable penetration rate of
55%. 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 1998 Nielsen ratings reports, WBKO-TV
was ranked number one in its market with an 8 rating and a 28% share of
households viewing television. WBKO-TV currently is the number one ranked news
station in this market and broadcasts 19 hours and 30 minutes of local news
programming each week, including 30 minutes recently added to the Station's
daily "AM Kentucky" program. WBKO-TV's special value-added local sales efforts
in 1998 included "Children First," a campaign to raise awareness of children's
needs and issues, "Home and Garden Expo" and "Bikes for Kids for Christmas"
projects. Further, WBKO-TV supports events such as "Relay for Life," which
benefits The American Cancer Society, "The Glasgow Highland Games" and "The
TransFinancial Balloon Classic." WBKO-TV's first run and off-network syndicated
programming includes "Home Improvement," "The Oprah Winfrey Show," "Live with
Regis & Kathie Lee" "Hollywood Squares" and "Wheel of Fortune."
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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. Meridian's favorable industrial
climate has lured over 100 manufacturing plants to the area, including Peavey
Electronics Corporation, Fort James and the Avery Dennison Stationery Products
Division. 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. The 1997 opening of a new regional shopping mall has generated
approximately 3,000 jobs. Further, the Mississippi Band of Choctaw Indians
operates one of Mississippi's most successful casinos and several other
industries in the DMA. Meridian is also site of Meridian Naval Air Station, a
United States Naval training facility. The addition of the newest navy training
jet aircraft, the Goshawk T-45B, and the extension of Meridian sewer service to
the base enhances its future.
Station History and Characteristics. WTOK-TV was originally licensed in
1953 to serve Meridian, Mississippi. The Meridian market is ranked 183rd in the
United States, with approximately 68,110 television households and a population
of approximately 175,000. This market has a cable penetration rate of 53%.
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 resumed 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 1998 Nielsen ratings reports, WTOK-TV
was ranked number one in its market with an 8 rating and a 24% share of
households viewing television. WTOK-TV currently is the number one ranked news
station in this market and broadcasts 13 hours and 55 minutes of local news
programming each week. WTOK-TV's special value-added local sales efforts in 1998
included "Coats for Kids," a program to provide for area children in need,
"Children First," an annual information and entertainment festival and
"Toy-a-thon," an annual holiday toy drive. In addition, WTOK-TV presents
significant local political coverage, including debates, forums and town
meetings. WTOK-TV's first run syndicated programming includes "The Oprah Winfrey
Show," "Montel Williams," "Sally Jessy Raphael," "Live with Regis & Kathie Lee,"
"Wheel of Fortune" and "Jeopardy."
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 southeastern 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, Washington State Community
College, and Marietta State College with an aggregate student population of
approximately 6,600.
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 186th in the United States,
with approximately 61,750 television households and a population of
approximately 151,300. This market has a cable penetration rate of 76%. WTAP-TV
is broadcast on UHF channel 15 and is an NBC affiliate. The Company acquired
WTAP-TV in 1979. Other network affiliated
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stations, including NBC affiliates, located in Huntington, 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 1998 Nielsen ratings reports, WTAP-TV
had a 9 rating and a 28% share of households viewing television. WTAP-TV
currently broadcasts 15 hours of local news programming each week. WTAP-TV's
special value-added local sales efforts in 1998 included "Coats for Kids," a
program to provide for area children in need, and "Back to School Safety Tips"
and "Hunter Safety Tips," campaigns to teach and promote safety concerns.
Further, WTAP-TV presents significant local election coverage, including
debates. WTAP-TV's first run and off-network syndicated programming includes
"Wheel of Fortune," "Jeopardy," "Home Improvement," "Seinfeld," "The Oprah
Winfrey Show," "Judge Judy" and "Live with Regis and Kathie Lee."
KGWN-TV (CBS) CHEYENNE, WYOMING
KSTF-TV (CBS) SCOTTSBLUFF, NEBRASKA
KTVS-TV (CBS) STERLING, COLORADO
Market Description. The Cheyenne-Scottsbluff DMA consists of the four
counties, two in southeastern Wyoming and two 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.
In order to properly serve the Cheyenne-Scottsbluff 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. 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. 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 market is ranked 196th in the United States with
approximately 50,180 television households and a population of approximately
129,000. This market has a cable penetration rate of 72%. 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 in Casper, Wyoming, both of which
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 1998 Nielsen ratings reports, KGWN-TV
was ranked number one in its market with a 5 rating and a 18% share of
households viewing television. KGWN-TV currently is the number one ranked news
station in this market. Since being acquired in June 1996 by the Company, the
Station has added weekday newscasts at 6:30 am, 12:00 noon and 5:00 pm, as well
as expanded coverage during the 7:00 to 9:00 am time period. Currently, the
Station airs 13 hours and 53 minutes of local news programming per week as
opposed to 6 hours and 50 minutes it broadcast each week prior to being acquired
by the Company. KGWN-TV's special value-added local sales efforts in 1998
included coverage of "Cheyenne Frontier Days", a 10-day western celebration
featuring the world's largest outdoor rodeo, the live broadcast of the "Fire in
the Sky" Fourth of July celebration and "Motorsports Shootout," a car and bike
show and festival. Further, KGWN-TV presents the "Cheyenne Christmas Parade,"
"Christmas Choral Festival" and "Holiday Shopper," a direct mail campaign. Since
being acquired by the Company, the Station
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has added "The Rosie O'Donnell Show" to its first run syndicated programming
schedule. KGWN-TV's first run and off-network syndicated programming also
includes "Live with Regis & Kathie Lee," "Mad About You" and "Martha Stewart
Living."
KGWC-TV (CBS) CASPER AND RIVERTON, WYOMING
KGWL-TV (CBS) LANDER, WYOMING
KGWR-TV (CBS) ROCK SPRINGS, WYOMING
Market Description. The Casper-Riverton DMA consists of five 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 diversified with the
growth of its service sector. Major employers in the area include the Wyoming
Medical Center and Wotco, Inc., 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. The Casper-Riverton market is ranked 199th in the
United States, with approximately 47,690 television households and a population
of approximately 125,000. This market has a cable penetration rate of 63%.
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 three other commercial stations in this market,
an NBC affiliate which broadcasts on a VHF channel and ABC and Fox affiliates
which broadcast on UHF channels. In November 1997, KGWC-TV relocated to a 10,000
square foot leased facility in downtown Casper. The new location includes
significant technological improvements in order to better serve the market.
Station Performance. According to the 1998 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 the number two ranked news
station in this market. Since being acquired in June 1996 by the Company, the
Station has added 10:00 pm newscasts on Saturday and Sunday. Currently, the
Station airs 6 hours of local news programming per week as opposed to 5 hours it
broadcast each week prior to being acquired by the Company. KGWC-TV's special
value-added local sales efforts in 1998 included sponsorship of the local and
state-wide "Catch a Rising Star" talent contest, "Celebrate Casper," a local art
festival, and "The Central Wyoming Fair and Rodeo." In addition, KGWC-TV
provides coverage of the Wyoming State Wrestling and Basketball tournaments.
Since being acquired by the Company, the Station has added "Wheel of Fortune"
and "The Rosie O'Donnell Show" to its first run syndicated programming schedule.
KGWC-TV's first run and off-network syndicated programming also includes "Live
with Regis & Kathie Lee," "Mad About You" and "Martha Stewart Living."
INDUSTRY BACKGROUND
Commercial television broadcasting began in the United States on a regular
basis in the 1940's. 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
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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
Brothers Television Network recently have been launched as new television
networks. However, neither produce a significant amount of network programming.
Through the 1970's, 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 1998 Television & Cable Factbook, cable television currently passes
approximately 93% of all television households nationwide and approximately 69%
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 the alternative
programming from cable, according to Nielsen, 67.4% of all prime time television
viewing time during the 1997-1998 broadcast season, through November 1998, 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. Television 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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NETWORK AFFILIATION OF THE STATIONS
Each of the Stations is affiliated with either ABC, CBS, NBC or Fox
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 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 Stations' network affiliation agreements currently runs for a
period of two to ten 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. There can be no assurance that the Company will renew its affiliation with
ABC or, in the event of a renewal of these affiliations, whether the historical
level of network compensation will be maintained. 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.
WHOI-TV, an ABC affiliate, currently operates under an affiliation agreement
which expires in 2005 and which does not provide for renewals. Each of KDLH-TV,
WIFR-TV, KHQA-TV, WTVY-TV, KGWN-TV, KGWC-TV, KCOY- TV, WIBW-TV, WSAW-TV,
WTRF-TV, KAUZ-TV and KOSA-TV, all of which are CBS affiliates, has 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. 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. WTAP-TV, an NBC affiliate,
currently operates under a five-year affiliation agreement which expires in 1999
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.
During August 1997, the Company completed the purchase of the television
broadcasting licenses and certain equipment of K02NQ and K11TB, two low-power
television stations located in Columbia and Jefferson City, Missouri.
Concurrently with such purchase, the Company entered into a network affiliation
agreement for such Stations with Fox which expires July 31, 1999, and
automatically continues until terminated by either party upon 120 days' advance
notice. These two Stations began operating in September 1997. The primary means
of distribution for these Stations is via cable television.
In 1997, the Company entered into an agreement with The Warner Bros.
Television Network to develop a local cable affiliate called the "WeB" in each
of the Company's 20 markets which rank above 100. The WeB is a 24 hour, seven
day a week television channel which broadcasts The Warner Bros. Television
Network prime time programming, WB Kids programming and syndicated programming
of Warner Bros. and others. The WeB began service in September 1998 in most
100-plus markets. The Company is responsible for all local sales efforts for the
new channels in its WeB markets. The WeB's impact on the Company's operations
for 1998 was insignificant and is anticipated to be insignificant in 1999.
-22-
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<PAGE>
ADVERTISING SALES
Television station revenues are derived primarily from local, regional and
national advertising and, to a lesser extent, from compensation paid by the
networks for broadcasting network programming and barter transactions for goods
and services. Advertising rates are based upon numerous factors including a
program's 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 53.5% of the gross revenues of the Stations in
1998 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 frequently shares such information among the
Stations.
National Sales. Approximately 25.9% of the gross revenues of the Stations
in 1998 came from national advertisers. Typical national advertisers include
automobile manufacturers, consumer goods manufacturers, communications
companies, fast food franchisers, national retailers and direct marketers.
National advertising time is sold through representative agencies retained by
the Company. Nine of the Stations are represented by Katz Television Sales,
eleven Stations are represented by Petry Television, Inc., and three retain
Blair Television. The 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.
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 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 five markets, the Company owns one of three local television
stations. In nine markets, the Company owns one of four local television
stations. In the Columbia and Jefferson City, Missouri market, the Company owns
two of five stations, one of the owned stations being the jointly operated
low-power station known in the market as Fox-11. In addition, 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
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<PAGE>
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 and DBS, have 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 1970's, 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 in small
and medium-sized markets.
Three nationwide companies deliver DBS to homes from satellites. 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 one telephone
company has also begun offering digital MDS service. In addition, the FCC has
licensed a 28 GHz and 31 GHz microwave cable service that will have the
potential to provide up to 100 channels of video or more. The FCC has licensed
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
digital television ("DTV"), with the most advanced type of transmission system
being high definition television. Intensive research and development efforts
have achieved forms of DTV 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 provide a
single DTV system, and these efforts resulted in technical standards that were
submitted to the FCC in 1995. In 1996, the FCC adopted a technical standard for
DTV. The standard will involve the broadcast of DTV on a separate television
channel from that used for conventional broadcasting. This separate channel may
also be used by broadcasters for data transmission and multi-channel
transmission. The FCC has decided to issue a second channel to each television
broadcaster to permit it to provide DTV during a transition period. Although in
some cases a DTV channel may provide a station with a smaller geographic service
area than its current channel, most stations are expected to obtain DTV service
areas that are consistent with their current service areas. At the end of the
transition period in 2006, each broadcaster will 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 second television channel will require a
substantial capital outlay for all of the Stations. In late 1998, the FCC
refined its DTV rules and DTV channel assignments. The FCC's DTV decisions now
are subject to judicial review before the U.S. Court of Appeals for the District
of Columbia Circuit. Also in 1998, the FCC issued a decision to implement the
requirement of the Telecommunications Act of 1996 that it charge broadcasters a
fee for offering subscription services on the DTV channel. The FCC's decision to
impose a fee of 5% of the gross revenues generated by such services currently is
subject to petitions for reconsideration before the FCC. The FCC also is
considering whether and how to extend cable systems'
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<PAGE>
obligations for mandatory carriage of certain broadcast television signals to
the DTV channel. Deliberations on this issue include the question of whether
cable systems will be required to carry both DTV and analog channels broadcast
by a television station that multicasts on its DTV channel, and whether cable
systems should be required to retransmit DTV signals in the same definition in
which originally broadcast. 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.
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 products (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, local cable systems
and internet sites. 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.
RATING SERVICE DATA
All television stations in the United States are grouped into 211
television markets which are ranked in size according to the number of
television households in such markets. Nielsen periodically publishes reports on
the estimated audience for the television stations in the various television
markets throughout the country. 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. Each specific market
is called a Designated Market Area ("DMA"). Every county in the continental
United States is assigned to a DMA 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. In smaller markets only weekly diaries are completed during
four separate four-week periods during the course of any year. These periods are
commonly knows as "sweeps periods." All the Company's markets are measured
during these sweeps periods.
FEDERAL REGULATION OF TELEVISION BROADCASTING
Existing Regulation. Television broadcasting is subject to the jurisdiction
of the FCC, pursuant to the Communications Act of 1934, as amended (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
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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 violations 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 eight years. 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 term and urge denial of the
application. Additionally, if an incumbent licensee fails to meet the renewal
standard, and if it 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 the petitions to deny are filed against broadcast license renewal
applications. All of the Stations are presently operating under eight-year
licenses expiring on various dates from 1999 to 2006. Currently, WWLP-TV,
Springfield, Massachusetts has a pending application 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 WWLP-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. The FCC has a
pending proceeding that may result in the liberalization of the duopoly rules.
The FCC proposed revised duopoly rules during the fourth quarter of 1996 and it
is expected that, after considering public comments, new rules will become
effective during 1999. The Company owns several stations in adjacent markets
with overlapping signals. These stations are WIFR-TV in Rockford, Illinois and
WMTV-TV in Madison, Wisconsin; WYTV-TV in Youngstown, Ohio and WTRF-TV in
Wheeling, West Virginia; and WTAP-TV in Parkersburg, West Virginia and WTRF-TV
in Wheeling, West Virginia. The duopoly rules ordinarily would prevent the
Company from owning stations with overlapping signals. In all cases except
Rockford-Madison, the Company has obtained a waiver conditioned on the outcome
of the FCC's proceeding to reform the duopoly rule that will permit it to retain
the Stations if the FCC changes its rules to permit such common ownership.
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If the FCC does not so change its rules, the Company will have six months to
divest one of the Stations in each combination. In the case of Rockford-Madison,
the signal overlap was greater than permitted under the FCC's proposed rule;
accordingly, the Company has placed the Madison station in a disposition trust.
As a result of the limited waiver provided by the FCC, the Company has had
discussions concerning exchanging or selling Stations which would eliminate the
duopoly overlap. No agreement or understanding currently exists with respect to
any such sale or exchange. 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.
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 majority
stockholder who owns 87.4% of outstanding stock of the Company. In the event the
Company no longer had a single majority stockholder, minority interests would be
deemed to be attributable interests. The FCC has initiated an inquiry into
modifying several of these attribution standards. It is likely that this inquiry
will be concluded in late 1999, 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.
Qualified 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 election campaign, stations may not charge political candidates
rates any higher than the rate being charged to the most favored commercial
advertiser for a spot of the same length and class in 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 information 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.
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Television stations may not air obscene programming at any time, and may
not air indecent programming during the morning, afternoon and early evening (6
a.m. to 10 p.m.). 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.
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 continued establishment of DBS, wireless
cable systems and low power television stations and the participation of
telephone companies in the provision of video programming by wire.
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
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. In its March 31, 1997 decision, the Supreme Court, by a 5
to 4 vote, affirmed the judgement of the district court. The Court
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concluded that the record supports Congress' judgement that the must-carry
provisions serve significant governmental interests, namely preserving the
benefits of free, over-the-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.
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. 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. By
October 1, 1996, stations were required to make their second election covering
the three-year period from January 1, 1997 to December 31, 1999.
The Company has entered into agreements for the Stations with
substantially all of the cable system operators which carry the Stations'
signals. All of these agreements grant such cable system operators consent to
retransmit the Stations' signal. These retransmission arrangements do not
represent a significant source of revenue for the Company. 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 1,190 full-time employees. Approximately 230
of the Company's employees located at WMTV-TV, WILX-TV, WHOI-TV, WTRF-TV,
KDLH-TV and WYTV-TV are represented by labor unions under collective bargaining
agreements. The collective bargaining agreements expire at various times from
1999 through 2001. 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.
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ITEM 2. 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.
<TABLE>
<CAPTION>
OWNED APPROXIMATE EXPIRATION
STATION, MARKET AREA AND USE OR LEASED SIZE (a) HEIGHT/POWER 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 --
Youngstown, Ohio
WYTV
Office and Studio................. Owned 18,964 sq. ft. -- --
Tower/Transmitter Site............ Owned (b) 642 ft./550 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............ Leased 5,000 sq. ft. 994 ft./309 kw 10/18/2003
Peoria and Bloomington, Illinois
WHOI (TV)
Office and Studio................. Owned 16,900 sq. ft. -- --
Tower/Transmitter Site............ Owned (b). 640 ft./2,240 kw --
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 12/31/2017(c)
Duluth, Minnesota and Superior,
Wisconsin
KDLH-TV
Office and Studio................. Owned 25,000 sq. ft. (d) -- --
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 --
</TABLE>
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<TABLE>
<CAPTION>
OWNED APPROXIMATE EXPIRATION
STATION, MARKET AREA AND USE OR LEASED SIZE (a) HEIGHT/POWER OF LEASE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wausau and Rhinelander,
Wisconsin
WSAW-TV
Office and Studio................. Owned 24,400 sq. ft. -- --
Tower/Transmitter Site............ Leased (e) 432 sq. ft. 650 ft./316 kw 08/01/2002
Wheeling, West Virginia and
Steubenville, Ohio
WTRF-TV
Office and Studio................. Owned 43,872 sq. ft.(f) -- --
Tower/Transmitter Site............ Owned 2,000 sq. ft. 741 ft./316 kw --
Topeka, Kansas
WIBW-TV
Office and Studio................. Leased 18,774 sq. ft.(g) -- 08/31/2000
Tower/Transmitter Site............ Leased 2,338 sq. ft. 1,249 ft./316 kw 02/14/2062
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 --
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 --
Columbia and Jefferson City, Missouri
KO2NQ (low power)
Tower/Transmitter................ Leased (h) 60 ft./30 w 09/03/2002
K11TB (low power)
Tower/Transmitter Leased (i) 100 ft./10 w 05/15/2000
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 10/31/2003
Quincy, Illinois, Hannibal,
Missouri and Keokuk, Iowa
KHQA-TV
Office and Studio................. Owned 18,000 sq. ft. -- --
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. -- 12/31/2002
Tower/Transmitter Site............ Owned 2,500 sq. ft. 1,880 ft./100 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 12/31/2001(c)
</TABLE>
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<TABLE>
<CAPTION>
OWNED APPROXIMATE EXPIRATION
STATION, MARKET AREA AND USE OR LEASED SIZE (a) HEIGHT/POWER OF LEASE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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. -- 04/30/2005(j)
Tower/Transmitter Site............ Owned 3,600 sq. ft. 439 ft./208 kw --
Cheyenne, Wyoming
KGWN-TV
Office and Studio................. Owned 7,500 sq. ft. -- --
Tower/Transmitter Site............ (k) 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 --
Casper and Riverton, Wyoming
KGWC-TV
Office and Studio................. Leased 10,000 sq. ft. -- 03/04/2007(1)
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 12/31/2007
Rock Springs, Wyoming
KGWR-TV (satellite)
Tower/Transmitter Site............ Leased 400 sq. ft. 100 ft./12 kw 05/22/1999
</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) Occupied pursuant to a Special Use Permit granted by the United States
Department of Agriculture Forest Service.
(d) 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.
(e) Leased together with TAK Communications from the Wisconsin Educational
Board.
(f) 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.
(g) 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 Stauffer Communications, Inc., which owns and
operates radio stations WIBW AM and FM.
(h) The Company leases rooftop space for its tower/transmitter.
(i) The Company leases space on a tower on which it has mounted a broadcasting
antenna.
(j) The Company has an option to purchase the premises on each of May 1, 2000
and 2005 for $650,000 and $750,000, respectively.
(k) This property is utilized subject to an easement granted by the State of
Wyoming.
(l) The Company has an option to purchase the premises during the term of the
lease at purchase prices that are subject to adjustment during the lease
term based on the date the option is exercised. The purchase price would
have been $379,812 as of December 31, 1998.
-32-
<PAGE>
<PAGE>
ITEM 3. 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 of Brissette) is not currently a party to any lawsuit or
proceeding which, in the opinion of management, is likely to have a material
adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
-33-
<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Not applicable.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The following selected consolidated financial data for the five years ended
December 31, 1998 represents the consolidated financial information of the
Company and are derived from the audited Consolidated Financial Statements,
which Consolidated Financial Statements for the three years ended December 31,
1998 together with the report of McGladrey & Pullen, LLP, independent certified
public accountants, are included elsewhere in this Annual Report on Form 10-K.
The selected consolidated financial information presented below should be read
in conjunction with the Consolidated Financial Statements included elsewhere in
this Annual Report on Form 10-K and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
1994 1995(a) 1996(b) 1997
---- ------- ------- ----
BENEDEK BENEDEK BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS
CORPORATION CORPORATION CORPORATION CORPORATION
-----------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Net revenue(c) ..................... $ 44,221 $ 50,329 $ 96,386 $ 96,386 $ 127,073 $ 127,073
Operating expenses:
Station operating expenses ..... 24,810 29,049 58,602 58,602 80,003 80,003
Depreciation and amortization .. 3,403 5,041 20,220 20,220 31,380 31,380
--------- --------- --------- --------- --------- ---------
Station operating income ........... 16,008 16,239 17,564 17,564 15,690 15,690
Corporate ...................... 1,309 1,576 2,696 2,696 3,787 3,787
--------- --------- --------- --------- --------- ---------
Operating income ................... 14,699 14,663 14,868 14,868 11,903 11,903
--------- --------- --------- --------- --------- ---------
Financial expenses, net:
Interest expense, net(d):
Cash interest, net ............. (7,740) (14,763) (22,559) (22,559) (28,866) (28,866)
Other interest ................. (4,905) (712) (1,030) (8,130) (5,352) (19,374)
--------- --------- --------- --------- --------- ---------
(12,645) (15,475) (23,589) (30,689) (34,218) (48,240)
Other, net ......................... (10) -- -- -- -- --
--------- --------- --------- --------- --------- ---------
(12,655) (15,475) (23,589) (30,689) (34,218) (48,240)
--------- --------- --------- --------- --------- ---------
Income (loss) before income tax
benefit and extraordinary item . 2,044 (812) (8,721) (15,821) (22,315) (36,337)
Income tax benefit (e) ............ -- -- 1,849 4,664 6,393 12,027
--------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary item ............ 2,044 (812) (6,872) (11,157) (15,922) (24,310)
Extraordinary item (f) ............ -- 6,864 -- -- -- --
--------- --------- --------- --------- --------- ---------
Net income (loss) ................. 2,044 6,052 $ (6,872) (11,157) $ (15,922) (24,310)
========= =========
Preferred stock dividends
and accretion .................. -- -- (9,519) (19,037)
------------------------ --------- ---------
Net income (loss) applicable
to common stock ................ $ 2,044 $ 6,052 $ (20,676) $ (43,347)
======================== ========= =========
Basic earnings (loss) per
common share (k):
Income (loss) before
extraordinary item .......... $ 0.29 $ (0.12) $ (2.94) $ (6.17)
Extraordinary item ............. -- 0.98 -- --
------------------------ --------- ---------
Earnings (loss) per
common share .................. $ 0.29 $ 0.86 $ (2.94) $ (6.17)
------------------------ --------- ---------
------------------------ --------- ---------
Weighted-average common
shares outstanding.......... ... 7,030,000 7,030,000 7,030,000 7,030,000
------------------------ --------- ---------
------------------------ --------- ---------
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998
----
BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS
CORPORATION CORPORATION
--------------------------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C>
Statement of
Operations Data:
Net revenue(c) ..................... $ 139,833 $ 139,833
Operating expenses:
Station operating expenses ..... 85,509 85,509
Depreciation and amortization .. 30,830 30,830
--------- ---------
Station operating income ........... 23,494 23,494
Corporate ...................... 4,643 4,643
Operating income ................... 18,851 18,851
--------- ---------
Financial expenses, net:
Interest expense, net(d):
Cash interest, net ............. (26,809) (26,485)
Other interest ................. (1,341) (17,043)
--------- ---------
(28,150) (43,528)
Other, net ......................... -- --
--------- ---------
(28,150) (43,528)
--------- ---------
Income (loss) before income tax
benefit and extraordinary item .. (9,299) (24,677)
Income tax benefit (e) ........ .... 1,901 8,052
--------- ---------
Income (loss) before
extraordinary item ............. (7,398) (16,625)
Extraordinary item (f) ............. -- --
--------- ---------
Net income (loss) .................. $ (7,398) (16,625)
=========
Preferred stock dividends
and accretion ................... (30,855)
---------
Net income (loss) applicable
to common stock ................. $ (47,480)
=========
Basic earnings (loss) per
common share (k):
Income (loss) before
extraordinary item ........... $ (6.42)
Extraordinary item .............. --
---------
Earnings (loss) per
common share ................... $ (6.42)
---------
---------
Weighted-average common
shares outstanding............... 7,400,000
---------
---------
</TABLE>
-34-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1994 1995 (a) 1996 (b) 1997
---- -------- -------- ----
BENEDEK BENEDEK BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATION
CORPORATION CORPORATION CORPORATION CORPORATION
-----------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF CASH FLOW
DATA:
Net cash provided by
(used in) operating activities $ 10,493 $ 3,250 $ 17,842 $ 17,843 $ 8,471 $ 8,471
Net cash (used in)
investing activities ......... (2,507) (30,972) (326,632) (326,632) (6,282) (6,282)
Net cash provided by
(used in) financing activities (7,037) 32,773 307,212 307,212 (7,632) (7,632)
Certain Financial Data:
Broadcast cash flow (g) ......... $ 19,627 $ 21,310 $ 38,864 $ 38,864 $ 47,534 $ 47,534
Broadcast cash flow margin (h) .. 44.4% 42.3% 40.3% 40.3% 37.4% 37.4%
Adjusted EBITDA (i) ............. $ 18,318 $ 19,734 $ 36,169 $ 36,169 $ 43,747 $ 43,747
Adjusted EBITDA margin (j) ...... 41.4% 39.2% 37.5% 37.5% 34.4% 34.4%
Amortization of program
broadcast rights ............. $ 2,104 $ 2,162 $ 4,399 $ 4,399 $ 6,401 $ 6,401
Payment for program
broadcast rights ............. 1,888 2,132 3,318 3,318 5,937 5,937
Capital expenditures ............ 1,161 2,008 5,003 5,003 10,883 10,833
BALANCE SHEET DATA
(END OF PERIOD):
Total assets .................... $ 73,621 $ 114,453 $ 491,296 $ 495,015 $ 465,523 $ 468,495
Working capital ................. 1,611 13,665 3,697 3,697 2,511 2,511
Long-term debt (l) .............. 107,607 135,767 261,186 358,234 260,594 370,917
Redeemable preferred stock ...... -- -- -- 105,519 -- 124,556
Stockholder's equity (deficit) .. (42,616) (36,564) 144,472 (51,561) 128,550 (94,908)
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998
----
BENEDEK BENEDEK
BROADCASTING COMMUNICATION
CORPORATION CORPORATION
------------------------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C>
STATEMENT OF CASH FLOW
DATA:
Net cash provided by
(used in) operating activities $ 19,452 $ 19,776
Net cash (used in)
investing activities ......... (6,342) (6,342)
Net cash provided by
(used in) financing activities (11,467) (11,791)
Certain Financial Data:
Broadcast cash flow (g) ......... $ 54,683 $ 54,683
Broadcast cash flow margin (h) .. 39.1% 39.1%
Adjusted EBITDA (i) ............. $ 50,188 $ 50,188
Adjusted EBITDA margin (j) ...... 35.9% 35.9%
Amortization of program
broadcast rights ............. $ 6,758 $ 6,758
Payment for program
broadcast rights ............. 6,399 6,399
Capital expenditures ............ 10,308 10,308
BALANCE SHEET DATA
(END OF PERIOD):
Total assets .................... $ 445,102 $ 447,462
Working capital ................. 3,829 3,830
Long-term debt (l) .............. 249,403 374,816
Redeemable preferred stock ...... -- 162,644
Stockholder's equity (deficit) .. 123,833 (147,263)
</TABLE>
- -----------------------------------
(a) On March 31, 1995, the Company acquired WTVY-TV serving Dothan, Alabama and
Panama City, Florida. The statement of operations and other data does not
include information with respect to WTVY-TV prior to the date of
acquisition.
(b) On June 6, 1996, the Company acquired thirteen television stations . The
statement of operations and other data does not include information with
respect to the Acquisitions prior to June 6, 1996.
(c) Net revenues reflect deductions from gross revenues for agency and national
sales representative commissions.
(d) Cash interest expense, net includes cash interest paid and normal
adjustments to accrued interest. Other interest expense includes accrued
interest with respect to warrants to purchase the Company's common stock,
accrued interest with respect to the contingent equity value of the Company
and long-term deferred interest, accrued interest added to long-term debt
balances, deferred loan amortization and accretion of discounts.
(e) The Company had historically elected to be taxed as an S Corporation for
federal and state income tax purposes. The Company's election to be taxed
as an S Corporation terminated automatically concurrently with the
consummation of the Acquisitions. Accordingly, the then sole stockholder of
the Company is responsible for the payment of income taxes on the Company's
taxable income for any time prior to June 6, 1996. The Company is now
subject to federal and state income taxes.
(f) The Company 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.
(g) Broadcast cash flow is defined as operating income, excluding net income of
non-recourse subsidiaries, before financial income as derived from the
consolidated statements of operations plus depreciation and amortization,
amortization of program broadcast rights, corporate expenses and non-cash
compensation less payments for program broadcast rights. The Company has
included broadcast cash flow data because such data is used by certain
investors to measure a company's ability to service debt. Broadcast cash
flow does not purport to represent cash provided by operating activities as
reflected in the Company'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.
(h) Broadcast cash flow margin is defined as broadcast cash flow divided by net
revenues.
(i) Adjusted EBITDA is defined as operating income, excluding net income of
non-recourse subsidiaries, before financial income as derived from the
consolidated statements of operations plus depreciation and amortization,
amortization of program broadcast rights and noncash compensation less
payments for program broadcast rights. The Company has included Adjusted
EBITDA data because such data is used by certain investors to measure a
company's ability to service debt. Adjusted EBITDA does not purport to
represent cash provided by operating activities as reflected in the
Company'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.
(j) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net
revenues.
(k) Earnings (loss) per common share is computed by dividing income (loss)
after the deduction of preferred dividends and accretion of the redemption
prepayment premium and amortization of the initial warrants, by the
weighted average number of common shares outstanding. The effect of the
stock options, initial warrants and contingent warrants has not been
reflected in the computation since their inclusion as common stock
equivalents for both primary and fully-diluted earnings (loss) per share
was anti-dilutive.
(l) Long-term debt is defined as notes payable and capital leases payable
(including the current portion thereof), net of discount.
-35-
<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
The operating revenues of the Company 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 barter transactions for goods
and services. Revenue depends on the ability of the Company to provide popular
programming which attracts audiences in the demographic groups targeted by
advertisers, thereby allowing the Company 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.
In 1998, the Company reported net revenues of $139.8 million compared to
net revenues of $127.1 million in 1997 and $96.4 million in 1996. The results
for 1998 were favorably impacted by political revenue of $12.6 million compared
to $1.1 million in 1997 and $9.0 million in 1996. The increase in 1997 net
revenues was due largely to the Acquisitions. The Company had a net loss of
$16.6 million for 1998 compared to a net loss of $24.3 million for 1997 and a
net loss of $11.2 million for 1996. Benedek Broadcasting had a net loss of $7.4
million for 1998 compared to a net loss of $15.9 million for 1997 and a net loss
of $6.9 million for 1996. Adjusted EBITDA for the year ended December 31, 1998
was $50.2 million as compared to $43.7 million for 1997 and $36.2 million for
the year ended December 31, 1996.
Net revenues and operating cash flow of the Company are generally higher
during the fourth quarter of each year, primarily due to increased expenditures
by advertisers in anticipation of holiday season consumer spending, an increase
in viewership during this period, and political advertising expenditures in even
numbered years, and to a lesser extent, during the second quarter of each year.
Time sales to local/regional advertisers and national advertisers
constitute the largest concentration of the Company's operating revenues and
represent approximately 87% of gross revenues in 1998 as compared to 85% in
1997. Excluding political advertising revenue, however, the percentage of gross
revenues attributable to local/regional advertising and national advertising of
the Company in 1996, 1997 and 1998 was 86.6%, 85.9% and 86.1%, respectively.
Approximately 53.5% of the gross revenues of the Company in 1998 was generated
from local and regional advertising, which is sold primarily by the Stations'
sales staff, and the remainder of the advertising revenues is comprised
primarily of national advertising, which is sold by national sales
representatives retained by the Company. The Company 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.
The Company's primary operating expenses are employee compensation,
programming, 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. The Company purchases
first run and off-network syndicated programming on an ongoing basis. Under its
contract with the network, a network-affiliated station receives approximately
two-thirds of its daily programming from its network and in turn is compensated,
in most cases, by its network for carrying such programming with the network's
commercial content intact. Barter expense generally offsets barter revenue and
reflects the fair market value of goods and services received. The Company's
operating expenses
-36-
<PAGE>
<PAGE>
(excluding depreciation and amortization) represent approximately 65% of net
revenues for 1998 as compared to 66% for 1997 and 64% of net revenues for 1996.
During October 1998, the Company transferred WMTV-TV, the Company's station
in Madison, Wisconsin to a disposition trust (the " WMTV Trust") due to the
Grade A broadcast signal overlap between WMTV-TV and WIFR-TV, the Company's
station in Rockford, Illinois. Under the FCC's current duopoly rules, the
Company will be required to dispose of one of such stations within six months
after the transfer to the trust. The Company is seeking to comply with the FCC
requirements by either exchanging one of the stations for another broadcast
station in a transaction qualifying for deferred capital gains treatment under
Section 1031 of the Internal Revenue Code of 1986 or by selling either WMTV-TV
or WIFR-TV. Under the trust arrangement, the Company relinquished control of
WMTV-TV to a trustee while retaining the economic risks and benefits of
ownership. If the trustee is required to effect a sale of WMTV-TV, the Company
would incur a significant gain and related tax liability. The FCC has allowed up
to six months for the trustee to file an application seeking the agency's
approval of a swap or sale. The approval process is expected to take between two
and six months.
During September 1998, the Company began delivering The Warner Bros.
Television Network programming to local cable companies in 15 of the Company's
20 markets which rank above market 100 as measured by Nielsen surveys. These
local affiliates are called the "WeB" and are operated by a newly-formed
wholly-owned subsidiary of Benedek Broadcasting called Benedek Cable, Inc.
("BCI"). The WeB is a 24 hour, seven day a week television channel which
broadcasts The Warner Bros. Television Network prime time programming, WB Kids
children's programming and syndicated programming of Warner Bros. and others.
The Company is continuing its negotiations with cable systems in its markets for
the carriage of WeB programming to all households within its WeB markets. The
WeB's impact on the Company's operations for 1998 was insignificant and is
expected to be insignificant in 1999. For purposes of the Company's Adjusted
EBITDA, the net income (loss) of BCI is excluded due to its status as a
non-recourse subsidiary.
On June 6, 1996, the Company acquired substantially all of the broadcast
television assets of Stauffer Communications, Inc. 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 these stations are affiliated with CBS, except for KMIZ-TV,
Columbia, Missouri, which is affiliated with ABC.
On June 6, 1996, the Company acquired all of the capital stock of Brissette
Broadcasting Corporation ("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. 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. 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 of the
junior preferred stock of the Company to General Electric Capital Corporation
("GECC") and Mr. Paul Brissette.
The Company has included Adjusted EBITDA and broadcast cash flow data
because such data is used by certain investors to measure a company's ability to
service debt. Adjusted EBITDA is used to pay
-37-
<PAGE>
<PAGE>
principal and interest on long-term debt and to fund capital expenditures.
Adjusted EBITDA and broadcast cash flow do not purport to represent cash
provided by operating activities as reflected in the Company'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.
The following table sets forth certain historical results of the operations
and operating data for the periods indicated. The table includes the results of
operations of the Acquisitions only from the closing date of June 6, 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Operating income .................. $ 14,868 $ 11,903 $ 18,851
Add:
Amortization of program
broadcast rights ........... 4,399 6,401 6,758
Depreciation and amortization 20,220 31,380 30,830
Corporate expenses .......... 2,695 3,787 4,643
Less:
Payment for program
broadcast liabilities .... (3,318) (5,937) (6,399)
-------- -------- --------
Broadcast cash flow ............... $ 38,864 $ 47,534 $ 54,683
======== ======== ========
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
The following table provides historical information.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1998 % CHANGE
---- ---- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net revenues .................. $127,073 $139,833 10.0%
Operating expenses:
Selling, technical and
program expenses .......... 60,385 64,651 7.1
General and administrative .. 19,618 20,858 6.3
Depreciation and amortization 31,380 30,830 (1.7)
Corporate ................... 3,787 4,643 22.6
-------- -------- ----
115,170 120,982 5.0
-------- -------- ----
Operating income ... $ 11,903 $ 18,851 58.3%
-------- -------- ----
-------- -------- ----
Broadcast cash flow ........... $ 47,534 $ 54,683 15.0%
Broadcast cash flow margin .... 37.4% 39.1%
Adjusted EBITDA ............... $ 43,747 $ 50,188 14.7%
Adjusted EBITDA margin ........ 34.4% 35.9%
</TABLE>
Net revenues for the year ended December 31, 1998 increased $12.7 million or
10.0% to $ 139.8 million from $127.1 million for the year ended December 31,
1997. Gross revenues excluding political advertising revenue increased $3.6
million or 2.5% to $148.1 million from $144.5 million for the year ended
December 31, 1997. Net revenues for the year ended December 31, 1998 were
positively affected by
-38-
<PAGE>
<PAGE>
political spending and the Winter Olympics shown on the Company's 12 CBS
stations. Political advertising revenue for the year ended December 31, 1998
increased by $11.4 million to $12.6 million compared to $1.4 million in 1997.
Net revenues for the second half of 1998 were adversely affected by a General
Motors Corporation strike and a continued general weakness in revenue from
national advertising. Gross revenues excluding political advertising for the
second half of 1998 decreased $3.1 million or 4.2% to $71.1 million from $74.2
million for the six months ended December 31, 1997.
Net revenues during the year ended December 31, 1998 continued to be
adversely affected by weakness in advertising revenue for the Company's six ABC
affiliated stations. Net revenues of the Company's CBS and NBC affiliated
stations increased by 12.0% and 12.0%, respectively, while net revenues of the
Company's ABC affiliated stations increased by 5.2%.
Operating expenses for the year ended December 31, 1998 increased $5.8
million or 5.0% to $121.0 million from $115.2 million for the year ended
December 31, 1997. The increase in expenses was due in part to increased
compensation expense as the Company expanded news operations during the first
half of 1998, and increased programming expense. As a percentage of net
revenues, operating expenses decreased to 86.5% from 90.6% in the year ended
December 31, 1997.
Operating income for the year ended December 31, 1998 increased $7.0 million
or 58.8% to $18.9 million from $11.9 million for the year ended December 31,
1997.
Financial (expenses), net for Benedek Broadcasting decreased $6.0 million or
17.5% to $28.2 million from $34.2 million for the year ended December 31, 1997
due to the lower interest rates on its Term Loan Facilities. Benedek
Communications' financial expenses (net) for the year ended December 31, 1998
decreased $4.7 million or 9.8% to $43.5 million from $48.2 million in the year
ended December 31, 1997. Benedek Communications has higher financial expenses
than Benedek Broadcasting as a result of the interest on its Senior Subordinated
Discount Notes.
Income tax benefit for Benedek Broadcasting for the year ended December 31,
1998 was $1.9 million compared to $6.4 million for the year ended December 31,
1997. For the year ended December 31, 1998, Benedek Communications had an $8.1
million income tax benefit compared to $12.0 million for the year ended December
31, 1997. Benedek Communications has a greater income tax benefit than Benedek
Broadcasting due to the net tax affect on the difference in financial expenses.
The tax effect of the excess of book depreciation over tax depreciation and a
current period net operating loss for tax purposes were the primary factors
resulting in the income tax benefit for the year ended December 31, 1998.
Net loss for Benedek Broadcasting for the year ended December 31, 1998 was
$7.4 million as compared to $15.9 million net loss for the year ended December
31, 1997. Benedek Communications had a net loss of $16.6 million for the year
ended December 31, 1998 as compared to a net loss of $24.3 million for the year
ended December 31, 1997.
Broadcast cash flow for the year ended December 31, 1998 increased $7.2
million or 15.2% to $54.7 million from $47.5 million for the year ended December
31, 1997. As a percentage of net revenues, broadcast cash flow margin increased
to 39.1% for the year ended December 31, 1998 from 37.4% for the year ended
December 31, 1997.
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<PAGE>
<PAGE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
The following table provides both historical and Same Station information.
The Same Station information gives effect to the Acquisitions as if such
transactions were consummated on January 1, 1996. The Same Station information
for the year ended December 31, 1996 does not purport to represent what the
Company's results of operations would have been if such transactions had been
effected at such date and do not purport to project results of operations of the
Company in any future period.
<TABLE>
<CAPTION>
HISTORICAL SAME STATION
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------------------- ----------------------------------------
(DOLLARS IN THOUSANDS)
% %
1996 1997 CHANGE 1996 1997 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Net revenues .................. $ 96,386 $127,073 31.8% $126,165 $127,073 0.7%
-------- -------- ---- -------- -------- ----
Operating expenses:
Selling, technical and
program expenses ........... 43,759 60,385 38.0 57,332 60,385 5.3
General and administrative .. 14,844 19,618 32.2 20,239 19,618 (3.1)
Depreciation and amortization 20,220 31,380 55.2 29,955 31,380 4.8
Corporate ................... 2,695 3,787 40.5 3,700 3,787 2.4
-------- -------- ---- -------- -------- ----
81,518 115,170 41.3 111,226 115,170 3.5
-------- -------- ---- -------- -------- ----
OPERATING INCOME ... $ 14,868 $ 11,903 (19.9) $ 14,939 $ 11,903 (20.3)
-------- -------- ---- -------- -------- ----
-------- -------- ---- -------- -------- ----
Broadcast cash flow ........... $ 38,864 $ 47,534 22.3% $ 49,741 $ 47,534 (4.4)%
Broadcast cash flow margin .... 40.3% 37.4% 39.4% 37.4%
Adjusted EBITDA ............... $ 36,169 $ 43,747 20.9% $ 46,041 $ 43,747 (5.0)%
Adjusted EBITDA margin ........ 37.5% 34.4% 36.5% 34.4%
</TABLE>
Net revenues for the year ended December 31, 1997 increased $30.7 million or
31.8% to $127.1 million from $96.4 million for the year ended December 31, 1996
primarily as a result of the Acquisitions. On a Same Station basis, net revenues
for the year ended December 31, 1997 increased $1.0 million or 0.7% from the
year ended December 31, 1996. Gross revenues on a Same Station basis excluding
political advertising revenue increased $8.8 million or 6.5% from the year ended
December 31, 1996.
Net revenues during the year ended December 31, 1997 continued to be
adversely affected by weakness in advertising revenue for the Company's 12 CBS
affiliated stations and six ABC affiliated stations. On a Same Station basis,
net revenues of the Company's CBS affiliated stations decreased by 1.6% and net
revenues of the Company's ABC affiliated stations increased 0.6%, while net
revenues of the Company's NBC affiliated stations increased by 4.1%.
Operating expenses for the year ended December 31, 1997 increased $33.7
million or 41.3% to $115.2 million from $81.5 million for the year ended
December 31, 1996. The increase in operating expenses was attributable to the
Acquisitions. As a percentage of net revenues, operating expenses for the
Stations increased to 90.6% from 84.6% in the year ended December 31, 1996,
primarily as a result of an increase of $11.2 million in depreciation and
amortization expense. On a Same Station basis, operating expenses for the year
ended December 31, 1997 increased $4.0 million or 3.5% from the year ended
December 31, 1996. Such operating expenses were $115.2 million for the year
ended December 31, 1997 as compared to $111.2 million for the year ended
December 31, 1996. Operating expenses as a percentage of net revenues on a Same
Station basis increased from 88.2% for the year ended December 31, 1996 to 90.6%
for the year ended
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<PAGE>
<PAGE>
December 31, 1997. The increase in expenses on a Same Station basis was due
primarily to increased compensation expense as the Company expanded the news
operations at the stations acquired during 1996, increased programming expenses
as the Company revamped programming schedules at the stations acquired during
1996 and, to a lesser extent, increased depreciation and amortization.
Operating income for the year ended December 31, 1997 decreased $3.0 million
or 20.1% to $11.9 million from $14.9 million for the year ended December 31,
1996.
Financial (expenses), net for Benedek Broadcasting increased $10.6 million or
44.9% to $34.2 million from $23.6 million for the year ended December 31, 1996.
Benedek Communications financial expenses (net) for the year ended December 31,
1997 increased $17.5 million or 57.0% to $48.2 million from $30.7 million in the
year ended December 31, 1996. For the year ended December 31, 1997, the
increases were due to the Company's higher debt level following the completion
of the financing of the purchase price for the Acquisitions. Benedek
Communications has higher financial expenses than Benedek Broadcasting due to
the Company's debt structure.
Income tax benefit for Benedek Broadcasting for the year ended December 31,
1997 was $6.4 million compared to $1.9 million for the year ended December 31,
1996. For the year ended December 31, 1997, Benedek Communications had a $12.0
million income tax benefit compared to $4.7 million for the year ended December
31, 1996. Benedek Communications has a greater income tax benefit than Benedek
Broadcasting due to the net tax affect on the difference in financial expenses.
The tax effect of the excess of book depreciation over tax depreciation and a
current period net operating loss for tax purposes were the primary factors
resulting in the income tax benefit for the year ended December 31, 1997.
Net loss for Benedek Broadcasting for the year ended December 31, 1997 was
$15.9 million as compared to $6.9 million net loss for the year ended December
31, 1996. Benedek Communications had a net loss of $24.3 million for the year
ended December 31, 1997 as compared to a net loss of $11.2 million for the year
ended December 31, 1996.
Broadcast cash flow for the year ended December 31, 1997 increased $8.6
million or 22.1% to $47.5 million from $38.9 million for the year ended December
31, 1996 primarily as a result of the 1996 acquisitions. As a percentage of net
revenues, broadcast cash flow margin decreased to 37.4% for the year ended
December 31, 1997 from 40.3% for the year ended December 31, 1997. On a Same
Station basis, broadcast cash flow for the year ended December 31, 1997
decreased $2.2 million or 4.4% to $47 million from $49.7 million for the year
ended December 31, 1996. As a percentage of net revenues, broadcast cash flow
margin on a Same Station basis decreased to 37.4% for the year ended December
31, 1997 from 39.4% for the year ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities is the primary source of liquidity for
Benedek Broadcasting and were $19.5 million for the year ended December 31, 1998
compared to $8.5 million for the year ended December 31, 1997. Cash flows from
operating activities for Benedek Communications were $19.8 million for the year
ended December 31, 1998 as compared to $8.5 million for the year ended December
31, 1997. The change in cash flows from operating activities was the result of
an increase in net income and a reduction in cash payments of interest expense.
Cash payments of interest expense totaled $27.1 million for the year ended
December 31, 1998 as compared to $30.5 million for the year ended December 31,
1997.
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<PAGE>
<PAGE>
Cash Flows from Investing Activities were $(6.3) million for the year ended
December 31, 1998, as compared to $(6.3) million for the year ended December 31,
1997. The purchase of property and equipment was the primary component of cash
flows from investing activities for both years.
Cash Flows from Financing Activities were $(11.5) million for Benedek
Broadcasting for the year ended December 31, 1998 compared to $(7.6) million for
the year ended December 31, 1997. For the year ended December 31, 1998, Benedek
Communications had cash used in financing activities of $11.8 million compared
to $7.6 million for the year ended December 31, 1997. Benedek Broadcasting had
less cash used in financing activities due to a $0.3 million contribution of
paid in capital from Benedek Communications generated from interest income. For
the year ended December 31, 1998, cash flows from financing activities included
$100.0 million of proceeds from the issuances of the Benedek Communications' 11
1/2% Exchangeable Senior Preferred Stock (the "Senior Preferred Stock") issued
during the quarter ended June 30, 1998. The proceeds were used to redeem Benedek
Communications' 15% Exchangeable Redeemable Senior Preferred Stock (the
"Original Senior Preferred Stock") totaling $92.8 million and to pay fees and
expenses totaling $4.3 million associated with the offering. Cash flows from
financing activities for the Company also included $0.5 million to purchase
50,000 shares of its outstanding warrants to acquire Class A common stock of
Benedek Communications. Of the 600,000 warrants issued during 1996, 550,000
warrants remain outstanding.
At December 31, 1998, Benedek Broadcasting had available to it a maximum of
$15.0 million under the revolving credit facility of the Credit Agreement (the
"Revolving Credit Facility") all of which was unused at such time. From time to
time throughout 1998, Benedek Broadcasting's cash needs required the use of the
Revolving Credit Facility for general working capital purposes and to fund
capital expenditures. During the year ended December 31, 1998, the highest
outstanding balance under the Revolving Credit Facility was $14.6 million. The
Revolving Credit Facility has a term expiring in 2004 and is fully revolving
until final maturity. The Revolving Credit Facility bears interest, at Benedek
Broadcasting's option, at a base rate plus a spread or at a Eurodollar rate plus
a spread.
In June 1998, Benedek Communications redeemed the Original Senior Preferred
Stock for $92.8 million (including approximately $12.1 million representing
premiums relating to the redemption) which was funded by the proceeds of the
issuance of the Senior Preferred Stock of $100.0 million before fees and
expenses of the offering. The Senior Preferred Stock was exchanged for Senior
Preferred Stock registered with the Securities and Exchange Commission pursuant
to an S-4 registration statement declared effective on June 15, 1998.
In 1996, the Company implemented a financing plan in order to finance the
acquisitions of thirteen television stations and to pay fees and expenses
related thereto. The financing plan consisted of (i) the offer and sale by the
Benedek Communications of the Senior Subordinated Discount Notes (the "Discount
Notes"), (ii) the sale by Benedek Communications of units consisting of the
Original Senior Preferred Stock and warrants to acquire Class A common stock of
Benedek Communications, (iii) Benedek Broadcasting borrowing $128.0 million
pursuant to the Term Loan Facilities of the Credit Agreement and (iv) Benedek
Communications issuing an aggregate of $45.0 million initial liquidation
preference of Seller Junior Discount Preferred Stock (the "Junior Preferred
Stock") to GECC and Mr. Paul Brissette. Benedek Broadcasting also has an
outstanding $135.0 million of Senior Secured Notes due 2005 (the "Senior Secured
Notes") which were issued in 1995 to refinance outstanding indebtedness and
finance the acquisition of the Company's station in Dothan, Alabama.
The Discount Notes do not bear interest until May 15, 2001, and Benedek
Communications will not be obligated to pay cash interest on the Discount Notes
until November 15, 2001. Through and including May 15, 2003, Benedek
Communications may, at its option, pay dividends and/or interest, as applicable,
by adding the amount thereof to the then effective liquidation preference of the
Senior Preferred Stock or pay interest
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<PAGE>
<PAGE>
on the Exchange Debentures (issuable in exchange for the Senior Preferred Stock)
by issuing additional Exchange Debentures. The Credit Agreement currently
prohibits Benedek Communications from making cash payments with respect to
dividends on the Senior Preferred Stock and interest on the Exchange Debentures
at any time. Accordingly, Benedek Communications currently intends not to pay
cash dividends on the Senior Preferred Stock or cash interest on the Exchange
Debentures, as applicable, prior to May 15, 2003. For all dividend payment dates
with respect to the Junior Preferred Stock prior to October 1, 2001, Benedek
Communications will pay such dividends by adding the amount thereof to the then
effective liquidation preference of the Junior Preferred Stock.
Benedek Communications is a holding company that derives all of its operating
income and Adjusted EBITDA from its subsidiary, Benedek Broadcasting, the common
stock of which, together with all other assets of Benedek Communications, have
been pledged to secure Benedek Communications' senior guarantee of all
indebtedness of Benedek Broadcasting outstanding under the Credit Agreement. As
a holding company, Benedek Communications' ability to pay its obligations,
including its obligation to pay interest on and principal of the Discount Notes,
whether at maturity, upon a change of control or otherwise, is 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 Benedek
Communications or to make funds available to Benedek Communications 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
Benedek Communications, the Senior Secured Note Indenture does contain such
limitations. However, as of December 31, 1998, Benedek Broadcasting could have
distributed approximately $190.6 million to Benedek Communications under such
limitations.
The Company anticipates that Adjusted EBITDA of Benedek Broadcasting will be
sufficient to finance the operating requirements of the Stations, debt service
requirements of the Senior Secured Notes and Term Loan Facilities and presently
anticipated capital expenditures for at least the period until the Company is
required to make cash payments in respect of the Discount Notes. The Company
expects that at that time it will be necessary to refinance the Discount Notes
and the Junior Preferred Stock. Such refinancing will also require amending or
refinancing the Term Loan Facilities since the Credit Agreement currently
prohibits the repayment or redemption of the Discount Notes or the redemption of
the Junior Preferred Stock.
The Credit Agreement was amended and restated as of December 17, 1997 to
convert existing Term Loans to new term loans, to modify certain financial
covenants and ratios, to increase the Revolving Credit Facility to $15.0 million
and to replace certain parties to the agreement. The outstanding principal
balance of the existing term loans which totaled $110.8 million were converted
to (1) Term Loan Series A of $77.0 million and (2) Term Loan Series B of $33.8
million. The Term Loan Facilities generally provide for quarterly amortization
until final maturity on December 31, 2004. The Company is required to make
scheduled amortization payments on the Term Loan Facilities, on an aggregate
basis for Series A and Series B Facilities, as follows: during 1999, $11.0
million; during 2000, $13.0 million; during 2001, $13.0 million; during 2002,
$14.0 million; during 2003, $15.0 million; and during 2004, $42.3 million.
In addition, the Company is required to make prepayments on the Term Loan
Facilities under certain circumstances, including upon certain asset sales and
the issuance of certain debt or equity securities. Beginning in 1999, the
Company is required to make prepayments on the Term Loan Facilities in an amount
equal to 50% of excess cash flow (as defined). These mandatory prepayments will
be applied to prepay, on a pro rata basis, the Term Loan Series A and Term Loan
Series B. The 1999 excess cash flow prepayment is approximately $3.3 million.
The Term Loans Series A and Series B bear interest, at the Company's option,
at a base rate plus a spread or at Eurodollar rate plus a spread. The margins
above the base rate and the Eurodollar rate at which the
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<PAGE>
<PAGE>
Term Loans and Revolving Credit Facility bear interest are subject to reductions
at such times as certain leverage ratio performance tests are satisfied.
The Term Loans and the Revolving Credit Facility contain certain financial
covenants, including, but not limited to, covenants related to cash interest
coverage, maximum leverage ratio and minimum Consolidated Adjusted EBITDA (as
defined). In addition, the Term Loans and the Revolving Credit Facility 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 Benedek Communications) transactions with affiliates,
mergers and acquisitions, sales of assets, guarantees and investments. The Term
Loans and the Revolving Credit Facility contain customary events of default for
highly-leveraged financings, including certain changes in ownership or control
of Benedek Broadcasting or the Company.
The Term Loans and the Revolving Credit Facility are secured by certain of
Benedek Broadcasting's present and future property and assets. The Term Loans
are also guaranteed by BLC, a wholly-owned subsidiary of Benedek Broadcasting
that holds the FCC licenses and authorizations for the stations, and is secured
by all of the common stock of BLC. The Term Loans are also guaranteed by WMTV
LLC, a wholly owned subsidiary of the WMTV Trust. WMTV LLC holds the FCC license
for WMTV, Madison, Wisconsin.
RECENT DEVELOPMENTS
On December 30, 1998, the Company entered into an Asset Exchange Agreement
with The Ackerley Group, Inc. ("Ackerley") pursuant to which it will exchange
the television broadcast assets of KCOY-TV, in Santa Maria, California for the
television broadcast assets of KKTV, Ackerley's station in Colorado Springs,
Colorado. Both KCOY-TV and KKTV are CBS affiliates. The exchange remains subject
to FCC approval. It is anticipated that the exchange will be completed in the
second quarter of 1999.
The proposed transaction will include a $9,000,000 payment by the Company to
Ackerley at the closing. The parties have entered into a time brokerage
agreement for each station, effective January 1, 1999. The time brokerage
agreements provide each buyer a presence at and certain approval rights
regarding activities of the station it is acquiring. The transaction will be
structured, to the extent feasible, as a tax-free exchange pursuant to Section
1031 of the Internal Revenue Code. In addition, the Company has a high tax basis
in the KCOY-TV assets since they were acquired in an asset acquisition in 1996.
As a result of the foregoing, the Company does not expect to incur any material
tax liability as a result of the exchange.
INCOME TAXES
For the year ended December 31, 1998, Benedek Broadcasting had a tax benefit
of $1.9 million recognized consisting of a $2.2 million benefit related to the
net reduction of deferred income tax liabilities and $0.3 million of taxes
currently due. Benedek Communications had a tax benefit of $8.1 million for the
year ended December 31, 1998 consisting of an $8.3 million benefit related to
the net reduction of deferred income tax liabilities and $0.3 million of taxes
currently due.
Under the provisions of the Internal Revenue Code, Benedek Broadcasting has
approximately $12.2 million of actual net operating loss carryforwards available
to offset future tax liabilities whereas Benedek Communications has
approximately $13.5 million available to it. These net operating loss
carryforwards expire between 2007 through 2011.
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<PAGE>
<PAGE>
YEAR 2000
The Year 2000 ("Y2K") issue is a result of computer programs using a two
digit format, as opposed to four digits, to indicate the year. These computer
systems will then be unable to read dates beyond the year 1999, which could
cause a system failure or other computer errors. The worst case scenario for the
Company is that its Stations would be unable to broadcast their daily
programming in which advertising revenue is generated.
The Company is currently in the process of evaluating potential Y2K issues
for its internal information technology ("IT") and non-IT ("non-IT") systems
which include but are not limited to systems such as broadcast equipment,
editing equipment, cameras, microphones, telephone/PBX systems, fax machines and
certain other equipment. It is also in the process of evaluating potential Y2K
issues that would involve third parties with which the Company has material
relationships (suppliers and customers).
All internal software and hardware is purchased or leased from third party
vendors. The Company does not employ or contract for computer programmers to
write Company-specific applications. The Company believes that the sales systems
are Y2K compliant due to their recent implementation. The Company's core
financial system is not Y2K compliant and is scheduled for upgrade to a Y2K
compliant version by the third quarter of 1999. Non-IT systems that are not
critical to operations are being replaced or upgraded in the normal course of
business so that they will be Y2K compliant systems. At this time, the Company
is not aware of any additional significant upgrades or changes that will need to
be made to its internal software and hardware to become Y2K ready, but this is
subject to change as the evaluation and compliance testing process continues.
The Company expects to be able to successfully implement any software or
hardware changes that may be necessary to address Y2K IT and non-IT readiness
issues. Based upon preliminary estimates, the Company does not believe that the
costs associated with such actions will have a material effect on the Company's
results of operations or financial condition. There can be no assurance however
that there will not be increased costs associated with the implementation of any
such changes.
The Company has not yet begun the process of polling key suppliers and
customers to gain an understanding of their Y2K readiness. The Company cannot
guarantee that Y2K compliance problems of third parties with which it has a
material relationship will not have a material adverse effect on the Company's
business, results of operations and financial condition. The Company has not yet
formulated a contingency plan to address difficulties that may arise from Y2K
noncompliance of its IT and non-IT systems or those of key third parties,
however, a contingency plan will be developed during the second half of 1999.
PENDING ADOPTION OF ACCOUNTING STANDARD
The FASB (Financial Accounting Standards Board) has issued FASB statement No.
133 "Accounting for Derivative Instruments and Hedging Activities" which the
Company will be required to adopt for its year ending December 31, 2000. This
pronouncement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This pronouncement is not expected to have a significant impact
on the Company's financial statements since the Company currently has no
derivative instruments.
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<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See pages F-1 and S-2.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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<PAGE>
PART III
ITEM 10. 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......................... 59 Chairman, Chief Executive Officer and Director
K. James Yager............................. 63 President, Chief Operating Officer and Director
Ronald L. Lindwall......................... 53 Senior Vice President-Finance, Chief Financial
Officer, Treasurer, Secretary and Director
Terrance F. Hurley......................... 43 Senior Vice President of Benedek Broadcasting
Raymond P. Maselli......................... 57 Senior Vice President of Benedek Broadcasting
Clyde G. Payne............................. 62 Senior Vice President of Benedek Broadcasting
Raymond J. Schonbak........................ 56 Senior Vice President of Benedek Broadcasting
Keith L. Bland............................. 43 Senior Vice President-Planning and Technology of
Benedek Broadcasting
Mary L. Flodin............................. 43 Vice President and Controller
Jay Kriegel................................ 58 Director
Paul S. Goodman............................ 44 Director
</TABLE>
Mr. A. Richard Benedek has been engaged in the television broadcasting
industry for over 19 years. Mr. Benedek is the Chairman and Chief Executive
Officer of the Company, a position he has held since the formation of the
Company in 1996. 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. Benedek currently serves on the
board of directors of the ABC Affiliates Association.
Mr. K. James Yager has been engaged in the television broadcasting industry
for over 39 years. Mr. Yager is the President and Chief Operating Officer of the
Company, positions he has held since the formation of the Company in 1996. 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 been a director of Benedek Broadcasting
Since 1986. Mr. Yager has also served as Vice President of each of Blue Grass
and Youngstown from 1990 to 1993, respectively, until the Merger. Mr. Yager was
employed by Cosmos Broadcasting from 1960 until 1980, most recently 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. Yager currently serves as
chairman on the television board of directors of the National Association of
Broadcasters. Mr. Yager also serves on the board of directors of Broadcast
Music, Inc. and the Television Bureau of Advertising.
Mr. Ronald L. Lindwall is the Senior Vice President-Finance, Chief
Financial Officer, Secretary and Treasurer of the Company, a position he has
held since the formation of the Company in 1996. Mr. Lindwall
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<PAGE>
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 been a
director of Benedek Broadcasting since 1994. Mr. Lindwall has also served as
Senior Vice President, Chief Financial Officer and Treasurer of each of Blue
Grass and Youngstown from 1990 until the Merger. From 1982 to 1990, Mr. Lindwall
was a partner at the accounting firm of McGladrey & Pullen.
Mr. Terrance F. Hurley has served as Senior Vice President of Benedek
Broadcasting since May 1996. From December 1995 until he became Senior Vice
President, Mr. Hurley served as Vice President/General Manager of KDLH-TV
serving Duluth, Minnesota and Superior, 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
Rochester-Austin, Minnesota. Mr. Hurley currently serves on the 100 Plus
Committee of the National Association of Broadcasters and the television retail
advertising committee of the board of directors of the Television Bureau of
Advertising.
Mr. Raymond P. Maselli has served as Senior Vice President of Benedek
Broadcasting since March 1997. From 1989 until he became Senior Vice President,
Mr. Maselli served as Vice President, General Manager of WYTV-TV in Youngstown,
Ohio. He was the Vice President of Sales and Programming for WGRZ-TV of Buffalo,
New York from 1983 to 1989. Mr. Maselli started his broadcast career in 1965.
Mr. Clyde G. Payne has been engaged in the television broadcasting industry
for over 30 years. Mr. Payne was promoted to Senior Vice President of Benedek
Broadcasting effective March 1997. From March 1995 until February 1997, he
served as Divisional Vice President of Benedek Broadcasting. Mr. Payne also
served as General Manager of WBKO-TV, serving Bowling Green, Kentucky, from 1970
until 1997. Mr. Payne was also part owner of WBKO-TV from 1976 until the Station
was acquired by Blue Grass in 1983. Mr. Payne has served as chairman of the
Arbitron Television Advisory Counsel and the ABC Affiliates Association, as well
as Vice Chairman of the Television Board of the National Association of
Broadcasters.
Mr. Raymond J. Schonbak has served as Senior Vice President of Benedek
Broadcasting since April 1997. Mr. Schonbak was the founder and President of US
Broadcast Group of Shelton, Connecticut from 1995 to 1997. He served as the
Chief Executive Officer of Triad Communications of San Francisco, California
from 1991 to 1995. Prior to that time, Mr. Schonbak held a variety of management
positions in the broadcast field beginning in 1970.
Mr. Keith L. Bland has been engaged in the television broadcasting industry
for over 23 years. Mr. Bland has served as Senior 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 has served as Vice President and Controller of the
Company since its formation in 1996. 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 counselor with the public
relations firm of Abernathy MacGregor Frank and
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<PAGE>
<PAGE>
its predecessor firm. 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 formation in 1996.
Mr. Paul S. Goodman has been corporate counsel to Benedek Broadcasting
since 1983 and the Company since its formation in 1996. 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. In 1998, the Company paid each
director who is not an employee of the Company $2,500 per quarter and $500 per
Board meeting for his services as a director. No family relationship exists
between any of the executive officers or directors of the Company.
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION.
The following table sets forth certain information concerning the
compensation paid to the Company's Chief Executive Officer and the other five
most highly-compensated executives during the fiscal years ended December 31,
1998, December 31, 1997 and December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
OTHER ALL
ANNUAL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)(a)
--------------------------- ---- --------- -------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
A. Richard Benedek, Chairman and 1998 916,667 -- -- 11,326
Chief Executive Officer 1997 750,000 -- -- 11,218
1996 525,000 -- -- 9,598
K. James Yager, President 1998 542,667 -- -- 14,522
1997 415,500 -- -- 14,875
1996 406,586 -- -- 15,465
Ronald L. Lindwall, Senior Vice President- 1998 199,231 -- -- 4,180
Finance, Chief Financial Officer, Secretary 1997 174,327 25,000 -- 4,555
and Treasurer 1996 149,530 25,000 -- 4,458
Terrance F. Hurley, Senior Vice President 1998 218,615 -- -- 4,897
1997 174,327 -- -- 3,530
1996 125,538 25,000 -- 2,573
Raymond P. Maselli, Senior Vice President 1998 199,231 -- -- 13,305
1997 174,352 -- -- 7,703
Raymond J. Schonbak, Senior Vice
President 1998 250,000 -- -- 9,504
1997 182,693 -- 99,561(b) 5,544
</TABLE>
- --------------------------
(a) Represents the amount of the Company's contribution under its 401(k) plan
and life insurance premiums.
(b) Represents relocation expenses ($63,554), amounts reimbursed for the
payment of taxes ($31,116), personal use of Company vehicle and medical
insurance.
-49-
<PAGE>
<PAGE>
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. 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.
1999 STOCK OPTION PLAN
The Benedek Communications Corporation 1999 Stock Option Plan (the "Plan")
provides for granting of stock options to employees, directors, consultants and
advisors of the Company and its subsidiaries. The Plan is intended to encourage
stock ownership by employees, directors, consultants and advisors of the Company
and its subsidiaries and thereby enhance their proprietary interest in the
Company. Subject to the provisions of the Plan, the Board of Directors
determines which of the eligible directors, employees, consultants and advisors
receive stock options, the terms, including applicable vesting periods, of such
option, and the number of shares for which such options are granted.
The total number of shares of Benedek Communications Corporation Class B
Common Stock that may be purchased pursuant to options under the Plan shall not
exceed 240,000. The option price per share with respect to each such option is
determined by the Board and generally is not less than 100% of the fair market
value of the Class B Common Stock on the date such option is granted as
determined by the Board. The Plan terminates on December 31, 2008, unless
terminated earlier by the Board.
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.
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<PAGE>
<PAGE>
On January 1, 1998, Mr. K. James Yager, the President, Chief Operating
Officer and a director of the Company, exercised options to purchase 370,000
shares of Class B Common Stock of the Company for an aggregate exercise price of
$555,000. Mr. Yager borrowed the funds necessary to pay the exercise price from
the Company, which loan is evidenced by a promissory note which bears interest
at the rate of 5.93% per annum, is secured by the shares which were issued upon
exercise of the option and is payable as and when any such shares are sold and
in any event no later than December 31, 2007.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.
Mr. A. Richard Benedek, the Chairman and Chief Executive Officer of the
Company, owns 6,467,600 shares of Class B Common Stock of the Company,
representing 87.4% of its outstanding common stock.
Mr. Stephen Benedek, the son of Mr. A. Richard Benedek, owns 562,400 shares
of Class B Common Stock of the Company, representing 7.6% of its outstanding
common stock. Mr. Stephen Benedek is not an officer, director or employee of the
Company.
Mr. K. James Yager, the President, Chief Operating Officer and a director
of the Company, owns 370,000 shares of Class B Common Stock of the Company,
representing 5.0% of its outstanding common stock.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Liquidity and Capital Resources" for a discussion with
respect to arrangements which may result in a change in control of Benedek
Broadcasting and/or BLC.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.
On January 1, 1998, Mr. K. James Yager, the President, Chief Operating
Officer and a director of the Company, exercised options to purchase 370,000
shares of Class B Common Stock of the Company for an aggregate exercise price of
$555,000. Mr. Yager borrowed the funds necessary to pay the exercise price from
the Company, which loan is evidenced by a promissory note which bears interest
at the rate of 5.93% per annum, is secured by the shares which were issued upon
exercise of the option and is payable as and when any such shares are sold and
in any event no later than December 31, 2007.
During June 1998, Mr. A. Richard Benedek, the Chairman, Chief Executive
Officer and a director of the Company, borrowed $65,000 from the Company for
personal purposes. The loan is unsecured, evidenced by a promissory note which
bears interest at the rate of 5.58% per annum and is payable on July 1, 2000.
During July 1998, Mr. K. James Yager, the President, Chief Operating
Officer and a director of the Company, borrowed $150,000 from the Company for
personal purposes. The loan is unsecured, evidenced by a promissory note which
bears interest at the rate of 5.56% per annum and is payable on July 1, 2000.
In December 1998, the Company agreed with the lenders under its Credit
Agreement that the amounts permitted to be paid as compensation to Mr. A.
Richard Benedek under the Credit Agreement could be paid to him as loans
instead. In 1999, the Company intends to make loans to Mr. Benedek in amounts to
be determined within the limitations set forth in the Credit Agreement.
Paul S. Goodman, a member of the law firm of Shack & Siegel, P.C., is a
director of the Company. During the fiscal year ended December 31, 1998, the
Company paid approximately $0.6 million for legal services to Shack & Siegel,
P.C.
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<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Consolidated Financial Statements of the Company.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Benedek Communications Corporation and Subsidiaries
and Benedek Broadcasting Corporation and Subsidiaries
Independent Auditor's Report.................................................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998.................................. F-3
Consolidated Statements of Operations for the Three Years Ended
December 31, 1998........................................................................... F-4
Consolidated Statements of Stockholder's Equity (Deficit) for the Three Years Ended
December 31, 1998........................................................................... F-5
Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1998........................................................................... F-6
Notes to Consolidated Financial Statements.................................................... F-8
Benedek License Corporation and WMTV License Co., LLC
Independent Auditor's Report.................................................................. F-25
Combined Balance Sheets as of December 31, 1997 and 1998...................................... F-26
Combined Statements of Operations for the Three Years Ended December 31, 1998................. F-27
Combined Statements of Stockholder's Equity for the Three Years Ended
December 31, 1998............................................................................ F-28
Combined Statements of Cash Flows for the Three Years Ended December 31, 1998................. F-29
Notes to Combined Financial Statements........................................................ F-30
(a)(2) Supplemental Schedule
Benedek Communications Corporation and Subsidiaries
Independent Auditor's Report.................................................................. S-1
Schedule II---Valuation and Qualifying Accounts............................................... S-2
</TABLE>
All other schedules for which provision is made in the applicable
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
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<PAGE>
<PAGE>
(a)(3) Exhibits.
<TABLE>
<S> <C>
3.1 -- Certificate of Incorporation of the Registrant, as amended,
incorporated by reference to Exhibit 3.1 to Benedek
Communications Corporation'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 Benedek Communications Corporation 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 11
1/2% Senior Exchangeable Preferred Stock Qualifications,
Limitations and Restrictions thereof, of Benedek Communications
Corporation, incorporated by reference to Exhibit 3.3 to Benedek
Communications Corporation's Registration Statement on Form S-4,
File No. 333-56367, filed on June 9, 1998 (the "1998 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 of Benedek Communications Corporation,
incorporated by reference to Exhibit 3.4 to the S-4 Registration
Statement.
3.5 -- Certificate of Incorporation of Benedek Broadcasting Corporation,
as amended, incorporated by reference to Exhibit 3.1 to Benedek
Broadcasting Corporation's Registration Statement on Form S-1,
File No. 33-91412, filed on April 20, 1995 (the "S-1 Registration
Statement").
3.6 -- By-Laws of Benedek Broadcasting Corporation, as amended,
incorporated by reference to Exhibit 3.2 to the S-1 Registration
Statement.
3.7 -- Certificate of Incorporation of Benedek License Corporation,
incorporated by reference to Exhibit 3.3 to Benedek Broadcasting
Corporation's Quarterly Report on From 10-Q for the quarter ended
June 30, 1996 (the "Second Quarter 1996 10-Q").
3.8 -- By-Laws of Benedek License Corporation, incorporated by reference
to Exhibit 3.4 to the Second Quarter 1996 10-Q.
4.1 -- Indenture dated as of May 15, 1996 between Benedek Communications
Corporations 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 of
Benedek Communications Corporation (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 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 Corporation (included in Exhibit 4.3 hereof),
incorporated by reference to Exhibit 4.4 to the S-4 Registration
Statement.
4.5 -- First Supplemental Indenture dated as of June 6, 1996 among
Benedek Broadcasting Corporation, Benedek License Corporation and
The Bank of New York, incorporated by reference to Exhibit 4.3 to
the Second Quarter 1996 10-Q.
4.6 -- Certificate of Designation, Preferences and Relative,
Participating, Optional and Other Special Rights of 11 1/2%
Senior Preferred Stock due 2008 and Qualifications, Limitations
and Restrictions thereof (filed as Exhibit 3.3 hereof),
incorporated by reference to Exhibit 4.6 to the 1998 S-4
Registration Statement.
4.7 -- 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 of Benedek Communications Corporation
(filed as Exhibit 3.4 hereof), incorporated by reference to
Exhibit 4.6 to the S-4 Registration Statement.
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
<S> <C>
4.8 -- Warrant Agreement dated as of June 5, 1996 between Benedek
Communications Corporation and IBJ Schroder Bank & Trust Company
with respect to Class A Common Stock of Benedek Communications
Corporation, incorporated by reference to Exhibit 4.7 to the S-4
Registration Statement.
4.9 -- Form of Exchange Debenture relating to the 11 1/2% Exchange
Debentures which may be issued, under certain circumstances, in
exchange for the 11 1/2% Senior Exchangeable Preferred Stock of
Benedek Communications Corporation incorporated by reference to
Exhibit 4.9 to the 1998 S-4 Registration Statement.
10.1 -- Purchase Agreement dated May 30, 1996 between Benedek
Communications Corporation 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 Benedek Communications Corporation and Goldman, Sachs &
Co. with respect to the 13 1/4% Senior Subordinated Discount
Notes due 2006 of the Registrant, incorporated by reference to
Exhibit 10.2 to the S-4 Registration Statement.
10.3 -- Purchase Agreement dated May 7, 1998 among Benedek Communications
Corporation, TD Securities (USA) and BT Alex. Brown Incorporated,
incorporated by reference to Exhibit 10.1 of the 1998 S-4
Registration Statement.
10.4 -- Exchange and Registration Rights Agreement dated May 7, 1998
among Benedek Communications Corporation, TD Securities (USA)
Inc. and BT Alex. Brown Incorporated with respect to the 11 1/2%
Senior Exchangeable Redeemable Preferred Stock of Benedek
Communications Corporation, incorporated by reference to Exhibit
10.2 of the 1998 S-4 Registration Statement.
10.5 -- Warrant Agreement dated as of June 5, 1996 between Benedek
Communications Corporation and IBJ Schroder Bank & Trust Company
(filed as Exhibit 4.8 hereof), incorporated by reference to
Exhibit 10.5 to the S-4 Registration Statement.
10.8 -- Common Stock Registration Rights Agreement dated as of June 5,
1996 among Benedek Communications Corporation, Goldman, Sachs &
Co. and BT Securities Corporation, incorporated by reference to
Exhibit 10.7 to the S-4 Registration Statement.
10.9 -- Amended and Restated Credit Agreement dated as of December 17,
1997 among Benedek Communications Corporation, Benedek
Broadcasting, the Lenders listed therein and Bankers Trust
Company, as Agent, incorporated by reference to Exhibit 10.8 to
Benedek Communications Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 (the "1997 10-K").
10.10 -- Limited Waiver and First Amendment to Credit Agreement dated as
of May 6, 1998 among Benedek Communications Corporation, Benedek
Broadcasting Corporation, the Lenders listed therein and Bankers
Trust Company as Agent, incorporated by reference to Exhibit 10.1
to the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 (the "Third Quarter 1998 10-Q").
10.11 -- Second Amendment to Credit Agreement dated as of October 31,
1998, among Benedek Communications Corporation, Benedek
Broadcasting Corporation, the Lenders listed therein and Bankers
Trust Company, as Agent, incorporated by reference to Exhibit
10.2 to the Third Quarter 1998 10-Q.
*10.12 -- Limited Waiver and Consent Regarding Exchange of Assets of
KCOY-TV and Compensation of Benedek dated as of December 30, 1998
among Benedek Communications Corporation, Broadcasting
Corporation, the Lenders listed therein and Bankers Trust
Company, as Agent, and Benedek License Corporation.
10.13 -- Amended and Restated Guaranty dated as of December 17, 1997 by
Benedek Communications Corporation in favor of Bankers Trust
Company, incorporated by reference to Exhibit 10.9 to the 1997
10-K.
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
<S> <C>
10.14 -- Amended and Restated Guaranty dated as of December 17, 1997 by
Benedek License Corporation in favor of Bankers Trust Company,
incorporated by reference to Exhibit 10.10 to the 1997 10-K.
10.15 -- Amended and Restated Pledge Agreement dated as of December 17,
1997 between Benedek Communications Corporation and Bankers Trust
Company, incorporated by reference to Exhibit 10.11 to the 1997
10-K.
10.16 -- Amended and Restated Security Agreement dated as of December 17,
1997 between Benedek Communications Corporation and Bankers Trust
Company, incorporated by reference to Exhibit 10.12 to the 1997
10-K.
10.17 -- Amended and Restated Accounts Receivable Security Agreement dated
as of December 17, 1997 between Benedek Broadcasting Corporation
and Bankers Trust Company, incorporated by reference to Exhibit
10.13 to the 1997 10-K.
10.18 -- Amended and Restated Acquired Assets Security Agreement dated as
of December 17, 1997 between Benedek Broadcasting Corporation and
Bankers Trust Company, incorporated by reference to Exhibit 10.14
to the 1997 10-K.
10.19 -- Amended and Restated Tangible Assets Security Agreement dated as
of December 17, 1997 between Benedek Broadcasting Corporation and
Bankers Trust Company, incorporated by reference to Exhibit 10.15
to the 1997 10-K.
10.20 -- Amended and Restated Collateral Account Agreement dated as of
December 17, 1997 between Benedek Communication Corporation and
Bankers Trust Company, incorporated by reference to Exhibit 10.16
to the 1997 10-K.
10.21 -- Form of Indemnity Agreement between Benedek Communications
Corporation and each of its executive officers and directors,
incorporated by reference to Exhibit 10.14 to the S-4
Registration Statement.
10.22 -- Employment Agreement dated as of June 6, 1996 between Benedek
Broadcasting Corporation and A. Richard Benedek, incorporated by
reference to Exhibit 10.16 to the S-4 Registration Statement.
10.23 -- Employment Agreement dated as of June 6, 1996 between Benedek
Broadcasting Corporation and K. James Yager, incorporated by
reference to Exhibit 10.17 to the S-4 Registration Statement.
10.24 -- Employment Agreement dated as of June 6, 1996 between Benedek
Broadcasting Corporation and Ronald L. Lindwall, incorporated by
reference to Exhibit 10.19 to the S-4 Registration Statement.
10.25 -- Employment agreement dated as of June 6, 1996 between Benedek
Broadcasting Corporation and Terrance F. Hurley, incorporated by
reference to Exhibit 10.20 to the S-4 Registration Statement.
*10.26 -- Trust Agreement dated as of September 21, 1998 among Benedek
Broadcasting Corporation, Benedek License Corporation and Philip
A. Jones, as trustee.
*10.27 -- Asset Exchange Agreement dated December 30, 1998 between Benedek
Broadcasting Corporation and Benedek License Corporation, and AK
Media Group, Inc.
*10.28 -- 1999 Stock Option Plan of Benedek Communications Corporation.
*10.29 -- Time Brokerage Agreement (KKTV(TV)) dated as of December 30, 1998
between Benedek Broadcasting Corporation and AK Media Group, Inc.
*10.30 -- Time Brokerage Agreement (KCOY-TV) dated as of December 30, 1998
between Benedek Broadcasting Corporation, Benedek License
Corporation and AK Media Group, Inc.
*10.31 -- Letter Agreement dated January 22, 1999 between AK Media Group,
Inc. and Benedek Broadcasting Corporation amending the Time
Brokerage Agreement (KKTV(TV)) dated as of December 30, 1998.
*10.32 -- Letter Agreement dated January 22, 1999 between AK Media Group,
Inc. and Benedek Broadcasting Corporation amending the Time
Brokerage Agreement (KCOY-TV) dated as of December 30, 1998.
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
<S> <C>
*21 -- Subsidiaries of Benedek Communications Corporation and Benedek
Broadcasting Corporation.
*27.1 -- Financial Data Schedule pursuant to Article 5 of Regulation S-X
with respect to Benedek Communications Corporation.
*27.2 -- Financial Data Schedule pursuant to Article 5 of Regulation S-X
with respect to Benedek Broadcasting Corporation.
</TABLE>
- ---------------
*Filed herewith
(b) Reports on Form 8-K
None.
-56-
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BENEDEK COMMUNICATIONS CORPORATION
(REGISTRANT)
By: /s/ A. RICHARD BENEDEK
-----------------------------------
A. RICHARD BENEDEK
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
DATE: March 9, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
--------- ------------------------ ----
<S> <C> <C>
/s/ A. RICHARD BENEDEK Chairman and Chief Executive Officer March 9, 1999
...................................... (Principal Executive Officer) and
A. RICHARD BENEDEK Director
/s/ K. JAMES YAGER President and Director March 9, 1999
......................................
K. JAMES YAGER
/s/ RONALD L. LINDWALL Senior Vice President-Finance, Chief March 9, 1999
....................................... Financial Officer, Secretary and
RONALD L. LINDWALL Treasurer (Principal Financial and
Accounting Officer) and Director
/s/ JAY KRIEGEL Director March 9, 1999
.......................................
JAY KRIEGEL
/s/ PAUL S. GOODMAN Director March 9, 1999
.......................................
PAUL S. GOODMAN
</TABLE>
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<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BENEDEK BROADCASTING CORPORATION
(REGISTRANT)
By: /s/ A. RICHARD BENEDEK
.....................................
A. RICHARD BENEDEK
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
DATE: March 9, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
--------- ------------------------ ----
<S> <C> <C>
/s/ A. RICHARD BENEDEK Chairman and Chief Executive Officer March 9, 1999
....................................... (Principal Executive Officer) and
A. RICHARD BENEDEK Director
/s/ K. JAMES YAGER President and Director March 9, 1999
.......................................
K. JAMES YAGER
/s/ RONALD L. LINDWALL Senior Vice President-Finance, Chief March 9, 1999
....................................... Financial Officer, Secretary and
RONALD L. LINDWALL Treasurer (Principal Financial and
Accounting Officer) and Director
/s/ JAY KRIEGEL Director March 9, 1999
.......................................
JAY KRIEGEL
/s/ PAUL S. GOODMAN Director March 9, 1999
.......................................
PAUL S. GOODMAN
</TABLE>
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<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BENEDEK LICENSE CORPORATION
(SUBSIDIARY GUARANTOR REGISTRANT)
By: /s/ RONALD L. LINDWALL
......................................
RONALD L. LINDWALL
SENIOR VICE PRESIDENT, CHIEF
FINANCIAL OFFICER, SECRETARY AND TREASURER
DATE: March 9, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
--------- ------------------------ ----
<S> <C> <C>
/s/ A. RICHARD BENEDEK Chairman and Chief Executive Officer March 9, 1999
...................................... (Principal Executive Officer) and
A. RICHARD BENEDEK Director of Benedek License Corporation
/s/ K. JAMES YAGER President and Director of Benedek License March 9, 1999
....................................... Corporation
K. JAMES YAGER
/s/ RONALD L. LINDWALL Senior Vice President, Chief Financial March 9, 1999
....................................... Officer, Secretary and Treasurer
RONALD L. LINDWALL (Principal Financial and Principal
Accounting Officer) and Director of
Benedek License Corporation
/s/ PAUL S. GOODMAN Director of Benedek License Corporation March 9, 1999
.......................................
PAUL S. GOODMAN
</TABLE>
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<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Benedek Communications Corporation and Subsidiaries
and Benedek Broadcasting Corporation and Subsidiaries
Independent Auditor's Report.................................................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998.................................. F-3
Consolidated Statements of Operations for the Three Years Ended
December 31, 1998.......................................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the Three Years Ended
December 31, 1998........................................................................... F-5
Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1998........................................................................... F-6
Notes to Consolidated Financial Statements.................................................... F-8
Benedek License Corporation and WMTV License Co., LLC
Independent Auditor's Report.................................................................... F-25
Combined Balance Sheets as of December 31, 1997 and 1998......................................... F-26
Combined Statements of Operations for the Three Years Ended December 31, 1998.................... F-27
Combined Statements of Stockholder's Equity for the Three Years Ended
December 31,1998............................................................................. F-28
Combined Statements of Cash Flows for the Three Years Ended December 31, 1998.................... F-29
Notes to Combined Financial Statements........................................................... F-30
</TABLE>
F-1
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Benedek Communications Corporation and Subsidiaries and
Benedek Broadcasting Corporation and Subsidiaries
Rockford, Illinois
We have audited the accompanying consolidated balance sheets of Benedek
Communications Corporation and subsidiaries and Benedek Broadcasting Corporation
(a wholly-owned subsidiary of Benedek Communications Corporation) and
subsidiaries as of December 31, 1997 and 1998 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
years ended December 31, 1996, 1997 and 1998. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Benedek
Communications Corporation and subsidiaries and Benedek Broadcasting Corporation
and subsidiaries as of December 31, 1997 and 1998 and the results of their
operations and their cash flows for the years ended December 31, 1996, 1997 and
1998, in conformity with generally accepted accounting principles.
/s/ McGLADREY & PULLEN, LLP
Rockford, Illinois
February 15, 1999
F-2
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------
1997 1998
-------------------------------------- ---------------------------------
Benedek Benedek Benedek Benedek
Broadcasting Communications Broadcasting Communications
Corporation Corporation Corporation Corporation
---------------- ---------------- ---------------------------------
ASSETS (In thousands, except share and per share data)
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents ................ $ 2,647 $ 2,648 $ 4,290 $ 4,291
Receivables
Trade, less allowance for doubtful accounts of
$472 and $480 for 1997 and 1998 ........... 25,004 25,004 25,984 25,984
Other ........................................ 1,729 1,729 1,389 1,389
Current portion of program broadcast rights .... 4,869 4,869 4,878 4,878
Prepaid expenses ............................... 1,659 1,659 1,623 1,623
Deferred income taxes .......................... 1,004 1,004 1,191 1,191
--------- --------- --------- ---------
TOTAL CURRENT ASSETS ........... 36,912 36,913 39,355 39,356
--------- --------- --------- ---------
Property and equipment (Note D) .................... 73,811 73,811 62,627 62,627
--------- --------- --------- ---------
Intangible assets (Note E) ......................... 345,588 345,588 335,634 335,634
--------- --------- --------- ---------
Other assets
Program broadcast rights, less current portion
(Note H) ...................................... 1,796 1,796 1,198 1,198
Deferred loan costs ............................ 7,245 10,216 6,116 8,475
Land held for sale ............................. 109 109 109 109
Other .......................................... 62 62 63 63
--------- --------- --------- ---------
9,212 12,183 7,486 9,845
--------- --------- --------- ---------
$ 465,523 $ 468,495 $ 445,102 $ 447,462
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current Liabilities
Current maturities of notes payable ............ $ 13,480 $ 13,480 $ 15,911 $ 15,911
Current program broadcast rights payable ....... 6,762 6,762 6,994 6,994
Accounts payable and accrued expenses (Note I) . 13,476 13,477 11,977 11,977
Deferred revenue ............................... 683 683 644 644
--------- --------- --------- ---------
TOTAL CURRENT LIABILITIES ...... 34,401 34,402 35,526 35,526
--------- --------- --------- ---------
Long-Term Obligations
Notes and leases payable (Note F, G) ........... 247,114 357,437 233,492 358,905
Program broadcast rights payable (Note H) ...... 1,353 1,353 891 891
Deferred revenue ............................... 3,760 3,760 2,994 2,994
Deferred income taxes (Note K) ................. 50,345 41,895 48,366 33,765
--------- --------- --------- ---------
302,572 404,445 285,743 396,555
--------- --------- --------- ---------
Exchangeable redeemable senior preferred stock
liquidation preference 1997 $75,610,
1998 $106,579 (Note F) ........................ -- 73,660 -- 107,596
--------- --------- --------- ---------
Seller junior discount preferred stock (Note F) .... -- 50,896 -- 55,048
--------- --------- --------- ---------
Commitments (Note H, J)
Stockholders' Equity (Deficit) (Note C, F, L)
Common stock ................................... 1,047 -- 870 --
Common stock, Class A .......................... -- -- -- --
Common stock, Class B .......................... -- 70 -- 74
Additional paid-in capital ..................... 149,592 (40,192) 150,969 (59,549)
Accumulated deficit ............................ (20,608) (54,786) (28,006) (87,200)
Stockholder's note receivable (Note C) ......... -- -- -- (588)
--------- --------- --------- ---------
130,031 (94,908) 123,833 (147,263)
Less common stock held in treasury ............. (1,481) -- -- --
--------- --------- --------- ---------
128,550 (94,908) 123,833 (147,263)
--------- --------- --------- ---------
$ 465,523 $ 468,495 $ 445,102 $ 447,462
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-3
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1996 1997 1998
-------------------------------- ------------------------------- ------------------------------
BENEDEK BENEDEK BENEDEK BENEDEK BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS
CORPORATION CORPORATION CORPORATION CORPORATION CORPORATION CORPORATION
------------ ------------- ------------- -------------- ------------ -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net revenues .................. $ 96,386 $ 96,386 $ 127,073 $ 127,073 $ 139,833 $ 139,833
----------- ----------- ----------- ----------- ----------- -----------
Operating expenses:
Selling, technical and
program expenses ..... 43,759 43,759 60,385 60,385 64,651 64,651
General and administrative 14,844 14,844 19,618 19,618 20,858 20,858
Depreciation and
amortization ......... 20,220 20,220 31,380 31,380 30,830 30,830
Corporate ................. 2,695 2,695 3,787 3,787 4,643 4,643
----------- ----------- ----------- ----------- ----------- -----------
81,518 81,518 115,170 115,170 120,982 120,982
----------- ----------- ----------- ----------- ----------- -----------
Operating income ....... 14,868 14,868 11,903 11,903 18,851 18,851
----------- ----------- ----------- ----------- ----------- -----------
Financial income (expense):
Interest expense: (Note A)
Cash interest .......... (22,841) (22,841) (28,996) (28,996) (26,979) (26,979)
Other interest ......... (1,030) (8,130) (5,352) (19,374) (1,341) (17,043)
----------- ----------- ----------- ----------- ----------- -----------
(23,871) (30,971) (34,348) (48,370) (28,320) (44,022)
Interest income ........... 282 282 130 130 170 494
----------- ----------- ----------- ----------- ----------- -----------
(23,589) (30,689) (34,218) (48,240) (28,150) (43,528)
----------- ----------- ----------- ----------- ----------- -----------
(Loss) before income
tax benefit ......... (8,721) (15,821) (22,315) (36,337) (9,299) (24,677)
Income tax benefit (Note K) ... 1,849 4,664 6,393 12,027 1,901 8,052
----------- ----------- ----------- ----------- ----------- -----------
Net (loss) ........ $ (6,872) (11,157) $ (15,922) (24,310) $ (7,398) (16,625)
----------- ----------- -----------
----------- ----------- -----------
Preferred stock dividends and
accretion ................. (9,519) (19,037) (30,855)
----------- ----------- -----------
Net (loss) applicable to common
stock ..................... $ (20,676) $ (43,347) $ (47,480)
----------- ----------- -----------
----------- ----------- -----------
Basic and diluted (loss) per
common share .................. $ (2.94) $ (6.17) $ (6.42)
----------- ----------- -----------
----------- ----------- -----------
Weighted-average common
shares outstanding ............ 7,030,000 7,030,000 7,400,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
BENEDEK BROADCASTING CORPORATION
<TABLE>
<CAPTION>
Additional
Common Paid-In Accumulated Treasury
Stock Capital Deficit Stock Total
-------- --------- --------- ------------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ................ $ 1,047 $ 2,758 $ (38,887) $ (1,481) $ (36,563)
Contribution of additional paid-in capital
by parent in connection with acquisitions -- 187,907 -- -- 187,907
Reclassification of accumulated deficit
due to change in income tax status ...... -- (41,073) 41,073 -- --
Net (loss) .............................. -- -- (6,872) -- (6,872)
--------- --------- --------- --------- ---------
Balance at December 31, 1996 ................ $ 1,047 $ 149,592 $ (4,686) $ (1,481) $ 144,472
Net (loss) .............................. -- -- (15,922) -- (15,922)
--------- --------- --------- --------- ---------
Balance at December 31, 1997 ................ $ 1,047 $ 149,592 $ (20,608) $ (1,481) $ 128,550
Contribution of paid-in capital by parent -- 2,681 -- -- 2,681
Retirement of treasury stock ............ (177) (1,304) -- 1,481 --
Net (loss) .............................. -- -- (7,398) -- (7,398)
--------- --------- --------- --------- ---------
Balance at December 31, 1998 ................ $ 870 $ 150,969 $ (28,006) $- $ 123,833
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
BENEDEK COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
Additional Stockholder's
Common Paid-In Accumulated Note
Stock Capital Deficit Receivable Total
---------- ---------- ----------- ------------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ................ $ 70 $ 2,253 $ (38,887) $ -- $ (36,564)
Allocation of proceeds from sale of
exchangeable redeemable senior
preferred stock to initial warrants .. -- 9,000 -- -- 9,000
Accretion to exchangeable redeemable
senior preferred stock (Note F) ...... -- (2,205) -- -- (2,205)
Financial costs related to the sale of
preferred stock ...................... -- (3,322) -- -- (3,322)
Reclassification of accumulated deficit
due to change in income tax status ... -- (41,073) 41,073 -- --
Dividends on preferred stock ............ -- -- (7,313) -- (7,313)
Net (loss) .............................. -- -- (11,157) -- (11,157)
--------- --------- --------- --------- -----------
Balance at December 31, 1996 ................ $ 70 $ (35,347) $ (16,284) $ -- $ (51,561)
Accretion to exchangeable redeemable
senior preferred stock (Note F) ....... -- (4,845) -- -- (4,845)
Dividends on preferred stock ............ -- -- (14,192) -- (14,192)
Net (loss) .............................. -- -- (24,310) -- (24,310)
--------- --------- --------- --------- -----------
Balance at December 31, 1997 ................ $ 70 $ (40,192) $ (54,786) $ -- $ (94,908)
Accretion to exchangeable redeemable
senior preferred stock (Note F) ...... -- (15,067) -- -- (15,067)
Dividends on preferred stock ............ -- -- (15,789) -- (15,789)
Financial costs related to the sale of
preferred stock ...................... -- (4,339) -- -- (4,339)
Repurchase and retirement of initial
warrants ............................. -- (535) -- -- (535)
Stock options exercised in exchange for
stockholder note receivable (Note C) . 4 551 -- (555) --
Accrued interest on note receivable ..... -- 33 -- (33) --
Net (loss) .............................. -- -- (16,625) -- (16,625)
--------- --------- --------- --------- ---------
Balance at December 31, 1998 ................ $ 74 $ (59,549) $ (87,200) $ (588) $(147,263)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1996 1997 1998
------------------------------- ------------------------------- -------------------------------
BENEDEK BENEDEK BENEDEK BENEDEK BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS
CORPORATION CORPORATION CORPORATION CORPORATION CORPORATION CORPORATION
------------ -------------- ------------ -------------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net (loss) ...................... $ (6,872) $ (11,157) $ (15,922) $ (24,310) $ (7,398) $ (16,625)
Adjustments to reconcile net
(loss) to net cash provided
by operating activities:
Amortization of program
broadcast rights.............. 4,399 4,399 6,401 6,401 6,758 6,758
Depreciation and amortization .. 13,839 13,839 20,971 20,971 21,178 21,178
Amortization and write-off of
intangibles and deferred loan
costs.......................... 7,387 7,617 15,031 15,779 11,045 11,657
Amortization of note discount .. -- 6,870 -- 13,275 -- 15,090
Deferred income taxes .......... (1,944) (4,759) (6,741) (12,376) (2,166) (8,317)
Other .......................... -- -- 610 610 -- --
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Receivables .................... (723) (722) (2,603) (2,603) (640) (640)
Due to sellers ................. 2,188 2,188 (153) (153) -- --
Prepaid expenses and other ..... (266) (266) (206) (206) 36 36
Payments on program broadcast
rights payable................. (3,318) (3,318) (5,937) (5,937) (6,399) (6,399)
Accounts payable and accrued
expenses....................... 3,566 3,566 (2,281) (2,281) (2,157) (2,157)
Deferred revenue ............... (414) (414) (699) (699) (805) (805)
--------- --------- --------- --------- --------- ---------
Net cash provided by operating
activities.................... 17,842 17,843 8,471 8,471 19,452 19,776
--------- --------- --------- --------- --------- ---------
Cash flows from investing
activities
Purchase of property and
equipment...................... (4,165) (4,165) (6,174) (6,174) (6,295) (6,295)
Payment for acquisition of
station........................ (322,082) (322,082) -- -- -- --
Purchase of other assets ....... (671) (671) (211) (211) (1) (1)
Purchase of intangibles ........ -- -- -- -- (199) (199)
Other .......................... 286 286 103 103 153 153
--------- --------- --------- --------- --------- ---------
Net cash (used in) investing
activities.................... (326,632) (326,632) (6,282) (6,282) (6,342) (6,342)
--------- --------- --------- --------- --------- ---------
Cash flows from financing
activities
Principal payments on notes
payable........................ (3,647) (3,647) (14,864) (14,864) (4,134) (4,134)
Proceeds from issuance of
preferred stock................ -- 105,000 -- -- -- 100,000
Net (payments) borrowings on
long-term revolver............. -- -- 10,000 10,000 (10,000) (10,000)
Proceeds from long-term
borrowing...................... 128,000 218,178 -- -- -- --
Contribution of paid-in capital
by parent...................... 187,907 -- -- -- 2,681 --
Payoff of senior preferred
stock.......................... -- -- -- -- -- (92,768)
Purchase of initial warrants ... -- -- -- -- -- (535)
Payment of debt and preferred
stock acquisition costs........ (5,048) (12,319) (2,768) (2,768) (14) (4,354)
--------- --------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities.......... 307,212 307,212 (7,632) (7,632) (11,467) (11,791)
--------- --------- --------- --------- --------- ---------
Increase (decrease) in cash
and cash equivalents.......... (1,578) (1,577) (5,443) (5,443) 1,643 1,643
Cash and cash equivalents:
Beginning ...................... 9,668 9,668 8,090 8,091 2,647 2,648
--------- --------- --------- --------- --------- ---------
Ending ......................... $ 8,090 $ 8,091 $ 2,647 $ 2,648 $ 4,290 $ 4,291
========= ========= ========= ========= ========= =========
</TABLE>
(Continued)
F-6
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS-(CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1996 1997 1998
------------------------------- ------------------------------- -------------------------------
BENEDEK BENEDEK BENEDEK BENEDEK BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS
CORPORATION CORPORATION CORPORATION CORPORATION CORPORATION CORPORATION
------------ -------------- ------------ -------------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Supplemental Disclosure of Cash
Flow Information:
Cash payments for interest ...... $ 20,945 $ 20,945 $ 30,489 $ 30,489 $ 27,055 $ 27,055
Cash payments for income taxes .. -- -- 432 432 152 152
========= ========= ========= ========= ========= =========
Supplemental Schedule of
Noncash Investing and
Financing Activities:
Acquisition of program
broadcast rights ................ $ 4,630 $ 4,630 $ 6,340 $ 6,340 $ 6,169 $ 6,169
Notes payable incurred for
purchase of equipment ........... 1,067 1,067 4,271 4,271 2,943 2,943
Equipment acquired by barter
transactions .................... 161 161 388 388 909 909
Dividends accrued on
redeemable preferred stock ...... -- 7,313 -- 14,192 -- 15,789
Stock option exercised in
exchange for note receivables ... -- -- -- -- -- 555
Accrued interest on note
receivable stockholder added to
additional paid in capital ....... -- -- -- -- -- 33
Accretion to exchangeable
redeemable senior preferred
stock ........................... -- 2,205 -- 4,845 -- 15,067
========= ========= ========= ========= ========= =========
Acquisition of stations:
Cash purchase price .............. $ 322,082 $ 322,082 $ -- $ -- $ -- $ --
========= ========= ========= ========= ========= =========
Net working capital acquired,
excluding cash of $536 in 1996 ... $ 9,982 $ 9,982 $ -- $ -- $ -- $ --
Property and equipment acquired
at fair market value ............. 72,578 72,578 -- -- -- --
Intangible assets acquired ....... 300,559 300,559 -- -- -- --
Deferred income taxes assumed .... (58,026) (58,026) -- -- -- --
Other, net ....................... 214 214 -- -- -- --
--------- --------- --------- --------- --------- ---------
325,307 325,307 -- -- -- --
Less: Amount paid in 1995 ......... (3,225) (3,225) -- -- -- --
--------- --------- --------- --------- --------- ---------
$ 322,082 $ 322,082 $ -- $ -- $ -- $ --
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE A) - NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF BUSINESS
Benedek Communications Corporation (the "Company") is a holding company
with minimal operations other than from its wholly-owned subsidiary, Benedek
Broadcasting Corporation ("Benedek Broadcasting"). Benedek Broadcasting owns and
operates twenty-three television stations (the "Stations") located throughout
the United States. The operating revenues of the Stations 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 barter
transactions for goods and services. 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. Segment information is not
presented since all of the Company's revenue is attributed to a single
reportable segment.
BASIS OF PRESENTATION
The consolidated financial statements of the Company include the accounts
of the Company and its wholly-owned subsidiary, Benedek Broadcasting and its
wholly-owned subsidiaries, Benedek License Corporation ("BLC") Benedek Cable,
Inc. ("BCI") and The WMTV Trust and its subsidiary, WMTV License, Co., LLC
("WMTV LLC"). The consolidated financial statements of Benedek Broadcasting
include the accounts of Benedek Broadcasting, BLC, BCI and The WMTV Trust and
its subsidiary, WMTV LLC. Separate financial statements have been provided for
each reporting entity and, where there are differences, separate disclosures.
All significant intercompany items and transactions have been eliminated in each
of the sets of consolidated financial statements.
The Company was formed on April 10, 1996. Benedek Broadcasting and the
Company had identical stock ownership, so the capitalization of the Company by
the stockholder of Benedek Broadcasting was accounted for in a manner similar to
pooling-of-interests accounting. These consolidated financial statements include
the consolidated financial statement of Benedek Broadcasting for the period
prior to June 6, 1996 recast to reflect the difference in par value of the
Company's and Benedek Broadcasting's stock.
During 1998, BCI was formed as the entity through which Benedek
Broadcasting delivers The Warner Bros. Television Network programming to local
cable companies in 15 of its 20 markets ranked above 100 as measured by Nielsen
surveys. Since BCI is a wholly-owned subsidiary of Benedek Broadcasting, the
assets, liabilities and results of operations from this company are included in
the consolidated financial statements of Benedek Broadcasting. BCI holds minimal
assets and had insignificant operations in 1998.
During October 1998, in order to comply with certain FCC duopoly rules,
Benedek Broadcasting transferred all assets and liabilities related to WMTV-TV,
serving Madison, Wisconsin, to The WMTV Trust, a disposition trust. Since
Benedek Broadcasting is the sole beneficiary of this grantor trust, the assets,
liabilities and results of operations from this trust are included in the
consolidated financial statements of Benedek Broadcasting.
F-8
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
SIGNIFICANT ACCOUNTING POLICIES
(1) Accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in financial statements and the
accompanying notes. Actual results could differ from those estimates.
(2) Cash equivalents and concentration
The Company 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, the Company had cash and cash
equivalents on deposit with a financial institution in excess of federal
depository insurance limits. The Company 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 revenues primarily relate to compensation due from the network and
national sales representatives at the inception of the network affiliation
agreement and the national sales representative agreements, respectively. These
revenues are recognized over the life of the agreements on a straight-line
method. Since these payments are earned over the life of the respective
agreements, the network affiliation payment is recognized over ten years and the
national sales representative payments are recognized over five 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 amortized cost or net 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 assets 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.
F-9
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(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. Costs incurred in connection with issuances of
preferred stock are included in stockholders' deficit as a permanent reduction
of additional paid-in capital.
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 in 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 and intangible assets
(a) 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 ................... 1-5
</TABLE>
Gains and losses on the disposition of property and equipment are
insignificant and are included in depreciation and amortization on the
consolidated statement of operations.
(b) 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.
(c) The Company reviews its property and equipment and intangibles annually
to determine potential impairment by comparing the carrying value of the assets
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 and adjust the carrying value of
the assets to the appraisal value if the appraisal value is less than the
carrying value.
(8) Other interest expense
Other interest expense includes accrued interest added to long-term debt
balances, deferred loan cost amortization and write offs, financing costs not
consummated, and accretion of discounts.
F-10
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(9) Income taxes
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences, operating losses and
tax credit carryforwards. Deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment. Reference
should also be made to (Note K) regarding a change in tax status in 1996 and the
recording of deferred taxes upon change in status.
The Company and its subsidiaries file a consolidated federal income tax
return.
(10) Employee Benefits
The Company has a defined contribution plan covering all eligible
employees. The Company's contribution is at the discretion of the Board of
Directors.
The Company self-insures for health benefits which are provided to all
full-time employees with specified periods of service. Insurance coverage is
maintained by the Company for claims in excess of specific and annual aggregate
limits.
The Company has elected to continue accounting for stock-based compensation
under Accounting Principles Board Opinion No. 25.
(11) Earnings (loss) per common share
Basic per-share amounts are computed by dividing net income adjusted for
preferred stock dividends declared and accretion (the numerator) by the
weighted-average number of common shares outstanding (the denominator). Diluted
per-share amounts assume the conversion, exercise or issuance of all potential
common stock instruments unless the effect is to reduce the loss or increase the
income per common share from continuing operations. The Company has no present
dilutive per share amounts, since the inclusion of the Initial Warrants (as
defined) would have been anti-dilutive for the periods presented.
(NOTE B) - ACQUISITIONS
On June 6, 1996, Benedek Broadcasting completed two acquisitions. These
acquisitions included (i) the assets of the television broadcasting division of
Stauffer Communications, Inc., consisting of five television stations for a
total purchase price of $54,500,000 and (ii) all the issued and outstanding
capital stock of Brissette Broadcasting Corporation which owned and operated
eight television stations for a purchase price of $270,000,000.
These acquisitions were accounted for under the purchase method of
accounting. Accordingly, the results of operations of the acquired stations are
included in the consolidated financial statements since the date of the
respective acquisition. The purchase price has been allocated to the acquired
assets and liabilities based on their relative fair values as of the closing
date. The excess of the purchase price over the net assets received from this
acquisition is being amortized on a straight-line method over a period of 40
years.
F-11
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(NOTE C) - RELATED PARTY TRANSACTIONS AND 1999 STOCK OPTION PLAN
STOCK OPTION AGREEMENTS
The Company had a stock-based compensation plan for a key employee. The
Company applied APB Opinion No. 25 and related interpretations in accounting for
the plan and accordingly, no compensation cost was recognized for grants under
the fixed stock option plan. Had compensation cost been determined based on the
fair values method prescribed in FASB Statement No. 123, there would have been
no effect on the reported net (loss) and (loss) per common share for the year
ended December 31, 1996, 1997 and 1998, based upon the application of the
Black-Scholes option pricing model with the following assumptions: no dividends
will be paid on the Class B common stock; a risk-free interest rate of 6.30%; an
expected life of nine years; and an expected price volatility of 45%. Options
for the purchase of 370,000 shares at a weighted exercise price of $3.22 were
outstanding as of December 31, 1995, 1996 and 1997. In 1998 the exercise price
was reduced to $1.50 per share, based on an independent appraisal, and the
options were exercised. The Company loaned the key employee the funds necessary
to pay for the shares under a note which bears interest at 5.93% and is due on
December 31, 2007. This recourse note, which is a personal obligation of the
employee, is collateralized by the stock which was issued upon exercise of the
option, and is classified as a contra equity account in the accompanying
consolidated balance sheet.
In December 1998, the Company's Board of Directors (the "Board") adopted
The 1999 Stock Option Plan (the "Plan") whereby from time to time on or before
December 31, 2008, options to purchase shares of Class B Common Stock may be
granted to employees, directors or consultants and advisors of the Company and
its subsidiaries. The aggregate number of shares of common stock which may be
purchased pursuant to options granted at any time under the Plan shall not
exceed 240,000. The purchase price per share shall be the fair market value, as
defined by the Plan, or an amount determined by the Board. If options are
granted to an employee who, at the time of the grant, owns more than ten percent
of the voting stock of the Company, the purchase price per share shall be at
least one hundred and ten percent of the fair market value, as defined by the
Plan.
F-12
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
DIRECTOR FEES
The Company paid fees of approximately $1,062,000, $222,000, and $601,000
during the years ended December 31, 1996, 1997 and 1998, respectively, to the
law firm of Shack & Siegel, P.C., a partner of which serves as a director to
Benedek Communications and Benedek Broadcasting.
(NOTE D) - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Land and improvements ........................ $ 5,820 $ 5,823
Buildings and improvements ................... 25,834 28,152
Towers ....................................... 15,058 15,163
Transmission and studio equipment ............ 70,252 75,615
Office equipment ............................. 8,139 9,298
Transportation equipment ..................... 2,640 2,988
Construction in progress ..................... 4,251 2,434
-------- --------
131,994 139,473
Less accumulated depreciation and amortization 58,183 76,846
-------- --------
$ 73,811 $ 62,627
======== ========
</TABLE>
(NOTE E) - INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Goodwill ..................................... $163,774 $159,057
FCC licenses ................................. 120,525 117,330
Network affiliations ......................... 59,857 58,206
Other ........................................ 1,432 1,041
-------- --------
$345,588 $335,634
======== ========
</TABLE>
Intangible assets are recorded net of accumulated amortization of
$29,569,000 and $39,273,000 as of December 31, 1997 and 1998, respectively.
F-13
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(NOTE F) - REDEEMABLE EQUITY SECURITIES AND DISCOUNT NOTES
SENIOR PREFERRED STOCK
In 1996, the Company sold 60,000 Units in a private placement, which
generated proceeds of $60,000,000. Each Unit consisted of (i) ten shares of 15%
Exchangeable Redeemable Senior Preferred Stock due 2007 (the "Original Senior
Preferred Stock"), (ii) ten initial warrants to purchase Class A common stock of
the Company with an expiration date of July 1, 2007 (the "Initial Warrants"),
and (iii) 14.8 contingent warrants to purchase Class A common stock of the
Company.
The Original Senior Preferred Stock and the contingent warrants were
redeemed in June 1998 from the proceeds of the Company's May 14, 1998 issuance
of 100,000 shares of 11 1/2% Exchangeable Senior Preferred Stock (the "Senior
Preferred Stock"), with an initial liquidation preference equal to proceeds
received of $100,000,000.
The Company used approximately $92,800,000 of the net proceeds from the
issuance of the Senior Preferred Stock to redeem the Original Senior Preferred
Stock (including approximately $12,100,000 representing premiums relating to the
redemption). The balance of the proceeds were used to pay fees related to the
transaction and for general corporate purposes, including the reduction of a
portion of Benedek Broadcasting's Revolving Credit Facility (hereinafter
defined).
Dividends on the Senior Preferred Stock are cumulative and payable
quarterly commencing August 15, 1998 at a rate of 11 1/2% of the then effective
liquidation preference per share. The Company, at its option, may pay dividends
on any dividend payment date occurring on or before May 15, 2003 either in cash
or by adding such dividends to the then effective liquidation preference. The
Senior Preferred Stock is not redeemable until May 15, 2003. Thereafter, the
Company has the option to redeem these shares in whole or in part at
predetermined redemption prices. The Senior Preferred Stock contains various
restrictive covenants relating to limitations on dividends, transactions with
affiliates, further issuance of debt, and the sales of assets, among other
things. Notwithstanding the foregoing, until May 15, 2001, in the event of a
public equity offering, a Required Disposition (as defined) or other specified
circumstances, the Company may redeem up to 25% of the initial liquidation
preference at 111.50% of the then effective liquidation preference, provided at
least $75,000,000 in liquidation preference remains outstanding.
Since it is management's intention to redeem the Senior Preferred Stock
prior to being required to pay cash dividends, the amount of the redemption
premium payable at such time is being accreted as a constructive distribution
from May 14, 1998 to May 15, 2003. The Senior Preferred Stock is exchangeable
into debentures at the Company's option, subject to certain conditions, in whole
on any scheduled dividend payment date. The Senior Preferred Stock was exchanged
for Senior Preferred Stock registered with the Securities and Exchange
Commission pursuant to a registration statement declared effective on June 15,
1998.
JUNIOR PREFERRED STOCK
In 1996, the Company issued 450,000 shares of Seller Junior Discount
Preferred Stock due July 1, 2008 (the "Junior Preferred Stock") with an
aggregate liquidation preference equal to the proceeds of $45,000,000. Dividends
are payable to the holders of the Junior Preferred Stock at 7.92% per annum,
cumulative until the fifth anniversary of the issuance thereof and thereafter at
increasing rates up to 18%. Since the Company intends to redeem the Junior
Preferred Stock prior to the fifth anniversary, dividends are being accrued at
the initial rate. The dividends on the Junior Preferred Stock are cumulative.
Prior to June 1, 2001, dividend
F-14
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
payments on the Junior Preferred Stock are not permitted to be made in cash and
instead will be added automatically to the liquidation preference and as a
result will be deemed paid in full and will not accumulate.
The Junior Preferred Stock is subject to mandatory redemption in whole on
July 1, 2008 and the Company has the option to redeem these shares in whole or
in part at a price equal to the sum of the liquidation value per share plus an
amount equal to all accumulated and unpaid dividends per share to the date of
redemption.
The following table summarizes these activities from December 31, 1996
through December 31, 1998 as follows:
<TABLE>
<CAPTION>
SENIOR JUNIOR
PREFERRED PREFERRED
STOCK STOCK
-------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Balance at December 31, 1996 ........................ $ 58,462 $ 47,057
Accrued dividends ................................... 10,353 3,839
Accretion of initial discount and
redemption prepayment premium....................... 4,845 --
--------- ---------
Balance at December 31, 1997 ........................ 73,660 50,896
Accrued dividends ................................... 11,637 4,152
Accretion of initial discount and
redemption prepayment premium ....................... 15,067 --
Issuance of Senior Preferred Stock .................. 100,000 --
Redemption of Original Senior Preferred Stock ....... (92,768) --
--------- ---------
Balance at December 31, 1998 ........................ $ 107,596 $ 55,048
========= =========
</TABLE>
INITIAL WARRANTS
At December 31, 1998 there were 550,000 outstanding Initial Warrants which
expire July 1, 2007. Each Initial Warrant entitles the holder thereof to
purchase one share of Class A Common Stock at an exercise price of $0.01 per
share. The value of the Initial Warrants at the date of issuance was $9,000,000
which was allocated to paid-in capital. During October 1998, the Company
redeemed 50,000 of the outstanding Initial Warrants for $535,000.
DISCOUNT NOTES
In 1996, the Company issued Senior Subordinated Discount Notes due 2006 (the
"Discount Notes") in the principal amount of $170,000,000. These Discount Notes
were issued at a discount of $79,822,000 which generated gross proceeds of
$90,178,000. The Discount Notes mature on May 15, 2006 and yield 13.25% per
annum with no cash interest accruing prior to May 15, 2001. Thereafter, cash
interest will accrue until maturity payable semiannually, commencing November
15, 2001. On or after May 15, 2000, the Discount Notes are redeemable at the
option of the Company, in whole or in part, at predetermined redemption prices
and under specified conditions. The Discount Notes are subordinated to all other
senior debt of the Company. The Discount Notes contain various restrictive
covenants. The Discount Notes were exchanged for Discount Notes registered with
the Securities and Exchange Commission pursuant to a registration statement
declared effective in October 1996.
Since the Company derives all of its operating income and cash flow from
Benedek Broadcasting, the Company's ability to pay its obligations including (i)
interest on and principal of the Discount Notes, (ii) redemption of and cash
dividends on the Senior Preferred Stock, and (iii) redemption of and cash
dividends on the Junior Preferred Stock 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 legal
obligation, contingent or otherwise, to pay any amount to the Company or to make
funds available to the Company for debt service or any other obligation.
F-15
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(NOTE G) - NOTES PAYABLE
TERM LOANS AND REVOLVER
During 1996, Benedek Broadcasting entered into a credit agreement which
included two Term Loan Facilities in an initial aggregate principal amount of
$128,000,000. This agreement was amended and restated on December 17, 1997 to
convert the existing Term Loans to new Term Loans, to amend and delete certain
provisions of the agreement and to replace certain parties to the agreement.
Associated with this amendment and change in lead banks, fees of $3,631,000 were
written off to other interest expense.
The outstanding principal balance at December 31, 1998 was $108,317,000
comprised of (1) Term Loan (A) of $75,000,000 at the bank's base rate plus the
Applicable Margin or the Eurodollar rate plus the Applicable Margin (currently
7.94%) and (ii) Term Loan (B) of $33,317,000 at the bank's base rate plus 2.25%
per annum or the Eurodollar rate plus 3.25% per annum (currently 8.44%).
Applicable Margin is determined as a per annum percentage ranging from 0.75% to
2.75% by reference to the Leverage Ratio on such date. Interest is payable, at
Benedek Broadcasting's option, on either a one, two, three or six month period,
subject to certain conditions. Each Term Loan Facility provides for quarterly
principal payments until final maturity on December 31, 2004.
The credit agreement also includes a Revolving Credit Facility of
$15,000,000 which bears interest at the bank's base rate plus the Applicable
Margin or the Eurodollar rate plus the Applicable Margin and expires December
31, 2003. At December 31, 1998, there was no outstanding balance on the
revolver. The unused portion of the Revolving Credit Facility bears interest at
0.5% per annum, paid quarterly.
The credit agreement contains several mandatory principal prepayment or
permanent reductions of Revolving Loan Commitment provisions. As a result, the
Company will make a principal prepayment of approximately $3,800,000 due April
1999. The Term Loan Facilities also contain various restrictive covenants and
require compliance with certain financial ratios and covenants.
The Term Loan Facilities and the Revolving Credit Facility are guaranteed
by the Company and 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 WMTV LLC and are collateralized by all of the
stock of BLC which is also collateral on the Senior Secured Notes (hereinafter
defined) which have an equal position in the stock of BLC to the Term Loan
Facilities.
SENIOR SECURED NOTES
During 1995, Benedek Broadcasting issued $135,000,000 of 11 7/8% Senior
Secured Notes due 2005 (the "Senior Secured Notes"). 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 the sales of assets, among other
things. The Senior Secured Notes were exchanged for Senior Secured Notes
registered with the Securities and Exchange Commission in a registration
statement declared effective in November 1995.
F-16
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
The Senior Secured Notes are collateralized by all of the stock of BLC,
which is also collateral on the Term Loan Facilities which have an equal
position in the stock of BLC to the Senior Secured Notes. The Senior Secured
Notes are also collateralized by certain agreements and contract rights related
to nine of the Stations which include network affiliation agreements and certain
general intangibles.
OTHER NOTES
Other notes payable consist of multiple financing agreements requiring
monthly payments including interest ranging from 2.9% to 15.8% maturing from
1999 through 2005 collateralized by various assets of Benedek Broadcasting.
Notes payable of the Company and Benedek Broadcasting consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
----------------------------- -----------------------------
BENEDEK BENEDEK BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS
CORPORATION CORPORATION CORPORATION CORPORATION
------------ -------------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Senior Secured Notes ................................ $ 135,000 $ 135,000 $ 135,000 $ 135,000
Revolving Credit Facility ........................... 10,000 10,000 -- --
Term Loan A ......................................... 77,000 77,000 75,000 75,000
Term Loan B ......................................... 33,817 33,817 33,317 33,317
Discount Notes - see (Note F)
for terms ........................................ -- 110,323 -- 125,413
Other ............................................... 4,777 4,777 6,086 6,086
--------- --------- --------- ---------
260,594 370,917 249,403 374,816
Less current maturities ............................. 13,480 13,480 15,911 15,911
--------- --------- --------- ---------
$ 247,114 $ 357,437 $ 233,492 $ 358,905
========= ========= ========= =========
</TABLE>
At December 31, 1998, the notes of the Company and Benedek Broadcasting
provide for annual reductions as follows:
<TABLE>
<CAPTION>
BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS
YEAR ENDING DECEMBER 31, CORPORATION CORPORATION
-------------------------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C>
1999 ........................... $ 15,911 $ 15,911
2000 ........................... 14,321 14,321
2001 ........................... 14,154 14,154
2002 ........................... 15,699 15,699
2003 ........................... 15,326 15,326
Thereafter ..................... 173,992 299,405
--------- ---------
$ 249,403 $ 374,816
========= =========
</TABLE>
F-17
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(NOTE H) - PROGRAM BROADCAST RIGHTS PAYABLE
(1) Program broadcast rights and program broadcast rights payable consist of the
following:
<TABLE>
<CAPTION>
PROGRAM PROGRAM
BROADCAST BROADCAST
RIGHTS RIGHTS PAYABLE
---------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Balance at December 31, 1996...... $ 6,726 $ 7,712
Contracts acquired .......... 6,340 6,340
Amortization ................ (6,401) --
Payments .................... -- (5,937)
------- -------
Balance at December 31, 1997...... $ 6,665 $ 8,115
Contracts acquired .......... 6,169 6,169
Amortization ................ (6,758) --
Payments .................... -- (6,399)
------- -------
Balance at December 31, 1998...... $ 6,076 $ 7,885
======= =======
</TABLE>
(2) The current maturities of program broadcast rights payable consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Program contracts, due in varying installments..... $8,115 $7,885
Less current maturities ........................... 6,762 6,994
------ ------
Long-term portion ................................. $1,353 $ 891
====== ======
</TABLE>
The maturities of the contracts are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, (IN THOUSANDS)
--------------------------
<S> <C>
1999 ........................... 6,994
2000 ........................... 663
2001 ........................... 227
2002 ........................... 1
-------
$ 7,885
=======
</TABLE>
F-18
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
In addition, the Company has entered into noncancellable commitments for
future program broadcast rights aggregating approximately $10,922,000 as of
December 31, 1998 with future payments as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, (IN THOUSANDS)
--------------------------
<S> <C>
1999 ........................... $ 1,623
2000 ........................... 4,149
2001 ........................... 2,564
2002 ........................... 1,699
2003 ........................... 347
Thereafter ..................... 540
-------
$10,922
=======
</TABLE>
(NOTE I) - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Trade payables ................ $ 1,754 $ 1,073
Barter, net ................... 85 526
Compensation and benefits...... 4,084 3,093
Interest ...................... 5,747 5,624
Other ......................... 1,807 1,661
------- -------
$13,477 $11,977
======= =======
</TABLE>
(NOTE J) - LEASES
The Company leases land, office space and office and transportation equipment
under agreements which expire from 1999 through 2008 and require various minimum
annual rentals. The leases also require payment of the normal maintenance, real
estate taxes and insurance on the properties. The Company has the option to
acquire its leased premises in Parkersburg, West Virginia on each of May 1, 2000
and 2005 for $650,000 and $750,000, respectively.
The Company has the option to purchase its leased premises in Casper, Wyoming
upon written notice to the landlord at any time during the 10 year term which
expires March 5, 2007. At December 31, 1998, the option purchase price was
$379,812 which increases each year through 2004 by six percent and each year
thereafter by three percent.
F-19
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
The approximate total minimum rental commitments at December 31, 1998 under
these leases are due as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, (IN THOUSANDS)
--------------------------
<S> <C>
1999 ........................... $ 970
2000 ........................... 585
2001 ........................... 484
2002 ........................... 437
2003 ........................... 316
Thereafter ..................... 432
-------
$ 3,224
=======
</TABLE>
Total rental expense under these agreements and other monthly rentals for
the years ended 1996, 1997 and 1998 was approximately $1,064,000, $1,416,000,
and $1,244,007, respectively.
The Company is a lessor of certain portions of its real property to various
organizations. Total rental income under these agreements for the years ended
1996, 1997 and 1998 was approximately $680,000, $1,030,000, and $990,000,
respectively.
(NOTE K) - INCOME TAX MATTERS AND CHANGE IN TAX STATUS
Prior to the consummation of the acquisitions and the related financing in
1996, Benedek Broadcasting, with the consent of its stockholder, elected to be
taxed under sections of federal and state income tax law, which provided that,
in lieu of corporation income taxes, the stockholder separately accounted for
Benedek Broadcasting's income, deductions, losses and credits. Due to the
structure of the financing for the 1996 acquisitions, the election to be taxed
as an "S" Corporation automatically terminated and Benedek Broadcasting became
subject to federal and state income taxes. As a result, Benedek Broadcasting
recognized a net deferred tax asset of approximately $3,550,000. Concurrent with
the change in tax status the accumulated deficit of $41,073,000 which existed on
that date was reclassified to additional paid-in capital.
F-20
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
The deferred tax assets and liabilities consist of the following components
for the Company and Benedek Broadcasting:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
---------------------------- -----------------------------
BENEDEK BENEDEK BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS
CORPORATION CORPORATION CORPORATION CORPORATION
------------ -------------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Deferred tax assets:
Loss carryforwards ........................... $ 6,968 $ 7,360 $ 4,878 $ 5,385
Receivable allowances and accruals ........... 1,003 1,003 1,191 1,191
Network agreements ........................... 1,777 1,777 1,178 1,178
Original issue discount ...................... -- 8,058 -- 14,094
--------- --------- --------- ---------
9,748 18,198 7,247 21,848
--------- --------- --------- ---------
Deferred tax liabilities:
Property and equipment ....................... 11,748 11,748 7,877 7,877
Intangibles .................................. 47,341 47,341 46,545 46,545
--------- --------- --------- ---------
59,089 59,089 54,422 54,422
--------- --------- --------- ---------
Net deferred tax liability ................... $ (49,341) $ (40,891) $ (47,175) (32,574)
========= ========= ========= =========
</TABLE>
The income tax benefit for the Company and Benedek Broadcasting consisted of
the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1998
----------------------------- ----------------------------- -----------------------------
BENEDEK BENEDEK BENEDEK BENEDEK BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS
CORPORATION CORPORATION CORPORATION CORPORATION CORPORATION CORPORATION
------------ -------------- ------------ -------------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Current tax expense.... $ (95) $ (95) $ (349) $ (349) $ (265) $ (265)
Deferred tax benefit... 1,944 4,759 6,742 12,376 2,166 8,317
-------- -------- -------- -------- -------- --------
$ 1,849 $ 4,664 $ 6,393 $ 12,027 $ 1,901 $ 8,052
======== ======== ======== ======== ======== ========
</TABLE>
Under the provisions of the Internal Revenue Code, the Company and its
subsidiaries have approximately $13,500,000 of actual net operating loss
carryforwards available to offset future tax liabilities which expire in 2007
through 2011.
F-21
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
1996 1997 1998
----------------------------- ----------------------------- -----------------------------
BENEDEK BENEDEK BENEDEK BENEDEK BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS
CORPORATION CORPORATION CORPORATION CORPORATION CORPORATION CORPORATION
------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" income tax
benefit............................. (35.0)% (35.0)% (35.0)% (35.0)% (35.0)% (35.0)%
Increase (decrease) resulting from:
State income taxes, net of federal
effect.............................. (5.0) (5.0) (5.0) (5.0) (5.0) (5.0)
(Income) loss allocated to
stockholder due to "S" corporation
status.............................. 9.4 5.2 -- -- -- --
Nondeductible amortization and
expenses............................ 12.9 7.1 8.2 5.1 20.4 7.7
Other, net............................ (3.5) (1.8) 3.2 1.8 (0.8) (0.3)
----- ----- ----- ----- ----- -----
Effective tax rate (21.2)% (29.5)% (28.6)% (33.1)% (20.4)% (32.6)%
===== ===== ===== ===== ===== =====
</TABLE>
(NOTE L) - PREFERRED AND COMMON STOCK
The Board of Directors of the Company has authorized 2,500,000 shares of
preferred stock of which 550,000 was issued and outstanding as of December 31,
1998. The Board has the right and ability to set the terms and preferences of
the preferred stock. The Board has not set the terms and preferences of the
remaining 1,950,000 unissued shares.
The following table summarizes common stock:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998
----------- -----------
<S> <C> <C>
BENEDEK BROADCASTING CORPORATION:
Common stock, no par
Authorized shares .............. 200 200
Issued shares .................. 179.09 148.85
Outstanding shares ............. 148.85 148.85
Common stock held in treasury ...... 30.24 None
BENEDEK COMMUNICATIONS CORPORATION:
Common stock, Class A par value
$0.01, one vote per share
Authorized shares .............. 25,000,000 10,000,000
Issued and outstanding shares... None None
Common stock, Class B, par value
$0.01, ten votes per share,
convertible into Class A Common
stock at a ratio of 1:1
Authorized shares .............. 25,000,000 10,000,000
Issued and outstanding shares... 7,030,000 7,400,000
</TABLE>
F-22
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(NOTE M) - FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been estimated by the
Company using available market information and appropriate valuation
methodologies as discussed below. Considerable judgment was required, however,
to interpret market data to develop the estimates of fair value. Accordingly,
the estimates presented below are not necessarily indicative of the amounts the
Company could realize in a current market exchange.
Cash and cash equivalents, current receivables and current payables have
carrying values which approximate fair value because of the short-term nature of
those instruments. The floating rate long-term debt carrying amount approximates
fair value because the interest rate fluctuates with the bank's lending rate.
The following table shows the carrying amounts and estimated fair values of
other financial instrument liabilities at December 31, 1997 and 1998:
<TABLE>
<CAPTION>
1997 1998
-------------------------- --------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ------------ ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BENEDEK BROADCASTING:
Program broadcast rights payable $ 8,115 $ 7,967 $ 7,885 $ 7,461
Other notes payable ............ 4,777 4,777 6,086 6,086
Senior Secured Notes ........... 135,000 153,900 135,000 147,150
BENEDEK COMMUNICATIONS:
Discount Notes ................. 110,323 130,475 125,413 117,300
Original Senior Preferred Stock 73,660 73,660 -- --
Senior Preferred Stock ......... -- -- 107,596 69,000
Junior Preferred Stock ......... 50,896 37,306 55,048 48,478
</TABLE>
The fair value of program broadcast rights payable and other notes payable
were estimated using the discounted cash flow method.
The fair value of the Discount Notes, Senior Secured Notes and Senior
Preferred Stock were estimated using readily available quoted market prices.
The fair value of the Junior Preferred Stock is estimated using discounted
cash flow analysis, based on the interest rate, preferences and other risks
inherent in the instrument.
The above fair value estimates were made at a discrete point in time based
on relevant market information and other assumptions about the financial
instruments. As no active market exists for a significant portion of the
Company's financial instruments, fair value estimates were based on judgments
regarding current economic conditions, future expected cash flows, risk
characteristics and other factors. These estimates are subjective in nature and
involve uncertainties and therefore cannot be calculated with precision. Changes
in assumptions could significantly affect these estimates.
F-23
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(NOTE N) - PENDING ADOPTION OF ACCOUNTING STANDARD
The FASB (Financial Accounting Standards Board) has issued FASB statement
No. 133 "Accounting for Derivative Instruments and Hedging Activities" which the
Company will be required to adopt for its year ending December 31, 2000. This
pronouncement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This pronouncement is not expected to have a significant impact
on the Company's financial statements since the Company currently has no
derivative instruments.
(NOTE O) - SUBSEQUENT EVENT
On December 30, 1998, the Company entered into an Asset Exchange Agreement
with The Ackerley Group, Inc. ("Ackerley") pursuant to which it will exchange
the television broadcast assets of KCOY-TV, in Santa Maria, California for the
television broadcast assets of KKTV, Ackerley's station in Colorado Springs,
Colorado. Both KCOY-TV and KKTV are CBS affiliates. The exchange remains subject
to FCC approval. It is anticipated that the exchange will be completed in the
second quarter of 1999.
The proposed transaction will include a $9,000,000 payment by the Company
to Ackerley at the closing. The parties have entered into a time brokerage
agreement for each station, effective January 1, 1999. The time brokerage
agreements provide each buyer a presence at and certain approval rights
regarding activities of the station it is acquiring. The transaction will be
structured, to the extent feasible, as a tax-free exchange pursuant to Section
1031 of the Internal Revenue Code. In addition, the Company has a high tax basis
in the KCOY-TV assets since they were acquired in an asset acquisition in 1996.
As a result of the foregoing, the Company does not expect to incur any material
tax liability as a result of the exchange.
F-24
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Benedek License Corporation and
WMTV License Co., LLC
Rockford, Illinois
We have audited the accompanying combined balance sheets of Benedek License
Corporation and WMTV License Co., LLC as of December 31, 1997 and 1998 and the
related combined statements of operations, stockholder's equity and cash flows
for the years ended December 31, 1996, 1997, and 1998. 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Benedek
License Corporation and WMTV License Co., LLC as of December 31, 1997 and 1998
and the combined results of their operations and their cash flows for the years
ended December 31, 1996, 1997 and 1998, in conformity with generally accepted
accounting principles.
/s/ McGLADREY & PULLEN, LLP
Rockford, Illinois
February 15, 1999
F-25
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION AND
WMTV LICENSE CO., LLC
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
ASSETS 1997 1998
---- ----
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C>
Federal Communication Commission (FCC)
Licenses, at cost, less accumulated amortization of $5,514
and $8,710 for 1997 and 1998, respectively .............................. $ 120,526 $ 117,330
Goodwill, less accumulated amortization of $1,322 and $2,203 for 1997
and 1998, respectively ......................................... 33,915 33,034
--------- ---------
$ 154,441 $ 150,364
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Deferred tax liability .................................................... $ 33,017 $ 31,738
--------- ---------
Stockholder's equity (Note E):
Common stock, $0.01 par authorized 3,000 shares,
issued and outstanding 99 shares ................................... -- --
Additional paid-in capital ........................................... 126,040 126,040
Accumulated deficit .................................................. (4,616) (7,414)
--------- ---------
121,424 118,626
--------- ---------
$ 154,441 $ 150,364
========= =========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-26
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION AND
WMTV LICENSE CO., LLC
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1996 1997 1998
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating expense, amortization ..... $ 2,428 $ 4,081 $ 4,077
------- ------- -------
(Loss) before income tax benefit (2,428) (4,081) (4,077)
Income tax benefit .................. 731 1,489 1,279
------- ------- -------
Net (loss) .......................... $(1,697) $(2,592) $(2,798)
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-27
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION AND
WMTV LICENSE CO., LLC
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
----------- ------------ ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1995 ............. $ -- $ 15,630 $ (327) $ 15,303
Capital contribution of FCC licenses
from parent ............................ -- 110,231 -- 110,231
Net (loss) ............................... -- -- (1,697) (1,697)
---------- --------- --------- ---------
Balance at December 31, 1996 ............. -- 125,861 (2,024) 123,837
Capital contribution of FCC
licenses from parent ................... -- 179 -- 179
Net (loss) ............................... -- -- (2,592) (2,592)
---------- --------- --------- ---------
Balance at December 31, 1997 ............. -- 126,040 (4,616) 121,424
Net (loss) ............................... -- -- (2,798) (2,798)
---------- --------- --------- ---------
Balance at December 31, 1998 ............. $ -- $ 126,040 $ (7,414) $ 118,626
========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-28
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION AND
WMTV LICENSE CO., LLC
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1996 1997 1998
---------------- ----------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities
Net (loss) ................................... $ (1,697) $ (2,592) $ (2,798)
Adjustments to reconcile net (loss) to net
cash provided by operating activities:
Amortization ................................. 2,428 4,081 4,077
Deferred income tax .......................... (731) (1,489) (1,279)
--------- --------- ---------
Net cash provided by operating activities... -- -- --
Cash:
Beginning .................................... -- -- --
--------- --------- ---------
Ending ....................................... $ -- $ -- $ --
========= ========= =========
Supplemental Schedule of Noncash Investing
and Financing Activities:
FCC licenses acquired by contribution of
capital from parent ........................ $ 110,231 $ 179 $ --
Transfer of deferred tax liability and
offsetting goodwill related to FCC
licenses .................................. $ 35,237 $ -- $ --
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-29
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION AND
WMTV LICENSE CO., LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
(NOTE A) - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Benedek License Corporation ("BLC") is a wholly owned subsidiary of Benedek
Broadcasting Corporation ("Benedek Broadcasting"). WMTV License Co., LLC ("WMTV
LLC") is a wholly owned subsidiary of the WMTV Trust, a grantor trust for the
exclusive benefit of Benedek Broadcasting. BLC and WMTV LLC own and hold the
Federal Communications Commission ("FCC") licenses for the twenty-three
television stations owned by Benedek Broadcasting which are located throughout
the United States.
BASIS OF PRESENTATION
The combined financial statements include the accounts of BLC and WMTV LLC.
All significant intercompany items and transactions have been eliminated in the
combined financial statements. WMTV LLC was formed on October 26, 1998, in order
to comply with certain FCC duopoly rules. BLC transferred the FCC license and
associated deferred tax liability of WMTV-TV, serving Madison Wisconsin, to WMTV
LLC. Since all of the assets, liabilities and operations of WMTV LLC have
historically been reported as a part of BLC, WMTV LLC is included in the
reporting entity with BLC.
SIGNIFICANT ACCOUNTING POLICIES:
(1) Accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.
(2) Intangibles
Intangible assets, which include FCC licenses and goodwill, have been
recorded at cost and are amortized over 40 years using the straight-line method.
Benedek Broadcasting reviews its intangibles annually 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,
Benedek Broadcasting could 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.
(3) Income taxes
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences, operating losses and
tax credit carryforwards. Deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment. Reference
should also be made to (Note D) regarding a change in tax status and the
recording of deferred taxes upon change in status. BLC and WMTV LLC file as part
of Benedek Communications Corporation's consolidated federal tax return.
F-30
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION AND
WMTV LICENSE CO., LLC
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
(NOTE B) - BUSINESS COMBINATION
On June 6, 1996, Benedek Broadcasting Company, L.L.C. (the "LLC"), a
subsidiary of Benedek Broadcasting, was merged into BLC. Since these entities
had identical stockholder ownership, this was accounted for in a manner similar
to a pooling-of-interests and the results of operations are included for the
above-mentioned periods since the formation of the LLC on February 28, 1995. The
stockholder's equity accounts for 1995 have been recast to reflect BLC as if it
was formed on February 28, 1995.
(NOTE C) - ACQUISITIONS
On June 6, 1996, Benedek Broadcasting acquired thirteen television stations
including their respective FCC licenses. These licenses and the related goodwill
and deferred tax liability were transferred on that day to BLC as contributed
capital based on the pro rata share of the allocated purchase price paid by
Benedek Broadcasting.
(NOTE D) - INCOME TAX MATTERS AND CHANGE IN TAX STATUS
Prior to the consummation of the business combination discussed in (Note
B), the LLC filed a partnership income tax return and the members reported their
respective shares of the income, deductions, losses and credits of the LLC on
their income tax returns. Since BLC is a "C" corporation, BLC was subject to
federal and state income taxes upon consummation of the business combination. As
a result, on June 6, 1996, BLC recognized a net deferred tax asset of
approximately $650,000.
The deferred tax assets and liabilities consist of the following
components:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1997 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax asset:
Loss carryforwards ............ $ 1,161 $ 1,904
Deferred tax liability:
FCC licenses .................. (34,178) (33,642)
-------- --------
Net deferred tax liability .... $(33,017) $(31,738)
======== ========
</TABLE>
Under the provisions of the Internal Revenue Code, BLC has approximately
$4,760,000 of net operating loss carryforwards available to offset future tax
liabilities of BLC and its parent which begin to expire in 2011.
F-31
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION AND
WMTV LICENSE CO., LLC
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
Reconciliation of the statutory federal income tax rate to the effective
tax rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1996 1997 1998
---------- ----------- ----------
<S> <C> <C> <C>
Computed "expected" income tax benefit ......... (35.0)% (35.0)% (35.0)%
Increase (decrease) resulting from:
State income taxes, net of federal effect... (5.0) (5.0) (5.0)
Loss allocated to members of LLC............ 3.6 -- --
Nondeductible amortization and
expenses ................................... 7.1 8.7 8.6
Other ........................................ (0.8) (5.2) --
----- ----- -----
Effective rate tax ........................... (30.1)% (36.5)% (31.4)%
===== ===== =====
</TABLE>
(NOTE E) - STOCKHOLDER'S EQUITY
Benedek Broadcasting has pledged 100% of the outstanding common stock of
BLC and WMTV LLC as collateral for the Senior Secured Notes and the Term Loan
Facilities issued by Benedek Broadcasting.
BLC and WMTV LLC have guaranteed the obligations of Benedek Broadcasting
with respect to the Senior Secured Notes and the Term Loan Facilities.
F-32
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Benedek Communications Corporation and Subsidiaries
Rockford, Illinois
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidated
supplemental schedule is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not a part of the basic consolidated
financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic consolidated financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic consolidated financial statements taken as a whole.
/s/ McGLADREY & PULLEN, LLP
Rockford, Illinois
February 15, 1999
S-1
<PAGE>
<PAGE>
SCHEDULE II
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT BALANCES CHARGED TO BALANCE AT
BEGINNING ACQUIRED IN COSTS AND DEDUCTIONS END OF
OF PERIOD ACQUISITIONS EXPENSES DESCRIBED (1) PERIOD
-------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Deducted from asset account --
allowance for doubtful accounts:
Year ended December 31, 1996 .......... $249,023 $ 86,458 $403,842 $255,804 $483,519
Year ended December 31, 1997 .......... 483,519 -- 231,480 243,347 471,652
Year ended December 31, 1998 .......... 471,652 -- 552,357 543,834 480,175
</TABLE>
- ----------------------
(1) Uncollectible accounts written off, net of recoveries
S-2
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as.........................'SS'
<PAGE>
<PAGE>
EXECUTION
LIMITED WAIVER AND CONSENT REGARDING
EXCHANGE OF ASSETS OF KCOY-TV AND KKTV AND COMPENSATION OF BENEDEK
This LIMITED WAIVER AND CONSENT (this "Waiver") is dated as of
December 31, 1998 and entered into by and among BENEDEK COMMUNICATIONS
CORPORATION, a Delaware corporation ("BCC"), BENEDEK BROADCASTING CORPORATION, a
Delaware corporation ("Company"), the financial institutions listed on the
signature pages hereof (each individually referred to herein as a "Lender" and
collectively as "Lenders") and BANKERS TRUST COMPANY ("BTCo"), as agent for
Lenders (in such capacity, "Agent"), and solely with respect to Sections 3 and 7
hereof, Benedek License Corporation, a Delaware corporation ("License Sub"), and
is made with reference to that certain Amended and Restated Credit Agreement
dated as of December 17, 1997, by and among BCC, the Company, Lenders and Agent,
as amended by that certain Limited Waiver and First Amendment to Credit
Agreement, dated as of May 6, 1998, by and among BCC, the Company, the financial
institutions listed on the signature pages thereof as Lenders and Agent, and
solely with respect to Section 5 thereof, License Sub, and that certain Second
Amendment to Credit Agreement dated as of October 31, 1998, by and among BCC,
the Company, the financial institutions listed on the signature pages thereof as
Lenders and Agent, and solely with respect to Sections 3 and 4 thereof, Philip
A. Jones, solely in his capacity as Trustee under The WMTV Trust, a Wisconsin
Trust created pursuant to a Trust Agreement dated as of September 21, 1998 (the
"Trustee"), and WMTV License Co., LLC, a Delaware limited liability company
("WMTV License Co.") and License Sub (such Amended and Restated Credit
Agreement, as so amended, the "Credit Agreement"). Capitalized terms used herein
without definition shall have the same meanings herein as set forth in the
Credit Agreement.
RECITALS
WHEREAS, the Lenders and the Company desire to waive certain
requirements in subsections 2.5B, 6.3, 6.7 and 6.11 to allow the Company to: (i)
acquire the television broadcast assets of KKTV, Colorado Springs, Colorado
("KKTV") from the AK Media Group, Inc. ("AK Media") in exchange for the assets
of KCOY-TV, Santa Maria, California ("KCOY") and a cash payment of $9,000,000
(the "KKTV Acquisition"), pursuant to that certain Exchange Agreement dated as
of December 31, 1998, by and between the Company and AK Media (such Exchange
Agreement, together with all other material documents, agreements or instruments
to be delivered under, pursuant to or in connection therewith, the "Exchange
Agreement"); (ii) pursuant to the Exchange Agreement, to enter into with AK
Media (a) that certain KCOY Time Brokerage Agreement dated as of December 31,
1998 (such KCOY Time Brokerage Agreement, together with all other material
documents, agreements or instruments to be delivered under, pursuant to or in
connection therewith, the "KCOY LMA"), that would grant AK Media a presence at
and certain approval rights regarding KCOY and (b) that certain KKTV Time
Brokerage Agreement dated as of December 31, 1998 (such KKTV Local Marketing
Agreement,
<PAGE>
<PAGE>
together with all other material documents, agreements or instruments to be
delivered under, pursuant to or in connection therewith, the "KKTV LMA"), that
would grant the Company a presence at and certain approval rights regarding
KKTV; and (iii) permit the Company to pay part of the compensation permitted to
be paid to Benedek under the Credit Agreement through loans rather than cash;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
Section 1. WAIVERS AND CONSENTS
1.1 Waivers and Consents Relating to the KKTV Acquisition.
Subject to the terms and conditions set forth herein and in reliance on the
representations and warranties of the Company herein contained, the Lenders
hereby (i) consent to the KKTV Acquisition and the Company entering into the
Exchange Agreement, the KKTV LMA and the KCOY LMA and (ii) waive compliance with
certain provisions of subsections 2.5B and 6.7 of the Credit Agreement in
connection with the KKTV Acquisition as follows:
A. Use of Proceeds of Revolving Loans. The Lenders hereby waive
compliance with the provisions of subsection 2.5B of the Credit Agreement
to the extent, and only to the extent, necessary to allow the Company to
use the proceeds of Revolving Loans to make cash payments of up to
$9,000,000 to AK Media in connection with the KKTV Acquisition; provided,
however, that any such payments shall be made by the Company pursuant to
the express terms of the Exchange Agreement on or before the date of the
closing of the KKTV Acquisition (such date, the "KKTV Acquisition Closing
Date").
B. Restrictions on LMAs. The Lenders hereby waive the restriction
contained in subsection 6.7 of the Credit Agreement prohibiting the
Company from entering into any LMAs other than Permitted LMAs and Third
Party Permitted LMAs to the extent, and only to the extent, necessary to
allow the Company to enter into the KKTV LMA and the KCOY LMA; provided,
however, that for purposes of determining, pursuant to the Credit
Agreement, net income and Consolidated Adjusted EBITDA (without
duplication) amounts received under or pursuant to the KKTV LMA or the
KCOY LMA shall only be included as net income or Consolidated Adjusted
EBITDA, as the case may be, to the extent such amounts are fully received
and unconditionally retained for the Company's account; provided,
further, that within 30 (thirty) days of the Effective Date (as
hereinafter defined), Trustee and WMTV License Co. will execute and
deliver an acknowledgement and consent similar in substance to Sections 3
and 7 herein and otherwise satisfactory to Agent.
C. Restrictions on Swaps or Exchanges of Owned Television
Stations. The Lenders hereby waive the requirement in subsection 6.7(x)
of the Credit Agreement that neither BCC nor any of its Subsidiaries
shall incur any Indebtedness in connection with a swap or exchange of
Owned Television Station Asset Groups for one or more other Television
Station Asset Groups in order to finance such swap or exchange (other
than
2
<PAGE>
<PAGE>
certain Indebtedness assumed by the Company in connection with such
swap or exchange that was incurred by the Person with whom such Owned
Television Asset Groups were swapped or exchanged) to the extent, and
only to the extent, necessary to allow the Company to use the proceeds of
Revolving Loans to finance the payment of up to $9,000,000 to AK Media in
connection with the KKTV Acquisition; provided, however, that any such
payments shall be made by the Company pursuant to the express terms of
the Exchange Agreement on or before the KKTV Acquisition Closing Date;
provided, further, that all other requirements set forth in subsection
6.7(x) of the Credit Agreement shall be complied with in connection with
the KKTV Acquisition; provided, further, that after the Effective Date,
the Company may only make Permitted Acquisitions pursuant to subsection
6.7(xi) of the Credit Agreement with an aggregate purchase price less
than or equal to $16,000,000.
1.2 Waivers Relating to Payment of Compensation to Benedek.
Subject to the terms and conditions set forth herein and in reliance on the
representations and warranties of the Company herein contained, Lenders hereby
waive compliance with the provisions of subsections 6.3 and 6.11 of the Credit
Agreement to the extent, and only to the extent, necessary to permit the Company
to make loans to Benedek in each Fiscal Year (such Fiscal Year, the "current
Fiscal Year") in an aggregate dollar amount not exceeding an amount equal to (x)
110% of the Compensation Limit for the prior Fiscal Year minus (y) all cash
payments made to Benedek pursuant to subsection 6.11 of the Credit Agreement in
the current Fiscal Year; provided, however, that, notwithstanding anything to
the contrary contained herein, the sum of (x) the aggregate amount of cash
compensation paid to Benedek pursuant to subsection 6.11 during any Fiscal Year
plus (y) such loans made to Benedek during such Fiscal Year shall not in any
such Fiscal Year exceed 110% of the Compensation Limit for the prior Fiscal
Year; provided, further, that all such loans shall be included as "cash
compensation" in any calculation of the Unutilized Compensation Amount under the
Credit Agreement.
Section 2. LIMITATION OF WAIVER
Without limiting the generality of the provisions of subsection
9.6 of the Credit Agreement, the waiver set forth above shall be limited
precisely as written and relates solely to the noncompliance by the Company with
the provisions of subsections 2.5B, 6.3, 6.7 and 6.11 of the Credit Agreement in
the manner and to the extent described above, and nothing in this Waiver shall
be deemed to:
(a) constitute a waiver of compliance by the Company with respect
to (i) subsections 2.5B, 6.3, 6.7 or 6.7 of the Credit Agreement
in any other instance or (ii) any other term, provision or
condition of the Credit Agreement or any other instrument or
agreement referred to therein (whether in connection with the
KKTV Acquisition, any payment or loans to Benedek or otherwise);
or
(b) prejudice any right or remedy that Agent or any Lender may
now have (except to the extent such right or remedy was based
upon existing defaults that will not exist after giving effect to
this Waiver) or may have in the future under
3
<PAGE>
<PAGE>
or in connection with the Credit Agreement or any other
instrument or agreement referred to therein.
Except as expressly set forth herein, the terms, provisions and conditions of
the Credit Agreement and the other Loan Documents shall remain in full force and
effect and in all other respects are hereby ratified and confirmed.
Section 3. ACKNOWLEDGEMENT AND CONSENT REGARDING RELATED AGREEMENTS
The Lenders, Company, BCC and License Sub hereby expressly acknowledge
and agree that the Exchange Agreement, the KCOY LMA and the KKTV LMA shall be
considered "Related Agreements" for all purposes under the Credit Agreement and
any other Loan Document.
Section 4. REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Waiver, each of BCC
and the Company hereby represents and warrants that after giving effect to this
Waiver:
(a) as of the date hereof, there exists no Event of Default or
Potential Event of Default under the Credit Agreement;
(b) all representations and warranties contained in the Credit
Agreement and the other Loan Documents are true, correct and
complete in all material respects on and as of the date hereof
except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of
such earlier date;
(c) as of the date hereof, each of the BCC and the Company has
performed all agreements to be performed on its part as set forth
in the Credit Agreement;
(d) the Company and BCC have all requisite corporate power and
authority to enter into this Waiver, to consummate the
transactions contemplated by this Waiver and the transactions
contemplated by, and perform its obligations under, the Credit
Agreement;
(e) the execution of this Waiver, and the consummation of the
transactions contemplated by this Waiver, have been duly
authorized by all necessary corporate action on the part of the
Company and BCC; and
(f) the execution and delivery by Company and BCC of this Waiver,
and the consummation of the transactions contemplated by this
Waiver by the Company and BCC, does not and will not (i) violate
any provision of any law or any governmental rule or regulation
applicable to the Company, BCC or any of their respective
Subsidiaries, any constating documents of the Company, BCC or any
order, judgment or decree of any court or other agency of
government binding on
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<PAGE>
the Company, BCC or any or their respective Subsidiaries, (ii)
conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any Contractual
Obligation of the Company, BCC or any of their respective
Subsidiaries, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of
the Company, BCC or any of their respective Subsidiaries (other
than any Liens created under any of the Loan Documents in favor
of Agent on behalf of Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any
Contractual Obligation of the Company, BCC or any of their
respective Subsidiaries.
Section 5. COUNTERPARTS; EFFECTIVENESS
This Waiver may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Waiver shall become effective upon (i) the execution of a
counterpart hereof by BCC, the Company, License Sub, and Requisite Lenders and
receipt by the Company and Agent of written or telephonic notification of such
execution and authorization of delivery thereof and (ii) Agent's acknowledgement
that the Exchange Agreement, the KKTV LMA and the KCOY LMA are in form and
substance satisfactory to Agent in its sole discretion (the date of satisfaction
of both such conditions being referred to herein as the "Effective Date").
Section 6. GOVERNING LAW
THIS WAIVER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Section 7. ACKNOWLEDGEMENT AND CONSENT BY GUARANTORS
Each of BCC and License Sub hereby acknowledges that it has read
this Waiver and consents to the terms hereof and further hereby confirms and
agrees that, notwithstanding the effectiveness of this Waiver, the obligations
of such Loan Party under each of the Loan Documents to which it is a party shall
not be impaired and each of the Loan Documents to which it is a party are, and
shall continue to be, in full force and effect and are hereby confirmed and
ratified in all respects.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Waiver to be duly executed and delivered by their respective officers thereunto
duly authorized as of the date first written above.
BCC:
BENEDEK COMMUNICATIONS CORPORATION
By: /s/
------------------------------------
Name:
Title:
COMPANY:
BENEDEK BROADCASTING CORPORATION
By: /s/
-------------------------------------
Name:
Title:
S-1
<PAGE>
<PAGE>
ACKNOWLEDGED AND CONSENTED
TO AS OF DECEMBER 31, 1998:
BENEDEK LICENSE CORPORATION
By: /s/
----------------------------------
Name:
Title:
S-2
<PAGE>
<PAGE>
LENDERS:
BANKERS TRUST COMPANY,
individually and as Agent
By: /s/
--------------------------------
Name:
Title:
S-3
<PAGE>
<PAGE>
PILGRIM RATE TRUST
By: PILGRIM INVESTMENTS, INC.,
as its Investment Manager
By: /s/
-------------------------------
Name:
Title:
S-4
<PAGE>
<PAGE>
KZH III LLC
By: /s/
-------------------------------
Name:
Title:
S-5
<PAGE>
<PAGE>
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------
Name:
Title:
S-6
<PAGE>
<PAGE>
SENIOR DEBT PORTFOLIO
By: BOSTON MANAGEMENT AND
RESEARCH, as Investment Advisor
By: /s/
-------------------------------
Name:
Title:
S-7
<PAGE>
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/
-------------------------------
Name:
Title:
S-8
<PAGE>
<PAGE>
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/
-------------------------------
Name:
Title:
S-9
<PAGE>
<PAGE>
STRATA FUNDING LTD.
By:
-------------------------------
Name:
Title:
S-10
<PAGE>
<PAGE>
MORGAN STANLEY SENIOR FUNDING, INC.
By:
-------------------------------
Name:
Title:
S-11
<PAGE>
<PAGE>
HARVARD MANAGEMENT COMPANY INC.
By: /s/
-------------------------------
Name:
Title:
S-12
<PAGE>
<PAGE>
VAN KAMPEN PRIME RATE INCOME TRUST
By: /s/
-------------------------------
Name:
Title:
S-13
<PAGE>
<PAGE>
VAN KAMPEN CLO I, LIMITED
By: VAN KAMPEN MANAGEMENT INC.,
as Collateral Manager
By: /s/
-------------------------------
Name:
Title:
S-14
<PAGE>
<PAGE>
KZH LANGDALE LLC
By: /s/
-------------------------------
Name:
Title:
S-15
<PAGE>
<PAGE>
EATON VANCE SENIOR INCOME TRUST
By: EATON VANCE MANAGEMENT,
as Investment Advisor
By: /s/
-------------------------------
Name:
Title:
S-16
<PAGE>
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/
-------------------------------
Name:
Title:
S-17
<PAGE>
<PAGE>
TRUST AGREEMENT
THIS TRUST AGREEMENT (the "Trust Agreement") is entered into as of
September 21,1998 by and among Benedek Broadcasting Corporation, a Delaware
corporation ("BBC"), Benedek License Corporation, a Delaware corporation ("BLC")
and Philip A. Jones, as trustee ("Trustee").
RECITALS
A. BBC owns and operates television stations WIFR (TV), Rockford, Illinois
("WIFR") and WMTV(TV), Madison, Wisconsin (the "Station"). The licenses and
authorizations issued by the Federal Communications Commission (the "FCC") for
WIFR and the Station are owned by BLC, a wholly-owned subsidiary of BBC. Unless
the context otherwise requires, references herein to BBC shall include BBC and
BLC.
B. BBC has been the licensee of WIFR since 1986. In June 1996, BBC acquired
the Station as part of BBC's acquisition of all of the outstanding stock of
Brissette Broadcasting Corporation. The Communications Act of 1934, as amended,
and the rules, regulations and policies of the FCC (collectively, the
"Communications Act") do not permit BBC to own and operate both the Station and
WIFR. Pursuant to a temporary waiver of such rules by the FCC, BBC has continued
to own both the Station and WIFR since the acquisition of the Station.
C. BBC intends to enter into an agreement to sell either the Station or
WIFR within no more than six months after the date hereof in order to comply
with the Communications Act. Interim acquisition by the Trustee, for the benefit
of BBC, of the assets of the Station would provide an appropriate mechanism to
facilitate compliance with the laws and regulations of the FCC pending the sale
of the Station or WIFR. Subject to the terms and conditions of this Trust
Agreement, upon a request by BBC to the Trustee to sell the Station Assets (as
defined below), and upon concurrence of the Trustee with such request, the
Trustee shall use his best efforts to complete the sale of the Station Assets
within six months after the date of this Trust Agreement.
D. The assets of the Station (other than the FCC Licenses) are subject to a
lien and security interest in favor Bankers Trust Company, as agent for lenders
to BBC. In order to assure compliance by BBC with its obligations in respect of
such collateral, such assets must remain subject to such lien. As further
collateral for BBC's lenders, the FCC licenses for the Station must be held by
the Trustee in a limited liability company wholly owned by the Trustee and the
Trustee must pledge the membership interests in such limited liability company
in favor of The Bank of New York, as agent for lenders to BBC.
Therefore, the parties agree as follows:
AGREEMENT
1. Creation and Purpose of The WMTV Trust. Subject to the terms and
conditions hereof, a trust in respect of the Station Assets is hereby created
and established, to be known as the "The WMTV Trust," and the Trustee hereby
accepts the trust created hereby and agrees to serve as trustee hereunder. The
WMTV Trust created hereby shall be irrevocable until this Trust is terminated
pursuant to Section 6 hereof.
<PAGE>
<PAGE>
2. Assets to be Conveyed; Assumption of Obligations.
(a) Upon execution of this Trust Agreement and pursuant to prior FCC
consent, BBC shall transfer and convey to Trustee, and Trustee shall acquire
from BBC, all of the assets, real, personal and mixed, tangible and intangible
(including the business of the Station as a going concern), owned or held by BBC
as of the date of this Trust Agreement, and used, useful or necessary in the
conduct of the business and operation of the Station (other than the FCC
Licenses (as herein defined) which shall be transferred to the LLC (as herein
defined)), including, but not limited to, the following:
(i) all rights in and to the licenses, permits and other
authorizations issued to BBC by any governmental authority and held by BBC and
used or intended for use in the conduct of the business and operation of the
Station (other than the FCC Licenses), and any applications for such licenses,
permits and authorizations, and all other intangible personal property owned by
BBC and associated with or related to the Station or the operation thereof,
including the call letters "WMTV";
(ii) all land, leaseholds and other interests of every kind and
description in real property, buildings, towers, and antennae, and fixtures and
improvements thereon owned by BBC as of the date hereof and used or held for use
in connection with the business and operation of the Station;
(iii) all equipment, cameras, transmitters, antennas, office
furniture and fixtures, office materials and supplies, tools, inventory, spare
parts, and other tangible personal property of every kind and description, owned
by it and used or intended for use in the conduct of the business and operation
of the Station;
(iv) all cash in the Station's operating bank accounts, all
prepaid expenses, advances and deposits with respect to the Station, including
prepaid film and programming expenses and all barter receivables arising in
connection with trade-out agreements;
(v) all accounts receivable arising out of the operation of the
Station;
(vi) all leases, contracts, licenses, purchase orders, sales
orders, commitments and other agreements to which BBC is a party with respect to
the Station all orders and agreements for the sale of advertising time on the
Station all of BBC's rights under and interest in all contracts relating to the
conduct of the business of the Station (but excluding any contract or agreement
for the sale of the Station Assets following termination of the Trust created
hereby);
(vii) all programs and programming materials and elements of
whatever form or nature owned by BBC as of the date of this Agreement and used
or held for use in connection with the business and operations of the Station,
whether recorded on tape or any other substance or intended of live performance,
and whether completed or in production, and all related common-law and statutory
copyrights owned by or licensed to BBC and used solely in connection with the
business and operations of the Station;
(viii) all rights of BBC, insofar as it pertains to the Station,
in and to trade names, service marks, trademarks, trademark registrations and
trademark applications, copyrights, copyright registrations and copyright
applications, patents and patent applications, inventions, trade secrets,
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<PAGE>
logos, slogans, jingles, proprietary processes, computer software and all other
information, know-how and intellectual property rights and all licenses and
other agreements relating to any of the foregoing all of BBC's right, title and
interest in and to the trademarks, trade names, service marks, franchises,
copyrights, including registrations and applications for registration of any of
them, jingles, logos, slogans, licenses, permits and privileges owned or held by
BBC and used, useful or necessary in the conduct of the business and operation
of the Station;
(ix) all files, records, books of account, computer programs and
software and logs relating to the operation of the Station, including, without
limitation, payable records, receivable records, invoices, statements, traffic
material, programming information and studies, technical information and
engineering data, news and advertising studies and consultants' reports, ratings
reports, marketing and demographic data, sales correspondence, lists of
advertisers, promotional materials, credit and sales reports, budgets, financial
reports and projections, sales, operating and business plans, filings with the
FCC and original executed copies of all written contracts to be assigned
hereunder; and
(x) all of BBC's rights under manufacturers' and vendors'
warranties relating to items included in the Station Assets and all similar
rights against third parties relating to items included in the Station Assets to
the extent contractually assignable.
The assets to be transferred to Trustee hereunder are hereinafter collectively
referred to as the "Station Assets."
(b) The Trustee shall assume and undertake to pay, satisfy or
discharge the liabilities, obligations and commitments of the Station under all
its contracts, agreements and commitments, including without limitation time
sales agreement, programming agreements and employment agreements.
(c) The Trustee shall retain and hold the Station Assets, and assume
the Station's obligations, only in accordance with, and subject to the terms and
conditions set forth in, this Trust Agreement.
(d) Anything contained in this Trust Agreement to the contrary
notwithstanding, this Trust Agreement shall not constitute an agreement or an
attempted agreement to transfer or assign any contract, license, lease,
commitment, sales order, purchase order or other agreement, or any claim or
right of any benefit arising thereunder or resulting therefrom if any such
attempted transfer or assignment thereof, without the consent of any other party
thereto, would constitute a breach thereof or in any way affect the rights of
the Trustee thereunder. BBC shall use its reasonable best efforts to obtain the
consent of any party or parties to any such contracts, licenses, leases,
commitments, sales orders, purchase orders or other agreements to the transfer
or assignment thereof by BBC to the Trustee hereunder in all cases in which such
consent is required for transfer or assignment.
(e) The Trustee acknowledges that the Station Assets (other than the
FCC Licenses) are and shall remain subject to a lien and security interest in
favor Bankers Trust Company, as agent for lenders to BBC. The Trustee shall
cooperate with BBC in assuring compliance by BBC with its obligations in respect
of such collateral, including, if requested by such lenders, by directly
granting or acknowledging such lien and security interest in favor of such
lenders. In addition, pursuant to prior FCC consent, the FCC Licenses shall be
assigned to a limited liability company wholly owned by the Trustee (the "LLC")
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<PAGE>
(with the Trustee holding the sole power to vote the membership interests in
such limited liability company) and the Trustee shall pledge the membership
interests in such limited liability company (subject to ordinary FCC
limitations) to The Bank of New York, as agent for lenders to BBC, pursuant to
such documentation as The Bank of New York may reasonably request. Upon
execution of this Trust Agreement and pursuant to prior FCC consent, BBC shall
transfer and convey to the LLC all rights in and to the licenses, permits and
other authorizations issued to BBC by the FCC (the "FCC Licenses"), and any
applications for such licenses, permits and authorizations.
3. Management and Other Actions by Trustee.
(a) During the term of this Trust Agreement, the right to manage and
direct the management of the business of the Station shall be solely vested in
the Trustee, subject to the following:
(i) The Trustee shall conduct the operations of the
Station as a television broadcaster serving the
Madison, Wisconsin television market in the
ordinary course of business consistent with past
operations of the Station and the Station's
network affiliation agreement. To the extent
possible, the Trustee shall maintain the status
quo of such operation as currently operating with
a view of maximizing the value to be received by
BBC consistent with the Trustee's duties as a
licensee of the FCC and as fiduciary of BBC. With
respect to so conducting the operations and
management of the Station, the Trustee shall
within four days of the end of each calendar month
provide BBC or its designee with such monthly
financial reports, prepared in accordance with
generally accepted accounting principles and BBC's
historical accounting practices, consisting of
unaudited balance sheets of the Station and
related statements of operations and cash flows
for the month and three-month period then ended as
shall be necessary for BBC to meet its financial
reporting requirements to its accountants,
lenders, the Securities and Exchange Commission
and any other authorities of competent
jurisdiction. The Trustee shall also provide BBC
or its designee with monthly budgets and estimates
(which shall be prepared consistent with all
budgets and estimates previously prepared by BBC),
setting forth the Station's monthly expenses,
including expenditures for equipment or other
capital assets, and operating income anticipated
to be incurred or earned monthly during the next
upcoming three calendar months as well as on an
aggregate basis through the next upcoming 12
calendar months. BBC shall not use or attempt to
use these financial materials to limit or restrict
the Trustee's discretion to operate the Station in
the manner described in this subsection;
(ii) to the extent that the Station's operations
generate cash accumulations in excess of the
Station's actual and projected expenses (not
including capital expenditures) as determined by
the Trustee in his reasonable discretion ("Excess
Cash Flow"), such Excess Cash Flow shall first be
applied to repay amounts due to BBC under the line
of credit provided for in Section
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<PAGE>
3(a)(iii) of this Trust Agreement, and thereafter
shall be remitted to BBC from time to time as the
Trustee shall determine;
(iii) to the extent that the Trustee determines in his
reasonable discretion that management and
operation of the Station consistent with past
practice or that payment of the charges and other
expenses of the operation of the Station (other
than for capital expenditures) requires funds in
excess of the ordinary cash flow of the Station
(as diminished by any prior remittances of Excess
Cash Flow), BBC agrees to provide a line of credit
to Trustee in the amount of $100,000, repayable
from Excess Cash Flow. BBC shall not communicate
directly or indirectly with the Trustee about, or
participate with the Trustee in making, any
decision to draw on the line of credit or as to
when or how the funds will be used. The Trustee
may draw on the line of credit by written notice
to BBC for a specific amount of funds. BBC shall,
within 10 days of receipt of such notice, provide
such funds to Trustee in the amount requested, up
to the limit of the line of credit;
(iv) the Trustee shall make such capital expenditures
as the Trustee determines in his reasonable
discretion consistent with the existing capital
budget for the Station and BBC shall, to the
extent the Station requires funds in excess of the
ordinary cash flow of the Station for such purpose
or for emergency capital expenditures not
contemplated by such budget, make such funds
available to the Trustee; and
(v) any employee hired by the Trustee who is not
employed at the Station as of the effective date
of this Trust Agreement shall not be a 1% or
greater shareholder, director, officer, or
employee of BBC or its affiliates, and may not
have any business and familial relationship (as
defined in the FCC Policy Statement in MM Docket
No. 85-218, FCC 86-67 (March 17, 1986)) with BBC
or with any 1% or greater shareholder, director,
officer, or employee of BBC or its affiliates.
(b) The Trustee shall cause any employee hired by him pursuant to
Section 3(a)(iv), and any person previously employed by BBC whom the Trustee
elects to retain, to execute and deliver to the Trustee an agreement, in form
and substance acceptable to the Trustee, pursuant to which such employee agrees
to comply with the rules, regulations and policies of the FCC, including without
limitation all rules, regulations and policies governing communications among
such employee and BBC or its officers, directors, employees, and affiliates,
regarding the Station and its management and operations.
(c) No person other than the Trustee or managers designated by the
Trustee shall have any authority with respect to the management of the Station
or the Station Assets for so long as this Trust Agreement is in effect. The
Trustee shall have no beneficial interest in the Station Assets.
(d) Except as expressly provided in this Trust Agreement, the Trustee
shall not: incur any debt or guaranty obligation in favor of any other person;
engage in any business other than as
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<PAGE>
necessary in Trustee's reasonable opinion to meet his fiduciary duties with
respect to the operation of the Station as a broadcast licensee serving the
Madison, Wisconsin market; sell or otherwise transfer, assign or encumber all or
any part of the Station Assets, or enter into any agreement to do so; or enter
into any merger, consolidation, or similar transaction or engage in any
reclassification or similar transaction.
(e) BBC shall have the right to request the Trustee to sell the
Station Assets to an unaffiliated third party. Within 72 hours of receipt of
such a request from BBC, Trustee shall advise BBC whether he concurs in such a
sale. In the event the Trustee so concurs, the Trustee shall have the authority
to take all actions necessary or appropriate to effectuate the transfer of title
to the Station Assets held by the Trustee pursuant to this Trust Agreement to
(and the assumption of the liabilities, obligations and commitments of the
Station by) an unaffiliated third party. In this regard, Trustee shall enter
into appropriate agreements, submit and fully prosecute appropriate applications
to such governmental authorities as such agreements require, requesting approval
to assign the Station Assets, and, upon satisfaction of all closing conditions
not otherwise waived, transfer the Station Assets to the approved assignee. To
facilitate any sale of the Station Assets to an unaffiliated third party (a
"Sale"), the Trustee may request in writing from BBC such information,
representations and warranties regarding operation of the Station as may be
needed to effectuate such Sale.
(f) If prior to the execution of this Trust Agreement, BBC has entered
into a binding agreement for a Sale of the Station Assets to a third party, and
BBC so notifies the Trustee in writing and provides the Trustee with a copy of
such binding agreement, then the Trustee, acting for the benefit of BBC, shall
sell such Station Assets as soon as practicable to such third party consistent
with the terms of the binding agreement.
(g) The Trustee shall have any and all such further powers and shall
take such further actions (including, but not limited to, taking legal action)
as may be necessary to fulfill the Trustee's obligations under this Trust
Agreement.
4. Concerning the Trustee.
(a) Subject to the provisions of this Trust Agreement, The WMTV Trust
created hereby and the operations of the Station shall be managed by the
Trustee, who shall comply with the CommuThe Trustee represents that he is
qualified in all respects under all requirements established by the FCC as of
the date of this Trust Agreement in order to accomplish and carry out the
purposes hereof, and shall maintain such qualifications as are required by the
pertinent Rules and Regulations of the FCC as may be in effect from time to time
during the existence of the Trust established by this Trust Agreement. In the
operation and management of the Station, the Trustee (either in person or by
nominee or proxy) shall exercise his best judgment to select suitable personnel
of the Station who are not affiliated with BBC and its affiliates, and shall
otherwise take such part or action in respect of the management of their affairs
as he deems necessary and proper.
(b) The Trustee shall be entitled to receive compensation for his
services hereunder in accordance with such arrangements as may be agreed to
between the Trustee and BBC for the duration of the WMTV Trust (prorated for any
partial month). The Trustee agrees that in return for such compensation, he will
devote such time to the WMTV Trust as is necessary in the proper exercise of his
fiduciary duties hereunder. Payment of Trustee's monthly compensation shall be
made by BBC on a
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<PAGE>
monthly basis within 10 days after the commencement of each month.
(c) The Trustee is expressly authorized to incur and pay, from the
Station Assets held in trust, all reasonable charges and other expenses which
the Trustee deems necessary and proper in the performance of his duties under
this Trust Agreement, including fees and charges for legal counsel of his
choosing and the cost of any necessary secretarial staff and travel expenses.
BBC hereby agrees to reimburse and to indemnify the Trustee against all claims,
costs and defense of claims (including reasonable attorneys' fees and
disbursements), expenses and liability incurred by the Trustee in connection
with the performance of his duties under this Trust Agreement, except those
incurred as a result of the Trustee's gross negligence, intentional wrongful
action or willful misconduct. The obligations of BBC to the Trustee under this
Section 4(c) shall survive the resignation, incapacity to act, death or
insolvency of the Trustee and the termination of this Trust Agreement.
(d) The Trustee shall be free from liability in acting upon any paper,
document or signature believed by the Trustee to be genuine and to have been
signed by the proper party. The Trustee shall not be liable for any error of
judgment in any act done or omitted, nor for any mistake of fact or law, nor for
anything which the Trustee may do or refrain from doing in good faith. The
Trustee may consult with legal counsel of his own choosing and any action under
this Trust Agreement taken or suffered in good faith by the Trustee and in
accordance with the opinion of the Trustee's counsel (if such opinion shall have
been obtained by Trustee) shall be conclusive on the parties to this Trust
Agreement, and the Trustee shall be fully protected and be subject to no
liability in respect thereto.
(e) Subject to Section 4(c) hereof, the rights and duties of the
Trustee hereunder shall terminate upon the Trustee's incapacity to act, death or
insolvency, and no interest in any of the Station Assets directly or indirectly
held by the Trustee nor any of the rights and duties of a deceased or insolvent
Trustee may be transferred by will, devise, succession or in any manner except
as provided in this Trust Agreement. The heirs, administrators, executors or
other representatives of an incapacitated, deceased or insolvent Trustee shall,
however, have the right and duty to convey any Station Assets held by the
Trustee to one or more successor Trustee designated by BBC pursuant to Section
4(g) below.
(f) The Trustee may resign by giving not less than 60 days' advance
written notice of resignation to BBC, provided that a successor Trustee has been
appointed, such appointment has received all necessary approval from the FCC,
and any order granting such approval has become effective. BBC shall cooperate
fully in the prompt appointment of a successor Trustee and shall not
unreasonably interfere with or delay the effectiveness of such resignation.
(g) In the event of such resignation, incapacity to act, death or
insolvency of the Trustee, he shall be succeeded, subject to such prior approval
of the FCC as may be required, by a successor Trustee chosen by BBC. Any
successor Trustee shall succeed to all of the rights and obligations of the
Trustee replaced hereunder upon execution by such successor Trustee of a
counterpart of this Trust Agreement.
(h) The Trustee and any successor Trustee designated pursuant to
paragraphs (f) and (g) of this Section 4 shall not be a 1% or greater
shareholder, officer, employee, director, or affiliate of BBC, and may not have
any business or familial relationship (as defined in the FCC Policy Statement in
MM Docket NO. 85-218, FCC 86-67 (March 17, 1986)) with any officer, employee,
director, or 1% or
7
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greater shareholder or affiliate of BBC. Neither the Trustee nor any successor
Trustee will serve as an officer, employee, or director of BBC, its affiliates,
or its successor companies following the assignment specified in Section 3(e) or
Section 3(f).
5. Certain Services from BBC. At the Trustee's request, BBC shall provide
the Trustee with such payroll, group insurance, accounting and engineering
services as BBC provides for its owned television stations and shall permit
employees of the Station to participate in BBC's 401(k) plan in accordance with
the terms thereof.
6. Termination of Trust Agreement; Distribution of Proceeds of Sale of
Assets.
(a) Subject to such FCC approval as may be required, and following the
receipt of such FCC approval, this Trust Agreement and the WMTV Trust created
hereby shall terminate, following consummation of (i) a Sale of the Station
Assets under Section 3(e) or Section 3(f) of this Trust Agreement, (ii) the
divestiture by BBC of its interest in WIFR, or (iii) a change in law or
regulation which permits BBC to own both the Station and WIFR.
(b) Upon the termination of this Trust Agreement pursuant to Section
6(a)(i) hereof and consistent with the requirements of the FCC, the Trustee
shall deliver to the assignee those Station Assets contemplated by the
assignment transaction that has been approved by the FCC, and shall deliver all
other property held by the Trustee pursuant to this Trust Agreement to BBC or
its designee. In the case of a Sale of all or substantially all of the Station
Assets to an unaffiliated third party pursuant to Section 3(e) or 3(f) of this
Trust Agreement, the Trustee shall receive the money, securities, rights or
property which are distributed or are distributable in respect of the Station
Assets, and, after paying (or reserving for payment thereof) any expenses or
liability incurred pursuant to this Trust Agreement, shall distribute or cause
the distribution of such money, securities, rights or property to BBC or its
designee.
(c) Upon termination of this Trust Agreement pursuant to Section
6(a)(ii) or (iii) hereof and consistent with the requirements of the FCC, the
Trustee shall deliver the Station Assets and all other property held by the
Trustee pursuant to this Agreement to BBC or its designee.
7. Communications.
(a) The Trustee may communicate with and provide reports (including
specifically the financial reports provided for in Section 3(a)(i)) to BBC
concerning the implementation of the WMTV Trust, but not concerning the
management and operations of the Station except as provided in Section 3(a)(i)
above.
(b) The Trustee may engage in the communications contemplated by
Section 3(e) hereof to facilitate a Sale of the Station Assets to an
unaffiliated third party.
(c) Neither BBC nor any of its officers, directors, employees,
shareholders or affiliates shall communicate with the Trustee regarding the
operation or management of the Station. BBC may communicate with the Trustee as
provided in Section 3(e) hereof, and concerning the mechanics of implementing
any Sale of the Station Assets. Existing programming broadcast by such Station
may continue in force until their termination, or may be renewed if renewal on
the same terms is automatic upon
8
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notification. Ministerial written communications in connection with existing
contracts and the services referred to in Section 5 may continue.
(d) Any communications permitted by Section 7(a), 7(b) or 7(c) shall
be evidenced in writing, and shall be retained by the Trustee for inspection
upon request by the FCC.
(e) All notices and other communications given under this Trust
Agreement shall be deemed to have been duly given when delivered in person or by
overnight express, mailed by first-class, registered or certified mail, postage
prepaid, or transmitted by facsimile and addressed to the parties as follows:
(i) If to BBC:
100 Park Avenue
Rockford, Illinois 61103
(ii) If to the Trustee:
2730 Verona Terrace
Mission Hills, Kansas 66208
or to such other address as either of them by written notice to the others may
from time to time designate. Each notice or other communication which shall be
delivered, mailed or transmitted in the manner described above shall be deemed
sufficiently received for all purposes at such time as it is delivered to the
addressee (with any return receipt or deliver receipt being deemed conclusive
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation, but in the case of a facsimile, only if a hard copy
is also sent by overnight courier.
8. Miscellaneous.
(a) This Trust Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior oral or other written agreements, commitments or understandings with
respect to the matters provided for herein. This Trust Agreement shall not be
amended, altered or modified except by an instrument in writing duly executed by
each of the parties hereto. Any material change in this Trust Agreement may be
made only if approved by the FCC. A copy of any material change shall be filed
by the Trustee with the FCC within ten days following the execution thereof,
with copies to the appropriate divisions and bureaus of the FCC.
(b) This Trust Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective permitted successors and
permitted assigns. Subject to Section 4(g) hereof, this Trust Agreement shall
not be assignable by the Trustee.
(c) If any part of any provision of this Trust Agreement or any other
agreement, document or writing giving pursuant to or in connection with this
Trust Agreement shall be invalid or unenforceable under applicable law, said
part shall be ineffective to the extent of such invalidity only, without in any
way affecting the remaining part of said provision or the remaining provisions
of this Trust
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Agreement.
(d) The headings of the sections of this Trust Agreement are inserted
for convenience of reference only and do not form a part or affect the meaning
thereof.
(e) This Trust Agreement, the rights and obligations of the parties
hereto, any claims and disputes relating thereto, shall be governed by and
construed in accordance with the laws of the State of Wisconsin applicable to
contracts made and to be performed entirely with such state.
(f) This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Trust Agreement
or caused this Trust Agreement to be duly executed on their behalf as of the
date and year first herein above set forth.
BENEDEK BROADCASTING CORPORATION
By: /s/ K. James Yager
---------------------------
Title: President
---------------------------
BENEDEK LICENSE CORPORATION
By: /s/ K. James Yager
---------------------------
Title President
---------------------------
PHILIP A. JONES, AS TRUSTEE
/s/ Philip A. Jones
---------------------------
Philip A. Jones
<PAGE>
<PAGE>
ASSET EXCHANGE AGREEMENT
BETWEEN
BENEDEK BROADCASTING CORPORATION
AND
BENEDEK LICENSE CORPORATION
AND
AK MEDIA GROUP, INC.
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions...................................................................................1
2. Exchange of Assets............................................................................3
2.1 KKTV Assets.........................................................................3
2.2 KCOY Assets.........................................................................5
2.3 Excluded KKTV Assets................................................................7
2.4 Excluded KCOY Assets................................................................7
2.5 Transfer of Assets..................................................................8
2.6 Non-Assignable Assets...............................................................8
3. Assumption of Liabilities.....................................................................9
3.1 Assumed Liabilities.................................................................9
3.2 Instruments of Assumption..........................................................10
3.3 Excluded KKTV Liabilities..........................................................10
3.4 Excluded KCOY Liabilities..........................................................11
4. Closing Payment; Allocation..................................................................12
4.1 Closing Payment....................................................................12
4.2 Closing Adjustments................................................................12
4.3 Allocation of Purchase Price.......................................................12
5. Closing......................................................................................12
5.1 Time of Closing....................................................................12
5.2 Time Brokerage Agreements..........................................................13
6. Governmental Consents........................................................................13
6.1 FCC Consent........................................................................13
6.2 Hart-Scott-Rodino..................................................................13
6.3 Other Governmental Consents........................................................14
7. Representations and Warranties of AKMG.......................................................14
7.1 Organization and Standing..........................................................14
7.2 Power and Authority................................................................14
7.3 No Conflicts.......................................................................14
7.4 Government Approval................................................................15
7.5 Validity...........................................................................15
7.6 Financial Statements...............................................................15
7.7 No Changes.........................................................................16
7.8 Taxes..............................................................................16
7.9 Contracts..........................................................................17
7.10 Real Estate........................................................................18
7.11 Personal Property..................................................................19
7.12 Intellectual Property..............................................................19
7.13 Insurance..........................................................................20
7.14 Litigation.........................................................................20
7.15 Compliance with Law................................................................20
7.16 Labor..............................................................................20
7.17 Employees..........................................................................21
7.18 Pension Plans......................................................................21
7.19 Environmental Warranties...........................................................22
7.20 Accuracy of Information............................................................24
8. Representations and Warranties of Benedek....................................................24
8.1 Organization and Standing..........................................................24
</TABLE>
(i)
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<TABLE>
<S> <C>
8.2 Power and Authority................................................................24
8.3 No Conflicts.......................................................................24
8.4 Government Approval................................................................25
8.5 Validity...........................................................................25
8.6 Financial Statements...............................................................25
8.7 No Changes.........................................................................25
8.8 Taxes..............................................................................26
8.9 Contracts..........................................................................27
8.10 Real Estate........................................................................28
8.11 Personal Property..................................................................29
8.12 Intellectual Property..............................................................29
8.13 Insurance..........................................................................30
8.14 Litigation.........................................................................30
8.15 Compliance with Law................................................................30
8.16 Labor..............................................................................30
8.17 Employees..........................................................................31
8.18 Pension Plans......................................................................31
8.19 Environmental Warranties...........................................................32
8.20 Accuracy of Information............................................................33
9. Certain Covenants and Agreements.............................................................33
9.1 Control of the Stations............................................................33
9.2 Access.............................................................................33
9.3 Interim Operations.................................................................34
9.4 Employees of the Stations..........................................................35
9.5 Compliance.........................................................................35
9.6 Compliance with Laws...............................................................35
9.7 No Solicitation....................................................................35
9.8 Payment of Taxes...................................................................36
9.9 FCC Consent........................................................................36
9.10 Time Brokerage Agreements..........................................................36
10. Conditions of Closing........................................................................36
10.1 Obligation of Benedek to Close.....................................................36
10.1.1 Representations........................................................36
10.1.2 Covenants..............................................................36
10.1.3 No Injunction..........................................................37
10.1.4 Consents...............................................................37
10.1.5 KKTV FCC Licenses......................................................37
10.1.6 Governmental Consents..................................................37
10.1.7 Instruments of Transfer................................................37
10.1.8 Assumption Agreements..................................................37
10.1.9 Books of Account.......................................................37
10.1.10 Resolutions............................................................38
10.1.11 Opinions of Counsel to AKMG............................................38
10.1.12 Hart-Scott-Rodino Compliance...........................................38
10.1.13 Environmental Condition................................................38
10.1.14 Further Documents......................................................38
10.2 Obligation of AKMG to Close........................................................38
10.2.1 Representations........................................................38
10.2.2 Covenants..............................................................39
10.2.3 No Injunction..........................................................39
10.2.4 Consents...............................................................39
10.2.5 KCOY FCC Licenses......................................................39
10.2.6 Governmental Consents..................................................39
10.2.7 Instruments of Transfer................................................39
10.2.8 Assumption Agreements..................................................39
10.2.9 Books of Account.......................................................40
</TABLE>
(ii)
<PAGE>
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<TABLE>
<S> <C> <C>
10.2.10 Resolutions............................................................40
10.2.11 Opinion of Counsels to Benedek.........................................40
10.2.12 Hart-Scott-Rodino......................................................40
10.2.13 Environmental Condition................................................40
10.2.14 Further Documents......................................................40
10.2.15 Receipt of Purchase Price Payable at Closing...........................40
11. Remedies for Breach..........................................................................40
11.1 Declining to Close.................................................................41
11.2 Election to Close..................................................................41
11.3 Remedies Cumulative................................................................41
12. Termination Rights...........................................................................41
13. Indemnification of the Parties...............................................................41
13.1 Indemnification by AKMG............................................................41
13.2 Indemnification by Benedek.........................................................42
13.3 Procedures.........................................................................42
13.4 Limitation.........................................................................43
13.5 Survival of Representations and Warranties.........................................43
14. Brokers......................................................................................43
15. Miscellaneous................................................................................43
15.1 Entire Agreement...................................................................43
15.2 Notices............................................................................43
15.3 Public Announcement................................................................44
15.4 No Waiver..........................................................................45
15.5 Governing Law......................................................................45
15.6 Consent to Jurisdiction............................................................45
15.7 Expenses...........................................................................45
15.8 Binding Agreement..................................................................45
15.9 Headings...........................................................................45
15.10 Counterparts.......................................................................45
</TABLE>
(iii)
<PAGE>
<PAGE>
SCHEDULES
<TABLE>
<CAPTION>
Schedule Number Description
- --------------- ------------
<S> <C>
1.9 AKMG's & Benedek's Knowledge
2.1.12 Other KKTV Assets
2.2.12 Other KCOY Assets
2.3 Excluded KKTV Assets
2.4 Excluded KCOY Assets
3.3.7 Excluded KKTV Contracts
3.4.7 Excluded KCOY Contracts
4.3 Allocation
7.3 AKMG Conflicts
7.4 KKTV FCC Licenses
7.6 KKTV Financial Statements
7.7 No Changes
7.8 Taxes
7.9 KKTV Contracts
7.9.4 KKTV Trade-Out Balance
7.10 KKTV Real Property
7.11 KKTV Personal Property
7.12 KKTV Intellectual Property
7.13 KKTV Insurance
7.14 KKTV Litigation
7.16 KKTV Labor
7.17 KKTV Employees
7.18 KKTV Employee Plans
</TABLE>
(iv)
<PAGE>
<PAGE>
<TABLE>
<S> <C>
8.3 Benedek Conflicts
8.4 KCOY FCC Licenses
8.6 KCOY Financial Statements
8.7 No Changes
8.8 Taxes
8.9 KCOY Contracts
8.9.4 KCOY Trade-Out Balance
8.10 KCOY Real Property
8.11 KCOY Personal Property
8.12 KCOY Intellectual Property
8.13 KCOY Insurance
8.14 KCOY Litigation
8.16 KCOY Labor
8.17 KCOY Employees
8.18 KCOY Employee Plans
10.1.4 AKMG Required Consents
10.2.4 Benedek Required Consents
</TABLE>
(v)
<PAGE>
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
- ------- ------------
<S> <C>
A Form of KKTV Time Brokerage Agreement
B Form of KCOY Time Brokerage Agreement
C-1 Form of Opinion of Counsel to AKMG
C-2 Form of Opinion of FCC Counsel to AKMG
C-3 Form of Opinion of Local Counsel to AKMG
D-1 Form of Opinion of Counsel to Benedek
D-2 Form of Opinion of FCC Counsel to Benedek
D-3 Form of Opinion of Local Counsel to Benedek
</TABLE>
(vi)
<PAGE>
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INDEX TO DEFINED TERMS
<TABLE>
<CAPTION>
Term Location
- ------ ---------
<S> <C>
"Affiliate" Section 1.1
"Agreement" Section 1.2
"AKMG" Page 1, paragraph 1
"Assumed KCOY Liabilities" Section 3.1.2
"Assumed KKTV Liabilities" Section 3.1.1
"Benedek" Page 1, paragraph 1
"BLC" Page 1, paragraph 1
"CBS" Section 2.1.4
"CERCLA" Section 7.19.2.1
"CERCLIS" Section 7.19.7
"Closing" Section 5
"Closing Date" Section 5.1
"Closing Payment" Section 4.1
"COBRA" Section 7.18.6
"Code" Page 1, 3rd WHEREAS
"control" Section 1.1.1
"Employee Plans" Section 7.18
"Environmental Laws" Section 7.19.1
"ERISA" Section 1.3
"ERISA Affiliate" Section 1.4
"Excluded KCOY Assets" Section 2.4
"Excluded KCOY Contracts" Section 3.4.7
"Excluded KCOY Records" Section 2.4.3
"Excluded KKTV Assets" Section 2.3
"Excluded KKTV Contracts" Section 3.3.7
"Excluded KKTV Records" Section 2.3.4
"FCC" Page 1, 1st WHEREAS
"FCC Applications" Section 6.1.1
"FCC Consents" Section 1.5
"Final Orders" Section 1.6
"GAAP" Section 1.7
"Hazardous Material" Section 7.19.2
"hazardous substance" Section 7.19.2.1
"hazardous waste" Section 7.19.2.2
"herein" Section 1.2
"hereof" Section 1.2
"hereunder" Section 1.2
"HSR Act" Section 6.2
"including" Section 1.15.4
</TABLE>
(vii)
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Term Location
- ----- ------------
<S> <C>
"Information Technology" Section 1.8
"Injured Party" Section 13.3
"Internal Revenue Service" Section 4.3
"KCOY" Page 1, 1st WHEREAS
"KCOY Assets" Section 2.2
"KCOY Financial Statements" Section 8.6
"KCOY Leases" Section 8.10
"KKTV" Page 1, 2nd WHEREAS
"KKTV Assets" Section 2.1
"KKTV Financial Statements" Section 7.6
"KKTV Leases" Section 7.10
"knowledge" Section 1.9
"Lien" Section 1.10
"Losses" Section 13.1
"Material Adverse Effect" Section 1.12
"or" Section 1.15.3
"Other Party" Section 13.3
"Parties" Page 1, paragraph 1
"Party" Page 1, paragraph 1
"Person" Section 1.13
"Station" Page 1, 2nd WHEREAS
"Stations" Page 1, 2nd WHEREAS
"Time Brokerage Agreement" Section 1.11
"Trade Rights" Section 7.12
"trade-out agreements" Section 3.1.1
"Transferred Assets" Section 2.2
"Year 2000 Compliant" Section 1.14
</TABLE>
(viii)
<PAGE>
<PAGE>
ASSET EXCHANGE AGREEMENT
AGREEMENT dated this 30th day of December, 1998, between BENEDEK
BROADCASTING CORPORATION ("Benedek") and BENEDEK LICENSE CORPORATION ("BLC"),
each a Delaware corporation having its principal place of business at 100 Park
Avenue, Rockford, Illinois 61101, and AK MEDIA GROUP, INC., a Washington
corporation having its principal place of business at 1301 Fifth Avenue, Suite
4000, Seattle, Washington 98101 ("AKMG") (Benedek and AKMG being each referred
to herein as a "Party" and collectively referred to herein as the "Parties").
W I T N E S S E T H :
WHEREAS, Benedek and its wholly-owned direct subsidiary BLC own and
operate television station KCOY(TV), Channel 12, Santa Maria, California and its
auxiliary facilities ("KCOY") pursuant to licenses issued by the Federal
Communications Commission (the "FCC"); and
WHEREAS, AKMG owns and operates television station KKTV(TV), Channel
11, Colorado Springs, Colorado and its auxiliary facilities ("KKTV") pursuant to
licenses issued by the FCC (KCOY and KKTV being each referred to herein as a
"Station" and collectively referred to herein as the "Stations"); and
WHEREAS, Benedek desires to exchange all of the KCOY Assets (as
hereinafter defined) and Assumed KCOY Liabilities (as hereinafter defined) for
the KKTV Assets (as hereinafter defined) and the Assumed KKTV Liabilities (as
hereinafter defined), and AKMG also desires to make such exchange, in each case
as a like-kind exchange under Section 1031 of the Internal Revenue Code of 1986,
as amended (the "Code"), and in each case upon the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, contemporaneously with the execution of this Agreement, AKMG
and Benedek are entering into Time Brokerage Agreements (as herein defined) with
respect to certain aspects of the operation of the Stations between the date
hereof and the Closing Date (as herein defined).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. Definitions. Unless otherwise stated in this Agreement, the
following terms shall have the following meanings:
1.1 The term "Affiliate" means, with respect to a Person, any
other Person which, directly or indirectly, is in control of, is controlled by
or is under common control with such Person. For purposes of the foregoing
definition, "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.
1.2 The term "Agreement" means this agreement, including the
Schedules and all Exhibits hereto, as the same may be amended or otherwise
modified from time to time, and the terms "herein", "hereof", "hereunder" and
like terms shall be taken as referring to this Agreement in its entirety and
shall not be limited to any particular section or provision hereof.
<PAGE>
<PAGE>
1.3 The term "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and any successor statute
thereto and all final or temporary regulations promulgated thereunder.
1.4 The term "ERISA Affiliate" shall mean with respect to a
Party, all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control and all other
entities which, together with such Party, are treated as a single employer under
any or all of Sections 414(b), (c), (m) or (o) of the Code.
1.5 The term "FCC Consents" means action by the FCC granting
its consent to the assignment of the KKTV FCC Licenses to BLC and action by the
FCC granting its consent to the assignment of the KCOY FCC Licenses to AKMG, as
contemplated by this Agreement.
1.6 The term "Final Orders" means written actions or orders
issued by the FCC, setting forth the FCC Consents and (a) which have not been
reversed, stayed, enjoined, set aside, annulled or suspended, and (b) with
respect to which no requests have been filed for administrative or judicial
review, reconsideration, appeal or stay and the periods provided by statute or
FCC regulations for filing of any such requests for administrative or judicial
review, reconsideration, appeal or stay or for the FCC to set aside the actions
on its own motion have expired.
1.7 The term "GAAP" means generally accepted accounting
principles set forth in opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.
1.8 "Information Technology" means computer software, computer
firmware, computer hardware (whether general or specific purpose) and other
similar or related items of automated, computerized or software system(s) that
are used or relied on by a Party in the conduct of the business of its Station.
1.9 The term "knowledge" or similar words shall be deemed to
mean the actual personal knowledge as of the date specified or if no such date
is specified, as of the Closing Date, of each Party's officers, directors and
employees identified on Schedule 1.9 attached hereto.
1.10 The term "Lien" means any charge, claim, lien, mortgage,
obligation, pledge, security interest or other encumbrance of any nature
whatsoever upon, of or in property or other assets of a Person, whether absolute
or conditional, voluntary or involuntary, whether created pursuant to agreement,
arising by force of statute, by judicial proceedings or otherwise.
1.11 The term "Material Adverse Effect" means, with respect to
a Station, a material adverse effect upon the business, operations, assets or
financial condition of such Station.
1.12 The term "Person" shall include an individual, a
partnership, a joint venture, a corporation, a trust, an estate, an
unincorporated organization or association and a governmental agency.
1.13 The term "Time Brokerage Agreements" means (i) the Time
Brokerage Agreement of even date herewith between AKMG, as owner, and Benedek,
as programmer, with respect to KKTV in
2
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the form of Exhibit A annexed hereto and (ii) the Time Brokerage Agreement of
even date herewith between Benedek, as owner, and AKMG, as programmer, with
respect to KCOY in the form of Exhibit B annexed hereto.
1.14 The term "Year 2000 Compliant" means that Information
Technology is designed to be used prior to, during and after the calendar year
2000 A.D., and that Information Technology used during each such time period
will accurately receive, provide and process date/time data (including, but not
limited to, calculating, comparing and sequencing) from, into and between the
20th and 21st centuries, including the years 1999 and 2000, and leap-year
calculations and will not malfunction, cease to function, or provide invalid or
incorrect results as a result of date/time data.
1.15 Unless the context otherwise requires:
1.15.1 a term has the meaning assigned to it;
1.15.2 an accounting term not otherwise defined has the
meaning assigned to it in accordance GAAP and all accounting calculations will
be determined in accordance with such principles;
1.15.3 "or" is not exclusive;
1.15.4 "including" means including without limitation; and
1.15.5 words in the singular include the plural and words
in the plural include the singular as the context may require.
2. Exchange of Assets.
2.1 KKTV Assets. On the terms and subject to the conditions of
this Agreement, at the Closing AKMG shall transfer, convey, assign and deliver
to Benedek (or, with respect to the assets described in Section 2.1.1 below, to
BLC) all of the right, title and interest in and to all assets, properties and
rights of others, of every nature, kind and description, wherever located,
tangible and intangible, real, personal and mixed exclusively with respect to
KKTV (excluding only the Excluded KKTV Assets as specified in Section 2.3 below)
(the "KKTV Assets"), as the same shall exist at and as of the Closing Date,
including, without limitation, the following:
2.1.1 all rights in and to the licenses, permits and other
authorizations issued by any governmental authority and held by AKMG and used or
intended for exclusive use in the conduct of the business and operation of KKTV,
including the KKTV FCC Licenses listed on Schedule 7.4 annexed hereto, together
with any renewals, extensions or modification thereof and additions thereto
between the date hereof and the Closing Date, the goodwill and other intangible
personal property associated with or related to KKTV or the operation thereof,
the business of KKTV as a going concern, and all of AKMG's rights in and to the
call letters "KKTV";
2.1.2 all land, leaseholds and other interests of every
kind and description in real property, buildings, towers, and antennae, and
fixtures and improvements thereon as of the date hereof and used or held for
exclusive use in connection with the business and operation of KKTV, including,
3
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without limitation, those shown on Schedule 7.10 annexed hereto, and any
additions, improvements, replacements and alterations thereto made between the
date of this Agreement and the Closing Date;
2.1.3 all equipment, cameras, transmitters, antennas,
office furniture and fixtures, office materials and supplies, tools, inventory,
spare parts, and other tangible personal property of every kind and description,
owned by it and used or intended for exclusive use in the conduct of the
business and operation of KKTV, including the property listed on Schedule 7.11
annexed hereto, together with, to the extent permitted by this Agreement, any
replacements thereof and additions thereto made between the date hereof and the
Closing Date, and less any retirements or dispositions thereof made between the
date hereof and the Closing Date which are permitted by this Agreement;
2.1.4 all leases, contracts, licenses, purchase orders,
sales orders, commitments and other agreements pertaining exclusively to KKTV to
which AKMG is a party or in which AKMG has rights, listed on Schedule 7.9
annexed hereto, including the affiliation agreements with CBS Inc. ("CBS"), or
not required by Section 7.9 hereof to be set forth on Schedule 7.9, and those
leases, contracts, licenses, purchase orders, sales orders, commitments and
other agreements pertaining to KKTV entered into between the date hereof and the
Closing Date in accordance with Section 9.3 hereof;
2.1.5 all orders and agreements now existing, or entered
into in the ordinary course of business between the date hereof and the Closing
Date, for the sale of advertising time on KKTV except those which on the Closing
Date have already been filled or cancelled in accordance with Section 9.3 hereof
or have expired;
2.1.6 all programs and programming materials and elements
of whatever form or nature as of the date of this Agreement and used or held for
use in connection with the business and operations of KKTV, whether recorded on
tape or any other substance or intended of live performance, and whether
completed or in production, and all related common-law and statutory copyrights
owned by or licensed to AKMG and used in connection with the business and
operations of KKTV, together with all such programs, materials, elements, and
copyrights acquired by AKMG in connection with the business and operations of
KKTV between the date hereof and the Closing Date, except those that expire or
are cancelled in accordance with Section 9.3 hereof between the date hereof and
the Closing Date;
2.1.7 all rights of AKMG in and to trade names, service
marks, trademarks, trademark registrations and trademark applications,
copyrights, copyright registrations and copyright applications, patents and
patent applications, inventions, trade secrets, logos, slogans, jingles,
proprietary processes, computer software and all other information, know-how and
intellectual property rights and all licenses and other agreements relating to
any of the foregoing to the extent the same relate exclusively to the business
and operations of KKTV, including those listed on Schedule 7.9 annexed hereto;
2.1.8 all causes of action, judgments, claims, demands and
other rights of AKMG of every kind or nature to the extent the same relate
exclusively to the business and operations of KKTV, including, without
limitation, claims under insurance policies;
2.1.9 all rights of AKMG relating to or arising out of or
under express or implied warranties from suppliers with respect to the KKTV
Assets;
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2.1.10 except as provided in the Time Brokerage Agreement
pertaining to KKTV with respect to the proration of income and expenses, all
prepaid expenses, advances and deposits, including prepaid film and programming
expenses (it being understood that the consideration for the KKTV Assets
includes payment for the contracts and commitments AKMG relating to film and
programming and that no further payment to AKMG or proration shall be due in
respect thereof) and all barter receivables arising in connection with trade-out
agreements now existing or hereafter entered into in the ordinary course of
business to the extent the same relate to the business and operations of KKTV;
2.1.11 all books and records, including, but not limited
to, correspondence, employment records, production records, accounting records,
property records, filings with the FCC, mailing lists, customer and vendor lists
and other records and files of or relating exclusively to the business and
operations of KKTV, other than the Excluded KKTV Records (as herein defined);
provided, however, that such books and records shall be maintained in existence
for a period of three years following the Closing Date and shall be made
available for inspection and duplication by Benedek, at its expense, upon
reasonable notice during normal business hours; and
2.1.12 those other assets, properties and rights described
on Schedule 2.1.12 annexed hereto and made a part hereof.
2.2 KCOY Assets. On the terms and subject to the conditions of
this Agreement, at the Closing Benedek shall transfer, convey, assign and
deliver to AKMG all of the right, title and interest in and to all assets,
properties and rights of others, of every nature, kind and description, wherever
located, tangible and intangible, real, personal and mixed exclusively with
respect to the KCOY (excluding only the Excluded KCOY Assets as specified in
Section 2.4 below) (the "KCOY Assets"), as the same shall exist at and as of the
Closing Date, including, without limitation, the following (the KCOY Assets and
the KKTV Assets being collectively referred to herein as the "Transferred
Assets"):
2.2.1 all rights in and to the licenses, permits and other
authorizations issued by any governmental authority and held by Benedek and BLC
and used or intended for exclusive use in the conduct of the business and
operation of KCOY, including the KCOY FCC Licenses listed on Schedule 8.4
annexed hereto, together with any renewals, extensions or modification thereof
and additions thereto between the date hereof and the Closing Date, the goodwill
and other intangible personal property associated with or related to KCOY or the
operation thereof, the business of KCOY as a going concern, and all of Benedek's
rights in and to the call letters "KCOY";
2.2.2 all land, leaseholds and other interests of every
kind and description in real property, buildings, towers, and antennae, and
fixtures and improvements thereon owned by Benedek as of the date hereof and
used or held for exclusive use in connection with the business and operation of
KCOY, including, without limitation, those shown on Schedule 8.10 annexed
hereto, and any additions, improvements, replacements and alterations thereto
made between the date of this Agreement and the Closing Date;
2.2.3 all equipment, cameras, transmitters, antennas,
office furniture and fixtures, office materials and supplies, tools, inventory,
spare parts, and other tangible personal property of every kind and description,
owned by it and used or intended for exclusive use in the conduct of the
business and operation of KCOY, including the property listed on Schedule 8.11
annexed hereto, together with, to the extent permitted by this Agreement, any
replacements thereof and additions thereto made between the date
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hereof and the Closing Date, and less any retirements or dispositions thereof
made between the date hereof and the Closing Date which are permitted by this
Agreement;
2.2.4 all leases, contracts, licenses, purchase orders,
sales orders, commitments and other agreements pertaining exclusively to KCOY to
which Benedek is a party or in which Benedek has rights, listed on Schedule 8.9
annexed hereto, including the affiliation agreements with CBS or not required by
Section 8.9 hereof to be set forth on Schedule 8.9, and those leases, contracts,
licenses, purchase orders, sales orders, commitments and other agreements
pertaining to KCOY entered into by a Party between the date hereof and the
Closing Date in accordance with Section 9.3 hereof;
2.2.5 all orders and agreements now existing, or entered
into in the ordinary course of business between the date hereof and the Closing
Date, for the sale of advertising time on KCOY except those which on the Closing
Date have already been filled or cancelled in accordance with Section 9.3 hereof
or have expired;
2.2.6 all programs and programming materials and elements
of whatever form or nature as of the date of this Agreement and used or held for
exclusive use in connection with the business and operations of KCOY, whether
recorded on tape or any other substance or intended of live performance, and
whether completed or in production, and all related common-law and statutory
copyrights owned by or licensed to Benedek and used in connection with the
business and operations of KCOY, together with all such programs, materials,
elements, and copyrights acquired by Benedek in connection with the business and
operations of KCOY between the date hereof and the Closing Date, except those
that expire or are cancelled in accordance with Section 9.3 hereof between the
date hereof and the Closing Date;
2.2.7 all rights of Benedek in and to trade names, service
marks, trademarks, trademark registrations and trademark applications,
copyrights, copyright registrations and copyright applications, patents and
patent applications, inventions, trade secrets, logos, slogans, jingles,
proprietary processes, computer software and all other information, know-how and
intellectual property rights and all licenses and other agreements relating to
any of the foregoing to the extent the same relate to the business and
operations of KCOY, including those listed on Schedule 8.9 annexed hereto;
2.2.8 all causes of action, judgments, claims, demands and
other rights of Benedek of every kind or nature to the extent the same relate to
the business and operations of KCOY, including, without limitation, claims under
insurance policies;
2.2.9 all rights of Benedek relating to or arising out of
or under express or implied warranties from suppliers with respect to the KCOY
Assets;
2.2.10 except as provided in the Time Brokerage Agreement
pertaining to KCOY with respect to the proration of income and expenses, all
prepaid expenses, advances and deposits, including prepaid film and programming
expenses (it being understood that the consideration for the KCOY Assets
includes payment for the contracts and commitments of Benedek relating to film
and programming and that no further payment to Benedek or proration shall be due
in respect thereof) and all barter receivables arising in connection with
trade-out agreements now existing or hereafter entered into in the ordinary
course of business to the extent the same relate to the business and operations
of KCOY;
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2.2.11 all books and records, including, but not limited
to, correspondence, employment records, production records, accounting records,
property records, filings with the FCC, mailing lists, customer and vendor lists
and other records and files of or relating to the business and operations of
KCOY, other than the Excluded KCOY Records (as herein defined); provided,
however, that such books and records shall be maintained in existence for a
period of three years following the Closing Date and shall be made available for
inspection and duplication by AKMG, at its expense, upon reasonable notice
during normal business hours; and
2.2.12 those other assets, properties and rights described
on Schedule 2.2.12 annexed hereto and made a part hereof.
2.3 Excluded KKTV Assets. Anything contained in Section 2.1
above to the contrary notwithstanding, AKMG shall not transfer, convey or assign
to Benedek and the KKTV Assets shall not include the following (the "Excluded
KKTV Assets"):
2.3.1 the Closing Payment delivered by Benedek to AKMG
pursuant to this Agreement;
2.3.2 any cash or cash equivalents or money market
instruments, including unprocessed checks, savings and checking accounts and
other deposits, certificates of deposits, Treasury bills and other marketable
securities of AKMG;
2.3.3 all of the outstanding accounts receivable of AKMG
as of the date hereof arising out of the sale of advertising time on KKTV for
cash;
2.3.4 AKMG's minute books and such other books and records
(other than books and records specifically described in Section 2.1.11 hereof)
as pertain to the organization, existence or ownership of AKMG; provided,
however, that such books and records relating to KKTV shall be maintained in
existence for a period of three years following the Closing Date and shall be
made available for inspection and duplication by Benedek, at its expense, upon
reasonable notice during normal business hours (the "Excluded KKTV Records");
2.3.5 Excluded KKTV Contracts (as herein defined) and
contracts, commitments and agreements of AKMG to the extent the same relate
solely to Excluded KKTV Assets and not to the operation of KKTV;
2.3.6 assets sold by AKMG after the date hereof and prior
to the Closing Date in accordance with Section 9.3 hereof;
2.3.7 any refunds of Federal, state, local or other taxes,
including, without limitation, income, property or sales taxes, or other taxes
of any kind or description which relate to periods prior to the date hereof; and
2.3.8 those other assets, properties and rights listed on
Schedule 2.3 annexed hereto and made a part hereof.
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2.4 Excluded KCOY Assets. Anything contained in Section 2.2
above to the contrary notwithstanding, Benedek shall not transfer, convey or
assign to AKMG and the KCOY Assets shall not include the following (the
"Excluded KCOY Assets"):
2.4.1 any cash or cash equivalents or money market
instruments, including unprocessed checks, savings and checking accounts and
other deposits, certificates of deposits, Treasury bills and other marketable
securities of Benedek;
2.4.2 all of the outstanding accounts receivable of
Benedek as of the date hereof arising out of the sale of advertising time on
KCOY for cash;
2.4.3 Benedek's minute books and such other books and
records (other than books and records specifically described in Section 2.2.11
hereof) as pertain to the organization, existence or ownership of Benedek;
provided, however, that such books and records relating to KCOY shall be
maintained in existence for a period of three years following the Closing Date
and shall be made available for inspection and duplication by AKMG, at its
expense, upon reasonable notice during normal business hours (the "Excluded KCOY
Records");
2.4.4 Excluded KCOY Contracts (as herein defined) and
contracts, commitments and agreements of Benedek to the extent the same relate
solely to Excluded KCOY Assets and not to the operation of KCOY;
2.4.5 assets sold by Benedek after the date hereof and
prior to the Closing Date in accordance with Section 9.3 hereof;
2.4.6 any refunds of Federal, state, local or other taxes,
including, without limitation, income, property or sales taxes, or other taxes
of any kind or description which relate to periods prior to the date hereof; and
2.4.7 those other assets, properties and rights listed on
Schedule 2.4 annexed hereto and made a part hereof.
2.5 Transfer of Assets. The transfer of the Transferred Assets
as herein contemplated shall be made by the Parties, free and clear of all Liens
other than Liens set forth on Schedules 7.10, 7.11, 8.10 and 8.11 hereto and not
required to be discharged on or prior to the Closing Date pursuant to the terms
of this Agreement and except only those assumed by each Party pursuant to
Section 3 below. The transfer of the Transferred Assets shall be effected by
delivery by the Parties of such bills of sale, endorsements, assignments,
drafts, checks, deeds, affidavits of title and other instruments of transfer,
conveyance and assignment, including customary deeds with respect to real
property to be conveyed hereunder, as shall be necessary or appropriate to
transfer, convey and assign the KCOY Assets to AKMG and the KKTV Assets to
Benedek on the Closing Date as contemplated by this Agreement and as shall be
reasonably requested by the Parties. The conveyancing documents shall be in form
and substance reasonably satisfactory to the Parties. Each Party shall, at any
time and from time to time after the Closing Date, execute and deliver such
other instruments of transfer and conveyance and do all such further acts and
things as may be reasonably requested by the other Party to transfer, convey,
assign and deliver to the other Party or to aid and assist the other Party in
collecting and reducing to possession, any and all of the respective Transferred
Assets, or to vest in each Party good, valid and marketable title to such
Transferred Assets.
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2.6 Non-Assignable Assets. Anything contained in this Agreement
to the contrary, this Agreement shall not constitute an agreement or an
attempted agreement to transfer or assign any contract, license, lease,
commitment, sales order, purchase order or other agreement, or any claim or
right of any benefit arising thereunder or resulting therefrom if any such
attempted transfer or assignment thereof, without the consent of any other party
thereto, would constitute a breach thereof or in any way affect the rights of
the assignee Party thereunder. Each Party shall, between the date hereof and the
Closing Date, use their respective best efforts to obtain the consent of any
party or parties to any such contracts, licenses, leases, commitments, sales
orders, purchase orders or other agreements to which it is a party to the
transfer or assignment thereof by such Party to the other Party hereunder in all
cases in which such consent is required for transfer or assignment; provided,
that such efforts shall not require the payment of any consideration by the
Parties other than as expressly provided for in this Agreement. If after a Party
has used its best efforts to obtain the consent of any such other party to such
contract, license, lease, commitment, sales order, purchase order or other
agreement, such consent shall not be obtained at or prior to the Closing, or an
attempted assignment thereof at the Closing would be ineffective and would
affect the rights of the assignee Party thereunder, the Parties will cooperate
with each other in any reasonable arrangement designed to provide for the
assignee Party the benefits under any such contract, license, lease, commitment,
sales order, purchase order or other agreement, including the enforcement, at
the cost and for the benefit of the assignee Party, of any and all rights of the
transferring Party against such other party thereto arising out of the breach or
cancellation thereof by such other party or otherwise. The foregoing shall not
limit, waive or otherwise affect each Party's right to not close the
transactions contemplated by this Agreement to the extent the receipt of any
consent to the transfer or assignment of any contract, license, lease,
commitment, sales order, purchase order or other agreement is a condition to the
obligation of such Party to close hereunder.
3. Assumption of Liabilities.
3.1 Assumed Liabilities. Subject to the terms and conditions of
this Agreement and the performance by the parties hereto of their respective
obligations hereunder, on the Closing Date, simultaneously with the transfer,
conveyance and assignment by AKMG to Benedek of the KKTV Assets and the
transfer, conveyance and assignment by Benedek to AKMG of the KCOY Assets:
3.1.1 Benedek shall assume or otherwise be liable for,
subject to the limitations contained herein, the liabilities and obligations of
AKMG (collectively, the "Assumed KKTV Liabilities") under the following items:
(i) contracts, agreements and commitments set forth on Schedule 7.9, other than
Excluded KKTV Contracts, to the extent the liabilities and obligations
thereunder arise on or after the Closing Date, (ii) contracts, agreements and
commitments in existence on the date hereof and not required by Section 7.9
hereof to be set forth on Schedule 7.9, other than Excluded KKTV Contracts, to
the extent the liabilities and obligations thereunder arise on or after the
Closing Date, (iii) contracts, agreements and commitments with customers and
advertising agencies accepted in the ordinary course of business for the sale of
advertising time on KKTV for cash, to the extent the liabilities and obligations
thereunder arise on or after the Closing Date, (iv) contracts, agreements and
commitments of the type set forth in (i), (ii) or (iii) above, to the extent the
liabilities and obligations thereunder arise on or after the Closing Date, to
which AKMG becomes a party in the ordinary course of business subsequent to the
date of this Agreement and prior to the Closing Date, which (a) are not
performed or discharged prior to the Closing Date, (b) are permitted to be
entered into by AKMG under the terms and conditions of this Agreement and (c)
are effectively assigned and transferred to Benedek as contemplated herein;
provided, however, that Benedek shall not be obligated to assume any contract,
agreement or commitment with respect to programming for KKTV entered into after
the date hereof without Benedek's prior written consent and, further provided,
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however, that Benedek shall not assume any accrued payable in respect of any
such contract, agreement or commitment and (v) agreements with customers and
advertising agencies accepted in the ordinary course of business and reflected
on Schedule 7.9 or entered into after the date hereof in accordance with Section
9.3 hereof for the sale of advertising time in exchange for goods and services
("trade-out agreements") (film and program barter agreements shall not be
included within the definition of trade-out agreements); and
3.1.2 AKMG shall assume or otherwise be liable for,
subject to the limitations contained herein, the liabilities and obligations of
Benedek (collectively, the "Assumed KCOY Liabilities") under the following
items: (i) contracts, agreements and commitments set forth on Schedule 8.9
hereof, other than Excluded KCOY Contracts, to the extent the liabilities and
obligations thereunder arise on or after the Closing Date, (ii) contracts,
agreements and commitments in existence on the date hereof and not required by
Section 8.9 hereof to be set forth on Schedule 8.9, other than Excluded KCOY
Contracts, to the extent the liabilities and obligations thereunder arise on or
after the Closing Date, (iii) contracts, agreements and commitments with
customers and advertising agencies accepted in the ordinary course of business
for the sale of advertising time on KCOY for cash, to the extent the liabilities
and obligations thereunder arise on or after the Closing Date, (iv) contracts,
agreements and commitments of the type set forth in (i), (ii) or (iii) above, to
the extent the liabilities and obligations thereunder arise on or after the
Closing Date, to Benedek becomes a party in the ordinary course of business
subsequent to the date of this Agreement and prior to the Closing Date, which
(a) are not performed or discharged prior to the Closing Date, (b) are permitted
to be entered into by Benedek under the terms and conditions of this Agreement
and (c) are effectively assigned and transferred to AKMG as contemplated herein;
provided, however, that AKMG shall not be obligated to assume any contract,
agreement or commitment with respect to programming for KCOY entered into after
the date hereof without AKMG's prior written consent and, further provided,
however, that AKMG shall not assume any accrued payable in respect of any such
contract, agreement or commitment and (v) trade-out agreements with customers
and advertising agencies accepted in the ordinary course of business and
reflected on Schedule 8.9 or entered into after the date hereof in accordance
with Section 9.3 hereof.
3.2 Instruments of Assumption. The assumption by Benedek of the
Assumed KKTV Liabilities and the assumption by AKMG of the Assumed KCOY
Liabilities shall be effected by such instruments of assumption delivered to the
other Party on the Closing Date as shall be reasonably satisfactory to the
Parties. Each Party shall, at any time and from time to time after the Closing
Date, execute and deliver such other instruments of assumption and do all such
further acts and things as may be reasonably requested by the other Party to
implement the assumption of each such liability and obligation. The assumption
by Benedek of the Assumed KKTV Liabilities and the assumption by AKMG of the
Assumed KCOY Liabilities shall in no way expand the rights or remedies of third
parties against such Party as compared to the rights and remedies which the
third parties would have had against the such Party had this Agreement not been
consummated.
3.3 Excluded KKTV Liabilities. Benedek does not and shall not
assume, pay, perform or discharge any liabilities or obligations of AKMG, other
than the Assumed KKTV Liabilities and, without limiting the foregoing, it is
expressly agreed by the Parties that Benedek shall not assume or be liable for
any of the following liabilities or obligations of AKMG:
3.3.1 liabilities or obligations of AKMG for borrowed
money or to any of its shareholders or to any Person affiliated or associated
therewith;
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3.3.2 liabilities or obligations of AKMG incurred with
respect to its entry into this Agreement or its consummation of any of the
transactions contemplated hereunder (including, without limitation, AKMG's legal
and accounting fees);
3.3.3 liabilities or obligations for Federal, state, local
or other taxes, including, without limitation, corporate income taxes, property
or sales or use taxes or reports, or other taxes of any kind or description, in
each case which relate to periods prior to the Closing;
3.3.4 any pension, retirement, profit-sharing plan or
trust or other employee benefit plan of AKMG;
3.3.5 subject to the KKTV Time Brokerage Agreement
executed concurrently herewith, any litigation, proceeding, or claim by any
Person to the extent relating to the business or operation of or otherwise
relating to KKTV prior to the Closing, whether or not such litigation,
proceeding, or claim is pending, threatened, or asserted before, on, or after
the date hereof, including any litigation, proceeding or claim listed on
Schedule 7.14 hereto and any litigation, proceeding or claim pending or
threatened as of the date hereof.
3.3.6 liabilities or obligations which may arise by reason
of or with respect to the dissolution or liquidation of AKMG;
3.3.7 liabilities or obligations arising under or with
respect to the contracts, agreements and commitments listed on Schedule 3.3.7
hereto (the "Excluded KKTV Contracts"); and
3.3.8 liabilities or obligations incurred by Benedek which
violate any representation, warranty, covenant or agreement of AKMG contained
herein or made in connection herewith.
3.4 Excluded KCOY Liabilities. AKMG does not and shall not
assume, pay, perform or discharge any liabilities or obligations of Benedek,
other than the Assumed KCOY Liabilities and, without limiting the foregoing, it
is expressly agreed by the Parties that AKMG shall not assume or be liable for
any of the following liabilities or obligations of Benedek:
3.4.1 liabilities or obligations of Benedek for borrowed
money or to any of its shareholders or to any Person affiliated or associated
therewith;
3.4.2 liabilities or obligations of Benedek incurred with
respect to its entry into this Agreement or its consummation of any of the
transactions contemplated hereunder (including, without limitation, Benedek's
legal and accounting fees);
3.4.3 liabilities or obligations for Federal, state, local
or other taxes, including, without limitation, corporate income taxes, property
or sales or use taxes or reports, or other taxes of any kind or description, in
each case which relate to periods prior to the Closing;
3.4.4 any pension, retirement, profit-sharing plan or
trust or other employee benefit plan of Benedek;
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3.4.5 subject to the KCOY Time Brokerage Agreement
executed concurrently herewith, any litigation, proceeding, or claim by any
Person to the extent relating to the business or operation of or otherwise
relating to KCOY prior to the Closing, whether or not such litigation,
proceeding, or claim is pending, threatened, or asserted before, on, or after
the Closing, including any litigation, proceeding or claim listed on Schedule
8.14 hereto and any litigation, proceeding or claim pending or threatened as of
the Closing.
3.4.6 liabilities or obligations which may arise by reason
of or with respect to the dissolution or liquidation of Benedek;
3.4.7 liabilities or obligations arising under or with
respect to the contracts, agreements and commitments listed on Schedule 3.4.7
hereto (the "Excluded KCOY Contracts"); and
3.4.8 liabilities or obligations incurred by AKMG which
violate any representation, warranty, covenant or agreement of Benedek contained
herein or made in connection herewith.
4. Closing Payment; Allocation.
4.1 Closing Payment. AKMG and Benedek agree that the value of
KKTV exceeds the value of KCOY by an amount equal to the Closing Payment (as
herein defined). In addition to the conveyance of the KCOY Assets and the
assumption of the Assumed KKTV Liabilities, Benedek shall also pay to AKMG the
sum of Nine Million Dollars ($9,000,000) (the "Closing Payment") payable at the
Closing by the wire transfer by Benedek to an account for the sole benefit of
AKMG in immediately available funds.
4.2 Closing Adjustments. All income and expenses arising from
the conduct of the business and operation of the Stations shall be prorated
between the Parties in accordance with the Time Brokerage Agreements.
4.3 Allocation of Purchase Price. The Parties agree that they
will use such asset values in calculating gain (if any) recognized under Treas.
Reg. 'SS' 1.1031(j)-1(b)(3) with respect to each "exchange group" (as defined in
Treas. Reg. 'SS' 1.1031(j)-1(b)(2)(i)), the "residual group" as (defined in
Treas. Reg. 'SS' 1.1031(j)-1(b)(2)(iii)) (if any) and any properties transferred
and received that are not within any "exchange group" or the "residual group"
(if any) and will not take any position on any tax return inconsistent
therewith. To the extent required by Section 1060 of the Code, the regulations
thereunder and Treas. Reg. 'SS' 1.1031(d)-1T, each Party shall allocate, in
accordance with the foregoing provisions, (a) the value of the consideration
transferred by it to the consideration received by it for purposes of
determining the tax basis of the property so received by it and (b) the value of
the consideration received by it to the consideration transferred by it for
purposes of determining the gain and loss (if any) with respect to the property
so transferred. For purposes of the preceding sentence, the Parties shall use
the value of properties transferred and received determined in accordance with
Schedule 4.3. To the extent an IRS Form 8594 is required to be filed under
Section 1060, the regulations thereunder and Treas. Reg. 'SS' 1.1031(d)-1T, the
Parties agree to prepare and file on a timely basis with the Internal Revenue
Service ("IRS") substantially identical IRS Forms 8594 using the values of
properties transferred and received as determined by in accordance with Schedule
4.3, and shall not take any position on any tax return inconsistent therewith.
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5. Closing.
5.1 Time of Closing. The closing of this Agreement (the
"Closing") shall take place at 10:00 a.m. Eastern Time on a date within ten days
following (i) the date of public notice of the latter of the two FCC Consents,
unless a petition to deny has been timely filed with respect to either FCC
Application (as herein defined), in which event the date on which the latter of
the two FCC Consents shall have become a Final Order (or if either such date is
a Saturday, Sunday, or Federal holiday, on the next business day thereafter),
and (ii) the date on which all other conditions to the obligations of the
Parties hereunder shall have been satisfied or waived in writing. The Closing
shall take place at the offices of Shack & Siegel, P.C., 530 Fifth Avenue, New
York, New York 10036, or at such other place as may be agreed to by the Parties.
The date of the Closing is hereinafter referred to as the "Closing Date."
5.2 Time Brokerage Agreements. On the date hereof, the Parties
shall enter into the Time Brokerage Agreements, substantially in the form of
Exhibits A and B attached hereto, with respect to KKTV and KCOY, respectively.
Unless otherwise set forth herein, the Parties agree that the following matters
relating to the Stations shall be governed in accordance with the Time Brokerage
Agreements: (i) employees; (ii) accounts receivables; (iii) prorations and
adjustments of the income and expense of the Stations; and (iv) cash sales and
trade agreements.
6. Governmental Consents.
6.1 FCC Consent. The exchange of the Station Licenses as
contemplated by this Agreement is subject to the prior consent of the FCC.
6.1.1 Promptly after the execution of this Agreement,
the Parties shall proceed to prepare for filing with the FCC appropriate
applications (the "FCC Applications") for consent to (i) the assignment from
AKMG to BLC of the KKTV FCC Licenses and (ii) the assignment from BLC to AKMG of
the KCOY FCC Licenses. The FCC Application for consent to the assignment from
BLC to AKMG of the KCOY FCC Licenses shall include a request for a waiver of the
FCC's duopoly policy, conditioned upon the outcome of the FCC's ownership
proceedings. The FCC Applications shall be filed with the FCC as soon as
practicable but in no event later than 10 days after the date hereof. The
Parties shall thereafter prosecute the FCC Applications with all reasonable
diligence and otherwise use their reasonable best efforts to obtain the grant of
such application as expeditiously as practicable (but no party shall have any
obligation to take any unreasonable steps to satisfy complainants, if any). If
the FCC Consents impose any condition on any party hereto (other than a
conditional waiver of the FCC's duopoly policy with respect to the assignment of
the KCOY Licenses), such party shall use its reasonable best efforts to comply
with such condition unless compliance would be unduly burdensome or would have a
Material Adverse Effect upon it, its constituent partners, its parent
corporation, or any of its or its parent corporation's subsidiaries or
Affiliates, as appropriate. Each Party shall pay 50% of all filing fees payable
with respect to all filings required by the FCC in connection with the
transactions contemplated by this Agreement and made pursuant to this Section
6.1.1.
6.1.2 The transfer of the KKTV Assets and the KCOY
Assets hereunder is expressly conditioned upon the grant of the FCC Consents and
compliance by the Parties hereto with the conditions (if any) imposed in such
consent.
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6.2 Hart-Scott-Rodino. If applicable, the Parties will file as
soon as reasonably practicable (but in any event within 30 days after the date
of this Agreement) with the United States Federal Trade Commission and the
Antitrust Division of the United States Department of Justice any required
notification and report forms with respect to the transactions contemplated
hereunder pursuant to the Hart- Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act"). Such notification and report forms will comply as to form with
all requirements applicable thereto and all of the data and information reported
in such forms shall be true, correct and complete in all material respects. The
parties shall comply as promptly as practicable with all requests if any for
additional information and documentary materials unless, in the reasonable
opinion of counsel, such information or documentation, as the case may be, is
not required to be produced. Such additional information and documentation will
comply as to form with all requirements applicable thereto and will be true,
correct and complete in all material respects and shall be promptly delivered.
Each Party shall pay 50% of all filing fees payable with respect to all filings
required by the HSR Act in connection with the transactions contemplated by this
Agreement and made pursuant to this Section 6.2.
6.3 Other Governmental Consents. Promptly following the
execution of this Agreement, the Parties will proceed to prepare and file with
the appropriate governmental authorities and any other requests for approval or
waiver that are required from governmental authorities in connection with the
transactions contemplated hereby, and shall diligently and expeditiously
prosecute, and shall cooperate fully with each other in the prosecution of, such
requests for approval or waiver and all proceedings necessary to secure such
approvals and waivers.
7. Representations and Warranties of AKMG. In order to induce Benedek
to enter into this Agreement and to perform its obligations hereunder, AKMG
hereby makes the following representations and warranties to Benedek:
7.1 Organization and Standing. AKMG is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington and has all requisite power and authority, corporate or otherwise, to
own, lease, use and operate its properties and assets at and in the places where
such properties and assets are now owned, operated or leased and to transact its
business where and as now conducted. AKMG is duly qualified to do business and
is in good standing in each jurisdiction where it owns, leases or holds real
property or conducts or operates its business, where the nature of its
activities requires such qualification or where the failure to so qualify would
have a Material Adverse Effect on the business or results of operations of KKTV.
AKMG is the successor by merger to KKTV, Inc.
7.2 Power and Authority. AKMG has all requisite power and
authority, corporate or otherwise, to enter into this Agreement, the Time
Brokerage Agreements and the documents and instruments contemplated hereby and
thereby and to assume and perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement, the Time Brokerage Agreements and the
documents and instruments contemplated hereby and thereby and the performance by
AKMG of its obligations hereunder and thereunder have been duly and validly
authorized by all necessary corporate action of AKMG and no further action or
approval, corporate or otherwise, is required in order to constitute this
Agreement, the Time Brokerage Agreements and the documents and instruments
contemplated hereby and thereby as valid and binding obligations of AKMG,
enforceable in accordance with their terms.
7.3 No Conflicts. Except as set forth on Schedule 7.3 annexed
hereto and made a part hereof, the execution and delivery of this Agreement, the
Time Brokerage Agreements and the documents
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and instruments contemplated hereby and thereby, the consummation of the
transactions contemplated hereby and the performance by AKMG of its obligations
hereunder and thereunder:
7.3.1 do not and will not conflict with or violate any
provision of the certificate of incorporation or bylaws of AKMG;
7.3.2 do not and will not conflict with or result in any
breach of any condition or provisions of, or constitute a default under or give
rise to any right of termination, cancellation or acceleration or (whether after
the giving of notice or lapse of time or both) result in the creation or
imposition of any Lien on any of the KKTV Assets by reason of the terms of any
contract, mortgage, lien, lease, agreement, indenture, instrument, judgment or
decree to which AKMG is a party or which is or purports to be binding upon AKMG
or which affects or purports to affect any of the KKTV Assets; and
7.3.3 subject to the receipt of any governmental approvals
required in connection with the transfer of the KKTV Assets to Benedek or BLC,
do not and will not conflict with or result in a violation of or default under
(with or without notice of the lapse of time or both) any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge or other
restriction of any court, administrative agency or commission or other
governmental authority or instrumentality.
7.4 Government Approval. AKMG is the holder of the KKTV FCC
Licenses as set forth on Schedule 7.4 annexed hereto and made a part hereof,
which constitute all necessary authorizations from the FCC to enable KKTV to
broadcast and transmit the present television programming. Other than FCC
rulemaking procedures of general applicability, there are no fines, forfeitures,
notices of apparent liability, orders to show cause or any other administrative
or judicial orders outstanding nor any proceedings pending or, to AKMG's
knowledge, threatened, the effect of which would be the revocation,
cancellation, non-renewal, suspension or adverse modification of the KKTV FCC
Licenses or any adverse consequence for KKTV, and there does not exist any event
which with notice or the passing of time or both could result in a fine,
forfeiture, notice of apparent liability, order to show cause or any other
administrative or judicial order or proceeding by the FCC, the effect of which
would result in the revocation, cancellation, non-renewal, suspension or adverse
modification of the KKTV FCC Licenses or any adverse consequences for KKTV.
Since the date of its acquisition by AKMG, KKTV, including, without limitation,
the technical equipment owned by AKMG relating to KKTV, has been operated in
conformity with the KKTV FCC Licenses in all material respects and within the
FCC rules, regulations and standards of performance in all material respects.
Except as contemplated in Section 6 hereof, no action, approval consent,
authorization or other action, including, but not limited to, any action,
approval, consent or authorization by or filing with any governmental or
quasi-governmental agency, commission, board, bureau or instrumentality, is
necessary or required as to AKMG for the due execution, delivery or performance
by AKMG of this Agreement or any document or instrument contemplated hereby or
in order to constitute this Agreement as a valid and binding obligation of AKMG.
To the best knowledge of AKMG, there are no facts which, under the
Communications Act of 1934, as amended, or the existing rules and regulations of
the FCC, would disqualify AKMG as an assignee of KCOY FCC Licenses.
7.5 Validity. This Agreement and the Time Brokerage Agreements
constitute, and the other documents and instruments contemplated hereby and
thereby will, on the due execution and delivery thereof, constitute the legal,
valid and binding obligations of AKMG, enforceable in accordance with their
respective terms.
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7.6 Financial Statements. Annexed hereto as Schedule 7.6 and
made a part hereof are the following internal financial statements of KKTV
(collectively the "KKTV Financial Statements"): balance sheets as of November
30, 1998 and December 31, 1997 and 1996 and related statements of income for the
periods then ended. The KKTV Financial Statements are in accordance with GAAP
and the books and records of AKMG and fairly, completely and accurately present
the financial position of KKTV at the dates specified and the results of
operations for the periods covered.
7.7 No Changes. Except as set forth on Schedule 7.7 annexed
hereto and made a part hereof, since November 30, 1998, AKMG has not with
respect to KKTV:
7.7.1 incurred any damage, destruction or similar loss,
whether or not covered by insurance, adversely affecting the business, assets or
properties of KKTV;
7.7.2 other than in the ordinary course of business, sold,
assigned, leased, transferred or otherwise disposed of any of the KKTV Assets;
7.7.3 mortgaged, pledged or granted or suffered to exist
any Lien on any of the KKTV Assets;
7.7.4 other than in the ordinary course of business,
waived any rights of material value or cancelled, discharged, satisfied or paid
any debt, claim, lien, encumbrance, liability or obligation, whether absolute,
accrued, contingent or otherwise and whether due or to become due;
7.7.5 incurred any obligation or liability (absolute or
contingent, liquidated or unliquidated, choate or inchoate), except current
obligations and liabilities incurred in the ordinary course of business;
7.7.6 other than in the ordinary course of business,
entered into any lease, contract, license or other agreement, or made any
amendment of or terminated any lease, contract, license or other agreement to
which AKMG is a party;
7.7.7 effected any change in the accounting practices,
procedures or methods of AKMG;
7.7.8 paid, loaned or advanced any amount to or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement, arrangement or
transaction of any nature with any employee of KKTV or any Affiliate of AKMG or
any such employee, except for regular compensation paid to an employee of KKTV;
7.7.9 increased the compensation payable to any KKTV
employees or become obligated to increase any such compensation except in the
ordinary course of business and consistent with AKMG's past practices; or
7.7.10 entered into any other transaction other than in
the ordinary course of business and consistent with past practices.
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7.8 Taxes. Except as set forth on Schedule 7.8 annexed hereto
and made a part hereof, AKMG has duly filed all foreign, Federal, state, county
and local income, excise, sales, property, withholding, social security,
franchise, license, information returns and other tax returns and reports
required to have been filed by AKMG to the date hereof with respect to KKTV.
Each such return is true, correct and complete and AKMG has paid all taxes,
assessments, amounts, interest and penalties due to any foreign, Federal, state,
county, local or other taxing authority with respect to all periods prior to the
date hereof required to have been paid by AKMG with respect to KKTV and created
sufficient reserves or made provision for all thereof accrued but not yet due
and payable by it. No government or governmental authority is now asserting or
threatening to assert any deficiency or assessment for additional taxes or any
interest, penalties or fines with respect to AKMG that could result in a Lien on
the KKTV Assets.
7.9 Contracts.
7.9.1 Except only those contracts, agreements or
commitments listed and described on Schedule 7.9 annexed hereto and made a part
hereof (complete and correct copies of which have been heretofore delivered to
Benedek), the Excluded KKTV Contracts and contracts, agreements or commitments
entered into in the ordinary course of business and (x) involving less than
$25,000 over their term or (y) involving more than $25,000 over their term but
not more than $100,000 in the aggregate for all such contracts, agreements or
commitments or (z) involving sales of advertising time for cash in accordance
with the KKTV's customary rate practices or sales of advertising time pursuant
to trade-out agreements entered into in the ordinary course of business, AKMG is
not a party to nor has any contract, agreement or commitment of any kind or
nature whatsoever pertaining to KKTV, written or oral, formal or informal,
including, without limitation, any (i) license, franchise, agency, or similar
agreement, or any other contract relating to the payment of a commission, (ii)
contract or commitment for the employment of any employee or consultant, (iii)
collective bargaining agreement or other contract with any labor union, (iv)
contract or commitment for services, materials, supplies, merchandise, inventory
or equipment, (v) contract or commitment for the sale or purchase of any of its
services, products or assets, (vi) mortgage, indenture, promissory note, loan
agreement, guaranty or other contract or commitment for the borrowing of money
or for a line or letter of credit, (vii) contract or commitment with any
officer, director or any current or former employee of AKMG which will be in
effect on the Closing Date, (viii) contract or commitment with any government or
agency thereof, (ix) contract pursuant to which its right to compete with any
Person in the conduct of its business anywhere in the world is restrained or
restricted for any reason or in any way, (x) contract or commitment guaranteeing
the performance, liabilities or obligations of any Person, (xi) contract or
commitment for capital improvements or expenditures or with any contractor or
subcontractor for in excess of $10,000, (xii) contract or commitment for
charitable contributions aggregating in excess of $5,000, (xiii) lease or other
agreement or commitment pursuant to which it is a lessee of or holds or operates
any real property, machinery, equipment, motor vehicles, office furniture,
fixtures or similar personal property owned by any third party, or (xiv)
contract or commitment otherwise involving in excess of $10,000 in cash over its
term (including any periods covered by any options to renew by any party),
whether or not in the ordinary course of business. Except as set forth on
Schedule 7.9, each of the contracts and commitments referred to therein is valid
and existing, in full force and effect, and enforceable in accordance with its
terms and no party thereto is in default and no claim of default by any party
has been made or is now pending, and no event exists which, with or without the
lapse of time or the giving of notice, or both, would constitute a breach or
default, cause acceleration of any obligation, would permit the termination or
excuse the performance by any party thereto, or would otherwise materially and
adversely affect the KKTV Assets. Except as noted on Schedule 7.9, all contracts
and commitments listed thereon are assignable by AKMG to Benedek without consent
of any other Person.
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7.9.2 The network signal is delivered to KKTV by virtue of
earth receive stations and AKMG has entered into such contracts, leases and
agreements and made such other arrangements as are necessary for the carriage of
the network signal.
7.9.3 KKTV is currently affiliated with CBS pursuant to
the network affiliation contract described on Schedule 7.9. Said network
affiliation contract is in full force and effect and AKMG is not aware of any
state of facts which would permit the termination for cause of such network
affiliation contract prior to the expiration of the term thereof.
7.9.4 Schedule 7.9.4 sets forth by customer the commercial
time owed and goods and services to be received as of the date hereof pursuant
to trade-out agreements, each of which trade- out agreement has been set forth
on Schedule 7.9.4.
7.10 Real Estate.
7.10.1 Schedule 7.10 annexed hereto and made a part hereof
is a complete and correct list of (i) all real property or premises owned in
whole or in part by AKMG and used by KKTV (other than Excluded KKTV Assets) and
(ii) all real property or premises leased in whole or in part by AKMG for use by
KKTV (the "KKTV Leases"). Complete and correct copies of the KKTV Leases and all
deeds, mortgages, deeds of trust and other documents specifically concerning
real property owned by AKMG for use by KKTV (other than Excluded KKTV Assets)
have been heretofore delivered to Benedek.
7.10.2 Schedule 7.10 annexed hereto and made a part hereof
lists all guarantees of the KKTV Leases by any other Person.
7.10.3 Schedule 7.10 annexed hereto and made a part hereof
contains a brief description of all alterations being made or which are planned
in any premises of KKTV, together with the amounts budgeted for such alterations
and the names of architects and general contractors retained in connection
therewith. All permits and approvals of any government or quasi-governmental
authority and all consents of landlords required in connection with such
alterations being made have been obtained or will be obtained by the Closing
Date. AKMG has all required legal and valid occupancy permits and other licenses
or government approvals for each of the properties and premises demised pursuant
to the KKTV Leases or owned by AKMG for use by KKTV (copies of which have been
heretofore delivered to Benedek other than with respect to Excluded KKTV
Assets).
7.10.4 Each KKTV Lease is legal, valid and binding as
between AKMG and the other party or parties thereto and AKMG is a tenant or
possessor in good standing thereunder, free of any material default or breach by
the other party or parties thereto and quietly enjoys the premises provided for
therein. Each rental and other payment due thereunder has been duly made; each
act required to be performed which, if not performed, would constitute a breach
or default thereof has been duly performed by AKMG; and no act forbidden to be
performed has been performed thereunder by AKMG which would constitute a breach
or default thereof. AKMG has the legal right (without the consent or other
approval of any other party) to possess and quietly enjoy each of such premises
and properties under each of the KKTV Leases. Each KKTV Lease is in full force
and effect and constitutes a legal, valid and binding obligation of AKMG and
there is not under any KKTV Lease any claim of default or event which, with or
without notice or the lapse of time or both, would constitute a breach or
default thereunder.
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7.10.5 Except as set forth on Schedule 7.10 annexed hereto
and made a part hereof, AKMG has good, marketable and insurable title to all
real property purported to be owned or occupied by AKMG for use by KKTV (other
than Excluded KKTV Assets), free and clear of all Liens and no party has the
right to acquire or use such real property or any improvements, fixtures or
equipment located thereon except as set forth on Schedule 7.9. Except as set
forth on Schedule 7.10 or Schedule 7.11, AKMG has good and marketable title and
owns outright, free and clear of all Liens, claims, easements, rights of way or
restrictions (whether zoning or otherwise), each improvement, fixture and item
of equipment located in or on each of the properties and premises owned, leased,
used or occupied by it for use by KKTV. No improvement, fixture or equipment in
or on any such premises and properties, to the extent owned or occupied by AKMG
for use by KKTV, or the occupation or leasehold with respect thereto, is in
violation of any law, rule or ordinance, including any zoning, building, safety,
health or environmental law and each of such premises and properties is zoned or
otherwise lawfully used for the purposes for which each of such premises or
properties is now used by AKMG.
7.10.6 None of such premises or properties has been
condemned or otherwise taken by any public authority, no condemnation or taking
is, to AKMG's knowledge, threatened or contemplated, and none thereof is, to
AKMG's knowledge, subject to any claim, contract or law which might affect its
use or value for the purposes now made of it, and each thereof is in good
condition and repair.
7.11 Personal Property. Schedule 7.11 annexed hereto and made a
part hereof is a true and complete list of (i) all tangible personal property
owned by AKMG for use by KKTV having a book value at the date hereof in excess
of $1,000 per item (other than items of personal property having a value in
excess of $1,000 but not in excess of $25,000 in the aggregate) and (ii) all
personal property owned by a third party which is leased or otherwise used by
AKMG for use by KKTV, including, without limitation, leases or other agreements
relating to the use or operation of any machinery, equipment, motor vehicles,
office furniture or fixtures owned by any third party (complete and correct
copies of which leases or other agreements have been heretofore delivered to
Benedek). Each such lease and agreement is in full force and effect and
constitutes a legal, valid and binding obligation of AKMG and there is not under
any such lease or other agreement any default or any claim of default or of an
event which, with or without notice or the lapse of time or both, would
constitute a breach or default thereunder. Except as set forth on Schedule 7.11,
all personal property purported to be owned by AKMG for use by KKTV is owned by
it, free and clear of all Liens, and is in good working condition, subject to
normal wear and tear.
7.12 Intellectual Property. Schedule 7.12 annexed hereto and
made a part hereof is a complete and correct list, and a brief description
(including, if applicable, date of application, filing or registration, as the
case may be, and the registration or application number) of each patent,
invention, trade secret, copyright, proprietary software or hardware, trade
name, trademark, brand name, service mark, or design, or representation or
expression of any thereof or registration or application therefor ("Trade
Rights") relating to KKTV, whether or not registered in the name of or applied
for by AKMG, in which AKMG has any rights or interests, whether through any
contract or otherwise, except for rights under contracts listed on Schedule 7.9
and rights arising from the direct or indirect purchase of "off the shelf"
software, and in each case a brief description of the nature of such rights and
interests. Except as otherwise listed on Schedule 7.12, AKMG is not a licensor
or a licensee in respect of any Trade Right relating to KKTV nor does AKMG pay
or receive royalty payments to or from any third party in respect of any Trade
Right relating to KKTV. AKMG owns or has the exclusive right to use each such
Trade Right necessary to conduct, or be used in, its business as now operated
and there are no conflicts with or infringements of the rights of others in
respect thereof or any unauthorized use or misappropriation of any thereof. With
respect to each Trade Right
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relating to KKTV, such Trade Right is subsisting, has not been adjudged invalid
or unenforceable, in whole or in part, and is valid and enforceable; and AKMG
has made all necessary filings and recordations to protect its interest in such
Trade Rights, including, without limitation, recordations of all its interests
in patents, trademarks and service marks in the United States Patent and
Trademark Office and its claims to copyrights in the United States Copyright
Office. AKMG is the exclusive owner of the entire and unencumbered right, title
and interest in and to the Trade Rights owned by AKMG and which relate to KKTV
and no claim is currently being asserted that the use of any such Trade Right
does or may violate the asserted rights of any third party. The Trade Rights
listed on Schedule 7.12 constitute all of the Trade Rights necessary to operate
KKTV and conduct its business as heretofore conducted by AKMG in all material
respects. To the best knowledge of AKMG, KKTV's Information Technology is Year
2000 Compliant in all material respects.
7.13 Insurance. Schedule 7.13 annexed hereto and made a part
hereof is a complete and correct list, and brief description (including name of
insurer, agent, type of coverage, policy number, annual premium, amount of
coverage, expiration date and any material pending claims thereunder) of all
insurance policies, including, without limitation, liability, burglary, theft,
fidelity, life, fire, product liability, workers' compensation, health and other
forms of insurance of any kind held by AKMG relating to the KKTV Assets or KKTV;
each such policy is valid and enforceable, outstanding and in full force and
effect; except as set forth on Schedule 7.13 hereto, AKMG is the sole
beneficiary of each such policy; no such policy, or the future proceeds thereof,
has been assigned to any other Person; all premiums and other payments due from
AKMG under or on account of any such policy have been paid; to AKMG's knowledge,
there is no act or fact or failure to act which has or might cause any such
policy to be cancelled or terminated; AKMG has given each notice and presented
each claim under each such policy and taken any other required or appropriate
action with respect thereto in due and timely fashion; and each such policy is
adequate for the business in which AKMG is engaged. No notice of cancellation or
non-renewal with respect to, or disallowance of any material claim under, any
insurance policies or binders of insurance which relate to the KKTV Assets or
KKTV has been received by AKMG.
7.14 Litigation. Except as set forth on Schedule 7.14 annexed
hereto and made a part hereof, no action, suit, claim, investigation, proceeding
or controversy, whether legal or administrative or in mediation or arbitration,
is pending or, to AKMG's knowledge, threatened, at law or in equity or
admiralty, before or by any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
against or affecting the KKTV Assets or KKTV or seeking to restrain, prohibit,
invalidate, set aside, rescind, prevent or make unlawful this Agreement or the
carrying out of this Agreement or the transactions contemplated hereby, nor, is
there any basis for any such action, suit, claim, investigation or proceeding.
KKTV is not operating under or subject to, or in default in respect of, any
judgment, order, writ, injunction or decree of any court or any Federal, state,
municipal or other governmental department commission, board, bureau, agency or
instrumentality.
7.15 Compliance with Law. AKMG has all permits, licenses,
orders and approvals of all Federal, state or local governmental regulatory
bodies required for it to conduct the business of KKTV in all material respects
as conducted on the date of this Agreement. All such permits, licenses, orders
and approvals are in full force and effect and no suspension or cancellation of
any of them is pending or threatened. AKMG is in compliance in all material
respects with each law, rule, ordinance, regulation, order and decree applicable
to the business of KKTV, including, without limitation, laws, rules and
regulations respecting occupational safety, environmental protection and
employment practices. The conduct of the business of KKTV and all assets and
properties utilized by AKMG therein are in conformance in all material respects
with the requirements and regulations of the Occupational Safety and Health
Administration.
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7.16 Labor. AKMG is not a party to any representation or labor
contract with respect to employees of KKTV. AKMG has not received any written
notice from any labor union or group of employees that such union or group
represents or believes or claims it represents or intends to represent any of
the employees of AKMG at KKTV; to AKMG's knowledge, no strike or work
interruption by AKMG's employees at KKTV is planned, under consideration,
threatened or imminent; and AKMG has not made any loan or given anything of
value, directly or indirectly, to any officer, official, agent or representative
of any labor union or group of employees at KKTV other than salaries and
ordinary course compensation. At no time since its acquisition of KKTV has AKMG
experienced any threats of strikes, work stoppages or demands for collective
bargaining by any union or labor organization or any other group or other
organization of employees, any grievances, disputes or controversies with any
union or any other group or any other organization of employees at KKTV or any
pending or threatened court or arbitration proceedings involving an employment
grievance, dispute or controversy at KKTV. Except as set forth on Schedule 7.16
annexed hereto and made a part hereof: (i) AKMG is not delinquent in payments to
any of its employees at KKTV for any wages, salaries, commissions, bonuses or
other direct compensation for any services performed by them to the date hereof
or amounts required to be reimbursed to such employees; (ii) in the event of
termination of the employment of any said employees other than termination of
any employee who is a party to an employment agreement with AKMG, neither AKMG
nor Benedek will by reason of anything done prior to the Closing be liable to
any of said employees for so-called "severance pay," "pay in lieu of notice" or
any other payments; (iii) AKMG is in compliance in all material respects with
all Federal, state and local laws and regulations respecting labor, employment
and employment practices, terms and conditions of employment and wages and hours
with respect to its employees at KKTV; and (iv) there is no unfair labor
practice complaint against AKMG pending before the National Labor Relations
Board or any comparable state or local agency with respect to its employees at
KKTV.
7.17 Employees. Schedule 7.17 annexed hereto and made a part
hereof is a complete and correct list of the names and current annual salary,
bonus and commission for each current employee of KKTV. Except as set forth on
Schedule 7.17, no current or former employee of KKTV or any relative, associate
or agent of such employee has any interest in any property of KKTV, or is a
party, directly or indirectly, to any contract for employment or otherwise or
any lease or has entered into any transaction with AKMG, including, without
limitation, any contract for the furnishing of services by, or rental of real or
personal property from or to, or requiring payments to, any such employee or
relative, associate or agent. Complete and correct copies of any such contracts
have been delivered to Benedek. AKMG does not have any contract for the future
employment of any employee of KKTV except as may be listed on Schedule 7.17.
7.18 Employee Plans. Schedule 7.18 annexed hereto and made a
part hereof is a complete and correct list of all pension, profit sharing
agreements or arrangements, deferred compensation, medical, severance and other
employee benefit and fringe benefit plans ("Employee Plans") maintained or
contributed to by AKMG or any ERISA Affiliate of AKMG with respect to its
employees at KKTV, including any employee benefit plans within the meaning of
Section 3(3) of ERISA. True and complete copies of each such Employee Plan have
been heretofore made available to Benedek. All such Employee Plans, related
trust instruments or annuity contracts (or any other funding instruments) are
legal, valid and binding and are in full force and effect, and each such
Employee Plan intended to be qualified under Section 401(a) of the Code is so
qualified and has been so qualified at all times since its inception. All such
Employee Plans have been maintained, in all material respects, in accordance
with the requirements of the Code and ERISA, or any other applicable statute,
regulation or rule. There are no pending claims against any such Employee Plan
(other than routine claims for benefits in accordance with its terms) nor, to
the
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knowledge of AKMG, has any claim been threatened in writing by any participant
thereof or beneficiary thereunder.
7.18.1 No Employee Plan with respect to employees at KKTV
is covered by Title IV of ERISA, Section 302 of ERISA or Section 912 of the
Code.
7.18.2 With respect to all Employee Plans with respect to
employees at KKTV that are defined contribution plans, AKMG and any ERISA
Affiliate of AKMG have made all contributions due thereunder for plan years
prior to the date hereof.
7.18.3 Neither AKMG nor any ERISA Affiliate of AKMG or any
plan fiduciary of any Employee Plan with respect to employees at KKTV is or has
engaged in any transaction in violation of Section 406(a) or 406(b) of ERISA for
which no exemption exists under ERISA or under applicable sections of the Code.
Neither AKMG nor any ERISA Affiliate of AKMG, or the administering committee or
trustees of any such Employee Plan has received (i) notice from the IRS or the
Department of Labor of the occurrence of a prohibited transaction within the
meaning of Section 406 of ERISA, or (ii) notice of any breach of loyalty,
prudence, diversification or effectuation within the meaning of Section 404 of
ERISA.
7.18.4 No Employee Plan with respect to employees at KKTV
is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA.
7.18.5 All Employee Plans with respect to employees at
KKTV are in material compliance with all applicable reporting, disclosure,
filing and other administrative requirements pertaining to employee benefit
plans set forth in the Code and ERISA and rules and regulation promulgated under
either, including, but not limited, to those set forth in Sections 6057, 6058
and 6059 of the Code and applicable rules and regulations thereunder, and in
Sections 101, 102, 103, 104, 105, and 107 of ERISA.
7.18.6 With respect to employees at KKTV, AKMG and any
ERISA Affiliate of AKMG at all times have been in full compliance with all
provisions of the Title X of the Consolidation Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), and with the provisions of Part 6 of Title I of
ERISA.
7.18.7 During the twelve-consecutive month period prior to
the date of this Agreement, no steps have been taken to terminate any Employee
Plan with respect to employees at KKTV, and no contribution failure has occurred
with respect to any such Employee Plan sufficient to give rise to a lien under
Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to such an Employee Plan which might result in the
incurrence of any material liability, fine or penalty by either AKMG or any
ERISA Affiliate of AKMG. Neither AKMG nor any ERISA Affiliate of AKMG has any
contingent liability with respect to any post-retirement benefit under any
welfare plan with respect to employees at KKTV, as such term is defined in
Section 3(1) of ERISA, other than liability for continuation coverage described
in Part 6 of Title I of ERISA.
7.18.8 The transactions contemplated by this Agreement
will not result in any payment or series of payments by AKMG to any person of a
parachute payment within the meaning of Section 280G of the Code.
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7.19 Environmental Warranties.
7.19.1 "Environmental Laws" means all applicable Federal,
state or local statutes laws, ordinances, codes, rules, regulations and
guidelines (including consent decrees and administrative orders) relating to
public health and safety and protection of the environment.
7.19.2 "Hazardous Material" means
7.19.2.1 any "hazardous substance", as defined by the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended ("CERCLA");
7.19.2.2 any "hazardous waste", as defined by the
Resource Conservation and Recovery Act, as amended;
7.19.2.3 any petroleum product; or
7.19.2.4 any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material or substance within the meaning of any
other applicable Federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders) relating to or
imposing liability or standards of conduct concerning any hazardous, toxic or
dangerous waste, substance or material, all as amended or hereafter amended.
7.19.3 All facilities and property (including underlying
groundwater) owned or leased by AKMG with respect to KKTV have been, and
continue to be, owned or leased by AKMG in material compliance with all
Environmental Laws.
7.19.4 There have been no past, and there are no pending
(i) claims, complaints, notices or requests for information received by AKMG
with respect to KKTV regarding any alleged violation of any Environmental Law,
or (ii) complaints, notices or inquiries to AKMG with respect to KKTV regarding
potential liability under any Environmental Law.
7.19.5 There have been no releases of Hazardous Materials
at, on or under any property now or previously owned or leased by AKMG with
respect to KKTV.
7.19.6 AKMG has been issued and is in material compliance
with all permits, certificates, approvals, licenses, applicable comprehensive
plans and other authorizations relating to environmental matters and necessary
or desirable for the business of KKTV.
7.19.7 To AKMG's knowledge, no property now owned or
leased by AKMG with respect to KKTV is listed or proposed for listing (with
respect to owned property only) on the National Priorities List pursuant to
CERCLA, on the Comprehensive Environmental Response Compensation Liability
Information System List ("CERCLIS") or on any similar state list of sites
requiring investigation or clean-up.
7.19.8 There are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property now owned
or leased by AKMG with respect to KKTV.
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7.19.9 AKMG has not directly transported or directly
arranged for the transportation of any Hazardous Material to any location which
is listed or proposed for listing on the National Priorities List pursuant to
CERCLA, on the CERCLIS or on any similar state list or which is the subject of
Federal, state or local enforcement actions or other investigations which may
lead to claims against AKMG for any remedial work, damage to natural resources
or personal injury, including claims under CERCLA.
7.19.10 There are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or leased by AKMG with
respect to KKTV.
7.19.11 No conditions exist at, on or under any property
now owned or leased by AKMG with respect to KKTV which, with the passage of
time, or the giving of notice or both, would give rise to any material liability
under any Environmental Law or would materially adversely affect the use of any
such property.
7.20 Accuracy of Information. Neither this Agreement nor
the representations and warranties by AKMG contained herein or in any documents,
instruments, certificates or schedules furnished pursuant hereto or in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements or fact contained herein and therein not misleading.
8. Representations and Warranties of Benedek. In order to induce AKMG
to enter into this Agreement and to perform its obligations hereunder, Benedek
hereby makes the following representations and warranties to AKMG:
8.1 Organization and Standing. Benedek is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority, corporate or otherwise, to
own, lease, use and operate its properties and assets at and in the places where
such properties and assets are now owned, operated or leased and to transact its
business where and as now conducted. Benedek is duly qualified to do business
and is in good standing in each jurisdiction where it owns, leases or holds real
property or conducts or operates its business, where the nature of its
activities requires such qualification or where the failure to so qualify would
have a Material Adverse Effect on the business or results of operations of KCOY.
8.2 Power and Authority. Benedek has all requisite power and
authority, corporate or otherwise, to enter into this Agreement, the Time
Brokerage Agreements and the documents and instruments contemplated hereby and
thereby and to assume and perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement, the Time Brokerage Agreements and the
documents and instruments contemplated hereby and thereby and the performance by
Benedek of its obligations hereunder and thereunder have been duly authorized by
all necessary corporate action of Benedek and no further action or approval,
corporate or otherwise, is required in order to constitute this Agreement, the
Time Brokerage Agreements and the documents and instruments contemplated hereby
and thereby as valid and binding obligations of Benedek, enforceable in
accordance with their terms.
8.3 No Conflicts. Except as set forth on Schedule 8.3 annexed
hereto and made a part hereof, the execution and delivery of this Agreement, the
Time Brokerage Agreements and the documents
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and instruments contemplated hereby and thereby, the consummation of the
transactions contemplated hereby and the performance by Benedek of its
obligations hereunder and thereunder:
8.3.1 do not and will not conflict with or violate any
provision of the certificate of incorporation or bylaws of Benedek;
8.3.2 do not and will not conflict with or result in
any breach of any condition or provisions of, or constitute a default under or
give rise to any right of termination, cancellation or acceleration or (whether
after the giving of notice or lapse of time or both) result in the creation or
imposition of any Lien on any of the KCOY Assets by reason of the terms of any
contract, mortgage, lien, lease, agreement, indenture, instrument, judgment or
decree to which Benedek is a party or which is or purports to be binding upon
Benedek or which affects or purports to affect any of the KCOY Assets; and
8.3.3 subject to the receipt of any governmental
approvals required in connection with the transfer of the KCOY Assets to AKMG,
do not and will not conflict with or result in a violation of or default under
(with or without notice of the lapse of time or both) any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge or other
restriction of any court, administrative agency or commission or other
governmental authority or instrumentality.
8.4 Government Approval. BLC is the holder of the KCOY FCC
Licenses as set forth on Schedule 8.4 annexed hereto and made a part hereof,
which constitute all necessary authorizations from the FCC to enable KCOY to
broadcast and transmit the present television programming. Other than FCC
rulemaking procedures of general applicability, there are no fines, forfeitures,
notices of apparent liability, orders to show cause or any other administrative
or judicial orders outstanding nor any proceedings pending or, to Benedek's
knowledge, threatened, the effect of which would be the revocation,
cancellation, non-renewal, suspension or adverse modification of the KCOY FCC
Licenses or any adverse consequence for KCOY, and there does not exist any event
which with notice or the passing of time or both could result in a fine,
forfeiture, notice of apparent liability, order to show cause or any other
administrative or judicial order or proceeding by the FCC, the effect of which
would result in the revocation, cancellation, non-renewal, suspension or adverse
modification of the KCOY FCC Licenses or any adverse consequences for KCOY.
Since the date of its acquisition by Benedek, KCOY, including, without
limitation, the technical equipment owned by Benedek relating to KCOY, has been
operated in conformity with the KCOY FCC Licenses in all material respects and
within the FCC rules, regulations and standards of performance in all material
respects. Except as contemplated in Section 6 hereof, no action, approval
consent, authorization or other action, including, but not limited to, any
action, approval, consent or authorization by or filing with any governmental or
quasi-governmental agency, commission, board, bureau or instrumentality, is
necessary or required as to Benedek for the due execution, delivery or
performance by Benedek of this Agreement or any document or instrument
contemplated hereby or in order to constitute this Agreement as a valid and
binding obligation of Benedek. To the best knowledge of Benedek, there are no
facts which, under the Communications Act of 1934, as amended, or the existing
rules and regulations of the FCC, would disqualify BLC as an assignee of KKTV
FCC Licenses.
8.5 Validity. This Agreement and the Time Brokerage Agreements
constitute, and the other documents and instruments contemplated hereby and
thereby will, on the due execution and delivery thereof, constitute the legal,
valid and binding obligations of Benedek, enforceable in accordance with their
respective terms.
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8.6 Financial Statements. Annexed hereto as Schedule 8.6 and
made a part hereof are the following internal financial statements of KCOY
(collectively the "KCOY Financial Statements"): balance sheets as of November
30, 1998 and December 31, 1997 and 1996 and related statements of income for the
periods then ended. The KCOY Financial Statements are in accordance with GAAP
and the books and records of KCOY and fairly, completely and accurately present
the financial position of KCOY at the dates specified and the results of
operations for the periods covered.
8.7 No Changes. Except as set forth on Schedule 8.7 annexed
hereto and made a part hereof, since November 30, 1998, Benedek has not with
respect to KCOY:
8.7.1 incurred any damage, destruction or similar
loss, whether or not covered by insurance, adversely affecting the business,
assets or properties of KCOY;
8.7.2 other than in the ordinary course of business,
sold, assigned, leased, transferred or otherwise disposed of any of the KCOY
Assets;
8.7.3 mortgaged, pledged or granted or suffered to
exist any Lien on any of the KCOY Assets;
8.7.4 other than in the ordinary course of business,
waived any rights of material value or cancelled, discharged, satisfied or paid
any debt, claim, lien, encumbrance, liability or obligation, whether absolute,
accrued, contingent or otherwise and whether due or to become due;
8.7.5 incurred any obligation or liability (absolute
or contingent, liquidated or unliquidated, choate or inchoate), except current
obligations and liabilities incurred in the ordinary course of business;
8.7.6 other than in the ordinary course of business,
entered into any lease, contract, license or other agreement, or made any
amendment of or terminated any lease, contract, license or other agreement to
which Benedek is a party;
8.7.7 effected any change in the accounting practices,
procedures or methods of Benedek;
8.7.8 paid, loaned or advanced any amount to or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement, arrangement or
transaction of any nature with any employee of KCOY or any Affiliate of Benedek
or any such employee, except for regular compensation paid to an employee of
KCOY;
8.7.9 increased the compensation payable to any KCOY
employees or become obligated to increase any such compensation except in the
ordinary course of business and consistent with Benedek's past practices; or
8.7.10 entered into any other transaction other than
in the ordinary course of business and consistent with past practices.
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8.8 Taxes. Except as set forth on Schedule 8.8 annexed hereto
and made a part hereof, Benedek has duly filed all foreign, Federal, state,
county and local income, excise, sales, property, withholding, social security,
franchise, license, information returns and other tax returns and reports
required to have been filed by Benedek to the date hereof with respect to KCOY.
Each such return is true, correct and complete and Benedek has paid all taxes,
assessments, amounts, interest and penalties due to any foreign, Federal, state,
county, local or other taxing authority with respect to all periods prior to the
date hereof required to have been paid by Benedek with respect to KCOY and
created sufficient reserves or made provision for all thereof accrued but not
yet due and payable by it. No government or governmental authority is now
asserting or threatening to assert any deficiency or assessment for additional
taxes or any interest, penalties or fines with respect to Benedek that could
result in a Lien on the KCOY Assets.
8.9 Contracts.
8.9.1 Except only those contracts, agreements or
commitments listed and described on Schedule 8.9 annexed hereto and made a part
hereof (complete and correct copies of which have been heretofore delivered to
AKMG), the Excluded KCOY Contracts and contracts, agreements or commitments
entered into in the ordinary course of business and (x) involving less than
$25,000 over their term or (y) involving more than $25,000 over their term but
not more than $100,000 in the aggregate for all such contracts, agreements or
commitments or (z) involving sales of advertising time for cash in accordance
with the KCOY's customary rate practices or sales of advertising time pursuant
to trade-out agreements entered into in the ordinary course of business, Benedek
is not a party to nor has any contract, agreement or commitment of any kind or
nature whatsoever pertaining to KCOY, written or oral, formal or informal,
including, without limitation, any (i) license, franchise, agency, or similar
agreement, or any other contract relating to the payment of a commission, (ii)
contract or commitment for the employment of any employee or consultant, (iii)
collective bargaining agreement or other contract with any labor union, (iv)
contract or commitment for services, materials, supplies, merchandise, inventory
or equipment, (v) contract or commitment for the sale or purchase of any of its
services, products or assets, (vi) mortgage, indenture, promissory note, loan
agreement, guaranty or other contract or commitment for the borrowing of money
or for a line or letter of credit, (vii) contract or commitment with any
officer, director or any current or former employee of Benedek which will be in
effect on the Closing Date, (viii) contract or commitment with any government or
agency thereof, (ix) contract pursuant to which its right to compete with any
Person in the conduct of its business anywhere in the world is restrained or
restricted for any reason or in any way, (x) contract or commitment guaranteeing
the performance, liabilities or obligations of any Person, (xi) contract or
commitment for capital improvements or expenditures or with any contractor or
subcontractor for in excess of $10,000, (xii) contract or commitment for
charitable contributions aggregating in excess of $5,000, (xiii) lease or other
agreement or commitment pursuant to which it is a lessee of or holds or operates
any real property, machinery, equipment, motor vehicles, office furniture,
fixtures or similar personal property owned by any third party, or (xiv)
contract or commitment otherwise involving in excess of $10,000 in cash over its
term (including any periods covered by any options to renew by any party),
whether or not in the ordinary course of business. Except as set forth on
Schedule 8.9, each of the contracts and commitments referred to therein is valid
and existing, in full force and effect, and enforceable in accordance with its
terms and no party thereto is in default and no claim of default by any party
has been made or is now pending, and no event exists which, with or without the
lapse of time or the giving of notice, or both, would constitute a breach or
default, cause acceleration of any obligation, would permit the termination or
excuse the performance by any party thereto, or would otherwise materially and
adversely affect the KCOY Assets. Except as noted on Schedule 8.9, all contracts
and commitments listed thereon are assignable by Benedek to AKMG without consent
of any other Person.
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8.9.2 The network signal is delivered to KCOY by
virtue of earth receive stations and Benedek has entered into such contracts,
leases and agreements and made such other arrangements as are necessary for the
carriage of the network signal.
8.9.3 KCOY is currently affiliated with CBS pursuant
to the network affiliation contract described on Schedule 8.9. Said network
affiliation contract is in full force and effect and Benedek is not aware of any
state of facts which would permit the termination for cause of such network
affiliation contract prior to the expiration of the term thereof.
8.9.4 Schedule 8.9.4 sets forth by customer the
commercial time owed and goods and services to be received as of the date hereof
pursuant to trade-out agreements, each of which trade-out agreement has been set
forth on Schedule 8.9.4.
8.10 Real Estate.
8.10.1 Schedule 8.10 annexed hereto and made a part
hereof is a complete and correct list of (i) all real property or premises owned
in whole or in part by Benedek and used by KCOY (other than Excluded KCOY
Assets) and (ii) all real property or premises leased in whole or in part by
Benedek for use by KCOY (the "KCOY Leases"). Complete and correct copies of the
KCOY Leases and all deeds, mortgages, deeds of trust and other documents
specifically concerning real property owned by Benedek for use by KCOY (other
than Excluded KCOY Assets) have been heretofore delivered to AKMG.
8.10.2 Schedule 8.10 annexed hereto and made a part
hereof lists all guarantees of the KCOY Leases by any other Person.
8.10.3 Schedule 8.10 annexed hereto and made a part
hereof contains a brief description of all alterations being made or which are
planned in any premises of KCOY, together with the amounts budgeted for such
alterations and the names of architects and general contractors retained in
connection therewith. All permits and approvals of any government or
quasi-governmental authority and all consents of landlords required in
connection with such alterations being made have been obtained or will be
obtained by the Closing Date. Benedek has all required legal and valid occupancy
permits and other licenses or government approvals for each of the properties
and premises demised pursuant to the KCOY Leases or owned by Benedek for use by
KCOY (copies of which have been heretofore delivered to AKMG other than with
respect to Excluded KCOY Assets).
8.10.4 Each KCOY Lease is legal, valid and binding as
between Benedek and the other party or parties thereto and Benedek is a tenant
or possessor in good standing thereunder, free of any material default or breach
by the other party or parties thereto and quietly enjoys the premises provided
for therein. Each rental and other payment due thereunder has been duly made;
each act required to be performed which, if not performed, would constitute a
breach or default thereof has been duly performed by Benedek; and no act
forbidden to be performed has been performed thereunder by Benedek which would
constitute a breach or default thereof. Benedek has the legal right (without the
consent or other approval of any other party) to possess and quietly enjoy each
of such premises and properties under each of the KCOY Leases. Each KCOY Lease
is in full force and effect and constitutes a legal, valid and binding
obligation of Benedek and there is not under any KCOY Lease any claim of default
or event which, with or without notice or the lapse of time or both, would
constitute a breach or default thereunder.
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8.10.5 Except as set forth on Schedule 8.10 annexed
hereto and made a part hereof, Benedek has good, marketable and insurable title
to all real property purported to be owned or occupied by Benedek for use by
KCOY (other than Excluded KCOY Assets), free and clear of all Liens and no party
has the right to acquire or use such real property or any improvements, fixtures
or equipment located thereon except as set forth on Schedule 8.9. Except as set
forth on Schedule 8.10 or Schedule 8.11, Benedek has good and marketable title
and owns outright, free and clear of all Liens, claims, easements, rights of way
or restrictions (whether zoning or otherwise), each improvement, fixture and
item of equipment located in or on each of the properties and premises owned,
leased, used or occupied by it for use by KCOY. No improvement, fixture or
equipment in or on any such premises and properties, to the extent owned or
occupied by Benedek for use by KCOY, or the occupation or leasehold with respect
thereto, is in violation of any law, rule or ordinance, including any zoning,
building, safety, health or environmental law and each of such premises and
properties is zoned or otherwise lawfully used for the purposes for which each
of such premises or properties is now used by Benedek.
8.10.6 None of such premises or properties has been
condemned or otherwise taken by any public authority, no condemnation or taking
is, to Benedek's knowledge, threatened or contemplated, and none thereof is, to
Benedek's knowledge, subject to any claim, contract or law which might affect
its use or value for the purposes now made of it, and each thereof is in good
condition and repair.
8.11 Personal Property. Schedule 8.11 annexed hereto and made a
part hereof is a true and complete list of (i) all tangible personal property
owned by Benedek for use by KCOY having a book value as of November 30, 1998 in
excess of $1,000 per item (other than items of personal property having a value
in excess of $1,000 but not in excess of $25,000 in the aggregate) and (ii) all
personal property owned by a third party which is leased or otherwise used by
Benedek for use by KCOY, including, without limitation, leases or other
agreements relating to the use or operation of any machinery, equipment, motor
vehicles, office furniture or fixtures owned by any third party (complete and
correct copies of which leases or other agreements have been heretofore
delivered to AKMG). Each such lease and agreement is in full force and effect
and constitutes a legal, valid and binding obligation of Benedek and there is
not under any such lease or other agreement any default or any claim of default
or of an event which, with or without notice or the lapse of time or both, would
constitute a breach or default thereunder. Except as set forth on Schedule 8.11,
all personal property purported to be owned by Benedek for use by KCOY is owned
by it, free and clear of all Liens, and is in good working condition, subject to
normal wear and tear.
8.12 Intellectual Property. Schedule 8.12 annexed hereto and
made a part hereof is a complete and correct list, and a brief description
(including, if applicable, date of application, filing or registration, as the
case may be, and the registration or application number) of each Trade Right
relating to KCOY, whether or not registered in the name of or applied for by
Benedek, in which Benedek has any rights or interests, whether through any
contract or otherwise, except for rights under contracts listed on Schedule 8.9
and rights arising from the direct or indirect purchase of "off the shelf"
software, and in each case a brief description of the nature of such rights and
interests. Except as otherwise listed on Schedule 8.12, Benedek is not a
licensor or a licensee in respect of any Trade Right relating to KCOY nor does
Benedek pay or receive royalty payments to or from any third party in respect of
any Trade Right relating to KCOY. Benedek owns or has the exclusive right to use
each such Trade Right necessary to conduct, or be used in, its business as now
operated and there are no conflicts with or infringements of the rights of
others in respect thereof or any unauthorized use or misappropriation of any
thereof. With respect to each Trade Right relating to KCOY, such Trade Right is
subsisting, has not been adjudged invalid or unenforceable, in whole or in part,
and is valid and enforceable; and Benedek has made all necessary filings and
recordations to
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protect its interest in such Trade Rights, including, without limitation,
recordations of all its interests in patents, trademarks and service marks in
the United States Patent and Trademark Office and its claims to copyrights in
the United States Copyright Office. Benedek is the exclusive owner of the entire
and unencumbered right, title and interest in and to the Trade Rights owned by
Benedek and which relate to KCOY and no claim is currently being asserted that
the use of any such Trade Right does or may violate the asserted rights of any
third party. The Trade Rights listed on Schedule 8.12 constitute all of the
Trade Rights necessary to operate KCOY and conduct its business as heretofore
conducted by Benedek in all material respects. To the best knowledge of Benedek,
KCOY's Information Technology is Year 2000 Compliant in all material respects.
8.13 Insurance. Schedule 8.13 annexed hereto and made a part
hereof is a complete and correct list, and brief description (including name of
insurer, agent, type of coverage, policy number, annual premium, amount of
coverage, expiration date and any material pending claims thereunder) of all
insurance policies, including, without limitation, liability, burglary, theft,
fidelity, life, fire, product liability, workers' compensation, health and other
forms of insurance of any kind held by Benedek relating to the KCOY Assets or
KCOY; each such policy is valid and enforceable, outstanding and in full force
and effect; except as set forth on Schedule 8.13 hereto, Benedek is the sole
beneficiary of each such policy; no such policy, or the future proceeds thereof,
has been assigned to any other Person; all premiums and other payments due from
Benedek under or on account of any such policy have been paid; to Benedek's
knowledge, there is no act or fact or failure to act which has or might cause
any such policy to be cancelled or terminated; Benedek has given each notice and
presented each claim under each such policy and taken any other required or
appropriate action with respect thereto in due and timely fashion; and each such
policy is adequate for the business in which Benedek is engaged. No notice of
cancellation or non-renewal with respect to, or disallowance of any material
claim under, any insurance policies or binders of insurance which relate to the
KCOY Assets or KCOY has been received by Benedek.
8.14 Litigation. Except as set forth on Schedule 8.14 annexed
hereto and made a part hereof, no action, suit, claim, investigation, proceeding
or controversy, whether legal or administrative or in mediation or arbitration,
is pending or, to Benedek's knowledge, threatened, at law or in equity or
admiralty, before or by any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
against or affecting the KCOY Assets or KCOY or seeking to restrain, prohibit,
invalidate, set aside, rescind, prevent or make unlawful this Agreement or the
carrying out of this Agreement or the transactions contemplated hereby, nor, is
there any basis for any such action, suit, claim, investigation or proceeding.
KCOY is not operating under or subject to, or in default in respect of, any
judgment, order, writ, injunction or decree of any court or any Federal, state,
municipal or other governmental department commission, board, bureau, agency or
instrumentality.
8.15 Compliance with Law. Benedek or BLC has all permits,
licenses, orders and approvals of all Federal, state or local governmental
regulatory bodies required for it to conduct the business of KCOY in all
material respects as conducted on the date of this Agreement. All such permits,
licenses, orders and approvals are in full force and effect and no suspension or
cancellation of any of them is pending or threatened. Benedek is in compliance
in all material respects with each law, rule, ordinance, regulation, order and
decree applicable to the business of KCOY, including, without limitation, laws,
rules and regulations respecting occupational safety, environmental protection
and employment practices. The conduct of the business of KCOY and all assets and
properties utilized by Benedek therein are in conformance in all material
respects with the requirements and regulations of the Occupational Safety and
Health Administration.
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8.16 Labor. Benedek is not a party to any representation or
labor contract with respect to employees of KCOY. Benedek has not received any
written notice from any labor union or group of employees that such union or
group represents or believes or claims it represents or intends to represent any
of the employees of Benedek at KCOY; to Benedek's knowledge, no strike or work
interruption by Benedek's employees at KCOY is planned, under consideration,
threatened or imminent; and Benedek has not made any loan or given anything of
value, directly or indirectly, to any officer, official, agent or representative
of any labor union or group of employees at KCOY other than salaries and
ordinary course compensation. At no time since its acquisition of KCOY has
Benedek experienced any threats of strikes, work stoppages or demands for
collective bargaining by any union or labor organization or any other group or
other organization of employees at KCOY, any grievances, disputes or
controversies with any union or any other group or any other organization of
employees or any pending or threatened court or arbitration proceedings
involving an employment grievance, dispute or controversy at KCOY. Except as set
forth on Schedule 8.16 annexed hereto and made a part hereof: (i) Benedek is not
delinquent in payments to any of its employees at KCOY for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them to the date hereof or amounts required to be reimbursed to such employees;
(ii) in the event of termination of the employment of any said employees other
than termination of any employee who is a party to an employment agreement with
Benedek, neither AKMG nor Benedek will by reason of anything done prior to the
Closing be liable to any of said employees for so-called "severance pay," "pay
in lieu of notice" or any other payments; (iii) Benedek is in compliance in all
material respects with all Federal, state and local laws and regulations
respecting labor, employment and employment practices, terms and conditions of
employment and wages and hours with respect to its employees at KCOY; and (iv)
there is no unfair labor practice complaint against Benedek pending before the
National Labor Relations Board or any comparable state or local agency.
8.17 Employees. Schedule 8.17 annexed hereto and made a part
hereof is a complete and correct list of the names and current annual salary,
bonus and commission for each current employee of KCOY. Except as set forth on
Schedule 8.17, no current or former employee of KCOY or any relative, associate
or agent of such employee has any interest in any property of Benedek, or is a
party, directly or indirectly, to any contract for employment or otherwise or
any lease or has entered into any transaction with Benedek, including, without
limitation, any contract for the furnishing of services by, or rental of real or
personal property from or to, or requiring payments to, any such employee or
relative, associate or agent. Complete and correct copies of any such contracts
have been delivered to AKMG. Benedek does not have any contract for the future
employment of any employee of KCOY except as may be listed on Schedule 8.17.
8.18 Employee Plans. Schedule 8.18 annexed hereto and made a
part hereof is a complete and correct list of all Employee Plans maintained or
contributed to by Benedek or any ERISA Affiliate of Benedek with respect to its
employees at KCOY, including any employee benefit plans within the meaning of
Section 3(3) of ERISA. True and complete copies of each such Employee Plan have
been heretofore made available to AKMG. All such Employee Plans, related trust
instruments or annuity contracts (or any other funding instruments) are legal,
valid and binding and are in full force and effect, and each such Employee Plan
intended to be qualified under Section 401(a) of the Code is so qualified and
has been so qualified at all times since its inception. All such Employee Plans
have been maintained, in all material respects, in accordance with the
requirements of the Code and ERISA, or any other applicable statute, regulation
or rule. There are no pending claims against any such Employee Plan (other than
routine claims for benefits in accordance with its terms) nor, to the knowledge
of Benedek, has any claim been threatened in writing by any participant thereof
or beneficiary thereunder.
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8.18.1 No Employee Plan with respect to employees at
KCOY is covered by Title IV of ERISA, Section 302 of ERISA or Section 912 of the
Code.
8.18.2 With respect to all Employee Plans with respect
to employees at KCOY that are defined contribution plans, Benedek and any ERISA
Affiliate of Benedek have made all contributions due thereunder for plan years
prior to the date hereof.
8.18.3 Neither Benedek nor any ERISA Affiliate of
Benedek or any plan fiduciary of any Employee Plan with respect to employees at
KCOY is or has engaged in any transaction in violation of Section 406(a) or
406(b) of ERISA for which no exemption exists under ERISA or under applicable
sections of the Code. Neither Benedek nor any ERISA Affiliate of Benedek, or the
administering committee or trustees of any such Employee Plan has received (i)
notice from the IRS or the Department of Labor of the occurrence of a prohibited
transaction within the meaning of Section 406 of ERISA, or (ii) notice of any
breach of loyalty, prudence, diversification or effectuation within the meaning
of Section 404 of ERISA.
8.18.4 No Employee Plan with respect to employees at
KCOY is a "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA.
8.18.5 All Employee Plans with respect to employees at
KCOY are in material compliance with all applicable reporting, disclosure,
filing and other administrative requirements pertaining to employee benefit
plans set forth in the Code and ERISA and rules and regulation promulgated under
either, including, but not limited, to those set forth in Sections 6057, 6058
and 6059 of the Code and applicable rules and regulations thereunder, and in
Sections 101, 102, 103, 104, 105, and 107 of ERISA.
8.18.6 With respect to employees at KCOY, Benedek and
any ERISA Affiliate of Benedek at all times have been in full compliance with
all provisions of the Title X of COBRA, and with the provisions of Part 6 of
Title I of ERISA.
8.18.7 During the twelve-consecutive month period
prior to the date of this Agreement, no steps have been taken to terminate any
Employee Plan with respect to employees at KCOY, and no contribution failure has
occurred with respect to any such Employee Plan sufficient to give rise to a
lien under Section 302(f) of ERISA. No condition exists or event or transaction
has occurred with respect to such an Employee Plan which might result in the
incurrence of any material liability, fine or penalty by either Benedek or any
ERISA Affiliate of Benedek. Neither Benedek nor any ERISA Affiliate of Benedek
has any contingent liability with respect to any post-retirement benefit under
any welfare plan with respect to employees at KCOY, as such term is defined in
Section 3(1) of ERISA, other than liability for continuation coverage described
in Part 6 of Title I of ERISA.
8.18.8 The transactions contemplated by this Agreement
will not result in any payment or series of payments by Benedek to any person of
a parachute payment within the meaning of Section 280G of the Code.
8.19 Environmental Warranties.
8.19.1 All facilities and property (including
underlying groundwater) owned or leased by Benedek with respect to KCOY have
been, and continue to be, owned or leased by Benedek in material compliance with
all Environmental Laws.
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8.19.2 There have been no past, and there are no
pending (i) claims, complaints, notices or requests for information received by
Benedek with respect to KCOY regarding any alleged violation of any
Environmental Law, or (ii) complaints, notices or inquiries to Benedek with
respect to KCOY regarding potential liability under any Environmental Law.
8.19.3 There have been no releases of Hazardous
Materials at, on or under any property now or previously owned or leased by
Benedek with respect to KCOY.
8.19.4 Benedek has been issued and is in material
compliance with all permits, certificates, approvals, licenses, applicable
comprehensive plans and other authorizations relating to environmental matters
and necessary or desirable for the business of KCOY.
8.19.5 To Benedek's knowledge, no property now owned
or leased by Benedek with respect to KCOY is listed or proposed for listing
(with respect to owned property only) on the National Priorities List pursuant
to CERCLA, on CERCLIS or on any similar state list of sites requiring
investigation or clean-up.
8.19.6 There are no underground storage tanks, active
or abandoned, including petroleum storage tanks, on or under any property now
owned or leased by Benedek with respect to KCOY.
8.19.7 Benedek has not directly transported or
directly arranged for the transportation of any Hazardous Material to any
location which is listed or proposed for listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list or which is the
subject of Federal, state or local enforcement actions or other investigations
which may lead to claims against Benedek for any remedial work, damage to
natural resources or personal injury, including claims under CERCLA.
8.19.8 There are no polychlorinated biphenyls or
friable asbestos present at any property now or previously owned or leased by
Benedek with respect to KCOY.
8.19.9 No conditions exist at, on or under any
property now owned or leased by Benedek with respect to KCOY which, with the
passage of time, or the giving of notice or both, would give rise to any
material liability under any Environmental Law or would materially adversely
affect the use of any such property.
8.20 Accuracy of Information. Neither this Agreement nor the
representations and warranties by Benedek contained herein or under any
documents, instruments, certificates or schedules furnished pursuant hereto or
in connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements of fact contained herein and therein not misleading.
9. Certain Covenants and Agreements.
9.1 Control of the Stations. Prior to Closing, Benedek will
have full authority, power and control of the operations of KCOY and over the
persons working at KCOY. Prior to Closing, AKMG will have full authority, power
and control of the operation of KKTV and over the persons working at KKTV.
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9.2 Access. Between the date hereof and the Closing Date, each
Party will take all action reasonably necessary to enable to the other, its
counsel, accountants and other representatives to discuss the affairs,
properties, business, operations and records of the Transferred Assets at such
times and as often as the other Party may reasonably request with executives,
independent accountants, engineers and counsel of the such Party and each Party
will cause its officers, directors and employees to furnish to the other Party
and its authorized representatives any and all data and information pertaining
to the business and properties of such Party's Station as the other Party or its
authorized representatives shall from time to time request. Unless and until the
exchange contemplated herein has been consummated, each Party shall hold in
confidence all information obtained pursuant to this Agreement, and if such
exchange is not consummated, each Party shall return to the other all sensitive
documents and other sensitive materials received by it hereunder. Such
obligation of confidentiality shall not extend to any information which is shown
to have been (i) previously known to such Party, (ii) generally known to others
engaged in the trade or business of the Parties, (iii) part of public knowledge
or literature or (iv) lawfully received by the Party from a third party (not
including the other Party or any of its attorneys, consultants, accountants or
other representatives or agents). Any investigation made by a Party or its
representatives shall not affect or otherwise diminish or obviate the
representations and warranties made by the other Party in this Agreement and
such Party's right to rely thereon. If the acquisition contemplated herein is
consummated, each Party covenants and agrees that it shall preserve and keep the
records delivered to it hereunder for a period of three years after the Closing
Date and shall make such records available to the other Party or its authorized
representatives as reasonably required in connection with any legal proceedings
against or governmental investigation of such Party or in connection with any
tax examination of such Party, provided that the Party shall not be entitled to
any such records in connection with any dispute between such Party and the other
Party arising out of or relating to this Agreement.
9.3 Interim Operations. From the date hereof until the Closing
Date, except as otherwise consented to or approved in writing by the other Party
or as required by this Agreement, each Party shall conduct the business of the
Stations and use the Transferred Assets only in the ordinary course of business,
consistent with past practices, which shall include compliance in all respects
with all laws, regulations and administrative orders of any Federal, state or
local governmental authority that are applicable to each party with respect to
the Transferred Assets or the operation of the Stations, with the intent of
preserving the ongoing operations of the Stations and the Transferred Assets.
Without limiting the generality of the foregoing, and in each case subject to
the terms of the Time Brokerage Agreements:
9.3.1 Each Party shall: (i) maintain the Transferred
Assets in their present condition (reasonable wear and tear in normal use
excepted); (ii) remove, cure and correct prior to the Closing any violations
under applicable statutes, rules or regulations that render (or if unremedied
would render) inaccurate such Party's representations and warranties contained
in this Agreement or in any certificate delivered by such Party pursuant to this
Agreement; (iii) maintain its existing insurance coverage on the Stations and
the Transferred Assets listed on Schedules 7.13 and 8.13; and (iv) maintain its
books and records in the usual and ordinary manner, on a basis consistent with
prior periods.
9.3.2 Neither Party shall, without the other Party's
prior written consent, create, assume or permit to exist any Lien upon the
Transferred Assets (other than the Liens set forth on Schedules 7.10 and 7.11 or
8.10 and 8.11 hereto and not required to be discharged on or prior to the
Closing Date pursuant to the terms of this Agreement or Liens in existence on
the date hereof which will be removed on or prior to the Closing Date.
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9.3.3 Neither Party shall sell or agree to sell or
otherwise dispose of any of the Transferred Assets, unless such sale or disposal
occurs in the ordinary course of business, consistent with past practices and
such Transferred Assets are replaced with similar assets of equal or greater
value and utility.
9.3.4 AKMG shall operate KKTV and Benedek shall
operate KCOY in all respects in accordance with the KKTV FCC Licenses and KCOY
FCC Licenses, respectively, and any other material governmental licenses,
permits and other authorizations listed on Schedules 7.4 or 8.4 and will take
all reasonable actions to preclude the suspension, revocation, or adverse
modification of such licenses, permits and other authorizations. The Parties
will not take any action, by commission or omission, which would cause the FCC
or any other governmental authority to institute proceedings for the suspension,
revocation or adverse modification of any of said licenses, permits and
authorizations, or fail to prosecute with due diligence any pending application
to any governmental authority, or take any action within its control which would
result in the Stations being in non-compliance with the requirements of the
Communications Act of 1934, as amended, or the rules and regulations of the FCC
material to the transactions contemplated by this Agreement.
9.4 Employees of the Stations. Except as contemplated by the
Time Brokerage Agreements, for a period commencing on the Commencement Date and
continuing for one year after the Closing Date, neither AKMG nor Benedek will
directly or indirectly solicit for employment any of the employees of KKTV or
KCOY, respectively. AKMG acknowledges that the current general manager of KCOY
may be retained by Benedek during the term of the Time Brokerage Agreements and
after the Closing, and Benedek acknowledges that the current general manager of
KKTV may be retained by AKMG during the term of the Time Brokerage Agreements
and after the Closing.
9.5 Compliance. Each Party shall use its best efforts to take
or cause to be taken all action and do or cause to be done all things necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement, including, without limitation, to obtain all consents, approvals and
authorizations of third parties and to make all filings with and give all
notices to third parties which may be necessary or required in order to
effectuate the transactions contemplated hereby.
9.6 Compliance with Laws. Each Party will comply in all
material respects with all rules and regulations of the FCC, and with all other
applicable laws, rules, ordinances and regulations to which it is subject. Upon
receipt of notice of violation of any of such laws, rules, ordinances and
regulations, such Party shall use its reasonable best efforts to contest in good
faith or to cure such violation prior to the Closing Date. Each Party will file
with the FCC, when due, all ownership reports, renewal applications, financial
reports and other documents required to be filed between the date of this
Agreement and the Closing Date, and all such reports, applications and documents
will be true and correct to the best of such Party's knowledge and will comply
with the Communications Act of 1934, as amended, and the rules and regulations
of the FCC.
9.7 No Solicitation. AKMG shall not, directly or indirectly,
(i) solicit, elicit, encourage or initiate any discussions or negotiations with
or provide any information to any person (other than Benedek, or representatives
or associates of Benedek) concerning or in connection with sale of the KKTV
Assets, or (ii) except as required by law or in connection with the transactions
contemplated by this Agreement, disclose any information not customarily
disclosed to any Person concerning the business and assets of KKTV, or afford to
any other Person access to the properties, books and records of KKTV or
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otherwise assist any Person in connection with any of the foregoing, and AKMG
shall promptly notify Benedek of any substantial proposal, inquiry or offer
relating to any of the foregoing matters. Benedek shall not, directly or
indirectly, (i) solicit, elicit, encourage or initiate any discussions or
negotiations with or provide any information to any person (other than AKMG, or
representatives or associates of AKMG) concerning or in connection with sale of
the KCOY Assets, or (ii) except as required by law or in connection with the
transactions contemplated by this Agreement, disclose any information not
customarily disclosed to any Person concerning the business and assets of KCOY,
or afford to any other Person access to the properties, books and records of
KCOY or otherwise assist any Person in connection with any of the foregoing, and
Benedek shall promptly notify AKMG of any substantial proposal, inquiry or offer
relating to any of the foregoing matters.
9.8 Payment of Taxes. Except as otherwise provided in the Time
Brokerage Agreements, AKMG shall be responsible for all Federal, state, county,
local, income, property, sales, use, intangibles and other taxes attributable to
the operation or ownership of KKTV and the KKTV Assets and Benedek shall be
responsible for all Federal, state, county, local, income, property, sales, use,
intangibles and other taxes attributable to the operation or ownership of KCOY
and the KCOY Assets for the period between the date hereof and the Closing. Each
of AKMG and Benedek shall pay or otherwise discharge 50% of all sales and use
taxes and transfer, deed, documentary stamp and other recordation taxes or
charges arising out of the transfer of the KKTV Assets and KCOY Assets,
respectively.
9.9 FCC Consent. The Parties shall diligently prosecute the FCC
Applications and use all reasonable efforts to obtain the FCC Consents as
promptly and expeditiously as possible. The Parties shall not intentionally take
or omit to take any action that will cause the FCC to deny, delay or fail to
approve the FCC Applications or cause the FCC Consents not to become Final
Orders.
9.10 Time Brokerage Agreements. Anything to the contrary
contained in this Agreement notwithstanding, neither Party shall be deemed to
have breached or failed to comply with any of its covenants under this Agreement
with respect to the Station owned by it if such breach or failure is due or
caused by any act, omission or instruction of the other Party under or in
connection with the applicable Time Brokerage Agreement or any activities or
transactions in furtherance thereof or in connection therewith.
10. Conditions of Closing.
10.1 Obligation of Benedek to Close. The obligation of Benedek
to close hereunder shall be subject to the fulfillment and satisfaction, prior
to or at the Closing, of the following conditions or the written waiver thereof
by Benedek:
10.1.1 Representations. The representations and
warranties of AKMG in this Agreement shall be true and correct when made, except
where the failure to be true and correct would not have a Material Adverse
Effect upon KKTV or upon the ability of AKMG to consummate the transactions
contemplated hereby, and, except for changes permitted by this Agreement and
representations and warranties made as of a specific date, shall also be true
and correct on and as of the Closing Date, except where the failure to be true
and correct would not have a Material Adverse Effect upon KKTV or upon the
ability of AKMG to consummate the transactions contemplated hereby, and except
in each case for changes or failures to be true and correct arising out of in
connection with or as a result of any matter or transaction contemplated by the
Time Brokerage Agreement pertaining to KKTV or any act or omission or
instruction
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by Benedek in the course of its authority or activities under or in connection
with such Time Brokerage Agreement; and Benedek shall have received a
certificate to that effect dated the Closing Date and executed by an appropriate
officer of AKMG.
10.1.2 Covenants. Each of the agreements and covenants
of AKMG to be performed under this Agreement at or prior to the Closing Date
shall have been duly performed in all material respects, in each case except for
failures arising out of, in connection with or as a result of any matter or
transaction contemplated by the Time Brokerage Agreement pertaining to KKTV or
any act or omission or instruction by Benedek in the course of its authority or
activities under or in connection with such Time Brokerage Agreement; and
Benedek shall have received a certificate to that effect dated the Closing Date
and executed by an appropriate officer of AKMG.
10.1.3 No Injunction. No injunction or restraining
order shall be in effect to forbid or enjoin the consummation of the
transactions contemplated by this Agreement and no Federal, state or local
statute, rule or regulation shall have been enacted which prohibits, restricts
or delays the consummation hereof.
10.1.4 Consents. All necessary consents of any Persons
to the transfer of AKMG's interest in the contracts, agreements and commitments
constituting Assumed Liabilities that are set forth on Schedule 10.1.4 shall
have been obtained and delivered to Benedek.
10.1.5 KKTV FCC Licenses. AKMG shall be the holder of
the KKTV FCC Licenses and all other material governmental licenses, permits and
other authorizations listed on Schedule 7.4, and there shall not have been any
modification of any of such licenses, permits and other authorizations which has
a Material Adverse Effect on KKTV or the conduct of its business and operations.
No proceeding shall be pending (other than rule making proceedings of general
applicability to the broadcast industry) which seeks or the effect of which
could be to revoke, cancel, fail to renew, suspend or modify materially and
adversely any of the KKTV FCC Licenses or any other material governmental
licenses, permits or other authorizations listed on Schedule 7.4.
10.1.6 Governmental Consents. All consents,
authorizations, orders or approvals of, and filings or negotiations with, any
Federal, state, local or foreign governmental agency, commission, board or other
regulatory body (including as contemplated by Section 6) which are required for
or in connection with the execution, delivery and performance of this Agreement
by AKMG and the consummation of the transactions contemplated hereby, and in
order to permit or enable Benedek to conduct after the Closing a business
substantially similar to KKTV as conducted by AKMG as of the date hereof, shall
have been duly obtained or made.
10.1.7 Instruments of Transfer. Benedek shall have
received the deeds, bills of sale, endorsements, assignments, drafts, checks and
other documents of transfer, conveyance and assignment contemplated by Section
2.5 valid to transfer all of AKMG's right, title and interest in and to the KKTV
Assets to Benedek and to vest in Benedek good, marketable and insurable title to
the KKTV Assets, subject only to the Liens set forth on Schedules 7.10 and 7.11
hereto and not required to be discharged (in the manner herein provided) on or
prior to the Closing Date pursuant to the terms of this Agreement.
10.1.8 Assumption Agreements. AKMG shall have executed
and delivered the instruments of assumption contemplated by Section 3.2 hereof.
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10.1.9 Books of Account. Benedek shall have received
AKMG's books of account, records, leases, indentures, contracts, agreements,
evidences of indebtedness, securities, correspondence and other documents
pertaining to the KKTV Assets and KKTV. Unless otherwise requested by Benedek,
delivery of the foregoing shall not be effected by physical delivery at the
Closing but by surrendering access to the premises containing the foregoing to
Benedek.
10.1.10 Resolutions. Benedek shall have received a
certified copy of resolutions duly adopted by the board of directors of AKMG
authorizing and approving the transfer of the KKTV Assets and performance by
AKMG of its obligations hereunder and the other documents and instruments to be
executed and delivered in connection herewith.
10.1.11 Opinions of Counsel to AKMG. Benedek shall
have received opinions of Graham & Dunn PC, counsel to AKMG, Rubin, Winston,
Diercks, Harris & Cooke, LLP, FCC counsel to AKMG, and local counsel to AKMG in
Colorado, dated the Closing Date, addressed to Benedek and, if so requested by
Benedek, to lenders to Benedek under its Amended and Restated Credit Agreement
dated as of December 17, 1997, covering the matters set forth in Exhibits C-1,
C-2 and C-3, respectively, attached hereto, which opinions shall be in form and
substance acceptable to Benedek's counsel.
10.1.12 Hart-Scott-Rodino Compliance. If applicable,
the parties shall have filed with the United States Federal Trade Commission and
the Antitrust Division of the United States Department of Justice complete and
accurate notification and report forms with respect to the transactions
contemplated hereby pursuant to the HSR Act. With respect to the HSR Act,
neither such agency shall have instituted or threatened to institute an action
in connection with the transactions contemplated by this Agreement and all
waiting periods required to expire under the HSR Act, including any extension
thereof, shall have expired or been terminated prior to the Closing Date.
10.1.13 Environmental Condition. If Benedek elects
within 30 days after the date of this Agreement to conduct an environmental
audit of the real property owned or leased by AKMG with respect to KKTV, Benedek
shall have received from a qualified inspector selected by Benedek, a
certification substantially to the effect that no environmental conditions exist
at any of the real property owned or leased by AKMG with respect to KKTV which
could reasonably be expected to result in remediation costs in excess of
$25,000; provided, however, that in the event that such estimated remediation
costs exceed $25,000, this Section 10.1.13 shall be deemed satisfied if AKMG
agrees to pay any remediation costs in excess of $25,000 and makes arrangements
reasonably satisfactory to Benedek for the payment thereof; and further provided
that, with respect to any real property leased by AKMG which is subject to any
such remediation, AKMG shall have received any required consent of the owner of
the property.
10.1.14 Further Documents. Benedek shall have received
from AKMG such further certificates and documents relating to KKTV as shall have
been reasonably requested by Benedek.
10.2 Obligation of AKMG to Close. The obligation of AKMG to
close hereunder shall be subject to the fulfillment and satisfaction, prior to
or at the Closing, of the following conditions or the written waiver thereof by
AKMG:
10.2.1 Representations. The representations and
warranties of Benedek in this Agreement shall be true and correct when made,
except where the failure to be true and correct would not have a Material
Adverse Effect upon KCOY or upon the ability of Benedek to consummate the
transactions
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contemplated hereby, and, except for changes permitted by this Agreement and
representations and warranties made as of a specific date, shall also be true
and correct on and as of the Closing Date, except where the failure to be true
and correct would not have a Material Adverse Effect upon KCOY or upon the
ability of Benedek to consummate the transactions contemplated hereby, and
except in each case for changes or failures to be true and correct arising out
of in connection with or as a result of any matter or transaction contemplated
by the Time Brokerage Agreement pertaining to KCOY or any act or omission or
instruction by AKMG in the course of its authority or activities under or in
connection with such Time Brokerage Agreement; and AKMG shall have received a
certificate to that effect dated the Closing Date and executed by an appropriate
officer of Benedek.
10.2.2 Covenants. Each of the agreements and covenants
of Benedek to be performed under this Agreement at or prior to the Closing Date
shall have been duly performed in all material respects, in each case except for
failures arising out of, in connection with or as a result of any matter or
transaction contemplated by the Time Brokerage Agreement pertaining to KCOY or
any act or omission or instruction by AKMG in the course of its authority or
activities under or in connection with such Time Brokerage Agreement; and AKMG
shall have received a certificate to that effect dated the Closing Date and
executed by an appropriate officer of Benedek.
10.2.3 No Injunction. No injunction or restraining
order shall be in effect to forbid or enjoin the consummation of the
transactions contemplated by this Agreement and no Federal, state, local or
foreign statute, rule or regulation shall have been enacted which prohibits,
restricts or delays the consummation hereof.
10.2.4 Consents. All necessary consents of any Persons
to the transfer of Benedek's interest in the contracts, agreements and
commitments constituting Benedek Assumed Liabilities that are set forth on
Schedule 10.2.4 shall have been obtained and delivered to AKMG.
10.2.5 KCOY FCC Licenses. BLC shall be the holder of
the KCOY FCC Licenses and all other material governmental licenses, permits and
other authorizations listed on Schedule 8.4, and there shall not have been any
modification of any of such licenses, permits and other authorizations which has
a Material Adverse Effect on KCOY or the conduct of its business and operations.
No proceeding shall be pending (other than rule making proceedings of general
applicability to the broadcast industry) which seeks or the effect of which
could be to revoke, cancel, fail to renew, suspend or modify materially and
adversely any of the KCOY FCC Licenses or any other material governmental
licenses, permits or other authorizations listed on Schedule 8.4.
10.2.6 Governmental Consents. All consents,
authorizations, orders or approvals of, and filings or negotiations with, any
Federal, state, local or foreign governmental agency, commission, board or other
regulatory body (including as contemplated by Section 6) which are required for
or in connection with the execution, delivery and performance of this Agreement
by Benedek and the consummation of the transactions contemplated hereby, and in
order to permit or enable AKMG to conduct after the Closing a business
substantially similar to KCOY as conducted by Benedek as of the date hereof,
shall have been duly obtained or made.
10.2.7 Instruments of Transfer. AKMG shall have
received the deeds, bills of sale, endorsements, assignments, drafts, checks and
other documents of transfer, conveyance and assignment contemplated by Section
2.5 valid to transfer all of Benedek's right, title and interest in and to the
KCOY
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Assets to AKMG and to vest in AKMG good, marketable and insurable title to the
KCOY Assets, subject only to the Liens set forth on Schedules 8.10 and 8.11
hereto and not required to be discharged (in the manner herein provided) on or
prior to the Closing Date pursuant to the terms of this Agreement.
10.2.8 Assumption Agreements. Benedek shall have
executed and delivered the instruments of assumption contemplated by Section 3.2
hereof.
10.2.9 Books of Account. AKMG shall have received
Benedek's books of account, records, leases, indentures, contracts, agreements,
evidences of indebtedness, securities, correspondence and other documents
pertaining to the KCOY Assets and KCOY. Unless otherwise requested by AKMG,
delivery of the foregoing shall not be effected by physical delivery at the
Closing but by surrendering access to the premises containing the foregoing to
AKMG.
10.2.10 Resolutions. AKMG shall have received a
certified copy of resolutions duly adopted by the board of directors of Benedek
authorizing and approving the transfer of the KCOY Assets and performance by
Benedek of its obligations hereunder and the other documents and instruments to
be executed and delivered in connection herewith.
10.2.11 Opinion of Counsels to Benedek. AKMG shall
have received an opinion of Shack & Siegel, P.C., counsel to Benedek, Covington
& Burling, FCC counsel to Benedek, and Kirk & Simas, local counsel to Benedek in
California, dated the Closing Date, addressed to AKMG, covering the matters set
forth in Exhibits D-1, D-2 and D-3, respectively, attached hereto, which
opinions shall be in form and substance acceptable to AKMG's counsel.
10.2.12 Hart-Scott-Rodino. If applicable, the parties
shall have filed with the United States Federal Trade Commission and the
Antitrust Division of the United States Department of Justice complete and
accurate notification and report forms with respect to the transactions
contemplated hereby pursuant to the HSR Act. With respect to the HSR Act,
neither such agency shall have instituted or threatened to institute an action
in connection with the transactions contemplated by this Agreement and all
waiting periods required to expire under the HSR Act, including any extension
thereof, shall have expired or been terminated prior to the Closing Date.
10.2.13 Environmental Condition. If AKMG elects within
30 days after the date of this Agreement to conduct an update to the
environmental audit of the real property owned or leased by Benedek with respect
to KCOY, AKMG shall have received from a qualified inspector selected by AKMG,
an update to the certification done by Professional Service Industries, Inc.
substantially to the effect that no environmental conditions exist at any of the
real property owned or leased by Benedek with respect to KCOY which could
reasonably be expected to result in remediation costs in excess of $25,000;
provided, however, that in the event that such estimated remediation costs
exceed $25,000, this Section 10.2.13 shall be deemed satisfied if Benedek agrees
to pay any remediation costs in excess of $25,000 and makes arrangements
reasonably satisfactory to AKMG for the payment thereof; and further provided
that, with respect to any real property leased by Benedek which is subject to
any such remediation, Benedek shall have received any required consent of the
owner of the property.
10.2.14 Further Documents. AKMG shall have received
from Benedek such further certificates and documents relating to KCOY as shall
have been reasonably requested by AKMG.
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10.2.15 Receipt of Purchase Price Payable at Closing.
AKMG shall have received a certified or bank cashier's check or wire transfer in
the amount of the Closing Payment to be paid at the Closing.
11. Remedies for Breach.
11.1 Declining to Close. If a Party shall be entitled to
decline to close, and shall decline to close, the transactions contemplated by
this Agreement, such Party shall have no liability to the other Party under or
in any way by reason hereof and such Party shall, subject to the terms and
conditions of this Agreement, have all such rights and remedies against the
other Party as may be available to it in law or equity or otherwise.
11.2 Election to Close. If a Party shall be entitled to decline
to close the transactions contemplated by this Agreement but such Party shall
elect nevertheless to close, such Party shall not be deemed to have waived any
claims of any nature arising from the failure of the other Party to comply with
any of the terms and conditions of this Agreement and such Party shall, subject
to the terms and conditions of this Agreement, have all such rights and remedies
against the other Party as may be available to it at law or in equity or
otherwise. If such Party elects to close the transactions contemplated by this
Agreement and the other Party wrongfully refuses to do so, or if the other Party
fails, or if a failure by the other Party is threatened, to comply with any of
their covenants and agreements contained in this Agreement, then, in addition to
all other remedies which may be available to it, such Party shall be entitled to
injunctive and other equitable relief, including, without limitation, specific
performance, and shall be entitled to recover from the other Party its loss,
costs and expenses, including reasonable attorneys' fees incurred by such Party
in securing such injunctive or equitable relief.
11.3 Remedies Cumulative. Except as otherwise set forth in
Section 11.3 hereof, the specific remedies to which any party may resort under
the terms of this Agreement are cumulative and are not intended to be exclusive
of any other remedies or means of redress to which such party may lawfully be
entitled in case of any breach, threatened breach or failure of observance or
performance of any representation, warranty, covenant, agreement or commitment
made hereunder or relating hereto or by reason of any such representation,
warranty, covenant, agreement or commitment being untrue or incorrect.
12. Termination Rights. This Agreement may be terminated by either
Party, if not then in material default, upon written notice to the other upon
the occurrence of any of the following:
12.1 If the exchange of the Transferred Assets pursuant to this
Agreement shall not have been effected within nine months after the date that
the FCC accepts the latter of the two FCC Applications for filing;
12.2 If any Party defaults in any material respect in the
observance or in the due and timely performance of any of its covenants herein
contained other than the obligation to close on the Closing Date; provided,
however, that termination pursuant to this paragraph shall not be effective
unless the terminating party shall have given to the Party in default at least
30 days advance notice of its claim of default so as to afford the other Party
the opportunity to cure; or
12.3 If at the Closing any of the conditions precedent to the
obligations of the Parties set forth in this Agreement have not been satisfied
or waived by the respective Party.
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13. Indemnification of the Parties.
13.1 Indemnification by AKMG. AKMG shall defend and promptly
indemnify Benedek, and save and hold it harmless from, against, for and in
respect of and pay any and all damages, losses, obligations, liabilities,
claims, encumbrances, deficiencies, costs and expenses, including, without
limitation, reasonable attorneys' fees and other costs and expenses incident to
any action, investigation, claim or proceeding (all hereinafter collectively
referred to as "Losses") suffered, sustained, incurred or required to be paid by
Benedek by reason of: (i) any and all obligations and liabilities of AKMG, other
than the Assumed KKTV Liabilities; (ii) any breach or failure of observance or
performance of any covenant, agreement or commitment made by AKMG hereunder or
under any document or instrument relating hereto or executed pursuant hereto;
(iii) the operation of KKTV by AKMG for all periods prior to the Closing (other
than the Assumed KKTV Liabilities); (iv) any representation or warranty by AKMG
contained herein being untrue or incorrect in any respect; (v) any act, omission
or instruction by AKMG under or in connection with the Time Brokerage Agreement
pertaining to KCOY or any activities or transactions in furtherance thereof or
in connection therewith; or (vi) any liability or obligation of AKMG for
Federal, state, local or other taxes; provided, however, that AKMG shall be
required to indemnify and hold Benedek harmless under clause (iv) of this
Section 13.1 only if and to the extent the aggregate amount of such Losses
exceeds $100,000. For purposes of determining whether an event under clause (iv)
of this Section 13.1 has occurred for which indemnification may be sought, any
requirement in any representation or warranty contained herein that an event or
fact be material or have a Material Adverse Effect on KKTV in order for such
event or fact to constitute a misrepresentation or a breach of such warranty or
representation shall be disregarded in determining if the aggregate Losses
resulting from all such breaches and misrepresentations exceeds $100,000.
13.2 Indemnification by Benedek. Benedek shall defend and
promptly indemnify AKMG, and save and hold it harmless from, against, for and in
respect of and pay any and all Losses suffered, sustained, incurred or required
to be paid by AKMG by reason of: (i) any and all obligations and liabilities of
Benedek, other than the Assumed KCOY Liabilities; (ii) any breach or failure of
observance or performance of any covenant, agreement or commitment made by
Benedek hereunder or under any document or instrument relating hereto or
executed pursuant hereto; (iii) the operation of KCOY by Benedek for all periods
prior to the Closing (other than the Assumed KCOY Liabilities); (iv) any
representation or warranty by Benedek contained herein being untrue or incorrect
in any respect; (v) any act, omission or instruction by Benedek under or in
connection with the Time Brokerage Agreement pertaining to KKTV or any
activities or transactions in furtherance thereof or in connection therewith; or
(vi) any liability or obligation of Benedek for Federal, state, local or other
taxes; provided, however, that Benedek shall be required to indemnify and hold
AKMG harmless under clause (iv) of this Section 13.2 only if the aggregate
amount of such Losses exceeds $100,000. For purposes of determining whether an
event under clause (iv) of this Section 13.2 has occurred for which
indemnification may be sought, any requirement in any representation or warranty
contained herein that an event or fact be material or have a Material Adverse
Effect on KCOY in order for such event or fact to constitute a misrepresentation
or a breach of such warranty or representation shall be disregarded in
determining if the aggregate Losses resulting from all such breaches and
misrepresentations exceeds $100,000.
13.3 Procedures. For purposes of this Section, the Party
entitled to indemnification shall be known as the "Injured Party" and the party
required to indemnify shall be known as the "Other Party." In the event that the
Other Party shall be obligated to the Injured Party pursuant to this Section or
in the event that a suit, action, investigation, claim or proceeding is begun,
made or instituted as a result of which the
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Other Party may become obligated to the Injured Party hereunder, the Injured
Party shall give prompt written notice to the Other Party of the occurrence of
such event. The Other Party agrees to defend, contest or otherwise protect
against any such suit, action, investigation, claim or proceeding with counsel
chosen by the Other Party at the Other Party's own cost and expense. The Other
Party may settle or compromise any such suit, action, investigation, claim or
proceeding at its sole cost and expense; provided, that the Other Party shall
have obtained from any third party claimant an unconditional release of the
Injured Party. The Injured Party shall have the right but not the obligation to
participate at its own expense in the defense thereof by counsel of its own
choice. In the event that the Other Party fails timely to defend, contest or
otherwise protect against any such suit, action, investigation, claim or
proceeding, the Injured Party shall have the right to defend, contest or
otherwise protect against the same and may make any compromise or settlement
thereof and recover the entire cost thereof from the Other Party, including,
without limitation, reasonable attorneys' fees, disbursements and all amounts
paid as a result of such suit, action, investigation, claim or proceeding or
compromise or settlement thereof.
13.4 Limitation. Except for any claim for indemnification
arising from a claim by the United States of America, the State of California,
the State of Colorado, or any other governmental unit, body or agency with
taxing authority relating to taxes or interest or penalties in connection
therewith, no party shall be entitled to indemnification hereunder with respect
to the breach of any representation or, warranty contained herein unless such
claim for indemnification is asserted in writing to the party from whom
indemnification is sought within one year after the Closing Date.
13.5 Survival of Representations and Warranties.
Notwithstanding any right of a Parties and its representatives fully to
investigate the affairs of the other Party and the Stations and, except as
otherwise provided in Section 11.2 hereof, notwithstanding any knowledge of
facts determined or determinable by a Party and its representatives pursuant to
such investigation or right of investigation, each Party has the right to rely
fully upon the representations, warranties, covenants and agreements of the
other Party contained in this Agreement. Subject to Section 13.4 hereof, all
such representations warranties, covenants and agreements shall survive the
execution and delivery hereof and the Closing hereunder.
14. Brokers. The Parties covenant and represent to each other that they
had no dealings with any broker or finder in connection with this Agreement or
the transactions contemplated hereby and no broker, finder or other Person is
entitled to receive any broker's commissions or finder's fee or similar
compensation in connection with any such transaction. Each of the parties agrees
to defend, indemnify and hold harmless the other from, against, for and in
respect of any and all losses sustained by the other as a result of any
liability or obligation to any broker or finder on the basis of any arrangement,
agreement or acts made by or on behalf of such party with any Person whatsoever.
15. Miscellaneous.
15.1 Entire Agreement. This Agreement constitutes the entire
agreement of the parties (and supersedes any prior understanding of the parties)
with respect to the subject matter hereof. The representations, warranties,
covenants and agreements set forth in this Agreement and in any financial
statements, schedules or exhibits delivered pursuant hereto constitute all the
representations, warranties, covenants and agreements of the parties hereto and
upon which the parties have relied and except as may be specifically provided
herein, no change, modification, amendment, addition or termination of this
Agreement or any part thereof shall be valid unless in writing and signed by or
on behalf of the party to be charged therewith.
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15.2 Notices. Any and all notices or other communications or
deliveries required or permitted to be given or made pursuant to any of the
provisions of this Agreement shall be deemed to have been duly given or made for
all purposes if sent by certified or registered mail, return receipt requested
and postage prepaid, hand delivery or overnight delivery service or sent by
telephone facsimile as follows:
If to Benedek, at:
Benedek Broadcasting Corporation
100 Park Avenue
Rockford, Illinois 61101
Telephone: (815) 987-5350
Facsimile: (815) 987-5335
Attention: President
With a copy to:
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone: (212) 782-0700
Facsimile: (212) 730-1964
Attention: Paul S. Goodman, Esq.
If to AKMG, at:
AK Media Group, Inc.
1301 Fifth Avenue, Suite 4000
Seattle, Washington 98101
Telephone: (206) 624-2888
Facsimile: (206) 623-7853
Attention: Mr. Denis M. Curley
With a copy to:
Rubin, Winston, Diercks, Harris & Cooke, LLP
1333 New Hampshire Avenue, N.W., Suite 1000
Washington, D.C. 20036
Telephone: (202) 861-0870
Facsimile: (202) 429-0657
Attention: James L. Winston, Esq.
or at such other address as any party may specify by notice given to other party
in accordance with this Section. The date of the giving of any notice sent by
mail shall be three business days following the date of the posting of the mail,
if delivered in person, the date delivered in person or the next business day
following delivery to an overnight delivery service or the date sent by
telephone facsimile.
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15.3 Public Announcement. Except for any disclosures or
announcements which a Party shall be required to make pursuant to the
Communications Act of 1934, as amended, or the rules and regulations of the FCC,
or disclosures or announcements required to be made pursuant to the rules and
regulations of the Securities and Exchange Commission or any other Federal or
state governmental agency, the Parties will jointly prepare and determine the
timing of any press release or other announcement to the public (including any
announcement to the employees of the Stations) concerning the execution of this
Agreement and the transactions contemplated herein. Except as provided for in
the preceding sentence, no Party hereto will issue any press release or make any
other public announcement relating to the execution of this Agreement or the
transactions contemplated herein, except that any party may make any disclosure
required to be made by it under applicable law if it determines in good faith
that it is appropriate to do so and gives prior notice to the other party
hereto.
15.4 No Waiver. No waiver of the provisions hereof shall be
effective unless in writing and signed by the party to be charged with such
waiver. No waiver shall be deemed a continuing waiver in respect of any
subsequent breach or default, either of similar or different nature, unless
expressly so stated in writing.
15.5 Governing Law. This Agreement shall be governed,
interpreted and construed in accordance with the laws of the State of New York
applicable to contracts to be performed entirely within that State. Should any
clause, section or part of this Agreement be held or declared to be void or
illegal for any reason, all other clauses, sections or parts of this Agreement
which can be effected without such illegal clause, section or part shall
nevertheless continue in full force and effect.
15.6 Consent to Jurisdiction. Each Party hereby consents to the
jurisdiction and venue of the Courts of the State of New York located in the
County of New York, the United States District Court for the Southern District
of New York and the District Court of the District of Columbia with respect to
any matter relating to this Agreement and performance of the parties'
obligations hereunder, the documents and instruments executed and delivered
concurrently herewith or pursuant hereto and performance of the parties'
obligations thereunder and each Party hereby consents to the personal
jurisdiction of such courts and shall subject itself to such personal
jurisdiction. Any action, suit or proceeding relating to such matters shall be
commenced, pursued, defended and resolved only in such courts and any
appropriate appellate court having jurisdiction to hear an appeal from any
judgment entered in such courts. Service of process in any action, suit or
proceeding relating to such matters may be made and served within or outside the
State of New York, County of New York, the Southern District of New York or the
District of Columbia by registered or certified mail to the parties and their
representatives at their respective addresses specified in Section 15.2 hereof,
provided that a reasonable time, not less than 30 days, is allowed for response.
Service of process may also be made in such other manner as may be permissible
under the applicable court rules.
15.7 Expenses. Except as otherwise provided herein, the Parties
shall each bear their own costs and expenses in connection with this
transaction.
15.8 Binding Agreement. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that no party may assign any of its rights or
delegate any of its duties under this Agreement without the prior written
consent of the other party hereto.
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15.9 Headings. The headings or captions under sections of this
Agreement are for convenience and reference only and do not in any way modify,
interpret or construe the intent of the parties or effect any of the provisions
of this Agreement.
15.10 Counterparts. This Agreement may be executed in one or
more counterparts each of which when taken together shall constitute one
agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed on the date and year first above written.
BENEDEK BROADCASTING CORPORATION
By: /s/ K. James Yager
---------------------------
Name: K. James Yager
Title: President
BENEDEK LICENSE CORPORATION
By: /s/ K. James Yager
---------------------------
Name: K. James Yager
Title: President
AK MEDIA GROUP, INC.
By: /s/ Denis Curley
----------------------------
Name: Denis Curley
Title: Secretary/Treasurer
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BENEDEK COMMUNICATIONS CORPORATION
1999 STOCK OPTION PLAN
ARTICLE I
Purpose of the Plan
The 1999 Stock Option Plan (the "Plan) is intended to provide a method
whereby "Employees," "Directors" and "Consultants and Advisers" of Benedek
Communications Corporation (the "Company") and its "Subsidiaries" (as such
quoted terms are hereinafter defined) may be encouraged to acquire a proprietary
interest in the Company and whereby such individuals may realize benefits from
an increase in the value of the shares of Class B Common Stock, $0.01 par value
per share (the "Common Stock"), of the Company; and to provide such Employees,
Directors and Consultants and Advisers with greater incentive to exert their
best efforts on behalf of the Company and to encourage their continued provision
of services to the Company by more closely aligning their interests with those
of the Company's stockholders. Under the Plan, from time to time on or before
December 31, 2008 options to purchase shares of Common Stock may be granted to
such persons as may be selected in the manner hereinafter provided on the terms
and subject to the conditions hereinafter set forth. Capitalized terms are
defined in Article XV hereof.
ARTICLE II
ADMINISTRATION OF THE PLAN
SECTION 1. The Plan shall be administered by the Company's Board of
Directors (the "Board"). The Board is authorized to interpret the Plan and may
from time to time adopt such rules and regulations for carrying out the Plan as
it may deem best. All determinations by the Board shall be made by the
affirmative vote of a majority of its members, but any determination reduced to
writing and signed by a majority of its members shall be fully enforceable and
effective as if it had been made by a majority vote at a meeting duly called and
held. Subject to any applicable provisions of the Plan, all determinations by
the Board pursuant to the provisions of the Plan, and all related orders or
resolutions of the Board, shall be final, conclusive and binding on all Persons,
including the Company and its stockholders, employees, directors and optionees.
SECTION 2. At any time that Section 16 of the 1934 Act is applicable to any
persons holding or eligible to receive options under the Plan, transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
Plan or action by the Board fails to so comply, it shall be deemed null and void
to the extent permitted by law and deemed advisable by the Board.
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ARTICLE III
STOCK SUBJECT TO THE PLAN
SECTION 1. The shares to be issued or delivered upon exercise of options or
rights granted under the Plan shall be made available, at the discretion of the
Board, either from the authorized but unissued shares of Common Stock of the
Company or from shares of Common Stock reacquired by the Company, including
shares purchased by the Company in the open market or otherwise obtained.
SECTION 2. Subject to the provisions of Article X hereof, the aggregate
number of shares of Common Stock which may be purchased pursuant to options
granted at any time under the Plan shall not exceed 240,000. The maximum number
of shares with respect to which options may be granted under the Plan in any
calendar year to any one employee shall be 100,000 as such number may be
adjusted by the Board in accordance with Article X hereof. The Board shall
calculate such limit in a manner consistent with Section 162(m) of the Code.
Shares subject to any options which are canceled, lapse or are otherwise
terminated shall be immediately available for reissuance under the Plan.
ARTICLE IV
PURCHASE PRICE OF OPTIONED SHARES
In the case of Incentive Stock Options, or unless the Board shall fix a
greater or lesser purchase price, the purchase price per share of Common Stock
under each option granted to Employees, Directors, Consultants and Advisers
shall not be less than one hundred percent (100%) of the Fair Market Value (as
hereinafter defined) of the Common Stock at the time such option is granted;
provided, however, that in the case of an Incentive Stock Option granted to an
Employee who, at the time of the grant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company (a "Ten Percent Stockholder"), such purchase price per share shall be at
least one hundred and ten percent (110%) of the Fair Market Value.
ARTICLE V
ELIGIBILITY OF RECIPIENTS
Options will be granted only to Persons who are Employees, Directors,
Consultants or Advisers of the Company or a Subsidiary.
ARTICLE VI
DURATION OF THE PLAN
Unless previously terminated by the Board, the Plan will terminate on
December 31, 2008. Such termination will not terminate any option then
outstanding.
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ARTICLE VII
GRANT OF OPTIONS TO EMPLOYEES,
DIRECTORS, CONSULTANTS AND ADVISERS
SECTION 1. Each option granted under the Plan to Employees shall constitute
either an Incentive Stock Option or a Non-Qualified Stock Option, as determined
in each case by the Board and each option granted under the Plan to Directors,
Consultants and Advisers shall constitute a Non-Qualified Stock Option. With
respect to Incentive Stock Options granted to Employees, to the extent that the
aggregate Fair Market Value (determined at the time an option is granted) of
Common Stock of the Company with respect to which such Incentive Stock Options
are exercisable for the first time by any individual during any calendar year
(under the Plan and any other stock option plan of the Company) exceeds
$100,000, such Incentive Stock Options shall be treated as Non-Qualified Stock
Options to the extent of such excess. The foregoing rule shall be applied by
taking Incentive Stock Options into account in the order in which they were
granted. In the event outstanding Incentive Stock Options become immediately
exercisable under the terms hereof, such Incentive Stock Options will, to the
extent the aggregate Fair Market Value thereof exceeds $100,000, be treated as
Non-Qualified Stock Options.
SECTION 2. The Board shall from time to time determine the Employees,
Directors, Consultants and Advisers to be granted options, it being understood
that options may be granted at different times to the same person, provided,
however, that no one person may receive an option or options under the Plan
covering more than fifty percent (50%) of the total number of shares subject to
the Plan. In addition, the Board shall determine subject to the terms of the
Plan (a) the number of shares subject to each option, (b) the time or times when
the options will be granted, (c) whether such options shall be Incentive Stock
Options, Non-Qualified Stock Options or both, (d) the purchase price of the
shares subject to each option, which price shall be not less than that specified
in Article hereof, (e) the time or times when each option may be exercised and
(f) any other matters which the Board shall deem appropriate.
SECTION 3. All instruments evidencing options granted to Employees,
Directors, Consultants and Advisers under the Plan shall be in such form as the
Board shall from time to time determine, which form shall be consistent with the
Plan and any applicable determinations, orders, resolutions or other actions
of the Board.
ARTICLE VIII
TRANSFERABILITY OF OPTIONS
No Incentive Stock Option granted under the Plan shall be transferable by
the optionee otherwise than by will or by the laws of descent and distribution,
and any such Incentive Stock Option shall be exercised during the lifetime of
the optionee solely by him or her. Any Non-Qualified Stock Option granted under
the Plan may be transferable by the optionee to the extent specifically
permitted by the Board as specified in the instrument evidencing the option as
the same may be amended from time to time. Except to the extent permitted by
such instrument, no Non-Qualified Stock Option shall be transferable except by
will or by the laws of descent and distribution.
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ARTICLE IX
EXERCISE OF OPTIONS
SECTION 1. Each option granted under the Plan shall terminate on the date
specified by the Board which date shall be not later than the expiration of ten
years from the date on which it was granted; provided, however, that in the case
of an Incentive Stock Option granted to an Employee who, at the time of the
grant is a Ten Percent Stockholder, such period shall not exceed five (5) years
from the date of grant.
SECTION 2. A person electing to exercise an option then exercisable shall
give written notice to the Company of such election and, if electing to exercise
an option, of the number of shares of Common Stock such person has elected to
purchase. A person exercising an option shall at the time of purchase tender the
full purchase price of such shares, which tender, except as provided in Section
3 of this Article , shall be made in cash or cash equivalent (which may be such
person's personal check) or, to the extent permitted by applicable law, in
shares of Common Stock already owned by such person (which shares shall be
valued for such purpose on the basis of their Fair Market Value on the date of
exercise), or in any combination thereof; provided, however, that payment in
shares of common stock already owned shall not be permitted unless the chief
financial officer of the Company determines that such payment will not require
the Company to recognize a compensation expense under applicable accounting
rules. In the event of payment in shares of Common Stock already owned, such
shares shall be appropriately endorsed for transfer to the Company. The Company
shall have no obligation to deliver shares of Common Stock pursuant to the
exercise of any option, in whole or in part, until such payment in full of the
purchase price therefor is received by the Company. No optionee, or legal
representative, legatee, distributee or transferee of such optionee, shall be or
be deemed to be a holder of any shares of Common Stock subject to such option or
entitled to any rights of a stockholder of the Company in respect of any shares
of Common Stock covered by such option until such shares have been paid for in
full and issued or delivered by the Company.
SECTION 3. In order to assist an optionee in the exercise of an option
granted under the Plan, the Board may, in its discretion, authorize, either at
the time of the grant of the option or thereafter (a) the extension of a loan to
the optionee by the Company, (b) the payment by the optionee of the purchase
price of the Common Stock in installments, (c) the guarantee by the Company of
a loan obtained by the optionee from a third party or (d) make such other
reasonable arrangements to facilitate the exercise of options in accordance with
applicable law. The Board shall authorize the terms of any such loan,
installment payment arrangement or guarantee, including the interest rate
(which, in the case of incentive stock options, shall be not less than the
higher of (i) the "prime rate" as from time to time in effect at a commercial
bank of recognized standing, and (ii) the rate of interest from time to time
imputed under Section 483 of the Code) and terms of repayment thereof, and shall
cause the instrument evidencing any such option to be amended, if required, to
provide for any such extension of credit. Loans, installment payment
arrangements and guarantees may be authorized without security, and the maximum
amount of any such loan or guarantee shall be the purchase price of the Common
Stock being acquired, plus related interest payments.
SECTION 4. The Board may permit a person electing to exercise an option to
elect to tender the exercise price of such shares by irrevocably authorizing a
third party to sell shares of Common Stock (or of sufficient portion of the
shares) acquired upon the exercise of such option and remit to the Company a
sufficient portion of the sale proceeds to pay the entire exercise price and any
tax withholding results resulting from such exercise.
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SECTION 5. Each option shall be subject to the requirement that if at any
time the Board shall in its discretion determine that the listing, registration
or qualification of the shares of Common Stock subject to such option upon any
securities exchange or under any state or Federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such option or the issuance
or purchase of shares thereunder, such option may not be exercised in whole or
in part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free from any conditions not reasonably
acceptable to the Board. Unless at the time of exercise of an option and the
issuance of Common Stock so purchased, there shall be in effect as to such
Common Stock a registration statement under the Act, the holder of such option
shall deliver a certification (a) acknowledging that such shares of Common Stock
may be "restricted securities" as defined in Rule 144 promulgated under the Act;
and (b) containing such optionee's agreement that such Common Stock may not be
sold or otherwise disposed of except in compliance with applicable provisions of
the Act. In the event that the Common Stock is then listed on a national
securities exchange, the Company shall use its best efforts to cause the listing
of the shares of Common Stock subject to options upon such exchange.
SECTION 6. The Company may establish appropriate procedures to provide for
payment or withholding of such income or other taxes as may be required by law
to be paid or withheld in connection with the exercise of options or any other
matters under the Plan and to ensure that the Company receives prompt advice
concerning the occurrence of any event which may create, or affect the timing or
amount of, any obligation to pay or withhold any such taxes or which may make
available to the Company any tax deduction resulting from the occurrence of such
event.
ARTICLE X
ADJUSTMENTS
SECTION 1. New option rights may be substituted for the options granted
under the Plan, or the Company's duties as to options outstanding under the Plan
may be assumed by a corporation other than the Company, or by a parent or
subsidiary of the Company or such corporation, in connection with any merger,
consolidation, acquisition, separation, reorganization, liquidation or other
similar corporate transaction in which the Company is involved. Notwithstanding
the foregoing or the provisions of this Article X, in the event such
corporation, or parent or subsidiary of the Company or such corporation, does
not substitute new option rights for, and substantially equivalent to, the
options granted hereunder, or assume the options granted hereunder, the options
granted hereunder shall terminate and thereupon become null and void (i) upon
dissolution or liquidation of the Company, or similar occurrence, (ii) upon any
merger, consolidation, acquisition, separation, reorganization, or similar
occurrence, where the Company will not be a surviving entity or (iii) upon a
transfer of substantially all of the assets of the Company or more than 80% of
the outstanding Common Stock in a single transaction; provided, however, that
each optionee shall have the right immediately prior to or concurrently with
such dissolution, liquidation, merger, consolidation, acquisition, separation,
reorganization or other similar corporate transaction, to exercise any unexpired
option granted hereunder whether or not then exercisable.
SECTION 2. In the event that the Board determines that any dividend or
other distribution (whether in the form of cash, shares, other securities, or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of shares or other securities of the Company, issuance
of warrants or other rights to purchase shares or other securities of the
Company, or other corporate transaction or event affects the shares such that an
adjustment is determined by the Board to be appropriate in order to prevent
dilution or enlargement of the benefits or
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potential benefits intended to be made available under the Plan, then, the Board
shall, in such manner as it may deem equitable, adjust any or all of (i) the
number of shares of Common Stock or other securities of the Company (or number
and kind of other securities or property) with respect to which options may be
granted and any limitations set forth in the Plan, (ii) the number of shares of
Common Stock or other securities of the Company (or number and kind of other
securities or property) subject to outstanding options and (iii) the grant or
exercise or target price with respect to any option or, if deemed appropriate,
make provision for a cash payment to the holder of an outstanding option
including, if necessary, the termination of such an option; provided, in each
case, that with respect to Incentive Stock Options no such adjustment shall be
authorized to the extent that such authority would cause the Plan to violate
Section 422 of the Code. Without limiting the generality of the foregoing, any
such adjustment shall be deemed to have prevented any dilution and enlargement
of an optionee's rights if such optionee receives in any such adjustment rights
which are substantially similar (after taking into account the fact that the
optionee has not paid the applicable exercise price) to the rights the
optionee would have received had he exercised his outstanding options and become
a stockholder of the Company immediately prior to the event giving rise to such
adjustment.
SECTION 3. Adjustments and elections under this Article X shall be made by
the Board whose determination as to what adjustments, if any, shall be made and
the extent thereof shall be final, binding and conclusive. Adjustments required
under this Article X shall also be deemed to increase by a like number the
aggregate number of shares authorized for purchase pursuant to options granted
under the Plan as set forth in Section 2 of Article III hereof.
ARTICLE XI
PRIVILEGES OF STOCK OWNERSHIP
No optionee shall be entitled to the privileges of stock ownership as to
any shares of Common Stock not actually issued and delivered to him or her.
ARTICLE XII
TERMINATION OF SERVICE OR EMPLOYMENT
SECTION 1. In the event that an optionee shall cease his or her
relationship with the Company or a Subsidiary by voluntarily terminating such
relationship without the written consent of the Company or a Subsidiary, or if
the Company or a Subsidiary shall terminate for cause such relationship, unless
otherwise provided in the instrument evidencing such option, the option held by
such optionee shall terminate forthwith.
SECTION 2. If the holder of an option shall voluntarily terminate his or
her relationship with the Company or a Subsidiary with the written consent of
the Company, which written consent expressly sets forth a statement to the
effect that options which are exercisable on the date of such termination shall
remain exercisable, or if the optionee's relationship with the Company or a
Subsidiary shall have terminated by the Company or a Subsidiary for reasons
other than cause, unless otherwise provided in the instrument evidencing such
option, such optionee may exercise his or her option to the extent exercisable
at the time of such termination, at any time prior to the expiration of three
months after such termination or the date of expiration of the option as fixed
at the time of grant, whichever shall first occur. Options granted under the
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Plan to Employees shall not be affected by any change in the position of
employment so long as the holder thereof continues to be an Employee or a
Director.
SECTION 3. Should an optionee die during the existence of the optionee's
relationship with the Company or after the cessation of the optionee's
relationship with the Company, unless otherwise provided in the instrument
evidencing such option, all of the optionee's options shall be terminated,
except that any option, to the extent exercisable by the optionee at the time of
such death, may be exercised within one year after the date of such death but
not later than the expiration of the option solely in accordance with all of the
terms and conditions of the Plan by the optionee's personal representatives or
by the person or persons to whom the optionee's rights under the option shall
pass by will or by the applicable laws of descent and distribution.
ARTICLE XIII
AMENDMENTS TO PLAN
The Board may at any time terminate or from time to time amend, modify or
suspend the Plan; provided, however, that no such amendment or modification
without the approval of the stockholders of the Company shall:
(i) materially increase the benefits accruing to participants
under the Plan;
(ii) materially increase the maximum number (determined as
provided in the Plan) of shares of Common Stock which may be
purchased pursuant to options granted under the Plan; or
(iii) materially modify the requirements as to eligibility for
participation in the Plan.
The amendment or termination of the Plan shall not, without the written consent
of an optionee, adversely affect any rights or obligations under any option
theretofore granted to such optionee under the Plan.
ARTICLE XIV
EFFECTIVE DATE OF PLAN
The Plan shall become effective on January 1, 1999, subject to the
ratification of the Plan by the stockholders of the Company.
ARTICLE XV
DEFINITIONS
For the purposes of this Plan, the following terms shall have the meanings
indicated:
Act: The Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
Code: The Internal Revenue Code of 1986, as amended and the regulations
promulgated thereunder.
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Common Stock: Such term is defined in Article I hereof.
Consultants and Advisers: Such term includes any third party retained or
engaged by the Company or any Subsidiary to provide services to the Company or
such Subsidiary, including any employee of such third party providing such
services.
Director: Such term includes any director of the Company.
Employee: Such term includes any officer as well as any full-time salaried
executive, managerial, professional, administrative or other employee of the
Company or a Subsidiary. Such term also includes an employee on approved leave
of absence provided such employee's right to continue employment with the
Company or a Subsidiary upon expiration of such employee's leave of absence is
guaranteed either by statute or by contract with or by a policy of the Company
or a Subsidiary and any consultant, independent contractor, professional advisor
or other person who is paid by the Company or a Subsidiary for rendering
services or furnishing materials or goods to the Company or a Subsidiary.
Fair Market Value: The fair market value as of any date shall be determined
by the Board after giving consideration to the price of the Common Stock in the
public market and shall be determined otherwise in a manner consistent with the
provisions of the Code.
Incentive Stock Option: An option intended to qualify under Section 422 of
the Code.
1934 Act: The Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
Non-Employee Director: Any director of the Company who is a Non-Employee
Director as that term is defined in Rule 16b-3 promulgated under the 1934 Act
and who also qualifies as an outside director within the meaning of Section
162(m) and the related regulations under the Code, except as otherwise
determined by the Board.
Non-Qualified Stock Option: An option which does not qualify under Section
422 of the Code.
Person: Such term shall have the meaning ascribed to it under the 1934 Act.
Plan: Such term is defined in Article I hereof and includes all amendments
hereof.
Subsidiary: A "Subsidiary Corporation" of the Company as defined in Section
424 of the Code.
Ten Percent Stockholder: Such term is defined in Article IV hereof.
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TIME BROKERAGE AGREEMENT
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THIS TIME BROKERAGE AGREEMENT (the "Agreement") is made as of
this 30th day of December, 1998, by and between BENEDEK BROADCASTING
CORPORATION, a Delaware corporation ("Programmer"), and AK MEDIA GROUP, INC., a
Washington corporation ("Licensee").
WHEREAS, Licensee is the owner, operator and licensee of
television broadcast station KKTV(TV), Channel 11, Colorado Springs, Colorado
(the "Station");
WHEREAS, Licensee and Programmer have entered into as of the date
hereof that certain Exchange Agreement (the "Exchange Agreement") relating to
the sale by Licensee and the purchase by Programmer of all licenses, permits and
other authorizations for the Station (collectively, the "FCC Licenses") issued
by the Federal Communications Commission ("FCC") to Licensee and certain other
assets related to the Station as well as the sale by Programmer and the purchase
by Licensee of the FCC Licenses for KCOY, Santa Maria, California; and
WHEREAS, Licensee holds an affiliation agreement authorizing it
to broadcast programming of the CBS Television Network and various syndication
agreements authorizing it to broadcast entertainment and news programming (the
"Programming Agreements") and also provides locally produced news and public
affairs programming for its community of license (collectively, the "Licensee
Programming");
WHEREAS, Programmer wishes to provide programming for broadcast
on the Station, which may include, without limitation, original programs,
syndicated programs, barter programs, paid-for programs, locally produced
programs and advertising (the "Benedek Programming") and related management
services, and Licensee desires to accept and broadcast the programming supplied
by Programmer on the Station and such services, subject to the terms and
conditions hereof; and
WHEREAS, Programmer and Licensee, simultaneously with the
execution of this Agreement, are entering into a Time Brokerage Agreement with
respect to KCOY (the "KCOY TBA").
NOW, THEREFORE, for and in consideration of the mutual covenants
herein contained, the parties hereto have agreed and do agree as follows:
1. Programming and Transmission Services.
(a) Subject to the provisions of this Agreement, Licensee agrees
to make available to Programmer air time and transmission capabilities for the
broadcast of Benedek Programming on the Station for up to twenty-four (24) hours
per day, seven (7) days a week during periods when
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Licensee is not broadcasting Licensee Programming. Licensee may, in its
discretion, assign any of the Programming Agreements, individually or in the
aggregate, to Programmer during the term of this Agreement. If any Programming
Agreement is assigned from Licensee to Programmer, programming provided under
that Programming Agreement shall be considered to be part of the Benedek
Programming.
(b) Programmer shall assure that no contract or commitment for
Programming arranged by Programmer shall give rise to any liability or
obligation of Licensee; provided that Programmer shall promptly inform Licensee
of each such contract and commitment and of the terms thereof and, if Licensee
shall elect to assume any such contract or commitment, Programmer shall, in the
event that the Exchange Agreement terminates without a Closing, upon the
termination of the term of this Agreement arrange for the immediate assignment
to Licensee of such contract or commitment and for the concurrent consent of
each other party thereto to such assignment.
2. Advertising Sales. Licensee shall timely fulfill all orders
for advertising on the Station applicable to any of the Licensee Programming and
Benedek Programming. In the event any such order calls for the placement of any
advertising on the Station after the termination of the term of this Agreement
without the consummation of the Exchange Agreement, Programmer shall if, and
only if, and to the extent Licensee elects to fulfill such order, cooperate with
Licensee to enable such advertising to be broadcast on the Station in accordance
with the terms of such order and all revenues and accounts receivable relating
to or arising from such orders shall be the sole and exclusive asset of
Licensee.
3. Payments. As consideration for the rights granted hereunder,
Programmer hereby agrees to pay to Licensee in a timely manner the amounts
referred to on Attachment I hereto (the "Fee"), in each case on the dates
specified in said Attachment I. Anything to the contrary contained in this
Agreement notwithstanding, in no event shall Programmer be entitled to delay
payment of, reduce, or set off any claim against, any amount payable by
Programmer under this Agreement, whether by reason of a breach or default by
Licensee or otherwise.
4. Term. The term of this Agreement shall begin on January 1,
1999 (the "Commencement Date"), and shall continue in force from that date for a
period of three (3) months, except that it shall be automatically extended if
the Closing (as defined in the Exchange Agreement) on the sale of the Station by
Licensee has not occurred and the Exchange Agreement has not been terminated,
until the earlier of the occurrence of (i) such Closing or (ii) the termination
of the Exchange Agreement.
5. Benedek Programming. Benedek Programming shall comply with the
Station's Policy Guidelines attached on Exhibit A hereto, as the same may be
reasonably amended by Licensee from time to time, and with the provisions of
this Agreement, and, provided such compliance obligations are satisfied, shall
be entertainment programming of Programmer's own selection, together with
commercial matters, news, public service announcements and other
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programming suitable for broadcast on the Station. All actions or activities of
Programmer under this Agreement, and Benedek Programming shall be in accordance
with: (a) the Communications Act of 1934, as amended; (b) the rules,
requirements and policies of the FCC, including, without limitation, the FCC's
rules on children's television programming, plugola/payola, lotteries and
contests, hoaxes, station identification, minimum operating schedule,
sponsorship identification, political programming and political advertising
rates; (c) all applicable federal, state and local laws, regulations and
policies (collectively, "Applicable Government Regulations"); and (d) generally
accepted quality standards of the television broadcast industry. In the event
that Licensee determines, based on the exercise of Licensee's good faith
reasonable business judgment, that Programmer has failed to comply in any
material respect with any of the standards provided for in this Agreement,
Licensee may suspend or cancel any Benedek Programming not in compliance. In the
event of any such suspension or cancellation, Programmer shall retain the right
to use the Benedek Programming and to authorize the use of such Benedek
Programming in any manner and in any media whatsoever.
6. Preemption. Licensee reserves the right in its discretion, and
without liability, to preempt, delay or delete any of the broadcasts of the
Benedek Programming and to broadcast in substitution such other programming
which, in Licensee's judgment, is of greater local or national importance. In
all such cases (except for those involving breaking news), Licensee shall use
reasonable efforts to provide Programmer with at least twenty-four (24) hours
notice of Licensee's intention to preempt, delay or delete such Programming.
Programmer agrees to cooperate in the airing of Licensee's substitute
programming, including the use of Programmer's personnel and equipment as
reasonably required.
7. Advertising and Programming Revenues. Programmer shall be
entitled to all advertising and promotion-related revenues, and all accounts
receivable, in respect thereof, arising from the sale of advertising time on the
Benedek Programming and the Licensee Programming, or utilized by Programmer and
arising under those Programming Contracts assumed by Licensee pursuant to this
Agreement, and in fact broadcast during the term hereof. Programmer shall be
responsible for payment of all agency commissions and the commissions payable to
any sales representative engaged by Programmer for the purpose of selling
advertising within the Benedek Programming. Licensee shall collect all
advertising and promotion-related revenues on behalf of Programmer and remit
such revenues to Programmer as specified in Attachment I hereto. Licensee and
Programmer each shall have the right, at its own expense, to seek copyright
royalty payments for its own programming. Subject to compliance with applicable
laws, Programmer may sell advertising on the Station in combination with the
sale of advertising on other television or radio stations.
8. Station Facilities. Subject to the terms and conditions set
forth in this Agreement, Licensee hereby agrees to make the facilities of the
Station that are owned or leased by Licensee ("Licensee Station Facilities")
available to Programmer twenty-four (24) hours a day, seven (7) days per week
for operation and broadcast. Licensee shall perform reasonable and customary
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maintenance of all Licensee Station Facilities and equipment and in furtherance
of its obligations to comply with applicable FCC rules, regulations and
policies, and Licensee's obligations set forth in this Paragraph. Any downtime
in the Licensee Station Facilities occasioned by any such maintenance shall not
be deemed to be a default or violation by Licensee.
9. Right of Access. Licensee shall provide Programmer with access
at all times to its owned and leased property used for the Station's operations
to conduct, at Programmer's expense, all activities for which such property is
currently used and permitted to be used. Licensee shall have access at all times
to its equipment and facilities used in conjunction with the production and
broadcast of the Licensee Programming so as to permit Licensee to operate and
control the Station and to broadcast the Benedek Programming and Licensee
Programming as provided herein. Programmer shall have the right, upon Licensee's
express prior written consent, such consent not to be unreasonably withheld, to
install and maintain at the Licensee Station Facilities, at Programmer's
expense, any microwave studio/transmitter relay equipment, telephone lines,
transmitter remote control, monitoring devices or any other equipment necessary
for the proper transmission of the Programming on the Station, and Licensee and
Programmer shall take, at Programmer's expense, all steps reasonably necessary
to prepare and file any applications with the FCC to effectuate such proper
transmission.
10. Force Majeure. Any failure or impairment of the Licensee
Station Facilities or any Station equipment or services or any delay or
interruption in the broadcast of the Benedek Programming, or failure at any time
by Licensee to furnish the Licensee Station Facilities, or any station equipment
or services, in whole or in part, for the broadcast of the Benedek Programming
or otherwise, due to acts of God, strikes, or threats thereof or force majeure,
or due to causes beyond the control of Licensee, shall not constitute a breach
of this Agreement, and Licensee shall not be liable to Programmer.
11. Equipment. The parties agree that Licensee shall retain title
to all of the KKTV Assets (as such term is defined in the Exchange Agreement)
until the Closing of the Exchange Agreement. Programmer shall hold title to any
new equipment or assets purchased or otherwise acquired by Programmer for the
Station during the term of this Agreement; provided that in the event the term
of this Agreement shall end and the Closing under the Exchange Agreement shall
not then have occurred, any equipment or asset obtained as a replacement for any
equipment or assets of Licensee without the express written consent of Licensee
automatically shall become and hereinafter be deemed owned by Licensee, and, in
the case of any such replacement items so consented to, Licensee shall have the
right to purchase the same at the net book value thereof, in each case free and
clear of all Liens (as defined in the Exchange Agreement). Programmer shall
execute and deliver to Licensee all instruments necessary to effectuate the
foregoing.
12. Licensee Control of Station. Notwithstanding anything to the
contrary in this Agreement, Licensee shall have full authority, control and
power over the operation of the Station during the term of this Agreement.
Licensee shall retain control over the policies, programming,
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finances, personnel and operations of the Station, including, without
limitation, the right to accept or reject any Programming or advertisements, and
the right to take any other actions necessary for compliance with Applicable
Government Regulations. Licensee shall be responsible to the Federal
Communications Commission for the Station's compliance with all Applicable
Government Regulations, including but not limited to FCC requirements with
respect to ascertainment of the problems, needs and interests of the community,
public service programming, children's programming, political broadcasting, main
studio staffing, maintenance of public inspection files, and maintenance of
appropriate Emergency Alert System equipment, in all cases without intending to
limit any compensation, reimbursement or other obligations of Programmer under
this Agreement. Programmer shall provide Licensee with all necessary information
with respect to the Benedek Programming that is responsive to the problems,
needs and interests of the community, and shall assist Licensee in all
reasonable respects requested by Licensee in the preparation of information to
enable Licensee to prepare records, reports and logs required by the FCC or
other local, state or federal governmental agencies. All correspondence
(including e-mail) from members of the public concerning the Station's
programming shall be provided to the Licensee.
13. Responsibility for Employees and Expenses. During this term
of this Agreement, Licensee hereby agrees to employ no fewer than two full-time
employees for the Station, one of whom shall be a management level employee,
both of whom shall report to and be accountable solely to Licensee, and who
shall be ultimately responsible for the day-to-day operations of the Station.
Programmer shall not employ or seek to employ any of Licensee's current
employees without Licensee's express written consent. Licensee shall be
responsible for paying the salaries, payroll taxes, health insurance and other
employment related costs for all personnel employed by Licensee with respect to
the Station. Effective the date of this Agreement, Programmer shall employ and
be responsible for all personnel, equipment and facilities used in the
production of the Benedek Programming (including, without limitation,
salespeople, traffic personnel and programming staff), except for those
personnel whom Licensee elects to employ and who shall be covered by the
immediately preceding sentence. All Programmer personnel shall be subject to the
supervision and the direction of Licensee's designated personnel in connection
with the performance of their duties at the Station. Licensee shall be
responsible for all expenses of Licensee related to the operation of the Station
and the Licensee Station Facilities and the Station's equipment. Licensee shall
also be responsible for income taxes relating to Licensee's earnings from this
arrangement. Programmer shall pay promptly when due all copyright fees
attributable to Benedek Programming broadcast on the Station during the term of
this Agreement.
14. Compliance with Law. Programmer agrees that, throughout the
term of this Agreement, Programmer shall comply with all laws and regulations
applicable to the conduct of Programmer's business and activities, including all
Applicable Government Regulations.
15. Payola/Plugola/EEO. Programmer agrees that it shall not
accept, and shall not permit any of its employees to accept, any consideration,
compensation, gift or gratuity of any kind whatsoever, regardless of its value
or form, including, but not limited to, a commission,
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discount, bonus, materials, supplies or other merchandise, services or labor,
whether or not pursuant to written contracts or agreements between Programmer
and merchants or advertisers, unless the payer is identified in the Benedek
Programming as having paid for or furnished such consideration, in accordance
with FCC requirements. Programmer agrees that, on an annual basis, or more
frequently at the request of Licensee, it will execute and provide Licensee with
affidavits regarding payola/plugola compliance in such form and substance as
Licensee shall reasonably require. Programmer shall comply with all equal
employment opportunity regulations and policies (including but not limited to
those of the FCC) to the extent such regulations and policies apply, or may in
the future be deemed to apply, to the employment practices of Programmer's
personnel assigned to duties in connection with the operation of the Station;
and Programmer shall timely provide Licensee with all information that may be
necessary or appropriate to comply with any reporting obligations of the FCC
pursuant to such regulations or policies.
16. Political Advertising. Licensee shall retain full
responsibility for overseeing compliance with the FCC's political programming
policies and regulations, including setting political advertising rates for the
Station and determining which legally qualified political candidates and races
shall have reasonable access to political advertising on the Station. At least
90 days prior to the beginning of any primary or general election period,
Licensee will set the rates to be charged legally qualified political candidates
to ensure that the rate conforms with applicable election law and policies.
Programmer agrees to provide Licensee with access to its documentation
concerning the pricing of advertising sold on the Station as is necessary to
permit Licensee to ascertain that the political rate is appropriate. Within 24
hours of any request to purchase time on the Station on behalf of a legally
qualified candidate, Programmer will report the request and its disposition to
Licensee and obtain Licensee's approval to such disposition, which approval
shall not be unreasonably delayed or conditioned. Licensee shall be responsible
for placing appropriate records in the Station's political file.
17. Indemnification. Programmer hereby agrees to indemnify and
hold harmless each entity comprising Licensee and all members and partners
thereof, and all members, partners, shareholders, directors, officers, agents,
employees, successors, and assigns of any of the foregoing against all
liability, damages, cost and expense (including without limitation reasonable
attorney's fees) suffered or incurred by any of them for, or arising out of, or
by reason of (a) libel, slander, illegal competition or trade practice,
infringement of trade marks, trade names, or program titles, violation of rights
of privacy, infringement of copyrights and proprietary rights and other
liabilities resulting from or relating to the broadcast of any Benedek
Programming, and (b) all other matters arising out of or related to Programmer's
activities involving the Station or use of any of the Licensee Station
Facilities and/or any equipment or assets of the Station. Licensee hereby agrees
to indemnify and hold harmless Programmer and its directors, officers, agents,
employees, successors, and assigns against all liability arising out of
liabilities of the type described in clause (a) of the first sentence of this
Paragraph that arise as a result of Licensee's alteration of any Benedek
Programming prior to broadcast by Licensee which alteration is not consented to
by Programmer.
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Programmer's and Licensee's obligations under this Paragraph 15 shall survive
any termination of this Agreement until the expiration of all applicable
statutes of limitation.
18. Events of Default; Cure Periods and Remedies. (a) The
following shall, after the expiration of the "applicable cure periods,"
constitute events of default under the Agreement ("Events of Default"):
(1) Programmer's failure to timely pay any consideration
provided for in this Agreement or any amount then due under this
Agreement or the Exchange Agreement;
(2) The default by any party hereto in the material observance
or performance of any material covenant or agreement contained herein;
provided, however, that any failure of Licensee to comply with
Applicable Government Regulations shall not be deemed to be a default of
a material covenant or agreement by Licensee if Programmer has failed to
provide information or cooperation to Licensee concerning Benedek
Programming that could have allowed Licensee to avoid such
noncompliance, or any other act or omission, or any instruction or
request to station personnel, by Programmer is a basis or cause of such
failure to comply with Applicable Government Regulations;
(3) Any party (1) shall make a general assignment for the
benefit of creditors, or (2) files or has filed against it a petition
for bankruptcy, for reorganization, or for the appointment of a
receiver, trustee or similar creditors' representative for the property
or assets of such party under any federal or state insolvency law,
which, if filed against such party, has not been dismissed or discharged
within sixty (60) days thereof;
(4) The default by any party hereto (after the expiration of
all applicable cure periods) in the material observance or performance
of any material covenant or agreement contained in the Exchange
Agreement which entitles the other party to terminate the Exchange
Agreement.
(b) Cure Periods. An Event of Default under 17(a) above shall not
be deemed to have occurred until thirty (30) business days after the
non-defaulting party has provided the defaulting party with written notice
specifying the event or events that if not cured would constitute an Event of
Default. The Event of Default which is subject to a cure period hereunder shall
not be deemed to have occurred if actions necessary and sufficient to cure are
taken during the relevant cure period.
(c) Right of Termination. In addition to other remedies available
at law or equity, but subject to the requirements and limitations set forth
herein, this Agreement may be terminated as set forth below by either Licensee
or Programmer by written notice to the other upon the occurrence of the
following:
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(1) this Agreement is declared invalid or illegal in whole or
substantial part by an order or decree of an administrative agency or
court of competent jurisdiction and such order or decree has become
final and no longer subject to further administrative or judicial
review;
(2) an Event of Default by the other party has occurred and the
party seeking to terminate is not then in material default or breach
hereof;
(3) the termination of the Exchange Agreement;
(4) the termination of the KCOY TBA;
(5) the mutual consent of all parties; or
(6) there has been a material change in FCC rules, policies or
precedent that would cause this Agreement to be in violation thereof and
such change is in effect and not the subject of a timely appeal or
further administrative review, provided that in such event the parties
shall first negotiate in good faith and attempt to agree on an amendment
to this Agreement that will provide the parties with a valid, binding
and enforceable agreement that conforms to the new FCC rules, policies
or precedent.
(d) Termination Requirements and Procedures. Unless otherwise
mutually agreed by Programmer and Licensee, any termination of this Agreement
shall, at the election of Licensee, not become effective until the effective
date specified by Licensee which shall not be more than ninety (90) days after
notice of termination is provided by Programmer or Licensee.
(e) Liabilities Upon Termination. Upon termination of this
Agreement for any reason, Programmer shall be responsible for all liabilities,
debts and obligations of Programmer accrued from the purchase of air time and/or
transmission services and all Benedek Programming, including, without
limitation, accounts payable, barter agreements and unaired advertisements, but
not for Licensee's federal, state, and local tax liabilities associated with
Programmer's payments to Licensee as provided for herein. With respect to
Programmer's obligations to broadcast programming, advertisements and other
material over the Station after termination hereunder, Licensee may propose
compensation to Licensee for meeting these obligations, but Licensee shall be
under no duty to propose such compensation or to perform such obligations and
Programmer shall accept any such proposal by Licensee which is reasonable and
equitable under the circumstances and cooperate with Licensee to effectuate such
performance. In no event shall Licensee be under any obligation to make
available to Programmer any broadcast time or broadcast transmission facilities
and all amounts accrued or payable to Licensee up to the date of termination
which have not been paid shall immediately become due and payable.
(f) Survival. Anything to the contrary contained in this
Agreement notwithstanding, all obligations under this Agreement accrued or
arising prior to or by reason of the termination of
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this Agreement shall survive such termination and the following provisions shall
also survive any such termination: Paragraphs 1(b), (c), (d) and (e) (with
respect to periods prior to the effective date of such termination), 2, 6, 7,
10, 12, 15, 16, 19.3 and 20.
19. Responsive Programming, Programmer and Licensee mutually
acknowledge their interest in ensuring that the Station serve the needs and
interests of the residents of their communities of license, and the surrounding
service areas and agree to cooperate in doing so. Licensee may request, and
Programmer shall provide, information concerning such of Benedek Programming
that is responsive to community issues so as to assist Licensee in the
satisfaction of its public service programming obligations.
20. Time Brokerage Challenge. If this Agreement is challenged in
whole or in part at the FCC or in another administrative or judicial forum,
whether or not in connection with the Station's license renewal application,
counsel for Licensee and counsel for Programmer shall, at their joint expense,
jointly defend the Agreement and the parties' performance hereunder throughout
all such proceedings. If portions of this Agreement do not receive the approval
of the FCC's staff, or the Agreement receives such approval with conditions that
are adverse to Licensee or Programmer, then the parties shall endeavor in good
faith to reform the Agreement as necessary to satisfy the FCC staff's concerns,
while preserving the respective benefits to and without increasing the
respective obligations of the parties, or seek reversal of the staff decision
and approval from the full Commission on appeal.
21. Programmer's Representations, Warranties and Covenants.
Programmer makes the following additional representations, warranties and
covenants:
(a) Compliance with Applicable Law. Programmer's performance of
its obligations under this Agreement and its furnishing of Benedek
Programming shall be in compliance with, and shall not violate or cause
Licensee to violate any applicable laws or any applicable rules,
regulations, or orders of the FCC or any other governmental agency.
(b) Handling of Complaints. Programmer shall promptly advise
Licensee of any public or FCC complaint or inquiry that Programmer
receives concerning the Benedek Programming and shall cooperate with
Licensee and take all actions as may be reasonably requested by Licensee
in responding to any such complaint or inquiry.
(c) Copyright and Licensing. Programmer shall not broadcast on
the Station any material in violation of the Copyright Act.
(d) Insurance. Programmer shall maintain throughout the term of
this Agreement general liability insurance and errors and omissions
insurance covering broadcasts made on the Station, and shall name
Licensee as an additional insured on such insurance policies.
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(e) Information for FCC Reports. Upon request by Licensee,
Programmer shall provide in a timely manner any such information in its
possession that shall enable Licensee to prepare, file or maintain the
records and reports required by the FCC.
22. Miscellaneous.
(a) Certain Limitations. Anything to the contrary contained in
the Agreement notwithstanding:
(1) in the event the Closing under the Exchange Agreement shall
occur, Licensee shall have no liability or obligation whatsoever under
this Agreement, whether for matters arising prior to such Closing or
otherwise.
(2) Programmer's sole remedy for any breach or default by
Licensee under this Agreement shall be such rights as Programmer may
have under the Exchange Agreement upon the termination thereof.
(3) Nothing herein, express or implied, is intended or shall be
construed to confer upon or give to any person or entity, other than the
parties hereto, any rights, remedies or other benefits under or by
reason of this Agreement.
(b) Amendment; Waiver. No modification, amendment or waiver of
any provision of this Agreement shall in any event be effected unless the same
shall be in writing and signed by the party adversely affected by the waiver or
modification, and then such waiver and consent shall be effective only in the
specific instance and for the purpose for which given.
(c) No Waiver; Remedies Cumulative. No failure or delay on the
part of Licensee or Programmer in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. Except as otherwise provided in this
Agreement or in the Exchange Agreement, the rights and remedies of Licensee and
Programmer herein provided are cumulative and are not exclusive of any right or
remedy which Licensee or Programmer may otherwise have.
(d) Construction. This Agreement shall be construed in accordance
with the laws of the State of California, excluding the choice of law rules
thereof.
(e) Headings. The headings contained in this Agreement are
included for convenience only and no such heading shall in any way alter the
meaning of any provision.
(f) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and permitted assigns. This Agreement shall
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be assignable only to the same extent as and solely in connection with any
assignment of the Exchange Agreement permitted pursuant to the terms thereof.
(g) Notices. Any notice required hereunder shall be in writing
and any payment, notice or other communication shall be deemed given when
delivered personally, or mailed by certified mail or Federal Express, postage
prepaid, with return receipt requested:
If to Licensee:
AK Media Group, Inc.
1301 Fifth Avenue, Suite 4000
Seattle, WA 98101
Attn: Mr. Denis M. Curley
With a copy to:
Rubin, Winston, Diercks, Harris & Cooke, LLP
1333 New Hampshire Avenue, N.W., Suite 1000
Washington, D.C. 20036
Attn: James L. Winston, Esq.
If to Programmer:
Benedek Broadcasting Corporation
100 Park Avenue
Rockford, Illinois 61101
Attn: President
With a copy to:
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Attn: Paul S. Goodman, Esq.
(h) Entire Agreement. This Agreement, together with the Exchange
Agreement and the Schedules, Attachments and Exhibits hereto and thereto, embody
the entire agreement between the parties and there are no other agreements,
representations, warranties, or understandings, oral or written, between them
with respect to the subject matter hereof.
(i) Severability. In the event that any of the provisions
contained in this Agreement is held to be invalid, illegal or unenforceable,
this Agreement shall be construed as if
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such invalid, illegal or unenforceable provisions had not been contained herein,
subject to the termination rights contained in Paragraph 16 hereof.
(j) Signatures. This Agreement may be signed in one or more
counterparts, each of which shall be deemed a duplicate original, binding on the
parties hereto notwithstanding that the parties are not signatory to the
original or the same counterpart. This Agreement shall be binding and effective
as of the date on which the executed counterparts are exchanged by the parties.
The parties agree to be bound upon the exchange of signature pages transmitted
by facsimile; provided, however, upon execution of this Agreement, Programmer
agrees to send to Licensee and Licensee agrees to send to Programmer, the
original signature pages via overnight delivery.
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IN WITNESS WHEREOF, the parties have executed this Time Brokerage
Agreement as of the date first above written.
BENEDEK BROADCASTING CORPORATION
By: /s/ K. James Yager
------------------------------
Name: K. James Yager
Title: President
AK MEDIA GROUP, INC.
By: /s/ Denis Curley
-------------------------------
Name: Denis Curley
Title: Secretary/Treasurer
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TIME BROKERAGE AGREEMENT
ATTACHMENT I
1. Programmer shall pay to Licensee during each month of the term of
this Agreement an amount equal to one-twelfth of the Station's actual 1998
broadcast cash flow (as such term is commonly understood in the broadcasting
industry) (the "Fixed Fee Amount"), plus the following:
a. The amount of all salaries, commissions and other
compensation, payroll, taxes, health insurance and other fringe benefits
and other employment-related costs and expenses for or with respect to
all employees of the Station in respect of and/or allocable to the term
of this Agreement (the "Employment Related Amount"); and
b. An amount equal to all costs and expenses incurred by
Licensee in connection with operating the Station (including, without
limitation, lease payments, utilities, taxes, programming fees, sales
representatives' commissions, Programming Agreement charges and all
other fees and expenses) in respect of and/or allocable to the term of
this Agreement.
2. The fees, costs and expenses referred to above shall be termed,
collectively, the "Time Brokerage Fee." The Fixed Fee Amount for each calendar
month during the term of this Agreement shall be paid within 10 days after the
end of each such month. The Employment Related Amount for each calendar month
for each calendar month during the term of this Agreement shall be paid in
arrears within 10 days after the end of each such month. Programmer shall pay
all other amounts payable by Programmer as contemplated by this Attachment I
within 10 days of invoicing by Licensee therefor.
3. Licensee shall collect all accounts receivable relating to the
Station and the KKTV Assets (as such term is defined in the Exchange Agreement)
and shall be responsible for the payment of all costs and expenses relating to
the ownership and operation of the Station and the KKTV Assets, in each case,
for the period through December 31, 1998. All such accounts receivable arising
out of operation of the Station and the KKTV Assets prior to 12:01 a.m. Pacific
time on the Commencement Date (the "Licensee's Term") shall belong to the
Licensee. All such accounts receivables arising out of operation of the Station
and the KKTV Assets on or after 12:01 a.m. Pacific time on the Commencement Date
through the expiration of this Agreement (the "TBA Term") shall belong to the
Programmer. Licensee acknowledges that Programmer has granted a security
interest in and lien upon all of its accounts receivables, including the
accounts receivables arising out of the operation of KKTV on or after the
Commencement Date, to Bankers Trust Company, as agent for lenders to Programmer
under an Amended and Restated Credit Agreement dated as of December 17, 1997.
All costs and expenses relating to the operation of the Station and the KKTV
Assets during the Licensee's Term shall be borne by Licensee. All costs and
expenses relating to the operation of the Station and the KKTV Assets during the
TBA Term shall be borne by Programmer. Accounts receivable, costs and expenses
arising from contracts or services for
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periods covering both the Licensee's Term and the TBA Term shall be prorated
according to each term. Such prorations shall include, without limitation, all
ad valorem, real estate and other property taxes, business and license fees,
lease payments, rents, wages and salaries of employees (including accruals for
bonuses, commissions, and vacation pay), workers compensation premiums, utility
expenses, water and sewer use charges, time sales agreements, pre-paid fees and
expenses to the extent Programmer has received a benefit thereof, and all other
income and expenses attributable to the operation of the Station. Programmer
acknowledges, however, that the consideration for the Station includes payment
for the contracts and commitments of Licensee relating to motion pictures and
other programming and for barter receivables arising in connection with
trade-out agreements and that no further payment to Licensee or proration shall
be due in respect thereof, except that Licensee shall be responsible for all
payments relating to such contracts due pursuant to the contracts therefor prior
to the Commencement Date. Within 15 days after the end of each month after the
Closing Date (as such term is defined in the Exchange Agreement), Licensee will
provide Programmer with a written report on account receivables collections made
and costs and expenses paid for such month. On the Closing Date, Licensee and
Programmer shall settle any amounts owed to the other.
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TIME BROKERAGE AGREEMENT
EXHIBIT A
BROADCAST STATION PROGRAMMING POLICY STATEMENT
The following sets forth the policies generally applicable to the presentation
of programming and advertising over Television Station KKTV(TV), Colorado
Springs, Colorado. All programming and advertising broadcast by the Station must
conform to these policies and to the provisions of the Communications Act of
1934, as amended (the "Act"), and the Rules and Regulations of the Federal
Communications Commission ("FCC").
STATION IDENTIFICATION
The Station must broadcast a Station identification announcement once an hour as
close to the hour as feasible in a natural break in the programming. The
announcement must include (1) the Station's call letters; followed immediately
by (2) the Station's city of license.
BROADCAST OF TELEPHONE CONVERSATIONS
Before recording a telephone conversation for broadcast or broadcasting such a
conversation simultaneously with its occurrence, any party to the call must be
informed that the call will be broadcast or will be recorded for later
broadcast, and the party's consent to such broadcast must be obtained. This
requirement does not apply to calls initiated by the other party which are made
in a context in which it is customary for the Station to broadcast telephone
calls.
SPONSORSHIP IDENTIFICATION
When money, service, or other valuable consideration is either directly or
indirectly paid or promised as part of an arrangement to transmit any
programming, the Station at the time of broadcast shall announce (1) that the
matter is sponsored, either whole or in part; and (2) by whom or on whose behalf
the matter is sponsored. Products or services furnished to the Station in
consideration for an identification of any person, product, service, trademark
or brand name shall be identified in this manner.
In the case of any political or controversial issue broadcast for which any
material or service is furnished as an inducement for its transmission, an
announcement shall be made at the beginning and conclusion of the broadcast
stating (1) the material or service that has been furnished; and (2) the
person(s) or association(s) on whose behalf the programming is transmitted.
However, if the broadcast is 5 minutes duration or less, the required
announcement need only be made either at its beginning or end.
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Prior to any sponsored broadcast involving political matters or controversial
issues, the Station shall obtain a list of the chief executive officers, members
of the executive committee or board of directors of the sponsoring organization
and shall place this list in the Station's public inspection file.
The station, its personnel, or its programmers shall not accept or agree to
accept from any person any money, service, or other valuable consideration for
the broadcast of any matter unless such fact is disclosed to the Station so that
all required Station identification announcements can be made. All persons
responsible for Station programming must, from time to time, execute such
documents as may be required by Station management to confirm their
understanding of and compliance with the FCC's sponsorship identification
requirements.
REBROADCASTS
The Station shall not rebroadcast the signal of any other broadcast Station
without first obtaining such Station's prior written consent to such
rebroadcast.
FAIRNESS
Station shall seek to afford coverage to contrasting viewpoints concerning
controversial issues of public importance.
PERSONAL ATTACKS
The Station shall not air attacks upon the honesty, character, integrity or like
personal qualities of any identified person or group. If such an attack should
nonetheless occur during the presentation of view on a controversial issue of
public importance, those responsible for programming shall submit a tape or
transcript of the broadcast to Station management and to the person attacked
within 48 hours, and shall offer the person attacked a reasonable opportunity to
respond.
POLITICAL EDITORIALS
Unless specifically authorized by Station management, the Station shall not air
any editorial which either endorses or opposes a legally qualified candidate for
public office.
POLITICAL BROADCASTING
All "uses" of the Station by legally qualified candidates for elective office
shall be in accordance with the Act and the FCC's Rules and policies, including
without limitation, equal opportunities requirements, reasonable access
requirements, lowest unit charge requirements and similar rules and regulations.
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OBSCENITY AND INDECENCY
The Station shall not broadcast any obscene material. Material is deemed to be
obscene if the average person, applying contemporary community standards in the
local community, would find that the material, taken as a whole, appeals to the
prurient interest; depicts or describes in a patently offensive way sexual
conduct specifically defined by applicable state law; and taken as a whole,
lacks serious literary artistic, political or scientific value.
The Station shall not broadcast any indecent material outside of the periods of
time prescribed by the Commission. Material is deemed to be indecent if it
includes language or material that, in context, depicts or describes, in terms
patently offensive as measured by contemporary community standards for the
broadcast medium, sexual or excretory activities or organs.
BILLING
No entity which sells advertising for airing on the Station shall knowingly
issue any bill, invoice or other document which contains false information
concerning the amount charged or the broadcast of advertising which is the
subject of the bill or invoice. No entity which sells advertising for airing on
the Station shall misrepresent the nature or content of aired advertising, nor
the quantity, time of day, or day on which such advertising was broadcast.
CONTESTS
Any contests conducted on the Station shall be conducted substantially as
announced or advertised. Advertisements or announcements concerning such
contests shall fully and accurately disclose the contest's material terms. No
contest description shall be false, misleading or deceptive with respect to any
material term.
HOAXES
The Station shall not knowingly broadcast false information concerning a crime
or catastrophe.
EMERGENCY INFORMATION
Any emergency information which is broadcast by the Station shall be transmitted
both aurally and visually or only visually.
LOTTERY
The Station shall not advertise or broadcast any information concerning any
lottery (except any state lottery). The Station may advertise and provide
information about lotteries conducted by non-profit groups, governmental
entities and in certain situations, by commercial organizations, if and only if
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there is no state or local restriction or ban on such advertising or information
and the lottery is legal under state or local law. Any and all lottery
advertising must first be approved by Station management.
ADVERTISING
The Station shall comply with all federal, state and local laws concerning
advertising, including without limitation, all laws concerning misleading
advertising, and the advertising of alcoholic beverages.
PROGRAMMING PROHIBITIONS
Knowing broadcast of the following types of programs and announcements is
prohibited:
False Claims. False or unwarranted claims for any product or service.
Unfair Imitation. Infringement of another advertiser's rights through
plagiarism or unfair imitation of either program idea or copy, or any
other unfair competition.
Commercial Disparagement. Any unfair disparagement of competitors or
competitive goods.
Profanity. Any programs or announcements that are slanderous, obscene,
profane, vulgar, repulsive or offensive, as evaluated by Station
management.
Violence. Any programs which are excessively violent.
Unauthenticated Testimonials. Any testimonials which cannot be
authenticated.
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Exhibit 10.30
TIME BROKERAGE AGREEMENT
THIS TIME BROKERAGE AGREEMENT (the "Agreement") is made as of
this 30th day of December, 1998, by and between BENEDEK BROADCASTING
CORPORATION, a Delaware corporation ("BBC"), BENEDEK LICENSE CORPORATION, a
Delaware corporation (collectively with BBC, "Licensee"), and AK MEDIA GROUP,
INC., a Washington corporation ("Programmer").
WHEREAS, Licensee is the owner, operator and licensee of
television broadcast station KCOY(TV), Channel 12, Santa Maria, California (the
"Station");
WHEREAS, Licensee and Programmer have entered into as of the date
hereof that certain Exchange Agreement (the "Exchange Agreement") relating to
the sale by Licensee and the purchase by Programmer of all licenses, permits and
other authorizations for the Station (collectively, the "FCC Licenses") issued
by the Federal Communications Commission ("FCC") to Licensee and certain other
assets related to the Station as well as the sale by Programmer and the purchase
by Licensee of the FCC Licenses for KKTV, Colorado Springs, Colorado; and
WHEREAS, Licensee holds an affiliation agreement authorizing it
to broadcast programming of the CBS Television Network and various syndication
agreements authorizing it to broadcast entertainment and news programming (the
"Programming Agreements") and also provides locally produced news and public
affairs programming for its community of license (collectively, the "Licensee
Programming");
WHEREAS, Programmer wishes to provide programming for broadcast
on the Station, which may include, without limitation, original programs,
syndicated programs, barter programs, paid-for programs, locally produced
programs and advertising (the "AK Programming") and related management services,
and Licensee desires to accept and broadcast the programming supplied by
Programmer on the Station and such services, subject to the terms and conditions
hereof; and
WHEREAS, Programmer and Licensee, simultaneously with the
execution of this Agreement, are entering into a Time Brokerage Agreement with
respect to KKTV (the "KKTV TBA").
NOW, THEREFORE, for and in consideration of the mutual covenants
herein contained, the parties hereto have agreed and do agree as follows:
1. Programming and Transmission Services.
(a) Subject to the provisions of this Agreement, Licensee agrees
to make available to Programmer air time and transmission capabilities for the
broadcast of AK Programming on the Station for up to twenty-four (24) hours per
day, seven (7) days a week during periods when Licensee is not broadcasting
Licensee Programming. Licensee may, in its discretion, assign any of the
Programming Agreements, individually or in the aggregate, to Programmer during
the term of
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this Agreement. If any Programming Agreement is assigned from Licensee to
Programmer, programming provided under that Programming Agreement shall be
considered to be part of the AK Programming.
(b) Programmer shall assure that no contract or commitment for
Programming arranged by Programmer shall give rise to any liability or
obligation of Licensee; provided that Programmer shall promptly inform Licensee
of each such contract and commitment and of the terms thereof and, if BBC shall
elect to assume any such contract or commitment, Programmer shall, in the event
that the Exchange Agreement terminates without a Closing, upon the termination
of the term of this Agreement arrange for the immediate assignment to BBC of
such contract or commitment and for the concurrent consent of each other party
thereto to such assignment.
2. Advertising Sales. Licensee shall timely fulfill all orders
for advertising on the Station applicable to any of the Licensee Programming and
AK Programming. In the event any such order calls for the placement of any
advertising on the Station after the termination of the term of this Agreement
without the consummation of the Exchange Agreement, Programmer shall if, and
only if, and to the extent BBC elects to fulfill such order, cooperate with
Licensee to enable such advertising to be broadcast on the Station in accordance
with the terms of such order and all revenues and accounts receivable relating
to or arising from such orders shall be the sole and exclusive asset of BBC.
3. Payments. As consideration for the rights granted hereunder,
Programmer hereby agrees to pay to BBC in a timely manner the amounts referred
to on Attachment I hereto (the "Fee"), in each case on the dates specified in
said Attachment I. Anything to the contrary contained in this Agreement
notwithstanding, in no event shall Programmer be entitled to delay payment of,
reduce, or set off any claim against, any amount payable by Programmer under
this Agreement, whether by reason of a breach or default by Licensee or
otherwise.
4. Term. The term of this Agreement shall begin on January 1,
1999 (the "Commencement Date"), and shall continue in force from that date for a
period of three (3) months, except that it shall be automatically extended if
the Closing (as defined in the Exchange Agreement) on the sale of the Station by
Licensee has not occurred and the Exchange Agreement has not been terminated,
until the earlier of the occurrence of (i) such Closing or (ii) the termination
of the Exchange Agreement.
5. AK Programming. AK Programming shall comply with the Station's
Policy Guidelines attached on Exhibit A hereto, as the same may be reasonably
amended by Licensee from time to time, and with the provisions of this
Agreement, and, provided such compliance obligations are satisfied, shall be
entertainment programming of Programmer's own selection, together with
commercial matters, news, public service announcements and other programming
suitable for broadcast on the Station. All actions or activities of Programmer
under this Agreement, and AK Programming shall be in accordance with: (a) the
Communications Act of 1934, as amended; (b) the rules, requirements and policies
of the FCC, including, without limitation, the FCC's rules on
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children's television programming, plugola/payola, lotteries and contests,
hoaxes, station identification, minimum operating schedule, sponsorship
identification, political programming and political advertising rates; (c) all
applicable federal, state and local laws, regulations and policies
(collectively, "Applicable Government Regulations"); and (d) generally accepted
quality standards of the television broadcast industry. In the event that
Licensee determines, based on the exercise of Licensee's good faith reasonable
business judgment, that Programmer has failed to comply in any material respect
with any of the standards provided for in this Agreement, Licensee may suspend
or cancel any AK Programming not in compliance. In the event of any such
suspension or cancellation, Programmer shall retain the right to use the AK
Programming and to authorize the use of such AK Programming in any manner and in
any media whatsoever.
6. Preemption. Licensee reserves the right in its discretion, and
without liability, to preempt, delay or delete any of the broadcasts of the AK
Programming and to broadcast in substitution such other programming which, in
Licensee's judgment, is of greater local or national importance. In all such
cases (except for those involving breaking news), Licensee shall use reasonable
efforts to provide Programmer with at least twenty-four (24) hours notice of
Licensee's intention to preempt, delay or delete such Programming. Programmer
agrees to cooperate in the airing of Licensee's substitute programming,
including the use of Programmer's personnel and equipment as reasonably
required.
7. Advertising and Programming Revenues. Programmer shall be
entitled to all advertising and promotion-related revenues, and all accounts
receivable, in respect thereof, arising from the sale of advertising time on the
AK Programming and the Licensee Programming, or utilized by Programmer and
arising under those Programming Contracts assumed by Licensee pursuant to this
Agreement, and in fact broadcast during the term hereof. Programmer shall be
responsible for payment of all agency commissions and the commissions payable to
any sales representative engaged by Programmer for the purpose of selling
advertising within the AK Programming. Licensee shall collect all advertising
and promotion-related revenues on behalf of Programmer and remit such revenues
to Programmer as specified in Attachment I hereto. Licensee and Programmer each
shall have the right, at its own expense, to seek copyright royalty payments for
its own programming. Subject to compliance with applicable laws, Programmer may
sell advertising on the Station in combination with the sale of advertising on
other television or radio stations.
8. Station Facilities. Subject to the terms and conditions set
forth in this Agreement, Licensee hereby agrees to make the facilities of the
Station that are owned or leased by Licensee ("Licensee Station Facilities")
available to Programmer twenty-four (24) hours a day, seven (7) days per week
for operation and broadcast. Licensee shall perform reasonable and customary
maintenance of all Licensee Station Facilities and equipment and in furtherance
of its obligations to comply with applicable FCC rules, regulations and
policies, and Licensee's obligations set forth in this Paragraph. Any downtime
in the Licensee Station Facilities occasioned by any such maintenance shall not
be deemed to be a default or violation by Licensee.
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9. Right of Access. Licensee shall provide Programmer with access
at all times to its owned and leased property used for the Station's operations
to conduct, at Programmer's expense, all activities for which such property is
currently used and permitted to be used. Licensee shall have access at all times
to its equipment and facilities used in conjunction with the production and
broadcast of the Licensee Programming so as to permit Licensee to operate and
control the Station and to broadcast the AK Programming and Licensee Programming
as provided herein. Programmer shall have the right, upon Licensee's express
prior written consent, such consent not to be unreasonably withheld, to install
and maintain at the Licensee Station Facilities, at Programmer's expense, any
microwave studio/transmitter relay equipment, telephone lines, transmitter
remote control, monitoring devices or any other equipment necessary for the
proper transmission of the Programming on the Station, and Licensee and
Programmer shall take, at Programmer's expense, all steps reasonably necessary
to prepare and file any applications with the FCC to effectuate such proper
transmission.
10. Force Majeure. Any failure or impairment of the Licensee
Station Facilities or any Station equipment or services or any delay or
interruption in the broadcast of the AK Programming, or failure at any time by
Licensee to furnish the Licensee Station Facilities, or any station equipment or
services, in whole or in part, for the broadcast of the AK Programming or
otherwise, due to acts of God, strikes, or threats thereof or force majeure, or
due to causes beyond the control of Licensee, shall not constitute a breach of
this Agreement, and Licensee shall not be liable to Programmer.
11. Equipment. The parties agree that Licensee shall retain title
to all of the KCOY Assets (as such term is defined in the Exchange Agreement)
until the Closing of the Exchange Agreement. Programmer shall hold title to any
new equipment or assets purchased or otherwise acquired by Programmer for the
Station during the term of this Agreement; provided that in the event the term
of this Agreement shall end and the Closing under the Exchange Agreement shall
not then have occurred, any equipment or asset obtained as a replacement for any
equipment or assets of Licensee without the express written consent of BBC
automatically shall become and hereinafter be deemed owned by BBC, and, in the
case of any such replacement items so consented to, BBC shall have the right to
purchase the same at the net book value thereof, in each case free and clear of
all Liens (as defined in the Exchange Agreement). Programmer shall execute and
deliver to BBC all instruments necessary to effectuate the foregoing.
12. Licensee Control of Station. Notwithstanding anything to the
contrary in this Agreement, Licensee shall have full authority, control and
power over the operation of the Station during the term of this Agreement.
Licensee shall retain control over the policies, programming, finances,
personnel and operations of the Station, including, without limitation, the
right to accept or reject any Programming or advertisements, and the right to
take any other actions necessary for compliance with Applicable Government
Regulations. Licensee shall be responsible to the Federal Communications
Commission for the Station's compliance with all Applicable Government
Regulations, including but not limited to FCC requirements with respect to
ascertainment of the problems, needs and interests of the community, public
service programming, children's
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programming, political broadcasting, main studio staffing, maintenance of public
inspection files, and maintenance of appropriate Emergency Alert System
equipment, in all cases without intending to limit any compensation,
reimbursement or other obligations of Programmer under this Agreement.
Programmer shall provide Licensee with all necessary information with respect to
the AK Programming that is responsive to the problems, needs and interests of
the community, and shall assist Licensee in all reasonable respects requested by
Licensee in the preparation of information to enable Licensee to prepare
records, reports and logs required by the FCC or other local, state or federal
governmental agencies. All correspondence (including e-mail) from members of the
public concerning the Station's programming shall be provided to the Licensee.
13. Responsibility for Employees and Expenses. During this term
of this Agreement, BBC hereby agrees to employ no fewer than two full-time
employees for the Station, one of whom shall be a management level employee,
both of whom shall report to and be accountable solely to Licensee, and who
shall be ultimately responsible for the day-to-day operations of the Station.
Programmer shall not employ or seek to employ any of BBC's current employees
without BBC's express written consent. BBC shall be responsible for paying the
salaries, payroll taxes, health insurance and other employment related costs for
all personnel employed by BBC with respect to the Station. Effective the date of
this Agreement, Programmer shall employ and be responsible for all personnel,
equipment and facilities used in the production of the AK Programming
(including, without limitation, salespeople, traffic personnel and programming
staff), except for those personnel whom BBC elects to employ and who shall be
covered by the immediately preceding sentence. All Programmer personnel shall be
subject to the supervision and the direction of Licensee's designated personnel
in connection with the performance of their duties at the Station. BBC shall be
responsible for all expenses of Licensee related to the operation of the Station
and the Licensee Station Facilities and the Station's equipment. Licensee shall
also be responsible for income taxes relating to Licensee's earnings from this
arrangement. Programmer shall pay promptly when due all copyright fees
attributable to AK Programming broadcast on the Station during the term of this
Agreement.
14. Compliance with Law. Programmer agrees that, throughout the
term of this Agreement, Programmer shall comply with all laws and regulations
applicable to the conduct of Programmer's business and activities, including all
Applicable Government Regulations.
15. Payola/Plugola/EEO. Programmer agrees that it shall not
accept, and shall not permit any of its employees to accept, any consideration,
compensation, gift or gratuity of any kind whatsoever, regardless of its value
or form, including, but not limited to, a commission, discount, bonus,
materials, supplies or other merchandise, services or labor, whether or not
pursuant to written contracts or agreements between Programmer and merchants or
advertisers, unless the payer is identified in the AK Programming as having paid
for or furnished such consideration, in accordance with FCC requirements.
Programmer agrees that, on an annual basis, or more frequently at the request of
Licensee, it will execute and provide Licensee with affidavits regarding
payola/plugola compliance in such form and substance as Licensee shall
reasonably require. Programmer shall comply with all equal employment
opportunity regulations and policies (including
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but not limited to those of the FCC) to the extent such regulations and policies
apply, or may in the future be deemed to apply, to the employment practices of
Programmer's personnel assigned to duties in connection with the operation of
the Station; and Programmer shall timely provide Licensee with all information
that may be necessary or appropriate to comply with any reporting obligations of
the FCC pursuant to such regulations or policies.
16. Political Advertising. Licensee shall retain full
responsibility for overseeing compliance with the FCC's political programming
policies and regulations, including setting political advertising rates for the
Station and determining which legally qualified political candidates and races
shall have reasonable access to political advertising on the Station. At least
90 days prior to the beginning of any primary or general election period,
Licensee will set the rates to be charged legally qualified political candidates
to ensure that the rate conforms with applicable election law and policies.
Programmer agrees to provide Licensee with access to its documentation
concerning the pricing of advertising sold on the Station as is necessary to
permit Licensee to ascertain that the political rate is appropriate. Within 24
hours of any request to purchase time on the Station on behalf of a legally
qualified candidate, Programmer will report the request and its disposition to
Licensee and obtain Licensee's approval to such disposition, which approval
shall not be unreasonably delayed or conditioned. Licensee shall be responsible
for placing appropriate records in the Station's political file.
17. Indemnification. Programmer hereby agrees to indemnify and
hold harmless each entity comprising Licensee and all members and partners
thereof, and all members, partners, shareholders, directors, officers, agents,
employees, successors, and assigns of any of the foregoing against all
liability, damages, cost and expense (including without limitation reasonable
attorney's fees) suffered or incurred by any of them for, or arising out of, or
by reason of (a) libel, slander, illegal competition or trade practice,
infringement of trade marks, trade names, or program titles, violation of rights
of privacy, infringement of copyrights and proprietary rights and other
liabilities resulting from or relating to the broadcast of any AK Programming,
and (b) all other matters arising out of or related to Programmer's activities
involving the Station or use of any of the Licensee Station Facilities and/or
any equipment or assets of the Station. Licensee hereby agrees to indemnify and
hold harmless Programmer and its directors, officers, agents, employees,
successors, and assigns against all liability arising out of liabilities of the
type described in clause (a) of the first sentence of this Paragraph that arise
as a result of Licensee's alteration of any AK Programming prior to broadcast by
Licensee which alteration is not consented to by Programmer. Programmer's and
Licensee's obligations under this Paragraph 15 shall survive any termination of
this Agreement until the expiration of all applicable statutes of limitation.
18. Events of Default; Cure Periods and Remedies. (a) The
following shall, after the expiration of the "applicable cure periods,"
constitute events of default under the Agreement ("Events of Default"):
(1) Programmer's failure to timely pay any consideration
provided for in this Agreement or any amount then due under this
Agreement or the Exchange Agreement;
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(2) The default by any party hereto in the material observance
or performance of any material covenant or agreement contained herein;
provided, however, that any failure of Licensee to comply with
Applicable Government Regulations shall not be deemed to be a default of
a material covenant or agreement by Licensee if Programmer has failed to
provide information or cooperation to Licensee concerning AK Programming
that could have allowed Licensee to avoid such noncompliance, or any
other act or omission, or any instruction or request to station
personnel, by Programmer is a basis or cause of such failure to comply
with Applicable Government Regulations;
(3) Any party (1) shall make a general assignment for the
benefit of creditors, or (2) files or has filed against it a petition
for bankruptcy, for reorganization, or for the appointment of a
receiver, trustee or similar creditors' representative for the property
or assets of such party under any federal or state insolvency law,
which, if filed against such party, has not been dismissed or discharged
within sixty (60) days thereof;
(4) The default by any party hereto (after the expiration of
all applicable cure periods) in the material observance or performance
of any material covenant or agreement contained in the Exchange
Agreement which entitles the other party to terminate the Exchange
Agreement.
(b) Cure Periods. An Event of Default under 17(a) above shall not
be deemed to have occurred until thirty (30) business days after the
non-defaulting party has provided the defaulting party with written notice
specifying the event or events that if not cured would constitute an Event of
Default. The Event of Default which is subject to a cure period hereunder shall
not be deemed to have occurred if actions necessary and sufficient to cure are
taken during the relevant cure period.
(c) Right of Termination. In addition to other remedies available
at law or equity, but subject to the requirements and limitations set forth
herein, this Agreement may be terminated as set forth below by either Licensee
or Programmer by written notice to the other upon the occurrence of the
following:
(1) this Agreement is declared invalid or illegal in whole or
substantial part by an order or decree of an administrative agency or
court of competent jurisdiction and such order or decree has become
final and no longer subject to further administrative or judicial
review;
(2) an Event of Default by the other party has occurred and the
party seeking to terminate is not then in material default or breach
hereof;
(3) the termination of the Exchange Agreement;
(4) the termination of the KKTV TBA;
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(5) the mutual consent of all parties; or
(6) there has been a material change in FCC rules, policies or
precedent that would cause this Agreement to be in violation thereof and
such change is in effect and not the subject of a timely appeal or
further administrative review, provided that in such event the parties
shall first negotiate in good faith and attempt to agree on an amendment
to this Agreement that will provide the parties with a valid, binding
and enforceable agreement that conforms to the new FCC rules, policies
or precedent.
(d) Termination Requirements and Procedures. Unless otherwise
mutually agreed by Programmer and Licensee, any termination of this Agreement
shall, at the election of Licensee, not become effective until the effective
date specified by Licensee which shall not be more than ninety (90) days after
notice of termination is provided by Programmer or Licensee.
(e) Liabilities Upon Termination. Upon termination of this
Agreement for any reason, Programmer shall be responsible for all liabilities,
debts and obligations of Programmer accrued from the purchase of air time and/or
transmission services and all AK Programming, including, without limitation,
accounts payable, barter agreements and unaired advertisements, but not for
Licensee's federal, state, and local tax liabilities associated with
Programmer's payments to Licensee as provided for herein. With respect to
Programmer's obligations to broadcast programming, advertisements and other
material over the Station after termination hereunder, BBC may propose
compensation to BBC for meeting these obligations, but Licensee shall be under
no duty to propose such compensation or to perform such obligations and
Programmer shall accept any such proposal by BBC which is reasonable and
equitable under the circumstances and cooperate with BBC to effectuate such
performance. In no event shall Licensee be under any obligation to make
available to Programmer any broadcast time or broadcast transmission facilities
and all amounts accrued or payable to Licensee up to the date of termination
which have not been paid shall immediately become due and payable.
(f) Survival. Anything to the contrary contained in this
Agreement notwithstanding, all obligations under this Agreement accrued or
arising prior to or by reason of the termination of this Agreement shall survive
such termination and the following provisions shall also survive any such
termination: Paragraphs 1(b), (c), (d) and (e) (with respect to periods prior to
the effective date of such termination), 2, 6, 7, 10, 12, 15, 16, 19.3 and 20.
19. Responsive Programming, Programmer and Licensee mutually
acknowledge their interest in ensuring that the Station serve the needs and
interests of the residents of their communities of license, and the surrounding
service areas and agree to cooperate in doing so. Licensee may request, and
Programmer shall provide, information concerning such of AK Programming that is
responsive to community issues so as to assist Licensee in the satisfaction of
its public service programming obligations.
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20. Time Brokerage Challenge. If this Agreement is challenged in
whole or in part at the FCC or in another administrative or judicial forum,
whether or not in connection with the Station's license renewal application,
counsel for Licensee and counsel for Programmer shall, at their joint expense,
jointly defend the Agreement and the parties' performance hereunder throughout
all such proceedings. If portions of this Agreement do not receive the approval
of the FCC's staff, or the Agreement receives such approval with conditions that
are adverse to Licensee or Programmer, then the parties shall endeavor in good
faith to reform the Agreement as necessary to satisfy the FCC staff's concerns,
while preserving the respective benefits to and without increasing the
respective obligations of the parties, or seek reversal of the staff decision
and approval from the full Commission on appeal.
21. Programmer's Representations, Warranties and Covenants.
Programmer makes the following additional representations, warranties and
covenants:
(a) Compliance with Applicable Law. Programmer's performance of
its obligations under this Agreement and its furnishing of AK
Programming shall be in compliance with, and shall not violate or cause
Licensee to violate any applicable laws or any applicable rules,
regulations, or orders of the FCC or any other governmental agency.
(b) Handling of Complaints. Programmer shall promptly advise
Licensee of any public or FCC complaint or inquiry that Programmer
receives concerning the AK Programming and shall cooperate with Licensee
and take all actions as may be reasonably requested by Licensee in
responding to any such complaint or inquiry.
(c) Copyright and Licensing. Programmer shall not broadcast on
the Station any material in violation of the Copyright Act.
(d) Insurance. Programmer shall maintain throughout the term of
this Agreement general liability insurance and errors and omissions
insurance covering broadcasts made on the Station, and shall name
Licensee as an additional insured on such insurance policies.
(e) Information for FCC Reports. Upon request by Licensee,
Programmer shall provide in a timely manner any such information in its
possession that shall enable Licensee to prepare, file or maintain the
records and reports required by the FCC.
22. Miscellaneous.
(a) Certain Limitations. Anything to the contrary contained in
the Agreement notwithstanding:
(1) in the event the Closing under the Exchange Agreement shall
occur, Licensee shall have no liability or obligation whatsoever under
this Agreement, whether for matters arising prior to such Closing or
otherwise.
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(2) Programmer's sole remedy for any breach or default by
Licensee under this Agreement shall be such rights as Programmer may
have under the Exchange Agreement upon the termination thereof.
(3) Nothing herein, express or implied, is intended or shall be
construed to confer upon or give to any person or entity, other than the
parties hereto, any rights, remedies or other benefits under or by
reason of this Agreement.
(b) Amendment; Waiver. No modification, amendment or waiver of
any provision of this Agreement shall in any event be effected unless the same
shall be in writing and signed by the party adversely affected by the waiver or
modification, and then such waiver and consent shall be effective only in the
specific instance and for the purpose for which given.
(c) No Waiver; Remedies Cumulative. No failure or delay on the
part of Licensee or Programmer in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. Except as otherwise provided in this
Agreement or in the Exchange Agreement, the rights and remedies of Licensee and
Programmer herein provided are cumulative and are not exclusive of any right or
remedy which Licensee or Programmer may otherwise have.
(d) Construction. This Agreement shall be construed in accordance
with the laws of the State of California, excluding the choice of law rules
thereof.
(e) Headings. The headings contained in this Agreement are
included for convenience only and no such heading shall in any way alter the
meaning of any provision.
(f) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement shall be assignable only to the same extent as
and solely in connection with any assignment of the Exchange Agreement permitted
pursuant to the terms thereof.
(g) Notices. Any notice required hereunder shall be in writing
and any payment, notice or other communication shall be deemed given when
delivered personally, or mailed by certified mail or Federal Express, postage
prepaid, with return receipt requested:
If to Licensee:
Benedek Broadcasting Corporation
100 Park Avenue
Rockford, Illinois 61101
Attn: President
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With a copy to:
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Attn: Paul S. Goodman, Esq.
If to Programmer:
AK Media Group, Inc.
1301 Fifth Avenue, Suite 4000
Seattle, WA 98101
Attn: Mr. Denis M. Curley
With a copy to:
Rubin, Winston, Diercks, Harris & Cooke, LLP
1333 New Hampshire Avenue, N.W., Suite 1000
Washington, D.C. 20036
Attn: James L. Winston, Esq.
(h) Entire Agreement. This Agreement, together with the Exchange
Agreement and the Schedules, Attachments and Exhibits hereto and thereto, embody
the entire agreement between the parties and there are no other agreements,
representations, warranties, or understandings, oral or written, between them
with respect to the subject matter hereof.
(i) Severability. In the event that any of the provisions
contained in this Agreement is held to be invalid, illegal or unenforceable,
this Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had not been contained herein, subject to the termination rights
contained in Paragraph 16 hereof.
(j) Signatures. This Agreement may be signed in one or more
counterparts, each of which shall be deemed a duplicate original, binding on the
parties hereto notwithstanding that the parties are not signatory to the
original or the same counterpart. This Agreement shall be binding and effective
as of the date on which the executed counterparts are exchanged by the parties.
The parties agree to be bound upon the exchange of signature pages transmitted
by facsimile; provided, however, upon execution of this Agreement, Programmer
agrees to send to Licensee and Licensee agrees to send to Programmer, the
original signature pages via overnight delivery.
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IN WITNESS WHEREOF, the parties have executed this Time Brokerage
Agreement as of the date first above written.
BENEDEK BROADCASTING CORPORATION
By: /s/ K. James Yager
-----------------------------
Name: K. James Yager
Title: President
BENEDEK LICENSE CORPORATION
By: /s/ K. James Yager
-----------------------------
Name: K. James Yager
Title: President
AK MEDIA GROUP, INC.
By: /s/ Denis Curley
-----------------------------
Name: Denis Curley
Title: Secretary/Treasurer
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TIME BROKERAGE AGREEMENT
ATTACHMENT I
1. Programmer shall pay to Licensee during each month of the term of
this Agreement an amount equal to one-twelfth of the Station's actual 1998
broadcast cash flow (as such term is commonly understood in the broadcasting
industry) (the "Fixed Fee Amount"), plus the following:
a. The amount of all salaries, commissions and other
compensation, payroll, taxes, health insurance and other fringe benefits
and other employment-related costs and expenses for or with respect to
all employees of the Station in respect of and/or allocable to the term
of this Agreement (the "Employment Related Amount"); and
b. An amount equal to all costs and expenses incurred by
Licensee in connection with operating the Station (including, without
limitation, lease payments, utilities, taxes, programming fees, sales
representatives' commissions, Programming Agreement charges and all
other fees and expenses) in respect of and/or allocable to the term of
this Agreement.
2. The fees, costs and expenses referred to above shall be termed,
collectively, the "Time Brokerage Fee." The Fixed Fee Amount for each calendar
month during the term of this Agreement shall be paid within 10 days after the
end of each such month. The Employment Related Amount for each calendar month
for each calendar month during the term of this Agreement shall be paid in
arrears within 10 days after the end of each such month. Programmer shall pay
all other amounts payable by Programmer as contemplated by this Attachment I
within 10 days of invoicing by BBC therefor.
3. Licensee shall collect all accounts receivable relating to the
Station and the KCOY Assets (as such term is defined in the Exchange Agreement)
and shall be responsible for the payment of all costs and expenses relating to
the ownership and operation of the Station and the KCOY Assets, in each case,
for the period through December 31, 1998. All such accounts receivable arising
out of operation of the Station and the KCOY Assets prior to 12:01 a.m. Pacific
time on the Commencement Date (the "Licensee's Term") shall belong to the
Licensee. All such accounts receivables arising out of operation of the Station
and the KCOY Assets on or after 12:01 a.m. Pacific time on the Commencement Date
through the expiration of this Agreement (the "TBA Term") shall belong to the
Programmer. All costs and expenses relating to the operation of the Station and
the KCOY Assets during the Licensee's Term shall be borne by Licensee. All costs
and expenses relating to the operation of the Station and the KCOY Assets during
the TBA Term shall be borne by Programmer. Accounts receivable, costs and
expenses arising from contracts or services for periods covering both the
Licensee's Term and the TBA Term shall be prorated according to each term. Such
prorations shall include, without limitation, all ad valorem, real estate and
other property taxes, business and license fees, lease payments, rents, wages
and salaries of employees (including accruals for bonuses, commissions, and
vacation pay), workers compensation premiums, utility expenses, water and sewer
use charges, time sales agreements, pre-paid fees and expenses to the extent
Programmer has received a benefit thereof, and all other income and expenses
attributable to the operation of the Station. Programmer acknowledges, however,
that the consideration for the
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Station includes payment for the contracts and commitments of Licensee relating
to motion pictures and other programming and for barter receivables arising in
connection with trade-out agreements and that no further payment to Licensee or
proration shall be due in respect thereof, except that Licensee shall be
responsible for all payments relating to such contracts due pursuant to the
contracts therefor prior to the Commencement Date. Within 15 days after the end
of each month after the Closing Date (as such term is defined in the Exchange
Agreement), Licensee will provide Programmer with a written report on account
receivables collections made and costs and expenses paid for such month. On the
Closing Date, Licensee and Programmer shall settle any amounts owed to the
other.
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TIME BROKERAGE AGREEMENT
EXHIBIT A
BROADCAST STATION PROGRAMMING POLICY STATEMENT
The following sets forth the policies generally applicable to the presentation
of programming and advertising over Television Station KCOY(TV), Santa Maria,
California. All programming and advertising broadcast by the Station must
conform to these policies and to the provisions of the Communications Act of
1934, as amended (the "Act"), and the Rules and Regulations of the Federal
Communications Commission ("FCC").
Station Identification
The Station must broadcast a Station identification announcement once an hour as
close to the hour as feasible in a natural break in the programming. The
announcement must include (1) the Station's call letters; followed immediately
by (2) the Station's city of license.
Broadcast of Telephone Conversations
Before recording a telephone conversation for broadcast or broadcasting such a
conversation simultaneously with its occurrence, any party to the call must be
informed that the call will be broadcast or will be recorded for later
broadcast, and the party's consent to such broadcast must be obtained. This
requirement does not apply to calls initiated by the other party which are made
in a context in which it is customary for the Station to broadcast telephone
calls.
Sponsorship Identification
When money, service, or other valuable consideration is either directly or
indirectly paid or promised as part of an arrangement to transmit any
programming, the Station at the time of broadcast shall announce (1) that the
matter is sponsored, either whole or in part; and (2) by whom or on whose behalf
the matter is sponsored. Products or services furnished to the Station in
consideration for an identification of any person, product, service, trademark
or brand name shall be identified in this manner.
In the case of any political or controversial issue broadcast for which any
material or service is furnished as an inducement for its transmission, an
announcement shall be made at the beginning and conclusion of the broadcast
stating (1) the material or service that has been furnished; and (2) the
person(s) or association(s) on whose behalf the programming is transmitted.
However, if the broadcast is 5 minutes duration or less, the required
announcement need only be made either at its beginning or end.
Prior to any sponsored broadcast involving political matters or controversial
issues, the Station shall obtain a list of the chief executive officers, members
of the executive committee or board of directors of the sponsoring organization
and shall place this list in the Station's public inspection file.
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The station, its personnel, or its programmers shall not accept or agree to
accept from any person any money, service, or other valuable consideration for
the broadcast of any matter unless such fact is disclosed to the Station so that
all required Station identification announcements can be made. All persons
responsible for Station programming must, from time to time, execute such
documents as may be required by Station management to confirm their
understanding of and compliance with the FCC's sponsorship identification
requirements.
Rebroadcasts
The Station shall not rebroadcast the signal of any other broadcast Station
without first obtaining such Station's prior written consent to such
rebroadcast.
Fairness
Station shall seek to afford coverage to contrasting viewpoints concerning
controversial issues of public importance.
Personal Attacks
The Station shall not air attacks upon the honesty, character, integrity or like
personal qualities of any identified person or group. If such an attack should
nonetheless occur during the presentation of view on a controversial issue of
public importance, those responsible for programming shall submit a tape or
transcript of the broadcast to Station management and to the person attacked
within 48 hours, and shall offer the person attacked a reasonable opportunity to
respond.
Political Editorials
Unless specifically authorized by Station management, the Station shall not air
any editorial which either endorses or opposes a legally qualified candidate for
public office.
Political Broadcasting
All "uses" of the Station by legally qualified candidates for elective office
shall be in accordance with the Act and the FCC's Rules and policies, including
without limitation, equal opportunities requirements, reasonable access
requirements, lowest unit charge requirements and similar rules and regulations.
Obscenity and Indecency
The Station shall not broadcast any obscene material. Material is deemed to be
obscene if the average person, applying contemporary community standards in the
local community, would find that the material, taken as a whole, appeals to the
prurient interest; depicts or describes in a patently
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offensive way sexual conduct specifically defined by applicable state law; and
taken as a whole, lacks serious literary artistic, political or scientific
value.
The Station shall not broadcast any indecent material outside of the periods of
time prescribed by the Commission. Material is deemed to be indecent if it
includes language or material that, in context, depicts or describes, in terms
patently offensive as measured by contemporary community standards for the
broadcast medium, sexual or excretory activities or organs.
Billing
No entity which sells advertising for airing on the Station shall knowingly
issue any bill, invoice or other document which contains false information
concerning the amount charged or the broadcast of advertising which is the
subject of the bill or invoice. No entity which sells advertising for airing on
the Station shall misrepresent the nature or content of aired advertising, nor
the quantity, time of day, or day on which such advertising was broadcast.
Contests
Any contests conducted on the Station shall be conducted substantially as
announced or advertised. Advertisements or announcements concerning such
contests shall fully and accurately disclose the contest's material terms. No
contest description shall be false, misleading or deceptive with respect to any
material term.
Hoaxes
The Station shall not knowingly broadcast false information concerning a crime
or catastrophe.
Emergency Information
Any emergency information which is broadcast by the Station shall be transmitted
both aurally and visually or only visually.
Lottery
The Station shall not advertise or broadcast any information concerning any
lottery (except any state lottery). The Station may advertise and provide
information about lotteries conducted by non-profit groups, governmental
entities and in certain situations, by commercial organizations, if and only if
there is no state or local restriction or ban on such advertising or information
and the lottery is legal under state or local law. Any and all lottery
advertising must first be approved by Station management.
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Advertising
The Station shall comply with all federal, state and local laws concerning
advertising, including without limitation, all laws concerning misleading
advertising, and the advertising of alcoholic beverages.
Programming Prohibitions
Knowing broadcast of the following types of programs and announcements is
prohibited:
False Claims. False or unwarranted claims for any product or service.
Unfair Imitation. Infringement of another advertiser's rights through
plagiarism or unfair imitation of either program idea or copy, or any
other unfair competition.
Commercial Disparagement. Any unfair disparagement of competitors or
competitive goods.
Profanity. Any programs or announcements that are slanderous, obscene,
profane, vulgar, repulsive or offensive, as evaluated by Station
management.
Violence. Any programs which are excessively violent.
Unauthenticated Testimonials. Any testimonials which cannot be
authenticated.
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Exhibit 10.31
AK Media Group, Inc.
1301 Fifth Avenue
Suite 4000
Seattle, Washington 98101
January 22, 1999
Mr. K. James Yager, President
Benedek Broadcasting Corporation
100 Park Avenue
Rockford, Illinois 61101
Re: Time Brokerage Agreement (the "KKTV TBA") dated as of December 30,
1998 by and between Benedek Broadcasting Corporation ("Programmer")
and AK Media Group, Inc. ("Licensee")
Dear Mr. Yager:
This will confirm our agreement to modify the KKTV TBA in the following
respects.
1. Programmer shall employ all of the employees of KKTV (the "Station"), other
than James Lucas, the Station's General Manager, and Rick Craddock, the
Station's Chief Engineer. In the event that the KKTV TBA terminates without a
Closing under the Exchange Agreement, Licensee shall rehire the employees of the
Station employed by the Station on the date of termination who were Licensee's
employees on January 31, 1999; provided that Licensee shall have the right but
not the obligation to hire any employees of the station hired by Programmer
during the term of the KKTV TBA. The "Employee Related Amount" (Attachment I,
Section 1.(a)) shall refer to the expenses related to the Licensee's employees.
2. Programmer shall perform pursuant to and consistent with the Programming
Agreements for the Licensee Programming under the supervision and control of the
Licensee; however the Programming Agreements shall only be assigned to
Programmer at Closing or as otherwise permitted by the KKTV TBA.
3. Programmer will assume responsibility for fulfilling all orders for
advertising on the Station.
4. Programmer will collect all advertising and promotion-related revenues,
including revenues attributable to the Licensee's Term. Programmer shall pay on
behalf of Licensee all costs and expenses relating to the Licensee's Term. Such
revenues and costs and expenses attributable to the Licensee's Term shall be
reconciled in accordance with the proration provisions of the KKTV TBA. All cash
on hand on the effective date of this amendment shall
<PAGE>
<PAGE>
Mr. K. James Yager
January 22, 1999
Page 2
remain the property of Licensee. Licensee hereby constitutes and appoints
Programmer, its successors and assigns the true and lawful attorney of Licensee
with full power of substitution, in the name of Programmer, or the name of
Licensee, on behalf of and for the benefit of Licensee, to collect all accounts
receivable of Licensee, to endorse, without recourse, checks, notes and other
instruments in the name Licensee, to institute and prosecute, in the name of
Licensee or otherwise, all proceedings which Licensee may deem proper in order
to collect, assert or enforce any claim, right or title of any kind in or to the
accounts receivable of Licensee, to defend and compromise any and all actions,
suits or proceedings in respect of any of the accounts receivable of Licensee,
and to do all such acts and things in relation thereto as Programmer may deem
advisable. Licensee agrees that the foregoing powers are coupled with an
interest and so long as the KKTV TBA shall be in effect, shall be irrevocable by
Licensee directly or indirectly in any manner or for any reason.
5. The foregoing modifications shall become effective February 1, 1999.
6. In all other respects, the KKTV TBA shall remain in full force and effect.
Capitalized terms used herein not otherwise defined shall have the meanings
ascribed to them in the KKTV TBA.
Sincerely,
/s/ Denis M. Curley
Denis M. Curley
Secretary/Treasurer
Agreed:
Benedek Broadcasting Corporation
By: /s/ Ronald Lindwall
----------------------------
Name: Ronald Lindwall
Title: Senior Vice President
Date: January 22, 1999
<PAGE>
<PAGE>
Exhibit 10.32
AK MEDIA GROUP, INC.
1301 Fifth Avenue
Suite 4000
Seattle, Washington 98101
January 22, 1999
Mr. K. James Yager, President
Benedek Broadcasting Corporation
100 Park Avenue
Rockford, Illinois 61101
Re: Time Brokerage Agreement (the "KCOY TBA") dated as of December 30,
1998 by and between Benedek Broadcasting Corporation ("Licensee") and
AK Media Group, Inc. ("Programmer")
Dear Mr. Yager:
This will confirm our agreement to modify the KCOY TBA in the following
respects.
1. Programmer shall employ all of the employees of KCOY (the "Station"), other
than Vickie McPherson, the Station's Manager, and Dennis Bornhoft, the Station's
Chief Engineer. In the event that the KCOY TBA terminates without a Closing
under the Exchange Agreement, Licensee shall rehire the employees of the Station
employed by the Station on the date of termination who were Licensee's employees
on January 31, 1999; provided that Licensee shall have the right but not the
obligation to hire any employees of the station hired by Programmer during the
term of the KCOY TBA. The "Employee Related Amount" (Attachment I, Section
1.(a)) shall refer to the expenses related to the Licensee's employees.
2. Programmer shall perform pursuant to and consistent with the Programming
Agreements for the Licensee Programming under the supervision and control of the
Licensee; however the Programming Agreements shall only be assigned to
Programmer at Closing or as otherwise permitted by the KCOY TBA.
3. Programmer will assume responsibility for fulfilling all orders for
advertising on the Station.
4. Programmer will collect all advertising and promotion-related revenues,
including revenues attributable to the Licensee's Term. Programmer shall pay on
behalf of Licensee all costs and expenses relating to the Licensee's Term. Such
revenues and costs and expenses attributable to the Licensee's Term shall be
reconciled in accordance with the proration provisions of the KCOY TBA. All cash
on hand on the effective date of this amendment shall
<PAGE>
<PAGE>
Mr. K. James Yager
January 22, 1999
Page 2
remain the property of Licensee. Licensee hereby constitutes and appoints
Programmer, its successors and assigns the true and lawful attorney of Licensee
with full power of substitution, in the name of Programmer, or the name of
Licensee, on behalf of and for the benefit of Licensee, to collect all accounts
receivable of Licensee, to endorse, without recourse, checks, notes and other
instruments in the name Licensee, to institute and prosecute, in the name of
Licensee or otherwise, all proceedings which Licensee may deem proper in order
to collect, assert or enforce any claim, right or title of any kind in or to the
accounts receivable of Licensee, to defend and compromise any and all actions,
suits or proceedings in respect of any of the accounts receivable of Licensee,
and to do all such acts and things in relation thereto as Programmer may deem
advisable. Licensee agrees that the foregoing powers are coupled with an
interest and so long as the KCOY TBA shall be in effect, shall be irrevocable by
Licensee directly or indirectly in any manner or for any reason.
5. The foregoing modifications shall become effective February 1, 1999.
6. In all other respects, the KCOY TBA shall remain in full force and effect.
Capitalized terms used herein not otherwise defined shall have the meanings
ascribed to them in the KCOY TBA.
Sincerely,
/s/ Denis M. Curley
- -------------------
Denis M. Curley
Secretary/Treasurer
Agreed:
Benedek Broadcasting Corporation
By: /s/ Ronald Lindwall
----------------------------
Name: Ronald Lindwall
Title: Senior Vice President
Date: January 22, 1999
<PAGE>
<PAGE>
Exhibit 21
SUBSIDIARIES OF BENEDEK COMMUNICATIONS CORPORATION
AND BENEDEK BROADCASTING CORPORATION
At December 31, 1998
<TABLE>
<CAPTION>
Subsidiary Jurisdiction Ownership
---------- ------------ ---------
<S> <C> <C>
Benedek Broadcasting Corporation Delaware 100% owned by Benedek
Communications Corporation
Benedek License Corporation Delaware 100% owned by Benedek
Broadcasting Corporation
Benedek Cable, Inc. Delaware 100% owned by Benedek
Broadcasting Corporation
The WMTV Trust Wisconsin 100% beneficially owned by
Benedek Broadcasting Corporation
WMTV License Co., LLC Delaware 100% owned by Phillip A. Jones
solely in his capacity as trustee
under The WMTV Trust
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 1017522
<NAME> BENEDEK COMMUNICATIONS CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,291,354
<SECURITIES> 0
<RECEIVABLES> 27,853,116
<ALLOWANCES> 480,175
<INVENTORY> 0
<CURRENT-ASSETS> 39,355,891
<PP&E> 139,473,509
<DEPRECIATION> 76,846,348
<TOTAL-ASSETS> 447,462,535
<CURRENT-LIABILITIES> 35,526,917
<BONDS> 358,904,681
<COMMON> 74,000
162,643,832
0
<OTHER-SE> (147,336,693)
<TOTAL-LIABILITY-AND-EQUITY> 447,462,535
<SALES> 157,244,831
<TOTAL-REVENUES> 160,661,228
<CGS> 20,828,626
<TOTAL-COSTS> 20,828,626
<OTHER-EXPENSES> 120,428,665
<LOSS-PROVISION> 552,357
<INTEREST-EXPENSE> 44,022,137
<INCOME-PRETAX> (24,676,657)
<INCOME-TAX> (8,051,674)
<INCOME-CONTINUING> (16,624,983)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,624,983)
<EPS-PRIMARY> (6.42)
<EPS-DILUTED> (6.42)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 923027
<NAME> BENEDEK BROADCASTING CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,290,254
<SECURITIES> 0
<RECEIVABLES> 27,853,116
<ALLOWANCES> 480,175
<INVENTORY> 0
<CURRENT-ASSETS> 39,354,791
<PP&E> 139,473,509
<DEPRECIATION> 76,846,348
<TOTAL-ASSETS> 445,102,312
<CURRENT-LIABILITIES> 35,526,917
<BONDS> 233,492,162
<COMMON> 869,795
0
0
<OTHER-SE> 122,962,641
<TOTAL-LIABILITY-AND-EQUITY> 445,102,312
<SALES> 157,244,831
<TOTAL-REVENUES> 160,661,228
<CGS> 20,828,626
<TOTAL-COSTS> 20,828,626
<OTHER-EXPENSES> 120,428,665
<LOSS-PROVISION> 552,357
<INTEREST-EXPENSE> 28,320,095
<INCOME-PRETAX> (9,298,962)
<INCOME-TAX> (1,900,674)
<INCOME-CONTINUING> (7,398,288)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,398,288)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
