AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 25, 2001
REGISTRATION NO. 333-67278
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
<Table>
LIN TELEVISION CORPORATION LIN HOLDINGS CORP.
(and Certain Subsidiaries Identified in Footnote 1 (Exact Name of Co-Registrant as Specified in its
Below) Charter)
(Exact Name of Co-Registrant as Specified in its
Charter)
</Table>
<Table>
DELAWARE 75-2733091 DELAWARE
(State or Other Jurisdiction of (I.R.S. Employer Identification (State or Other Jurisdiction of
Incorporation or Organization) No.) Incorporation or Organization)
DELAWARE 75-2733097
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
</Table>
4833
(Primary Standard Industrial Classification Code Number)
<Table>
GARY R. CHAPMAN GARY R. CHAPMAN
FOUR RICHMOND SQUARE, SUITE 200 FOUR RICHMOND SQUARE, SUITE 200
PROVIDENCE, RHODE ISLAND 02906 PROVIDENCE, RHODE ISLAND 02906
(401) 454-2880 (401) 454-2880
(Address, including Zip Code, and Telephone Number, (Address, including Zip Code, and Telephone Number,
including Area Code, of Registrant's Principal Executive including Area Code, of Agent for Service)
Offices)
</Table>
With a copy to:
MICHAEL A. SASLAW, ESQ.
WEIL, GOTSHAL & MANGES LLP
100 CRESCENT COURT, SUITE 1300
DALLAS, TEXAS 75201
TELEPHONE: (214) 746-7700
FACSIMILE: (214) 746-7777
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is a compliance
with General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________
If this form is a post-effective amendment filed pursuant to the Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] __________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT THEREAFTER SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[LIN ACQUISITION COMPANY LOGO]
OFFER TO EXCHANGE
ALL OUTSTANDING
OLD 8% SENIOR NOTES
DUE 2008
FOR
NEW 8% SENIOR NOTES
DUE 2008
OF
LIN TELEVISION CORPORATION
- The exchange offer will expire at 5:00 p.m., New York City time, on
November 26, 2001, unless we extend this date.
- If you decide to participate in this exchange offer, the new notes you
receive will be the same as your old notes, except that, unlike your old
notes, you will be able to offer and sell the new notes freely to any
potential buyer in the United States.
- We will not receive any proceeds from the exchange offer.
OFFER TO EXCHANGE
ALL OUTSTANDING
OLD 10% SENIOR DISCOUNT NOTES
DUE 2008
FOR
NEW 10% SENIOR DISCOUNT NOTES
DUE 2008
OF
LIN HOLDINGS CORP.
- You will not owe additional federal income taxes if you exchange your old
notes.
- If you fail to tender your old notes, you will continue to hold
unregistered securities and your ability to transfer them could be
adversely affected.
- No public market currently exists for the notes, We do not intend to list
the notes on any securities exchange and, therefore, not active public
market is anticipated.
---------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER TO SELL OR THE SALE IS NOT PERMITTED.
We urge you to read the "Risk Factors" section of the prospectus beginning
on page , which describes information you should consider before participating
in the exchange offer.
---------------------------
The date of this prospectus is October 26, 2001.
WHERE YOU CAN FIND MORE INFORMATION
LIN TELEVISION AND LIN HOLDINGS FILE ANNUAL, QUARTERLY AND SPECIAL REPORTS,
AND OTHER INFORMATION, WITH THE SECURITIES AND EXCHANGE COMMISSION. YOU MAY READ
AND COPY ANY REPORTS, STATEMENTS, OR OTHER INFORMATION LIN TELEVISION AND LIN
HOLDINGS FILE WITH THE SEC AT ITS PUBLIC REFERENCE ROOMS AT 450 FIFTH STREET, N.
W., WASHINGTON, D.C. 20549, 7 WORLD TRADE CENTER, SUITE 1300, NEW YORK, NEW YORK
10048, AND 500 WEST MADISON STREET, SUITE 1400, CHICAGO, ILLINOIS 60661. PLEASE
CALL THE SEC AT 1-800-SEC-0330 FOR FURTHER INFORMATION ON THE PUBLIC REFERENCE
ROOMS. LIN TELEVISION'S AND LIN HOLDINGS' FILINGS ARE ALSO AVAILABLE TO THE
PUBLIC ON THE INTERNET, THROUGH A DATABASE MAINTAINED BY THE SEC AT
HTTP://WWW.SEC.GOV.
WE FILED A REGISTRATION STATEMENT ON FORM S-4 TO REGISTER WITH THE SEC THE
SECURITIES DESCRIBED IN THIS PROSPECTUS. THIS PROSPECTUS IS PART OF THAT
REGISTRATION STATEMENT. AS PERMITTED BY THE SEC RULES, THIS PROSPECTUS DOES NOT
CONTAIN ALL THE INFORMATION CONTAINED IN THE REGISTRATION STATEMENT OR THE
EXHIBITS TO THE REGISTRATION STATEMENT. YOU MAY REFER TO THE REGISTRATION
STATEMENT AND ACCOMPANYING EXHIBITS FOR MORE INFORMATION ABOUT US AND OUR
SECURITIES.
THE SEC ALLOWS US TO "INCORPORATE BY REFERENCE" INTO THIS DOCUMENT THE
INFORMATION LIN TELEVISION AND LIN HOLDINGS FILED WITH IT. THIS MEANS THAT WE
CAN DISCLOSE IMPORTANT BUSINESS, FINANCIAL AND OTHER INFORMATION TO YOU BY
REFERRING YOU TO OTHER DOCUMENTS SEPARATELY FILED WITH THE SEC. ALL INFORMATION
IS UPDATED AND SUPERCEDED BY THE INFORMATION CONTAINED IN THIS DOCUMENT OR ANY
INFORMATION INCORPORATED LATER.
WE ALSO INCORPORATE BY REFERENCE ALL FUTURE FILINGS WE MAKE WITH THE SEC
BETWEEN THE DATE OF THIS DOCUMENT AND THE DATE UPON WHICH WE SELL ALL THE
SECURITIES WE OFFER WITH THIS DOCUMENT.
YOU MAY OBTAIN COPIES OF FILINGS REFERRED TO ABOVE AT NO COST BY CONTACTING
US AT THE FOLLOWING ADDRESS: CORPORATE SECRETARY, FOUR RICHMOND SQUARE, SUITE
200, PROVIDENCE, RHODE ISLAND, 02906, TELEPHONE: (401) 454-2880.
---------------------
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO
OUR FINANCIAL CONDITIONS, RESULTS OF OPERATIONS AND BUSINESSES, INCLUDING
STATEMENTS UNDER THE CAPTIONS "SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS." ALL OF THESE
FORWARD LOOKING STATEMENTS ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE BY
MANAGEMENT OF THE ISSUERS WHICH, ALTHOUGH WE BELIEVE TO BE REASONABLE, ARE
INHERENTLY UNCERTAIN. THEREFORE, YOU SHOULD NOT PLACE UNDUE RELIANCE UPON SUCH
ESTIMATES AND STATEMENTS. WE CANNOT ASSURE YOU THAT ANY OF SUCH ESTIMATES OR
STATEMENTS WILL BE REALIZED AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER
MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS. FACTORS
THAT MAY CAUSE SUCH DIFFERENCES INCLUDE:
- INCREASED COMPETITION, INCLUDING FROM NEWER FORMS OF ENTERTAINMENT AND
ENTERTAINMENT MEDIA OR CHANGES IN THE POPULARITY OR AVAILABILITY OF
PROGRAMMING;
- INCREASED COSTS, INCLUDING INCREASED CAPITAL EXPENDITURES AS A RESULT OF
NECESSARY TECHNOLOGICAL ENHANCEMENTS SUCH AS EXPENDITURES RELATED TO THE
TRANSITION TO DIGITAL BROADCASTING, OR ACQUISITIONS OR INCREASED
PROGRAMMING COSTS;
- INABILITY TO CONSUMMATE ACQUISITIONS ON ATTRACTIVE TERMS;
- LOSS OR RETIREMENT OF KEY MEMBERS OF MANAGEMENT;
i
- INCREASES IN OUR COST OF BORROWINGS OR INABILITY OR UNAVAILABILITY OF
ADDITIONAL DEBT OR EQUITY CAPITAL;
- ADVERSE STATE OR FEDERAL LEGISLATION OR REGULATION OR ADVERSE
DETERMINATIONS BY REGULATORS INCLUDING ADVERSE CHANGES IN, OR
INTERPRETATIONS OF, THE EXCEPTIONS TO THE FCC "DUOPOLY" RULE; AND
- CHANGES IN ADVERTISING TRENDS AND/OR BUDGETS AND IN GENERAL ECONOMIC
CONDITIONS IN THE MARKETS IN WHICH WE MAY, FROM TIME TO TIME, COMPETE,
INCLUDING CONTINUATION OF THE PREVAILING WEAKNESS, WE BEGAN TO EXPERIENCE
IN 2000, IN NATIONAL ADVERTISING.
MANY OF THESE FACTORS ARE BEYOND OUR, AND OUR MANAGEMENT'S, CONTROL.
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN SPEAK ONLY AS OF THE DATE HEREOF. WE
UNDERTAKE NO OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. FOR
FURTHER INFORMATION OR OTHER FACTORS WHICH COULD AFFECT OUR FINANCIAL RESULTS
AND SUCH FORWARD LOOKING STATEMENTS, SEE "RISK FACTORS."
ii
CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA
The terms "broadcast cash flow," "BCF" and "EBITDA" are referred to in
various places in this prospectus. Broadcast cash flow, or BCF, is defined as
operating income plus corporate expenses plus depreciation and amortization of
intangible assets and amortization of program rights plus other non-cash
expenses (consisting of tower write-offs and non-cash pension expenses), minus
cash program payments. EBITDA is defined as BCF minus corporate expenses plus
our share of cash distributions made by our joint venture with NBC. BCF and
EBITDA are not measures of performance calculated in accordance with generally
accepted accounting principles or "GAAP." However, we believe that BCF is useful
to a prospective investor because it is a measure widely used in the broadcast
industry to evaluate a television broadcast company's operating performance and
that EBITDA is useful to a prospective investor because it is widely used in the
broadcast industry to evaluate a television broadcast company's ability to
service debt. BCF and EBITDA should not be considered in isolation of or as a
substitute for net income (loss), cash flows from operating activities and other
income and cash flow statement data prepared in accordance with GAAP or as a
measure of liquidity or profitability. BCF and EBITDA as determined above may
not be comparable to the BCF and EBITDA measures reported by other companies. In
addition, these measures do not represent funds available for discretionary use.
The term "LMAs" refers to local marketing agreements pursuant to which we
operate stations that we do not own.
Designated market area or "DMA" rankings are from the Nielsen Station Index
dated January 1, 2001 as estimated by the A.C. Nielsen Company. There are 210
generally-recognized television "markets" or DMAs in the United States, which
are ranked in size according to various factors based upon actual or potential
audience. Unless otherwise indicated herein:
- market revenue, market revenue share, projected advertising revenue
growth and station revenue share data have been obtained from Television
Market Report 2001, 1st edition, BIA Publications, Inc.;
- television household data has been obtained from the Nielsen Media
Research Local Universe Estimate for the 2000-2001 Broadcast Season for
stations in the United States of America;
- the total day television household shares (9:00 a.m. to midnight) of the
stations for the last eight rating periods have been obtained from
Nielsen Media Research for Markets within the United States of America,
as reported by BIA;
- the total day television household shares (from sign-on to sign-off) of
the stations for the last eight quarters have been obtained from Mediafax
TV Audience Measurements Puerto Rico for Puerto Rico;
- the term "station" or "commercial station" means a television broadcast
station and does not include public television stations, cable stations
or networks such as CNN, TBS or ESPN, or stations that do not meet the
minimum Nielsen reporting standards for example, weekly cumulative
audience share of at least 2.5% for Sunday to Saturday, 7:00 a.m. to 1:00
a.m.; and
- the term "independent" describes a commercial television station that is
not affiliated with the ABC, CBS, NBC, Fox, WB or UPN television
networks.
iii
SUMMARY
This brief summary highlights selected information contained elsewhere in
this prospectus. Because it is a summary, it does not contain all the
information you should consider before exchanging your old notes. You should
read the entire prospectus carefully, including the text under the section
entitled "Risk Factors" and the consolidated financial statements and notes
relating to those statements. Except where otherwise noted, the words "we,"
"our," "ours," "us" mean LIN Television Corporation and all of its subsidiaries.
For additional information relating to certain defined used herein, as well as
the sources for the market and other industry data contained herein, see
"Certain Definitions and Market and Industry Data."
LIN TELEVISION
We are a leading television station group operator in the United States of
America and Puerto Rico that operates eighteen television stations and provides
consulting services to two additional television stations. Nine of these
stations are network affiliates and are in the top fifty DMAs, including:
Indianapolis, Indiana; New Haven-Hartford, Connecticut; Buffalo, New York;
Norfolk-Portsmouth, Virginia; and Grand Rapids-Kalamazoo-Battle Creek, Michigan.
These stations have an aggregate United States household reach of approximately
5%, ranking us among the top independent, "pure-play" television station group
operators in the United States.
We generated an aggregate BCF margin of approximately 43.7% for the fiscal
year ended December 31, 2000. Among the factors contributing to our favorable
BCF margins are strong network affiliations, leading local news programming and
tight cost controls. In addition, we pioneered the "multi-channel strategy,"
which involves the combination of an owned and operated television station with
an LMA or other station in the same market. The multi-channel strategy has
enhanced our revenue market shares and increased our BCF by leveraging our fixed
costs over a larger revenue base.
Our station portfolio is well diversified in terms of our network
affiliations, geographic coverage, net revenues and cash flow. We own and
operate four CBS affiliates, four NBC affiliates and one ABC affiliate which
accounted for 25.9%, 43.3% and 17.6%, respectively, of our BCF for the fiscal
year ended December 31, 2000. Our stations broadcast in ten different markets,
with no market representing more than 15.9% of our net revenues or BCF for the
fiscal year ended December 31, 2000. Our net revenues, BCF and EBITDA were
$295.7 million, $129.2 million and $120.7 million, respectively, for the fiscal
year ended December 31, 2000.
In March 1998, we formed a joint venture with NBC that owns two television
stations. The joint venture owns KXAS-TV, the Dallas-Fort Worth NBC affiliate,
and KNSD-TV, the San Diego NBC affiliate. A wholly owned subsidiary of NBC has
managerial control over the joint venture, and NBC operates the stations owned
by the joint venture pursuant to a management agreement. NBC holds an
approximate 80% equity interest, and we hold an approximate 20% equity interest,
in the joint venture.
We own an approximate 33% partnership interest in WAND (TV) Partnership.
WAND (TV) Partnership owns WAND-TV, an ABC affiliate in Decatur, Illinois, and
we operate WAND-TV pursuant to a management agreement. We also hold a 50% equity
interest in Banks Broadcasting, Inc., which owns and operates KWCV-TV, a WB
affiliate in Wichita, Kansas, and KNIN-TV, a UPN affiliate in Boise, Idaho.
1
BUSINESS STRATEGY
Our business strategy is to maximize our BCF through both revenue growth
and the implementation of effective cost controls. To achieve these goals, we
seek, among other things, to:
Affiliate With National Television Networks. Most of our owned or managed
stations are affiliated with one of the major networks (ABC, CBS, NBC, Fox, UPN,
or WB) pursuant to an affiliation agreement. These network affiliations provide
our stations with competitive programming, including coverage of political
events and high profile sporting events such as the Olympic Games, Super Bowl
and the NCAA Men's Basketball Tournament.
Emphasize Leading Local News. Our stations that are affiliated with ABC,
CBS, or NBC place substantial emphasis on the production of news programming. We
believe that a successful news operation is critical to the success of a
television station because news audiences generally have the best demographic
profiles from an advertising sales perspective. In addition, news programming:
- enables us to purchase less syndicated programming, thereby maintaining
tight control over programming costs;
- serves as a strong lead-in to other programming; and
- fosters a high profile in the local community, which is critical to
maximizing local advertising sales.
Invest in Digital Technology. In accordance with current Federal
Communications Commission regulations, all commercial broadcasters will be
required to transmit a digital signal by May 1, 2002. We believe that we are
well-positioned for the transition to digital broadcasting. We have already
begun the transmission of digital signals in Austin, Indianapolis, New Haven,
Norfolk and Grand Rapids, and we are among the first television broadcasters in
the United States to transmit digital signals. We have already invested
approximately $33.8 million to prepare our towers and transmitter buildings for
the transition. We estimate that we will invest an additional $17.5 million over
the next two years to convert all of our television stations to transmit digital
signals.
Continue a Multi-Channel Strategy. We adopted a "multi-channel strategy"
in the early 1990s, which involved the combination of an owned and operated
television station with an LMA station in the same market. This multi-channel
strategy provides us with greater advertising opportunities and certain
operational synergies in our LMA markets. We have successfully implemented this
strategy in many of our television markets and intend to pursue our
multi-channel strategy in other markets.
Continue to Drive Revenue Share in Existing Markets. We have steadily
improved our share of revenue in our markets from 25.8%, in 1992, to 29.9%, in
2000. Our aggressive sales effort, combined with the broader audience reach
provided by LMA programming, has driven revenue growth in the past.
Reduce Leverage. We are focused on reducing leverage through a combination
of growing BCF, and applying available cash to reduce debt.
Control Costs. We have achieved operating efficiencies by applying group
leverage for the purchase of programming, capital equipment and vendor
relationships.
2
Participate in Industry Consolidation. We continually:
- review merger and other combination opportunities within the industry
that would enhance our operating leverage;
- pursue opportunities for increased audience share; and
- target television markets that are projected to have attractive growth in
advertising revenue.
MANAGEMENT AND OWNERSHIP
Our management team, led by Gary R. Chapman, who is our Chairman, President
and Chief Executive Officer, is recognized as an industry leader.
Funds managed by Hicks, Muse, Tate & Furst Incorporated indirectly own in
excess of 70% of the total equity of LIN Holdings. All of Hicks Muse's indirect
equity interest in LIN Holdings is non-voting. Entities controlled by each of
Royal W. Carson III and Randall S. Fojtasek, who are our directors and directors
of LIN Holdings, each indirectly control 50% of the voting power of LIN
Holdings. Hicks Muse has rights to consent to certain material corporate
changes, including dividends, transactions with affiliates, mergers,
consolidations or other transactions not in the ordinary course of business and
certain debt incurrences.
Hicks Muse is a leading private investment firm that specializes in
leveraged acquisitions, recapitalizations and other principal investing
activities. Hicks Muse and its predecessor firm have completed or have pending
over 390 transactions having a combined transaction value of more than $47
billion. Although Hicks Muse invests in a wide variety of industries, it has
significant investments and experience in the media and communications industry.
For additional information, see the discussion under the sections entitled "Risk
Factors -- Potential Conflicts of Interest" and "Certain Relationships and
Related Transactions."
RECENT DEVELOPMENTS
On August 2, 2001, the Company acquired the broadcast license and operating
assets of WJPX-TV, an independent television station in San Juan, Puerto Rico,
WKPV-TV, an independent television station in Ponce, Puerto Rico and WJWN-TV, an
independent television station in San Sebastian, Puerto Rico. WKPV-TV and
WJWN-TV currently rebroadcast the programming carried on WJPX-TV. The total
purchase price of the three stations is approximately $11.2 million, and will be
funded by available cash. The Company intends to account for the business
combination under the purchase method of accounting.
On July 25, 2001, the Company acquired the broadcast license and operating
assets of WNLO-TV (formerly called WNEQ-TV), an independent broadcast television
station located in Buffalo, New York. The Company has been operating WNLO-TV
since January 29, 2001 under a LMA agreement. The total purchase price is
approximately $26.2 million, and will be funded by available cash. The Company
intends to account for the business combination under the purchase method of
accounting.
PRINCIPAL EXECUTIVE OFFICES AND TELEPHONE NUMBERS
Our principal executive offices are located at Four Richmond Square, Suite
200, Providence, Rhode Island 02906, and our telephone number is (401) 454-2880.
3
THE EXCHANGE OFFERS
SENIOR NOTES EXCHANGE OFFER
Securities to be
Exchanged.................. On June 14, 2001, we issued $210,000,000 aggregate
principal amount of 8% senior notes to the initial
purchasers in the original offering in a
transaction exempt from the registration
requirements of the Securities Act of 1933. The
terms of the old senior notes and the new senior
notes will be the same, except that, unlike the old
senior notes, you will be able to offer and sell
the new senior notes freely to any potential buyer
in the United States. For more details, see the
section entitled "Description of the New Senior
Notes."
The Senior Notes Exchange
Offer.................... We are offering to issue $1,000 principal amount of
new senior notes in exchange for each $1,000
principal amount of old senior notes. The terms of
the new senior notes and the old senior notes are
substantially identical.
Senior Notes Registration
Rights Agreement......... We sold the old senior notes to the initial
purchasers in a transaction exempt from the
registration requirements of the Securities Act.
The old senior notes were immediately resold by the
initial purchasers in reliance on Rule 144A under
the Securities Act. In connection with the sale,
we, and those of our subsidiaries that are
guarantors of the old and new senior notes, entered
into a registration rights agreement with the
initial purchasers requiring us to make an exchange
offer. For more details, see the section entitled
"The Exchange Offers -- Purpose and Effect."
Ability to Resell New
Notes...................... Based on interpretations by the staff of the SEC
set forth in published no-action letters, we
believe that you may offer for resale, resell and
otherwise freely transfer the new senior notes
without registration or delivering a prospectus to
a buyer if:
- you acquire the new senior notes in the ordinary
course of your business;
- you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate in
the distribution of new senior notes; and
- you are not related to us.
However, the SEC has not considered this exchange
offer in the context of a no-action letter and we
cannot be sure that the staff of the SEC would make
the same determination with respect to the exchange
offer as in other circumstances. Furthermore, you
must, unless you are a broker-dealer, acknowledge
that you are not engaged in, and do not intend to
engage in, a distribution of your new senior notes
and have no arrangement or understanding to
participate in a distribu-
4
tion of new senior notes. If you are a
broker-dealer that receives new senior notes for
your own account pursuant to the exchange offer you
must acknowledge that you will comply with the
prospectus delivery requirements of the Securities
Act in connection with any resale of your new
senior notes. If you are a broker-dealer who
acquired old senior notes directly from us and not
as a result of market-making activities or other
trading activities, you may not rely on the SEC
staff's interpretations discussed above or
participate in the exchange offer and must comply
with the prospectus delivery requirements of the
Securities Act in order to resell the new senior
notes.
The exchange offer is not being made to:
- holders of old senior notes in any jurisdiction
in which the exchange offer or its acceptance
would not comply with the securities or blue sky
laws of that jurisdiction; and
- holders of old senior notes who we control.
Expiration Date............ The senior notes exchange offer will expire at 5:00
p.m., New York City time, on November 26, 2001, or
such later date and time to which it is extended.
Withdrawal................. Unless we extend the date, you may withdraw your
tendered old senior notes at any time before 5:00
p.m., New York City time, on the expiration date of
the exchange offer.
Interest on the New Senior
Notes and Old Senior
Notes.................... Interest on your new senior notes will accrue from
the date of the original issuance of the old senior
notes or from the date of the last periodic payment
of interest on the old senior notes, whichever is
later.
Conditions to the Senior
Notes Exchange Offer..... The senior note exchange offer is subject to
conditions, some of which we may waive. For more
information, see the section entitled "The Exchange
Offers -- Certain Conditions to the Exchange
Offers."
Procedures for Exchanging
Your Old Senior Notes.... If you wish to exchange your old senior notes for
new senior notes you must transmit to The Bank of
New York, our exchange agent, on or before the
expiration date either:
- a properly completed and executed letter of
transmittal, which we have provided to you with
this prospectus, or a facsimile of the letter of
transmittal, together with your old senior notes
and any other documentation requested by the
letter of transmittal;
- a computer generated message, in which you
acknowledge and agree to be bound by the terms of
the letter of transmittal, transmitted by means
of the Depository Trust Company's Automated
Tender Offer Program system; or
5
- a notice of guaranteed delivery, in accordance
with the procedures described under the heading
"The Exchange Offers -- Guaranteed Delivery
Procedures."
By agreeing to be bound by the terms of the letter
of transmittal, you will be deemed to have made the
representations described on page 78 under the
heading "The Exchange Offers -- Purpose and
Effect."
Shelf Registration
Requirement.............. Pursuant to the registration rights agreement for
the senior notes, we are required to file a "shelf"
registration statement for a continuous offering
pursuant to Rule 415 under the Securities Act in
respect of the old senior notes if:
- because of any change in law or applicable
interpretations of the staff of the SEC, we are
not permitted to effect the senior notes exchange
offer;
- any of the old senior notes validly tendered in
the senior notes exchange offer are not exchanged
for new senior notes within 165 days of the
offering of the old senior notes;
- any holder of a private exchange securities
requests within 60 days after the senior notes
exchange offer;
- any applicable law or interpretations do not
permit any holder of old senior notes to
participate in the senior notes exchange offer;
- any holder of old senior notes participates in
the senior notes exchange offer and does not
receive freely transferable new senior notes in
exchange for old senior notes; or
- we so elect.
Federal Income Tax
Considerations........... The exchange of your old senior notes for new
senior notes in connection with the senior notes
exchange offer should not constitute a sale or
exchange for federal income tax purposes. See
"Certain United States Federal Income Tax
Considerations."
Effect of Not Tendering.... If you fail to tender your old senior notes, you
will continue to hold unregistered securities and
your ability to transfer them could be adversely
affected.
SENIOR DISCOUNT NOTES OFFERING
Securities to be
Exchanged.................. On June 14, 2001, LIN Holdings issued $100,000,000
aggregate principal amount of 10% senior discount
notes to the initial purchasers in the original
offering in a transaction exempt from the
registration requirements of the Securities Act of
1933. The terms of the old senior discount notes
and the new senior discount notes will be the same,
except that, unlike the old senior discount notes,
you will be able to offer and sell the new senior
notes freely to any potential buyer in the United
6
States. For more details, see the section entitled
"Description of New Senior Discount Notes."
The Senior Discount Notes
Exchange Offer........... LIN Holdings is offering to issue $1,000 principal
amount of new senior discount notes in exchange for
each $1,000 principal amount of old senior discount
notes. The terms of the new senior discount notes
and the old senior discount notes are substantially
identical.
Senior Discount Notes
Registration Rights
Agreement................ LIN Holdings sold the old senior discount notes to
the initial purchasers in a transaction exempt from
the registration requirements of the Securities
Act. The old senior discount notes were immediately
resold by the initial purchasers in reliance on
Rule 144A under the Securities Act. In connection
with the sale, LIN Holdings entered into a
registration rights agreement with the initial
purchasers requiring us to make an exchange offer.
For more details, see the section entitled "The
Exchange Offers -- Purpose and Effect."
Ability to Resell New
Senior Discount Notes...... Based on interpretations by the staff of the SEC
set forth in published no-action letters, we
believe that you may offer for resale, resell and
otherwise freely transfer the new senior discount
notes without registration or delivering a
prospectus to a buyer if:
- you acquire the new senior discount notes in the
ordinary course of your business;
- you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate in
the distribution of new senior discount notes;
and
- you are not related to LIN Holdings.
However, the SEC has not considered this exchange
offer in the context of a no-action letter and we
cannot be sure that the staff of the SEC would make
the same determination with respect to the exchange
offer as in other circumstances. Furthermore, you
must, unless you are a broker-dealer, acknowledge
that you are not engaged in, and do not intend to
engage in, a distribution of your new senior
discount notes and have no arrangement or
understanding to participate in a distribution of
new senior discount notes. If you are a broker-
dealer that receives new senior discount notes for
your own account pursuant to the exchange offer you
must acknowledge that you will comply with the
prospectus delivery requirements of the Securities
Act in connection with any resale of your new
senior discount notes. If you are a broker-dealer
who acquired old senior discount notes directly
from LIN Holdings and not as a result of
market-making activities or other trading
activities, you may not rely on the SEC staff's
interpretations discussed
7
above or participate in the exchange offer and must
comply with the prospectus delivery requirements of
the Securities Act in order to resell the new
senior discount notes.
The exchange offer is not being made to:
- holders of old senior discount notes in any
jurisdiction in which the exchange offer or its
acceptance would not comply with the securities
or blue sky laws of that jurisdiction; and
- holders of old senior discount notes whom LIN
Holdings controls.
Expiration Date............ The senior discount notes exchange offer will
expire at 5:00 p.m., New York City time, on
November 26, 2001, or such later date and time to
which it is extended.
Withdrawal................. Unless we extend the date, you may withdraw your
tendered old senior discount notes at any time
before 5:00 p.m., New York City time, on the
expiration date of the exchange offer.
Interest on the New Senior
Discount Notes and Old
Senior Discount Notes.... Interest on your new senior discount notes will not
accrue or be payable prior to March 1, 2003.
Thereafter, cash interest on the new senior
discount notes will accrue at a rate of 10% per
annum and will be payable semi-annually in arrears
on March 1 and September 1 of each year, commencing
on September 1, 2003.
Conditions to the Senior
Discount Notes Exchange
Offer.................... The senior discount notes exchange offer is subject
to conditions, some of which we may waive. For more
information, see the section entitled "The Exchange
Offers -- Certain Conditions to the Exchange
Offers."
Procedures for Exchanging
Your Old Senior Discount
Notes.................... If you wish to exchange your old senior discount
notes for new senior discount notes you must
transmit to The Bank of New York, the exchange
agent, on or before the expiration date either:
- a properly completed and executed letter of
transmittal, which we have provided to you with
this prospectus, or a facsimile of the letter of
transmittal, together with your old senior
discount notes and any other documentation
requested by the letter of transmittal;
- a computer generated message, in which you
acknowledge and agree to be bound by the terms of
the letter of transmittal, transmitted by means
of the Depository Trust Company's Automated
Tender Offer Program system; or
8
- a notice of guaranteed delivery, in accordance
with the procedures described under the heading
"The Exchange Offers -- Guaranteed Delivery
Procedures."
By agreeing to be bound by the terms of the letter
of transmittal, you will be deemed to have made the
representations described on page 78 under the
heading "The Exchange Offers -- Purpose and
Effect."
Shelf Registration
Requirement.............. Pursuant to the registration rights agreement for
the senior discount notes, LIN Holdings is required
to file a "shelf" registration statement for a
continuous offering pursuant to Rule 415 under the
Securities Act in respect of the old senior
discount notes if:
- because of any change in law or applicable
interpretations of the staff of the SEC, we are
not permitted to effect the senior discount notes
exchange offer;
- any of the old senior discount notes validly
tendered in the senior discount notes exchange
offer are not exchanged for new senior discount
notes within 165 days of the offering of the old
senior discount notes;
- any holder of a private exchange securities
requests within 60 days after the senior discount
notes exchange offer;
- any applicable law or interpretations do not
permit any holder of old senior discount notes to
participate in the senior discount notes exchange
offer;
- any holder of old senior discount notes
participates in the senior discount notes
exchange offer and does not receive freely
transferable new senior discount notes in
exchange for old senior discount notes; or
- LIN Holdings so elects.
Federal Income Tax
Considerations........... The exchange of your old senior discount notes for
new senior discount notes in connection with the
exchange offer should not constitute a sale or
exchange for federal income tax purposes. See
"Certain United States Federal Income Tax
Considerations."
Effect of Not Tendering.... If you fail to tender your old senior discount
notes, you will continue to hold unregistered
securities and your ability to transfer them could
be adversely affected.
Please review the information on page 78 under the heading "The Exchange
Offers" for more detailed information concerning the exchange offers.
9
TERMS OF THE NEW NOTES
NEW SENIOR NOTES
Issuer..................... LIN Television Corporation.
Securities Offered......... $210,000,000 aggregate principal amount of 8%
senior notes due 2008.
Maturity................... The new senior notes will mature on January 15,
2008.
Interest Payment Dates..... Interest on the new senior notes will be payable
semi-annually on each January 15 and July 15,
commencing January 15, 2002.
Original Issue Discount.... For federal income tax purposes, the new senior
notes will be treated as having been issued with
"original issue discount" equal to the difference
between the issue price of the new senior notes and
the sum of all cash payments to be made thereon
other than payments of stated interest. You, as a
holder of a new senior note, must include as gross
income for federal income tax purposes a portion of
the original issue discount for each day during
each taxable year in which you hold a senior note
even though you will not receive the cash
attributable to such original issue discount prior
to maturity. See "Certain United States Federal
Income Tax Considerations -- U.S. Holders."
Sinking Fund............... None.
Optional Redemption........ Except as described below, we may not redeem the
new senior notes prior to January 15, 2005. On or
after January 15, 2005, we may redeem the new
senior notes, in whole or in part, at the
redemption prices set forth herein, together with
accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time and from time
to time on or prior to January 15, 2004, we may
redeem up to 35% of the aggregate principal amount
of the new senior notes with the net cash proceeds
of one or more private or public offerings, at a
redemption price equal to 108% of the principal
amount to be redeemed, together with accrued and
unpaid interest, if any, to the date of redemption,
provided that at least 65% originally issued
aggregate principal amount of the new senior notes
remains outstanding after each such redemption. See
"Description of the New Senior Notes -- Optional
Redemption."
Change of Control.......... Upon the occurrence of a change of control, we will
have the option, at any time on or prior to March
1, 2003, to redeem the new senior notes, in whole
but not in part, at a redemption price equal to
100% of the principal amount thereof, plus accrued
and unpaid interest, plus the applicable premium.
If we do not redeem the new senior notes, or if a
change of control occurs after March 1, 2003, we
will be required to offer to repurchase your new
senior notes at a price equal to 101% of the
principal amount thereof, together with accrued and
unpaid interest, if any, to the date of
10
purchase. See "Description of the New Senior
Notes -- Change of Control."
Guarantees................. The new senior notes will be guaranteed, jointly
and severally, on an unsecured senior basis, by our
direct and indirect, existing and future,
restricted subsidiaries. The guarantors also
guarantee all of our obligations under the senior
credit facilities. Our obligations under the senior
credit facilities are secured by substantially all
of our assets. See "Description of the New Senior
Notes -- Subsidiary Guarantees of the Senior
Notes."
Ranking.................... The new senior notes will be senior unsecured
obligations and will rank, in right of payment, the
same as all of our existing and future senior
unsecured indebtedness and will rank senior in
right of payment with all of our subordinated
indebtedness and will be effectively subordinated
to any secured senior indebtedness including
borrowings under the senior credit facility.
Restrictive Covenants...... We will issue the new senior notes under an
indenture with The Bank of New York, successor to
United States Trust Company. The indenture, among
other things, will restrict our ability and the
ability of our restricted subsidiaries to:
- borrow money and issue stock;
- pay dividends on stock or repurchase stock;
- use assets as security in other transactions;
- sell assets or merge with or into other
companies;
- pay dividends or make other payments by the
restricted subsidiaries; or
- enter into transactions with our affiliates.
For more details on these restrictive covenants,
see the discussion under the section entitled
"Description of the New Senior Notes -- Certain
Covenants."
Use of Proceeds............ We will not receive any cash proceeds from the
issuance of the new senior notes in connection with
the exchange offer.
SENIOR DISCOUNT NOTES
Issuer..................... LIN Holdings Corp.
Securities Offered......... $100,000,000 aggregate principal amount at maturity
of 10% senior discount notes due 2008. The new
senior discount notes will be issued at a discount
to their aggregate principal amount at maturity.
The yield to maturity of the new senior discount
notes is 12.5%, computed on a semi-annual bond
equivalent basis, calculated from June 14, 2001.
Maturity................... The new senior discount notes will mature on March
1, 2008.
Interest Payment Dates..... Cash interest will not accrue or be payable on the
new senior discount notes prior to March 1, 2003.
Thereafter, cash interest
11
on the new senior discount notes will accrue at a
rate of 10% per annum and will be payable
semi-annually in arrears on March 1 and September 1
of each year, commencing on September 1, 2003.
Original Issue Discount.... For federal income tax purposes, the new senior
discount notes will be treated as having been
issued with "original issue discount" equal to the
difference between the issue price of the new
senior discount notes and the sum of all cash
payments, whether denominated as principal or
interest, to be made thereon. You, as a holder of a
new senior discount note, must include as gross
income for federal income tax purposes a portion of
such original issue discount for each day during
each taxable year in which you hold a new senior
discount note even though you will not receive
interest payments prior to September 1, 2003. See
"Certain United States Federal Income Tax
Considerations -- U.S. Holders."
Sinking Fund............... None.
Optional Redemption........ The new senior discount notes will be redeemable at
the option of LIN Holdings, in whole or in part, at
any time on or after March 1, 2003. On or after
such date, LIN Holdings may redeem the new senior
discount notes, in whole or in part, at the
redemption prices set forth in this prospectus,
together with accrued and unpaid interest, if any,
to the date of redemption. See "Description of the
New Senior Discount Notes -- Optional Redemption."
Change of Control.......... Upon a change of control, LIN Holdings will have
the option, at any time on or prior to March 1,
2003, to redeem your new senior discount notes, in
whole but not in part, at a redemption price equal
to 100% of the accreted value thereof plus the
applicable premium and, if LIN Holdings does not
redeem the new senior discount notes or if a change
of control occurs after March 1, 2003, LIN Holdings
will be required to offer to repurchase your new
senior discount notes at a price equal to 101% of
the accreted value thereof if redeemed on or before
March 1, 2003, and 101% of the principal amount at
maturity, plus accrued and unpaid interest, if any,
thereon, if redeemed after March 1, 2003. See
"Description of the Senior Discount Notes -- Change
of Control."
Guarantees................. None.
Ranking.................... The new senior discount notes will be senior
unsecured obligations of LIN Holdings and will
rank, in right of payment, the same as all senior
indebtedness of LIN Holdings, including LIN
Holdings' guarantee of the senior credit
facilities. LIN Holdings is a holding company with
no operations of its own and whose primary asset is
our capital stock, all of which will be pledged to
secure the senior credit facilities. As a result of
the holding company structure, the new senior
discount notes will effectively rank junior in
right of payment to all our creditors and the
creditors of our subsidiaries, including the
lenders
12
under the senior credit facilities, holders of the
new senior notes, holders of the existing senior
notes and trade creditors. See "Description of the
New Senior Discount Notes."
Restrictive Covenants...... LIN Holdings will issue the new senior discount
notes under an indenture with The Bank of New York,
successor to United States Trust Company. The
indenture, among other things, will restrict LIN
Holdings' ability and the ability of our restricted
subsidiaries to:
- borrow money and issue stock;
- pay dividends on stock or repurchase stock;
- use assets as security in other transactions;
- sell assets or merge with or into other
companies;
- pay dividends or make other payments by the
restricted subsidiaries; and
- enter into transactions with its affiliates.
For more details on these restrictive covenants,
see the discussion under the section entitled
"Description of the New Senior Discount
Notes -- Certain Covenants."
Use of Proceeds............ LIN Holdings will not receive any cash proceeds
from the issuance of the new senior discount notes
in connection with the exchange offer.
RISK FACTORS
You should carefully consider all of the information set forth in this
prospectus and, in particular, should evaluate the specific factors set forth
under "Risk Factors" for risks involved with an investment in the new notes, as
well as a continuing investment in the old notes.
13
SUMMARY HISTORICAL FINANCIAL DATA
The following tables set forth, as of the dates and for the years
indicated, summary historical consolidated financial data of LIN Holdings and
LIN Television. See "Selected Consolidated Financial and Operating Data."
<Table>
<Caption>
LIN TELEVISION
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN TELEVISION CORPORATION AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
STATEMENT OF OPERATIONS
DATA:
Net revenues................ $273,367 $291,519 $43,804 $ 189,536 $ 224,446 $ 295,706 $ 131,074
Operating costs and
expenses:
Direct operating.......... 68,954 70,746 11,117 48,812 57,292 78,693 40,594
Selling, general and
administrative.......... 59,974 63,473 11,701 42,168 49,123 64,193 31,992
Corporate................. 6,998 6,763 1,170 7,130 7,900 9,270 4,484
KXTX management fee....... -- -- -- 8,033 1,178 -- --
Tower write-offs(a)....... -- 2,697 -- -- -- -- --
Amortization of program
rights.................. 14,464 15,596 2,743 10,712 15,029 21,214 10,799
Depreciation and
amortization of
intangible assets....... 23,817 24,789 4,581 45,199 57,934 63,734 33,315
-------- -------- ------- ----------- ---------- ---------- ----------
Total operating costs and
expenses.................. 174,207 184,064 31,312 162,054 188,456 237,104 121,184
-------- -------- ------- ----------- ---------- ---------- ----------
Operating income............ 99,160 107,455 12,492 27,482 35,990 58,602 9,890
Interest expense............ 26,582 21,340 2,764 35,577 45,315 67,126 33,987
Other (income) expense,
net....................... (359) 200 146 4,817 4,366 (1,653) (872)
Merger expense(b)........... -- 7,206 8,616 -- -- -- --
-------- -------- ------- ----------- ---------- ---------- ----------
Income (loss) before
provision for (benefit
from) income taxes and
extraordinary item........ 72,937 78,709 966 (12,912) (13,691) (6,871) (23,225)
Provision for (benefit from)
income taxes.............. 26,476 30,602 3,710 2,648 5,141 10,590 (1,786)
-------- -------- ------- ----------- ---------- ---------- ----------
Income (loss) before
extraordinary item........ 46,461 48,107 (2,744) (15,560) (18,832) (17,461) (21,439)
Extraordinary loss, net of
tax benefit............... -- -- -- -- -- -- 4,410
-------- -------- ------- ----------- ---------- ---------- ----------
Net income (loss)........... $ 46,461 $ 48,107 $(2,744) $ (15,560) $ (18,832) $ (17,461) $ (25,849)
======== ======== ======= =========== ========== ========== ==========
OTHER DATA:
Capital expenditures........ $ 27,557 $ 20,605 $ 1,221 $ 21,498 $ 18,191 $ 29,126 $ 7,786
BCF(c)(d)................... 130,399 142,773 17,104 80,519 102,163 129,170 47,189
BCF margin(c)............... 47.7% 49.0% 39.0% 42.5% 45.5% 43.7% 36.0%
EBITDA(c)(d)................ 123,401 136,010 15,934 73,389 94,263 120,715 49,124
Interest expense:
Actual.................... 26,582 21,340 2,764 35,577 45,315 67,126 33,987
Adjusted(e)............... 71,557 30,495
Ratio of total debt to
EBITDA(f)................. 2.8x 1.9x 6.4x 6.6x 6.0x
Ratio of EBITDA to interest
expense(g)
Actual.................... 4.8x 6.7x 6.1x 2.3x 2.3x 1.9x 1.6x
Adjusted(e)............... 1.8x 1.9x
Ratio of earnings to fixed
charges(h)................ 3.8x 4.8x 1.4x -- -- -- --
</Table>
14
<Table>
<Caption>
LIN TELEVISION
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN TELEVISION CORPORATION AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
BALANCE SHEET DATA (AT
PERIOD END):
Cash and cash equivalents... $ 27,952 $ 8,046 $ 41,349 $ 17,699 $ 7,832 $ 49,955
Intangible assets, net...... 381,145 369,588 1,444,600 1,546,392 1,600,882 1,583,440
Total assets................ 595,944 569,325 1,789,178 1,942,252 2,036,207 2,046,397
Total debt.................. 350,000 260,000 467,015 618,966 725,132 704,524
Total stockholders'
equity.................... 138,448 192,565 730,962 713,662 696,670 742,400
CASH FLOW DATA:
Net cash provided by (used
in):
Operating activities...... $ 70,799 $ 81,691 $ 8,416 $ 65,446 $ 21,717 $ 58,236 $ 2,460
Investing activities...... (27,864) (15,060) (1,468) (1,753,865) (197,269) (174,081) (6,603)
Financing activities...... (33,008) (86,537) 1,071 1,729,768 151,902 105,978 46,266
Net increase (decrease) in
cash and cash
equivalents............. 9,927 (19,906) 8,019 41,349 (23,650) (9,867) 42,123
</Table>
15
<Table>
<Caption>
LIN HOLDINGS
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN HOLDINGS CORP. AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS, EXCEPT FOR MARGIN AND RATIO DATA)
STATEMENT OF OPERATIONS
DATA:
Net revenues................ $273,367 $291,519 $43,804 $ 189,536 $ 224,446 $ 295,706 $ 131,074
Operating costs and
expenses:
Direct operating.......... 68,954 70,746 11,117 48,812 57,292 78,693 40,594
Selling, general and
administrative.......... 59,974 63,473 11,701 42,168 49,123 64,193 31,992
Corporate................. 6,998 6,763 1,170 7,130 7,900 9,270 4,484
KXTX management fee....... -- -- -- 8,033 1,178 -- --
Tower write-offs(a)....... -- 2,697 -- -- -- -- --
Amortization of program
rights.................. 14,464 15,596 2,743 10,712 15,029 21,214 10,799
Depreciation and
amortization of
intangible assets....... 23,817 24,789 4,581 45,199 57,934 63,734 33,315
-------- -------- ------- ----------- ---------- ---------- ----------
Total operating costs and
expenses.................. 174,207 184,064 31,312 162,054 188,456 237,104 121,184
-------- -------- ------- ----------- ---------- ---------- ----------
Operating income............ 99,160 107,455 12,492 27,482 35,990 58,602 9,890
Interest expense............ 26,582 21,340 2,764 53,576 68,689 92,868 48,178
Other (income) expense,
net....................... (359) 200 146 4,817 4,366 (1,653) (872)
Merger expense(b)........... -- 7,206 8,616 -- -- -- --
-------- -------- ------- ----------- ---------- ---------- ----------
Income (loss) before
provision for (benefit
from) income taxes and
extraordinary item........ 72,937 78,709 966 (30,911) (37,065) (32,613) (37,416)
Provision for (benefit from)
income taxes.............. 26,476 30,602 3,710 (3,652) (3,039) 1,581 (8,052)
-------- -------- ------- ----------- ---------- ---------- ----------
Income (loss) before
extraordinary item........ 46,461 48,107 (2,744) (27,259) (34,026) (34,194) (29,364)
Extraordinary loss, net of
tax benefit............... -- -- -- -- -- -- 4,410
-------- -------- ------- ----------- ---------- ---------- ----------
Net income (loss)........... $ 46,461 $ 48,107 $(2,744) $ (27,259) $ (34,026) $ (34,194) $ (33,774)
======== ======== ======= =========== ========== ========== ==========
OTHER DATA:
Capital expenditures........ $ 27,557 $ 20,605 $ 1,221 $ 21,498 $ 18,191 $ 29,126 $ 7,786
BCF(c)(d)................... 130,399 142,773 17,104 80,519 102,163 129,170 47,189
BCF margin(c)............... 47.7% 49.0% 39.0% 42.5% 45.5% 43.7% 36.0%
EBITDA(c)(d)................ 123,401 136,010 15,934 73,389 94,263 120,715 49,124
Interest expense:
Actual.................... 26,582 21,340 2,764 53,576 68,689 92,868 48,178
Adjusted(e)............... 106,997 47,303
Ratio of total debt to
EBITDA(f)................. 2.8x 1.9x 9.3x 9.1x 8.2x
Ratio of EBITDA to interest
expense(g)
Actual.................... 4.8x 6.7x 6.1x 2.2x 2.3x 1.9x 1.6x
Adjusted(e)............... 1.6x 1.7x
Ratio of earnings to fixed
charges(h)................ 3.8x 4.8x 1.4x -- -- -- --
</Table>
16
<Table>
<Caption>
LIN HOLDINGS
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN HOLDINGS CORP. AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
BALANCE SHEET DATA (AT
PERIOD END):
Cash and cash equivalents... $ 27,952 $ 8,046 $ 41,349 $ 17,699 $ 7,832 $ 49,955
Intangible assets, net...... 381,145 369,588 1,444,600 1,546,392 1,600,882 1,583,440
Total assets................ 595,944 569,325 1,800,890 1,952,685 2,045,363 2,057,310
Total debt.................. 350,000 260,000 683,580 857,626 988,257 1,055,036
Total stockholders'
equity.................... 138,448 192,565 532,409 499,915 466,190 432,555
CASH FLOW DATA:
Net cash provided by (used
in):
Operating activities...... $ 70,799 $ 81,691 $ 8,416 $ 65,446 $ 21,717 $ 58,236 $ 2,460
Investing activities...... (27,864) (15,060) (1,468) (1,753,865) (197,269) (174,081) (6,603)
Financing activities...... (33,008) (86,537) 1,071 1,729,768 151,902 105,978 46,266
Net increase (decrease) in
cash and cash
equivalents............... 9,927 (19,906) 8,019 41,349 (23,650) (9,867) 42,123
</Table>
---------------
(a) During the second quarter of 1997, we disposed of towers and other
broadcast equipment that could no longer be used with digital technology.
(b) During the last half of 1997, we incurred financial, legal advisory and
regulatory filing fees in connection with the acquisition of LIN
Television.
(c) For a discussion of the terms "BCF" and "EBITDA," see "Certain Definitions
and Market and Industry Data." BCF Margin is BCF divided by Net Revenue.
(d) EBITDA and BCF have been calculated for the periods presented as follows:
<Table>
<Caption>
LIN TELEVISION
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN TELEVISION CORPORATION AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
Operating income.... $ 99,160 $107,455 $12,492 $ 27,482 $ 35,990 $ 58,602 $ 9,890
Plus:
Amortization of
program rights.. 14,464 15,596 2,743 10,712 15,029 21,214 10,799
Depreciation and
amortization of
intangible
assets.......... 23,817 24,789 4,581 45,199 57,934 63,734 33,315
Capital
distributions
from equity
investments..... -- -- -- -- -- 815 6,419
Non cash expenses
(credits)....... 1,496 1,349 275 493 603 (900) (450)
Less:
Program
payments........ (15,536) (13,179) (4,157) (10,497) (15,293) (22,750) (10,849)
-------- -------- ------- -------- -------- -------- --------
EBITDA.............. $123,401 $136,010 $15,934 $ 73,389 $ 94,263 $120,715 $ 49,124
Plus: Corporate
expenses.......... 6,998 6,763 1,170 7,130 7,900 9,270 4,484
Less: Capital
distributions from
equity
investments....... -- -- -- -- -- (815) (6,419)
-------- -------- ------- -------- -------- -------- --------
BCF................. $130,399 $142,773 $17,104 $ 80,519 $102,163 $129,170 $ 47,189
======== ======== ======= ======== ======== ======== ========
</Table>
(e) Adjusted amounts and ratios for the year ended December 31, 2000 and for
the six months ended June 30, 2001 represent historical amounts and ratios
adjusted to reflect the issuance of the notes and the use of the proceeds
to repay a part of our senior credit facilities, as if such issuance and
use of proceeds had occurred at the beginning of the periods presented.
17
(f) For purposes of this calculation, total debt consists of total long-term
debt outstanding (including current portion).
(g) For purposes of this calculation, interest expense excludes the
amortization of debt financing costs and bond discounts and losses on
financial instruments as follows:
<Table>
<Caption>
LIN TELEVISION
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN TELEVISION CORPORATION AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
Amortization of debt
financing costs... $888 $1,013 $169 $3,494 $3,990 $3,990 $2,053
Amortization of
discounts......... -- -- -- 51 68 68 77
Loss on financial
instruments....... -- -- -- -- -- -- 1,982
</Table>
<Table>
<Caption>
LIN HOLDINGS
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN HOLDINGS CORP. AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
Amortization of debt
financing costs... $888 $1,013 $169 $ 4,559 $ 5,268 $ 5,268 $ 2,706
Amortization of
discounts......... -- -- -- 15,458 22,476 24,811 13,614
Loss on financial
instruments....... -- -- -- -- -- -- 1,982
</Table>
(h) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" consist of income before provision for (benefit from) income
taxes and share of (income) loss in equity investments, plus fixed charges
and the distributed income of equity investees. "Fixed charges" consist of
interest costs, exclusive of the loss on financial instruments, and the
amortization of debt discount and deferred financing costs. Our earnings
were insufficient to cover fixed charges by $6.9 million, $8.2 million,
$6.4 million and $15.6 million for the period from March 3, 1998 to
December 31, 1998, for the fiscal years ended 1999 and 2000 and for the
six-month period ended June 30, 2001, respectively. LIN Holdings' earnings
were insufficient to cover fixed charges by $24.9 million, $31.6 million,
$32.2 million and $29.7 million for the period from March 3, 1998 to
December 31, 1998, for the fiscal years ended 1999 and 2000 and for the
six-month period ended June 30, 2001, respectively.
18
(i) EBITDA and BCF have been calculated for the periods presented as follows:
<Table>
<Caption>
LIN HOLDINGS
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN HOLDINGS CORP. AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
Operating income.... $ 99,160 $107,455 $12,492 $ 27,482 $ 35,990 $ 58,602 $ 9,890
Plus:
Amortization of
program
rights.......... 14,464 15,596 2,743 10,712 15,029 21,214 10,799
Depreciation and
amortization of
intangible
assets.......... 23,817 24,789 4,581 45,199 57,934 63,734 33,315
Capital
distributions
from equity
investments..... -- -- -- -- -- 815 6,419
Non cash expenses
(credits)....... 1,496 1,349 275 493 603 (900) (450)
Less:
Program
payments........ (15,536) (13,179) (4,157) (10,497) (15,293) (22,750) (10,849)
-------- -------- ------- -------- -------- -------- --------
EBITDA.............. $123,401 $136,010 $15,934 $ 73,389 $ 94,263 $120,715 $ 49,124
Plus: Corporate
expenses.......... 6,998 6,763 1,170 7,130 7,900 9,270 4,484
Less: Capital
distributions from
equity
investments....... -- -- -- -- -- (815) (6,419)
-------- -------- ------- -------- -------- -------- --------
BCF................. $130,399 $142,773 $17,104 $ 80,519 $102,163 $129,170 $ 47,189
======== ======== ======= ======== ======== ======== ========
</Table>
19
RISK FACTORS
We urge you to carefully consider the following factors, as well as the
other matters described in this prospectus.
RISKS RELATED TO THE NOTES
Leverage -- We have a substantial amount of debt, which could adversely affect
our financial condition and results of operations and prevent us from
fulfilling our obligations under the notes.
We currently have a large amount of indebtedness when compared to the
equity of our stockholders. As of June 30, 2001, LIN Holdings had $1,055.0
million of consolidated indebtedness and $432.6 million of consolidated common
stockholders' equity, and LIN Television had $704.5 million of consolidated
indebtedness and $742.4 million of consolidated common stockholder's equity. On
an as adjusted basis, our earnings would have been insufficient to cover fixed
charges by $28.9 million and $12.1 million for LIN Holdings and LIN Television,
respectively, for the six months ended June 30, 2001, and were insufficient to
cover fixed charges by $46.3 million and $10.9 million, respectively, for the
twelve months ended December 31, 2000. We may incur additional indebtedness in
the future, subject to certain limitations contained in the documents governing
our existing indebtedness. Accordingly, we will have significant debt service
obligations.
Our large amount of indebtedness could, for example:
- require us to use a substantial portion of our cash flow from operations
to pay indebtedness and reduce the availability of this cash flow to fund
working capital, capital expenditures, and other general corporate
activities;
- limit our ability to obtain additional financing in the future for
capital expenditures, working capital and other general corporate
activities;
- cause us to face interest rate risk since interest expense on certain of
our borrowings, including amounts borrowed under our senior credit
facilities, are at variable rates of interest; and
- impair our ability to successfully withstand a downturn in our business
or the economy in general.
In addition, all of our indebtedness incurred in connection with our senior
credit facilities is secured and is scheduled to become due prior to the time
the principal payments on the notes are scheduled to become due.
The occurrence of any one of these events could have a material adverse
effect on our financial condition, results of operations and ability to satisfy
our obligations under the notes. For more information on the requirements of the
notes and our other indebtedness, see the discussion under the sections entitled
"Description of Certain Indebtedness," "Description of the New Senior Notes" and
"Description of the New Senior Discount Notes."
Ability to Service Debt -- We may not be able to generate sufficient cash flow
to meet our debt service obligations.
Our ability to make scheduled payments of the principal of, or to pay
interest on, or to refinance our indebtedness, including the notes, will depend
on our future performance, which, to a certain extent, will be subject to
economic, financial, competitive and other factors beyond our control. We cannot
assure you that our business will continue to generate sufficient cash flow from
operations in the future to pay our indebtedness, including the notes, or to
fund our other liquidity needs. As a result, we may need to refinance all or a
portion of
20
our indebtedness, including the notes, on or before maturity, to sell assets or
to obtain additional financing. We cannot assure you that we will be able to
refinance any of our indebtedness on commercially reasonable terms or at all.
Our inability to generate sufficient cash flow or refinance our indebtedness on
commercially reasonable terms would have a material adverse effect on our
financial condition, results of operations and ability to satisfy our
obligations under the notes.
Restrictive Covenants -- We are required to comply with numerous covenants
that will restrict the manner in which we conduct our business.
The indentures governing the notes and the existing 8 3/8% Senior
Subordinated Notes due 2008 issued by LIN Television, the existing 10% senior
discount notes due 2008 issued by LIN Holdings and the senior credit facilities
contain numerous restrictive covenants that will limit the discretion of
management with respect to various business matters. These covenants place
significant restrictions on our ability, and the ability of our restricted
subsidiaries, to:
- incur additional indebtedness;
- pay dividends;
- create liens;
- sell assets;
- engage in certain mergers and acquisitions; and
- refinance indebtedness.
In addition, the senior credit facilities also require us to maintain
certain financial ratios. Our ability to comply with the covenants and other
terms of the indentures and the senior credit facilities will depend on our
future operating performance. Our failure to comply with the various covenants
contained in the indentures and the senior credit facilities, could result in an
event of default under the indentures or senior credit facilities, which, if not
cured or waived, could permit acceleration of the indebtedness thereunder and
acceleration of indebtedness under other instruments that may contain
cross-acceleration or cross-default provisions. If we were unable to repay any
amounts outstanding under the senior credit facilities, our lenders could
proceed against the collateral granted to them to secure our indebtedness. If
the amounts outstanding under the senior credit facilities were accelerated, we
cannot assure you that our assets would be sufficient to repay the amount in
full, which could have a material adverse effect on our financial condition,
results of operations, and our ability to satisfy our obligations under the
notes. The senior credit facilities prohibit the repayment, purchase,
redemption, defeasance or other payment of any of the principal of the notes at
any time prior to their stated maturity. Such restrictions could limit our
ability to respond to market conditions, to provide for unanticipated capital
investments or to take advantage of business or acquisition opportunities. In
addition, as of June 30, 2001, the indentures governing the senior notes and the
existing senior subordinated notes permit LIN Television to pay dividends or
make other restricted payments of up to $98.7 million, and the indentures
governing the senior discount notes and the existing senior discount notes
prevent LIN Holdings from paying dividends or making other restricted payments.
For more information on the requirements of the notes and out other
indebtedness, see the discussion under the sections entitled "Description of
Certain Indebtedness," "Description of the New Senior Notes" and "Description of
the New Senior Discount Notes."
21
Ranking of the Senior Discount Notes -- Your right to receive payments on
these notes is junior to our existing and future senior indebtedness.
The senior discount notes will be unsecured senior obligations of LIN
Holdings and will rank equal in right of payment with all unsecured senior
indebtedness of LIN Holdings, including the existing senior discount notes and
LIN Holdings' guarantee of the senior credit facilities. As a result of the
holding company structure, your right to receive payment as a holder of the
senior discount notes will effectively rank junior in right of payment to all
creditors of LIN Television and its subsidiaries, including our lenders under
the senior credit facilities, holders of the senior notes and trade creditors.
In the event of the dissolution, bankruptcy, liquidation or reorganization of
LIN Holdings or LIN Television, you, as a holder of the senior discount notes,
may not receive any amounts for your senior discount notes until after the
payment in full of all claims of the creditors of LIN Television and its
subsidiaries. As of June 30, 2001, the senior discount notes would have been
effectively subordinated to approximately $763.2 million of liabilities of
subsidiaries of LIN Holdings reflected on its consolidated balance sheet,
including indebtedness and other liabilities such as trade payables and accrued
expenses. For additional information, see the discussion under the sections
entitled "Capitalization" and "Description of the New Senior Discount Notes."
Holding Company Structure -- The senior discount notes are effectively
subordinated and LIN Holdings must depend on contributions from LIN Television
to satisfy its obligations under the senior discount notes.
LIN Holdings is a holding company whose only material asset is the capital
stock of LIN Television. The senior discount notes are an obligation of LIN
Holdings and if you are a holder of the senior discount notes you will have no
recourse to LIN Television or its assets, including any of its subsidiaries. We
do not anticipate that LIN Holdings will have any business, other than in
connection with its ownership of the capital stock of LIN Television and the
performance of its obligations with respect to the senior discount notes and the
senior credit facilities, and will depend on distributions from LIN Television
to meet its debt service obligations, including, without limitation, interest
and principal obligations with respect to the senior discount notes. Because of
the substantial leverage of LIN Television, and the dependence of LIN Holdings
upon the operating performance of LIN Television to generate distributions to
LIN Holdings, we cannot assure you that LIN Holdings will have adequate funds to
fulfill its obligations in respect of the senior discount notes when due. In
addition, the indentures, the senior credit facilities and applicable federal
and state law will impose restrictions on the payment of dividends and the
making of loans by LIN Television to LIN Holdings. As a result, LIN Holdings may
be unable to gain access to the cash flow or assets of LIN Television in amounts
sufficient to pay cash interest on the senior discount notes on and after March
1, 2003, the date on which cash interest first becomes payable, and principal of
the senior discount notes when due or upon a change of control or the occurrence
of any other event requiring the repayment of principal. Accordingly, LIN
Holdings may be required to:
- refinance the senior discount notes and its existing senior discount
notes;
- seek additional debt or equity financing;
- cause LIN Television to refinance all or a portion of its indebtedness
with indebtedness containing covenants allowing LIN Holdings to gain
access to LIN Television's cash flow or assets;
22
- cause LIN Television to obtain modifications of the covenants restricting
LIN Holdings' access to cash flow or assets of LIN Television contained
in its financing documents, including the indentures or senior credit
facilities; or
- pursue a combination of these actions.
The measures LIN Holdings may undertake to gain access to sufficient cash
flow to meet its future debt service requirements for the senior discount notes
will depend on general economic and financial market conditions, as well as the
financial condition of LIN Holdings and LIN Television and other relevant
factors existing at such time. We cannot assure you that any of these measures
could be accomplished. For additional information, see the discussion under the
sections entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
Encumbrances on Assets -- Substantially all of our assets are pledged under
our senior credit facilities, which limits your right as a holder of notes to
recourse against our assets.
Our obligations under the senior credit facilities are secured by a first
priority pledge of, or a first priority security interest in, as the case may
be, substantially all of our assets, including 100% of the common stock of LIN
Television and its subsidiaries. If we become insolvent or liquidated, or if
payment under any of the senior credit facilities or in respect of any other
secured senior indebtedness is accelerated, our lenders under the senior credit
facilities or holders of such other secured senior indebtedness will be entitled
to exercise the remedies available to a secured lender under applicable law, in
addition to any remedies that may be available under documents pertaining to the
senior credit facilities or such other senior indebtedness. The notes will not
be secured. In addition, the indenture governing the senior notes will contain a
provision that prohibits the trustee thereunder or you, as holders of the senior
notes, from challenging:
- the existence, scope, legality, validity, enforceability, perfection or
priority of any security interest asserted by any lender or the agent for
the lenders under the senior credit facilities; or
- the rights of any lender or the agent for the lenders under the senior
credit facilities to realize the intended benefits of such security
interest.
Accordingly, holders of such secured senior indebtedness will have a prior claim
to you with respect to the assets securing such indebtedness. For additional
information, see the discussion under the sections entitled "Description of
Certain Indebtedness," "Description of the New Senior Notes" and "Description of
the New Senior Discount Notes."
Change of Control -- We may not have the ability to raise the funds necessary
to finance the change of control offer required by the indentures.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding notes. However, it is
possible that we will not have sufficient funds at the time of the change of
control to make the required repurchase of the notes, or that, in any event, we
would be permitted to repurchase the notes under the terms of senior credit
facilities or the indentures. For more information, see the discussion under the
sections entitled "Description of the New Senior Notes -- Change of Control" and
"Description of the New Senior Discount Notes -- Change of Control."
Fraudulent Conveyance -- Federal and state statutes allow courts, under
specific circumstances, to void debt obligations and require noteholders to
return payments received.
Our incurrence of indebtedness, such as the notes, the proceeds of which
will be used to reduce certain indebtedness incurred in connection with Hicks
Muse's acquisition of us, is
23
subject to review under relevant federal and state fraudulent conveyance
statutes in a bankruptcy or reorganization case or a lawsuit by or on behalf of
our creditors. Under these statutes, if a court were to find that the
indebtedness was incurred with the intent of hindering, delaying or defrauding
present or future creditors, or that we received less than a reasonably
equivalent value or fair consideration for those obligations and, at the time of
the occurrence of the obligations, we:
- were insolvent;
- became insolvent by reason of the incurrence of the indebtedness;
- were engaged or were about to engage in a business or transaction for
which our remaining unencumbered assets constituted unreasonably small
capital; or
- intended to or believed that we would incur debts beyond our ability to
pay such debts as they matured or became due,
the court could void our obligations under the notes, subordinate the notes to
our other indebtedness, or take other action detrimental to you as holders of
the notes.
The measure of insolvency for purposes of a fraudulent conveyance claim
will vary depending upon the law of the applicable jurisdiction. Generally,
however, a company will be considered insolvent at a particular time if the sum
of its debts at that time is greater than the then fair value of its assets or
if the fair saleable value of its assets at that time is less than the amount
that would be required to pay its probable liability on its existing debts as
they become due. We cannot assure you as to what standard a court would apply to
evaluate our intents or to determine whether we were insolvent at the time of,
or rendered insolvent upon, the consummation of the acquisition, or that,
regardless of the standard, a court would not determine that we were insolvent
at the time of, or rendered insolvent upon, the acquisition.
In addition, the subsidiary guarantees of the senior notes may be subject
to review under relevant federal and state fraudulent conveyance and similar
statutes in a bankruptcy or reorganization case or a lawsuit by or on behalf of
creditors of any of the guarantors. In such a case, the analysis set forth above
generally would apply. A court could avoid a guarantor's obligation under its
subsidiary guarantee, subordinate the subsidiary guarantee to other indebtedness
of the guarantor or take other action detrimental to you as holders of the
senior notes.
Original Issue Discount -- You will have to include interest in your taxable
income before you receive cash as a holder of the senior discount notes.
The senior discount notes will be issued at a substantial discount from
their principal amount at maturity. Although cash interest will not accrue on
the senior discount notes prior to March 1, 2003, and there will be no periodic
payments of cash interest on the senior discount notes prior to September 1,
2003, original issue discount, which is the difference between the stated
redemption price at maturity and the issue price of the senior discount notes,
will accrue from the issue date of the senior discount notes. Consequently, you,
as a purchaser of senior discount notes, generally will be required to include
amounts in gross income for United States federal income tax purposes in advance
of your receipt of the cash payments to which the income is attributable. Such
amounts in the aggregate will be equal to the difference between the stated
redemption price at maturity, inclusive of stated interest on the senior
discount notes, and the issue price of the senior discount notes. For more
information regarding such tax consequences, see the discussion under the
section entitled "Certain United States Federal Income Tax Considerations."
24
Original Issue Discount -- You will have to include interest in your taxable
income before you receive cash as a holder of senior notes.
For federal income tax purposes, the senior notes will be treated as having
been issued with "original issue discount" equal to the difference between the
issue price of the senior notes and the sum of all cash payments to be made
thereon other than payments of stated interest. You, as a holder of a senior
note, must include as gross income for federal income tax purposes a portion of
such original issue discount for each day during each taxable year in which a
senior note is held even though the cash attributable to such original issue
discount will not be received prior to maturity. For more information regarding
such tax consequences, see the discussion under the section entitled "Certain
United States Federal Income Tax Considerations -- U.S. Holders."
In the event a bankruptcy case is commenced by or against us under the
United States Bankruptcy Code after the issuance of the notes, your claim as a
holder of the notes may be limited to an amount equal to the sum of the initial
offering price and that portion of the original issue discount which is not
deemed to constitute "unmatured interest" for purposes of the Bankruptcy Code.
Any original issue discount that was not amortized as of the date of any such
bankruptcy filing would constitute "unmatured interest." To the extent that the
Bankruptcy Code differs from the Internal Revenue Code in determining the method
of amortization of original issue discount, you, as a holder of notes, may
realize taxable gain or loss on payment of your claim in bankruptcy.
Lack of Public Market -- No active trading market exists for the notes and one
may not develop.
We do not intend to apply for a listing of the notes on a securities
exchange or on any automated dealer quotation system. Currently, there is no
established market for the notes and we cannot assure you as to:
- markets that may develop for the notes;
- your ability as holders of the notes to sell your notes; or
- the prices at which you would be able to sell their notes.
If any markets were to exist, the notes could trade at prices that may be
lower than their initial market value, depending upon many factors, including
prevailing interest rates and the markets for similar securities.
The liquidity of, and trading market for, the notes also may be adversely
affected by general declines in the market for similar securities. Such a
decline may adversely affect such liquidity and trading markets independently of
our financial performance and prospects.
Failure to Exchange Old Notes -- You may suffer adverse consequences if you
fail to exchange your old notes.
If you do not exchange your old notes for new notes in connection with the
exchange offer, you will continue to be subject to the provisions of the
indentures regarding transfer and exchange of the old notes and the restrictions
on transfer of the old notes. In general, the old notes may not be offered or
sold, unless registered under the Securities Act and applicable state securities
laws. We do not currently intend to register the old notes.
25
RISKS RELATED TO OUR BUSINESS
Potential Conflicts of Interest -- Broadcast interests of our affiliates may
be attributable to us and may limit our ability to acquire television stations
in certain markets.
The number of television stations we may acquire in any market is limited
by FCC rules and may vary depending upon whether the interests in other
television stations or other media properties of individuals affiliated with us
are attributable to those individuals under FCC rules. The FCC generally applies
its ownership limits to "attributable" interests held by an individual,
corporation, partnership or other association. The broadcast interests of our
officers, directors and majority stockholder are generally attributable to us,
which may limit us from acquiring or owning television stations in certain
markets. For more information, see the discussion under the sections entitled
"Management," "Securities Ownership of Certain Beneficial Owners and Management"
and "Business -- Licensing and Regulation."
Potential Conflicts of Interest -- Due to our relationship with Hicks Muse, we
maybe unable to pursue certain acquisition opportunities.
Hicks Muse is in the business of making significant investments in existing
or newly formed companies and may from time to time acquire and hold controlling
or non-controlling interests in television broadcast assets, such as its
existing investment in STC Broadcasting, other than through us, or in other
businesses, like Clear Channel Communications, Inc., that may directly or
indirectly compete with us for advertising revenues. Hicks Muse and its
affiliates may from time to time identify, pursue and consummate acquisitions of
television stations or other broadcast related businesses that may be
complementary to our business and therefore such acquisition opportunities may
not be available to us. In addition, Hicks Muse may from time to time identify
and structure acquisitions for us and will receive fees in connection with these
transactions. Certain affiliates of Hicks Muse have entered, and in the future
may enter into, business relationships with us or our subsidiaries. For more
information, see the discussion under the sections entitled "Certain
Relationships and Related Transactions."
Key Personnel -- We depend on our key personnel and skilled employees for our
success. The loss of their services and the inability to hire and retain them
could have a negative impact on us.
Our success is dependent upon our ability to attract and retain skilled
managers and other personnel, including our present officers and general
managers. The loss of the services of our Chairman, President and Chief
Executive Officer, Gary R. Chapman, may have a material adverse effect on our
operations. Mr. Chapman's current employment agreement with us will
automatically renew for one additional year on December 31, 2001 unless
otherwise terminated by either Mr. Chapman or us by notice 90 days prior to that
date.
Acquisition Strategy -- We intend to pursue a growth strategy through
acquisitions of television stations, which could pose certain risks and
increase our leverage.
We intend to pursue selective acquisitions of television stations with the
goal of improving their operating performance by applying our management's
business strategy. Inherent in any future acquisitions are certain risks such as
increasing leverage and debt service requirements and combining company cultures
and facilities which could have a material adverse effect on our operating
results, particularly during the period immediately following any acquisitions.
Additional debt or equity capital may be required to complete future
acquisitions, and we cannot assure you that we will be able to raise the
required capital. We also cannot assure you that, with respect to any acquired
station, we will be able to successfully implement effective cost controls,
increase advertising revenues or increase the station's audience share.
26
Advertising -- Our operating results are dependent on advertising revenues.
The loss of advertising revenues could have a negative impact on us.
Our operating results are primarily dependent on advertising revenues
which, in turn, depend on:
- national and local economic conditions, coverage of political events and
high profile sporting events, such as the Olympics, Super Bowl and NCAA
Men's Basketball Tournament;
- the relative popularity of our programming, which in many cases, is
dependent on the relative popularity of the relevant network's
programming;
- the demographic characteristics of our markets; and
- the activities of competitors.
The television industry is cyclical in nature, and our revenues could be
adversely affected by a future local, regional or national recession.
Programming -- Our most significant operating cost is our programming.
Increased programming costs could have a negative impact on us.
Our most significant operating cost is syndicated programming. We cannot
assure you that we will not be exposed in the future to increased syndicated
programming costs which may adversely affect our operating results. We often
acquire program rights two or three years in advance, making it difficult for us
to accurately predict how a program will perform. In some instances, we may have
to replace programs before their costs have been fully amortized, resulting in
write-offs that increase station operating costs.
Affiliation Agreements -- Our operations are dependent upon our network
affiliation agreements. The loss of network affiliate agreements could have a
negative impact on us.
The non-renewal or termination of a network affiliation agreement could
have a material adverse effect on our operations. Each of the networks generally
provides our affiliated stations with up to 22 hours of prime time programming
per week. In return, the stations broadcast network-inserted commercials during
such programming and receive cash network compensation. Although network
affiliates generally have achieved higher ratings than unaffiliated independent
stations in the same market, we cannot assure you as to the future success of
each network's programming or the continuation of such programming. Our network
affiliation agreements are subject to termination by the networks under certain
circumstances. Some of the networks with which our stations are affiliated have
required other broadcast groups, upon renewal of affiliation agreements, to
reduce or eliminate network affiliation compensation and to accept other
material modifications of existing affiliation agreements. Consequently, we
cannot assure you that our affiliation agreements will remain in place or that
each network will continue to provide programming or compensation to affiliates
on the same basis as it currently provides programming or compensation.
Competition -- The competitive nature of the television broadcasting industry
could threaten our position.
The television broadcasting industry is highly competitive and is
undergoing a period of consolidation and significant change. Many of our current
and potential competitors have greater financial, marketing, programming and
broadcasting resources than we do. Technological innovation and the resulting
proliferation of programming alternatives, such as cable television, wireless
cable, satellite-to-home distribution services, pay-per-view and home video and
entertainment systems, have fractionalized television viewing audiences and have
27
subjected free over-the-air television broadcast stations to new types of
competition. In addition, as a result of the Telecommunications Act of 1996, the
legislative ban on telephone cable ownership has been repealed and telephone
companies are now permitted to seek FCC approval to provide video services to
homes under specified circumstances. Consequently, we may not be able to
maintain or increase our current audience ratings or advertising revenues.
New Technologies -- Changes in technology will impact our long-term success
and ability to compete.
The FCC has adopted rules for implementing advanced television, commonly
referred to as "digital" television, in the United States. Implementation of
digital television will improve the technical quality of over-the-air broadcast
television. It is possible, however, that conversion to digital operations may
reduce a station's geographical coverage area. We believe that digital
television is essential to our long-term viability and the broadcast industry,
but we cannot predict the precise effect digital television might have on our
business. As required by the Telecommunications Act of 1996, the FCC has also
proposed to levy fees on broadcasters with respect to non-broadcast uses of
digital channels, including data transmissions or subscriber services. For
additional information on the requirements of the FCC, see the discussion under
the section entitled "Business -- Licensing and Regulation."
Further advances in technology may also increase competition for household
audiences and advertisers. We are unable to predict the effect that
technological changes will have on the broadcast television industry or the
future results of our operations.
GECC Note -- A default under the GECC Note could result in unanticipated tax
liability to us and could trigger a change of control, which could have a
negative impact on us.
General Electric Capital Corporation or GECC provided debt financing for a
joint venture between us and NBC in the form of an $815.5 million, 25-year
non-amortizing senior secured note. The obligations under the note were assumed
by the joint venture, and we retained the proceeds of the note to finance a
portion of the cost of Hicks Muse's acquisition of us.
Annual cash interest payments on the note are approximately $65.2 million.
There are no scheduled payments of principal due prior to 2023, the stated
maturity of the note. The note is not an obligation or the obligation of any of
our subsidiaries and is recourse only to the joint venture, our equity therein
and to Ranger Equity Holdings B Corp. pursuant to a guarantee. Ranger Equity
Holdings B Corp. is one of LIN Holding's two corporate parents, owning 63% of
LIN Holdings common stock.
An event of default under the note will occur only if the joint venture
fails to make any scheduled payment of interest, within 90 days of the date due
and payable, on or principal of the note. The joint venture has established a
cash reserve of $10.0 million for the purpose of making interest payments on the
note when due. Both Ranger Equity Holdings B Corp. and NBC will have the right
to make a shortfall loan to the joint venture to cover any interest payment.
However, if the joint venture fails to pay interest on the note, and neither
Ranger Equity Holdings B Corp. nor NBC makes a shortfall loan to cover the
interest payment, an event of default would occur under the note and GECC could
accelerate the maturity of the $815.5 million principal amount due under the
note.
The formation of the joint venture was intended to be tax-free to us.
However, any repayment of the note, whether due to an acceleration upon default
or otherwise, could result in a substantial tax liability to us which would have
a material adverse effect on us. Other than the acceleration of the principal
amount of the note upon an event of default as described above, prepayment of
the principal of the note is prohibited without our prior consent.
28
In addition, if an event of default occurs under the note, and GECC is
unable to collect all amounts owed to it after exhausting all commercially
reasonable remedies against joint venture, including during the pendency of any
bankruptcy involving the joint venture, GECC may proceed against Ranger Equity
Holdings B Corp. to collect any deficiency, which could result in triggering the
change of control provisions under the senior credit facilities, the notes and
our existing indebtedness.
Regulation -- We are subject to significant regulation and must maintain our
licenses to continue our operations.
Our stations are subject to significant regulation by the FCC under The
Communications Act of 1934, as amended. For additional information regarding FCC
regulation, see the discussion under the section entitled "Business -- Licensing
and Regulation."
USE OF PROCEEDS
We will not receive any proceeds for the exchange of the new notes for the
old notes pursuant to the exchange offers. The net proceeds of the offering of
the old notes, after the repayment of term loans under existing senior credit
facilities, have been and will continue to be used for general corporate
purposes and for pending and future acquisitions.
29
CAPITALIZATION
The following table sets forth the consolidated capitalization of LIN
Television and LIN Holdings as of June 30, 2001. The information set forth below
should be read in conjunction with the "Selected Consolidated Financial and
Operating Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the consolidated financial statements of LIN
Television and LIN Holdings and the related notes thereto included elsewhere in
this prospectus.
<Table>
<Caption>
AS OF JUNE 30, 2001
-----------------------
LIN LIN
TELEVISION HOLDINGS
---------- ----------
Cash and Cash Equivalents.................................. $ 49,955 $ 49,955
========== ==========
Long Term Debt
Senior Credit Facilities................................. $ 200,301 $ 200,301
10% Senior Discount Notes due 2008....................... -- 276,282
8 3/8% Senior Subordinated Notes due 2008................ 299,470 299,470
Senior Notes............................................. 202,253 202,253
Senior Discount Notes.................................... -- 74,230
7% STC Broadcasting Note due 2006........................ 2,500 2,500
---------- ----------
Total Long-Term Debt............................. 704,524 1,055,036
Total Stockholders' Equity................................. 742,400 432,555
---------- ----------
Total Capitalization............................. $1,446,924 $1,487,591
========== ==========
</Table>
Since June 30, 2001, there has been no material changes in the consolidated
capitalization of LIN Television and LIN Holdings.
For a description of the senior credit facilities, the existing 10% senior
discount notes due 2008 and 8 3/8% senior notes due 2008, see the discussion
under the section entitled "Description of Certain Indebtedness."
30
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
Set forth below is selected consolidated financial and operating data of
LIN Television, LIN Holdings and its predecessor, for each of the five years in
the period ended December 31, 2000, and for the six months ended June 30, 2001.
The selected financial data as of June 30, 2001 and for the six months then
ended is derived from unaudited consolidated financial statements that appear
elsewhere in this prospectus. The selected financial data as of December 31,
2000 and 1999, and for the years ended December 31, 2000 and 1999, and the
period from March 3, 1998 to December 31, 1998, is derived from audited
consolidated financial statements that appear elsewhere in this prospectus. The
selected financial data as of December 31, 1998 is derived from audited
consolidated financial statements that are not presented in this prospectus. The
selected financial data for the period from January 1, 1998 to March 2, 1998, is
derived from audited consolidated financial statements of the predecessor
business that appear elsewhere in this prospectus. The selected financial data
as of and for the years ended December 31, 1997 and 1996, is derived from
audited consolidated financial statements of the predecessor business that are
not presented in this prospectus. The selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the historical consolidated financial statements
of LIN Television, LIN Holdings and its predecessor, and the notes thereto.
Because of the revaluation of assets and liabilities, and the related impact on
the balance sheet and statement of operations, as a result of the acquisition of
the predecessor business by LIN Holdings on March 3, 1998, the financial
statements of the predecessor business for the periods prior to March 3, 1998
are not directly comparable to those of LIN Television or LIN Holdings
subsequent to that date. The historical results presented are not necessarily
indicative of future results.
<Table>
<Caption>
LIN TELEVISION
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN TELEVISION CORPORATION AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
STATEMENT OF OPERATIONS
DATA:
Net revenues................ $273,367 $291,519 $43,804 $ 189,536 $224,446 $295,706 $131,074
Operating costs and
expenses:
Direct operating........... 68,954 70,746 11,117 48,812 57,292 78,693 40,594
Selling, general and
administrative........... 59,974 63,473 11,701 42,168 49,123 64,193 31,992
Corporate.................. 6,998 6,763 1,170 7,130 7,900 9,270 4,484
KXTX management fee........ -- -- -- 8,033 1,178 -- --
Tower write-offs(a)........ -- 2,697 -- -- -- -- --
Amortization of program
rights................... 14,464 15,596 2,743 10,712 15,029 21,214 10,799
Depreciation and
amortization of
intangible assets........ 23,817 24,789 4,581 45,199 57,934 63,734 33,315
-------- -------- ------- ----------- -------- -------- --------
Total operating costs and
expenses................... 174,207 184,064 31,312 162,054 188,456 237,104 121,184
-------- -------- ------- ----------- -------- -------- --------
Operating income............ 99,160 107,455 12,492 27,482 35,990 58,602 9,890
Interest expense............ 26,582 21,340 2,764 35,577 45,315 67,126 33,987
Other (income) expense,
net........................ (359) 200 146 4,817 4,366 (1,653) (872)
Merger expense(b)........... -- 7,206 8,616 -- -- -- --
-------- -------- ------- ----------- -------- -------- --------
Income (loss) before
provision for (benefit
from) income taxes and
extraordinary item......... 72,937 78,709 966 (12,912) (13,691) (6,871) (23,225)
Provision for (benefit from)
income taxes............... 26,476 30,602 3,710 2,648 5,141 10,590 (1,786)
-------- -------- ------- ----------- -------- -------- --------
Income (loss) before
extraordinary item......... 46,461 48,107 (2,744) (15,560) (18,832) (17,461) (21,439)
Extraordinary loss, net of
tax benefit................ -- -- -- -- -- -- 4,410
-------- -------- ------- ----------- -------- -------- --------
Net income (loss)........... $ 46,461 $ 48,107 $(2,744) $ (15,560) $(18,832) $(17,461) $(25,849)
======== ======== ======= =========== ======== ======== ========
</Table>
31
<Table>
<Caption>
LIN TELEVISION
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN TELEVISION CORPORATION AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
OTHER DATA:
Capital expenditures........ $ 27,557 $ 20,605 $ 1,221 $ 21,498 $ 18,191 $ 29,126 $ 7,786
BCF(c)(d)................... 130,399 142,773 17,104 80,519 102,163 129,170 47,189
BCF margin(c)............... 47.7% 49.0% 39.0% 42.5% 45.5% 43.7% 36.0%
EBITDA(c)(d)................ 123,401 136,010 15,934 73,389 94,263 120,715 49,124
Interest expense:
Actual..................... 26,582 21,340 2,764 35,577 45,315 67,126 33,987
Adjusted(e)................ 71,557 30,495
Ratio of total debt to
EBITDA(f).................. 2.8x 1.9x 6.4x 6.6x 6.0x
Ratio of EBITDA to interest
expense(g):
Actual..................... 4.8x 6.7x 6.1x 2.3x 2.3x 1.9x 1.6x
Adjusted(e)................ 1.8x 1.9x
Ratio of earnings to fixed
charges(h)................. 3.8x 4.8x 1.4x -- -- -- --
BALANCE SHEET DATA (AT
PERIOD END):
Cash and cash equivalents... $ 27,952 $ 8,046 $ 41,349 $ 17,699 $ 7,832 $ 49,955
Intangible assets, net...... 381,145 369,588 1,444,600 1,546,392 1,600,882 1,583,440
Total assets................ 595,944 569,325 1,789,178 1,942,252 2,036,207 2,046,397
Total debt.................. 350,000 260,000 467,015 618,966 725,132 704,524
Total stockholders'
equity..................... 138,448 192,565 730,962 713,662 696,670 742,400
CASH FLOW DATA:
Net cash provided by (used
in):
Operating activities....... $ 70,799 $ 81,691 $ 8,416 $ 65,446 $ 21,717 $ 58,236 $ 2,460
Investing activities....... (27,864) (15,060) (1,468) (1,753,865) (197,269) (174,081) (6,603)
Financing activities....... (33,008) (86,537) 1,071 1,729,768 151,902 105,978 46,266
Net increase (decrease) in
cash and cash
equivalents................ 9,927 (19,906) 8,019 41,349 (23,650) (9,867) 42,123
</Table>
32
<Table>
<Caption>
LIN HOLDINGS
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN HOLDINGS CORP. AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
STATEMENT OF OPERATIONS
DATA:
Net revenues................ $273,367 $291,519 $43,804 $ 189,536 $ 224,446 $ 295,706 $ 131,074
Operating costs and
expenses:
Direct operating............ 68,954 70,746 11,117 48,812 57,292 78,693 40,594
Selling, general and
administrative............ 59,974 63,473 11,701 42,168 49,123 64,193 31,992
Corporate................... 6,998 6,763 1,170 7,130 7,900 9,270 4,484
KXTX management fee......... -- -- -- 8,033 1,178 -- --
Tower write-offs(a)......... -- 2,697 -- -- -- -- --
Amortization of program
rights.................... 14,464 15,596 2,743 10,712 15,029 21,214 10,799
Depreciation and
amortization of intangible
assets.................... 23,817 24,789 4,581 45,199 57,934 63,734 33,315
-------- -------- ------- ----------- ---------- ---------- ----------
Total operating costs and
expenses.................. 174,207 184,064 31,312 162,054 188,456 237,104 121,184
-------- -------- ------- ----------- ---------- ---------- ----------
Operating income............ 99,160 107,455 12,492 27,482 35,990 58,602 9,890
Interest expense............ 26,582 21,340 2,764 53,576 68,689 92,868 48,178
Other (income) expense,
net....................... (359) 200 146 4,817 4,366 (1,653) (872)
Merger expense(b)........... -- 7,206 8,616 -- -- -- --
-------- -------- ------- ----------- ---------- ---------- ----------
Income (loss) before
provision for (benefit
from) income taxes and
extraordinary item........ 72,937 78,709 966 (30,911) (37,065) (32,613) (37,416)
Provision for (benefit from)
income taxes.............. 26,476 30,602 3,710 (3,652) (3,039) 1,581 (8,052)
-------- -------- ------- ----------- ---------- ---------- ----------
Income (loss) before
extraordinary item........ 46,461 48,107 (2,744) (27,259) (34,026) (34,194) (29,364)
Extraordinary loss, net of
tax benefit............... -- -- -- -- -- -- 4,410
-------- -------- ------- ----------- ---------- ---------- ----------
Net income (loss)........... $ 46,461 $ 48,107 $(2,744) $ (27,259) $ (34,026) $ (34,194) $ (33,774)
======== ======== ======= =========== ========== ========== ==========
OTHER DATA:
Capital expenditures........ $ 27,557 $ 20,605 $ 1,221 $ 21,498 $ 18,191 $ 29,126 $ 7,786
BCF(c)(h)................... 130,399 142,773 17,104 80,519 102,163 129,170 47,189
BCF margin(c)............... 47.7% 49.0% 39.0% 42.5% 45.5% 43.7% 36.0%
EBITDA(c)(h)................ 123,401 136,010 15,934 73,389 94,263 120,715 49,124
Interest expense:
Actual.................... 26,582 21,340 2,764 53,576 68,689 92,868 48,178
Adjusted(e)............... 106,997 47,303
Ratio of total debt to
EBITDA(f)................. 2.8x 1.9x 9.3x 9.1x 8.2x
Ratio of EBITDA to interest
expense(g):
Actual.................... 4.8x 6.7x 6.1x 2.2x 2.3x 1.9x 1.6x
Adjusted(e)............... 1.6x 1.7x
Ratio of earnings to fixed
charges(h)................ 3.8x 4.8x 1.4x -- -- -- --
</Table>
33
<Table>
<Caption>
LIN HOLDINGS
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN HOLDINGS CORP. AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
BALANCE SHEET DATA (AT
PERIOD END):
Cash and cash equivalents... $ 27,952 $ 8,046 $ 41,349 $ 17,699 $ 7,832 $ 49,955
Intangible assets, net...... 381,145 369,588 1,444,600 1,546,392 1,600,882 1,583,440
Total assets................ 595,944 569,325 1,800,890 1,952,685 2,045,363 2,057,310
Total debt.................. 350,000 260,000 683,580 857,626 988,257 1,055,036
Total stockholders'
equity.................... 138,448 192,565 532,409 499,915 466,190 432,555
CASH FLOW DATA:
Net cash provided by (used
in):
Operating activities........ $ 70,799 $ 81,691 $ 8,416 $ 65,446 $ 21,717 $ 58,236 $ 2,460
Investing activities........ (27,864) (15,060) (1,468) (1,753,865) (197,269) (174,081) (6,603)
Financing activities........ (33,008) (86,537) 1,071 1,729,768 151,902 105,978 46,266
Net increase (decrease) in
cash and cash
equivalents............... 9,927 (19,906) 8,019 41,349 (23,650) (9,867) 42,123
</Table>
---------------
(a) During the second quarter of 1997, we disposed of towers and other
broadcast equipment that could no longer be used with digital technology.
(b) During the last half of 1997, we incurred financial, legal advisory and
regulatory filing fees in connection with the acquisition of LIN
Television.
(c) For a discussion of the terms "BCF" and "EBITDA" see "Certain Definitions
and Market and Industry Data." BCF Margin is BCF divided by Net Revenue.
(d) EBITDA and BCF have been calculated for the periods presented as follows:
<Table>
<Caption>
LIN TELEVISION
-----------------------------------------
PREDECESSOR
-----------------------------------------
PERIOD FROM
YEAR ENDED YEAR ENDED JANUARY 1 -
DECEMBER 31, DECEMBER 31, MARCH 2,
1996 1997 1998
------------ ------------ -----------
(IN THOUSANDS)
Operating income.................... $ 99,160 $107,455 $12,492
Plus:
Amortization of program rights.... 14,464 15,596 2,743
Depreciation and amortization of
intangible assets............... 23,817 24,789 4,581
Capital distributions from equity
investments..................... -- -- --
Non cash expenses (credits)....... 1,496 1,349 275
Less:
Program payments.................. (15,536) (13,179) (4,157)
-------- -------- -------
EBITDA.............................. $123,401 $136,010 $15,934
Plus: Corporate expenses............ 6,998 6,763 1,170
Less: Capital distributions from
equity investments................ -- -- --
-------- -------- -------
BCF................................. $130,399 $142,773 $17,104
======== ======== =======
<Caption>
LIN TELEVISION
-------------------------------------------------------
LIN TELEVISION CORPORATION AND SUBSIDIARIES
-------------------------------------------------------
PERIOD FROM SIX MONTHS
MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1998 1999 2000 2001
------------ ------------ ------------ ----------
(IN THOUSANDS)
Operating income.................... $ 27,482 $ 35,990 $ 58,602 $ 9,890
Plus:
Amortization of program rights.... 10,712 15,029 21,214 10,799
Depreciation and amortization of
intangible assets............... 45,199 57,934 63,734 33,315
Capital distributions from equity
investments..................... -- -- 815 6,419
Non cash expenses (credits)....... 493 603 (900) (450)
Less:
Program payments.................. (10,497) (15,293) (22,750) (10,849)
-------- -------- -------- --------
EBITDA.............................. $ 73,389 $ 94,263 $120,715 $ 49,124
Plus: Corporate expenses............ 7,130 7,900 9,270 4,484
Less: Capital distributions from
equity investments................ -- -- (815) (6,419)
-------- -------- -------- --------
BCF................................. $ 80,519 $102,163 $129,170 $ 47,189
======== ======== ======== ========
</Table>
34
(e) Adjusted amounts and ratios for the year ended December 31, 2000 and for
the six months ended June 30, 2001 represent historical amounts and ratios
adjusted to reflect the issuance of the notes and the use of the proceeds
to repay a part of the senior credit facilities of LIN Television and LIN
Holdings, as if such issuance and use of proceeds had occurred at the
beginning of the periods presented.
(f) For purposes of this calculation, total debt consists of total long-term
debt outstanding (including current portion).
(g) For purposes of this calculation, interest expense excludes the
amortization of debt financing costs and bond discounts and losses on
financial instruments as follows:
<Table>
<Caption>
LIN TELEVISION
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN TELEVISION CORPORATION AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
Amortization of debt
financing costs... $888 $1,013 $169 $3,494 $3,990 $3,990 $ 2,053
Amortization of
discounts......... -- -- -- 51 68 68 77
Loss on financial
instruments....... -- -- -- -- -- -- 1,982
</Table>
<Table>
<Caption>
LIN HOLDINGS
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN HOLDINGS CORP. AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
Amortization of debt
financing costs... $888 $1,013 $169 $ 4,559 $ 5,268 $ 5,268 $ 2,706
Amortization of
discounts......... -- -- -- 15,458 22,476 24,811 13,614
Loss on financial
instruments....... -- -- -- -- -- -- 1,982
</Table>
(h) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" consist of income before provision for (benefit from) income
taxes and share of (income) loss in equity investments, plus fixed charges
and the distributed income of equity investees. "Fixed charges" consist of
interest costs, exclusive of the loss on financial instruments, and the
amortization of debt discount and deferred financing costs. LIN
Television's earnings were insufficient to cover fixed charges by $6.9
million, $8.2 million, $6.4 million and $15.6 million for the period from
March 3, 1998 to December 31, 1998, for the fiscal years ended 1999 and
2000 and for the six-month period ended June 30, 2001, respectively. LIN
Holdings' earnings were insufficient to cover fixed charges by $24.9
million, $31.6 million, $32.2 million and $29.7 million for the period from
March 3, 1998 to December 31, 1998, for the fiscal years ended 1999 and
2000 and for the six-month period ended June 30, 2001, respectively.
35
(i) EBITDA AND BCF have been calculated for the periods presented as follows:
<Table>
<Caption>
LIN HOLDINGS
---------------------------------------------------------------------------------------------------
PREDECESSOR LIN HOLDINGS CORP. AND SUBSIDIARIES
----------------------------------------- -------------------------------------------------------
PERIOD FROM PERIOD FROM SIX MONTHS
YEAR ENDED YEAR ENDED JANUARY 1 - MARCH 3 - YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 2, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 2000 2001
------------ ------------ ----------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
Operating income.... $ 99,160 $107,455 $12,492 $27,482 $ 35,990 $ 58,602 $ 9,890
Plus:
Amortization of
program
rights.......... 14,464 15,596 2,743 10,712 15,029 21,214 10,799
Depreciation and
amortization of
intangible
assets.......... 23,817 24,789 4,581 45,199 57,934 63,734 33,315
Capital
distributions
from equity
investments..... -- -- -- -- -- 815 6,419
Non cash expenses
(credits)....... 1,496 1,349 275 493 603 (900) (450)
Less:
Program
payments........ (15,536) (13,179) (4,157) (10,497) (15,293) (22,750) (10,849)
-------- -------- ------- ------- -------- -------- --------
EBITDA.............. $123,401 $136,010 $15,934 $73,389 $ 94,263 $120,715 $ 49,124
Plus: Corporate
expenses.......... 6,998 6,763 1,170 7,130 7,900 9,270 4,484
Less: Capital
distributions from
equity
investments....... -- -- -- -- -- (815) (6,419)
-------- -------- ------- ------- -------- -------- --------
BCF................. $130,399 $142,773 $17,104 $80,519 $102,163 $129,170 $ 47,189
======== ======== ======= ======= ======== ======== ========
</Table>
36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
We are a leading television station group operator in the United States of
America and Puerto Rico that operates seventeen television stations, nine of
which are network-affiliated television stations. We provide programming for
five other stations under LMAs in the markets in which we operate.
BUSINESS COMBINATIONS AND DISPOSITIONS
We have developed our business through a combination of acquisitions,
dispositions and organic growth. We were acquired by LIN Holdings on March 3,
1998. Thereafter, we have acquired the following business and assets:
- On June 3, 1999, we contributed all of the assets of KXTX-TV to Southwest
Sports Group Holdings LLC ("SSG"), a Texas limited liability company and
an entity in which a partner of Hicks Muse has a substantial economic
interest. In exchange, we received 500,000 units of SSG's Series A
Preferred Units, par value $100.00 per unit, valued at $47.0 million.
- On June 30, 1999, we acquired the assets of WOOD-TV and the LMA rights
related to WOTV-TV, both of which stations are located in the Grand
Rapids-Kalamazoo-Battle Creek market. The total purchase price for the
acquisition was approximately $142.4 million, including direct costs of
the acquisition, and was funded by a combination of operating funds and
$93.0 million of borrowings under the senior credit facilities.
- On October 19, 1999, we acquired Pegasus Broadcasting of San Juan,
L.L.C., the owner and operator of WAPA-TV, an independent station located
in San Juan, Puerto Rico. The total purchase price for the acquisition
was approximately $71.8 million in cash, including direct costs of the
acquisition, and was funded by a combination of operating funds and $60.0
million of borrowings under the senior credit facilities.
- On April 1, 2000, we exchanged, with Block Communications, Inc., formerly
Blade Communications Inc., a 66.7% interest in certain assets of our
television station WAND-TV, including its FCC license and network
affiliation agreement, for substantially all of the assets and certain
liabilities of WLFI-TV, Inc. Immediately after the WAND-TV exchange, we
and Block Communications Inc. contributed our respective interests in the
WAND-TV assets to a partnership, whereby we received a 33.3% interest in
the partnership.
- On August 15, 2000, we formed Banks Broadcasting Inc. with 21st Century
and BancAmerica. We contributed our interest in WLBB Broadcasting, LLC,
and we and 21st Century both contributed our interests in Banks-Boise,
Inc. to Banks Broadcasting, Inc. Banks Broadcasting, Inc. owns and
operates KWCV-TV, the WB affiliate serving the Wichita-Hutchinson, Kansas
DMA and owns and operates KNIN-TV, a UPN affiliate servicing the Boise,
Idaho market. We have invested $14.9 million in Banks Broadcasting as of
June 30, 2001.
- On November 10, 2000, we acquired the broadcast license and operating
assets of WWLP-TV, an NBC affiliate in Springfield, MA. The total
purchase price for the acquisition was approximately $128.0 million,
including direct costs of the acquisition. The acquisition was funded by
borrowings under the senior credit facilities. Although we did not own or
control the assets or FCC license of WWLP-TV prior to November 10, 2000,
pursuant to Emerging Issues Task Force Topic D-14, "Transactions
Involving Special Purpose Entities," WWLP Holdings, Inc., the parent of
WWLP-TV, satisfied the definition of a special purpose entity, as a
result of our $75.0 million guarantee of WWLP Holdings debt and other
factors, and we were deemed to be the sponsor of WWLP Holdings.
37
Accordingly, the financial results of operations of WWLP Holdings have
been consolidated with ours since March 31, 2000, when WWLP Holdings,
Inc. acquired WWLP-TV from Benedek Broadcasting Corporation.
- On June 5, 2001, the Company acquired the broadcast license and certain
related assets of WNAC-TV, the Fox affiliate serving the Providence-New
Bedford market. Simultaneously with the acquisition, the Company assumed
an existing LMA agreement with STC Broadcasting, Inc., an entity in which
Hicks Muse has a substantial economic interest, under which STC
Broadcasting, Inc. will operate WNAC-TV. The total purchase price was
approximately $2.5 million. The acquisition was funded with a note
payable to STC Broadcasting. The Company has accounted for the business
combination under the purchase method of accounting.
- On July 25, 2001, the Company acquired the broadcast license and
operating assets of WNLO-TV (formerly called WNEQ-TV), an independent
broadcast television station located in Buffalo, New York. The Company
has been operating WNLO-TV since January 29, 2001 under a LMA agreement.
The total purchase price is approximately $26.2 million, and will be
funded by available cash. The Company intends to account for the business
combination under the purchase method of accounting.
In connection with acquisitions accounted for under the purchase method of
accounting, we do not separately value acquired FCC broadcasting licenses and
network affiliation agreements as they do not represent separately identifiable
intangible assets but rather have a value that is inseparably linked. The future
value of our FCC licenses could be significantly impaired by the loss of
corresponding network affiliation agreements, or vice versa.
GENERAL FACTORS AFFECTING OUR BUSINESS
Our operating results depend primarily on advertising revenues, which in
turn depend on the economic conditions of the markets in which we operate, the
demographic makeup of those markets and the marketing strategy and efforts of
our stations in those markets. We experience quarterly fluctuations in operating
results, generally reporting our highest revenues during the fourth quarter each
year due to advertisers' anticipation of higher consumer spending during the
holiday season. We also experience annual fluctuations in operating results due
substantially to political spending in major election years, such as 1998 and
2000. The Olympic Games also cause cyclical fluctuations in our operating
results, the size of such fluctuations depending on which network is televising
the Olympic Games and which of our stations are affiliated with that network. We
also depend on automotive-related advertising. Approximately 22% of our gross
advertising revenues for the year ended December 31, 2000 consisted of
automotive advertising compared to 26% for the year ended December 31, 1999. A
significant decrease in automotive advertising could have a material adverse
affect on our operating results. For other factors that may affect our business,
see "Risk Factors" and "Summary -- Recent Developments."
RESULTS OF OPERATIONS
Set forth below are the significant factors that contributed to our
operating results for the three and six-month periods ended June 30, 2001 and
June 30, 2000 and the years ended December 31, 2000, 1999 and 1998, with 1998
being on a combined basis. Our results of operations from year to year are
significantly affected by the impact of our acquisitions of WOOD-TV, and its LMA
for WOTV-TV, and WAPA-TV in 1999, and WLFI-TV and WWLP-TV in 2000 and
dispositions of KXTX-TV in 1999 and WAND-TV in 2000. As a result, future
reported financial results may not be comparable to the historical financial
information and comparisons of any quarters or years may not be indicative of
future financial performance.
38
THREE AND SIX-MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE AND SIX-MONTHS ENDED
JUNE 30, 2000
Net Revenues
Our net revenues consist primarily of national and local airtime sales, net
of sales adjustments and agency commissions. Additional but less significant
amounts are generated from network compensation, Internet revenues, barter
revenues, production revenues and rental income. Our total net revenues for the
three and six-month periods ended June 30, 2001, decreased 6.1% to $73.0 million
and 4.4% to $131.0 million, respectively, compared to net revenue of $77.8
million and $137.1 million, respectively, for the same periods last year. The
decrease in the three and six-month periods ended June 30, 2001 was primarily
due to a decrease of $1.0 million and $2.3 million, respectively, in national
and political advertising due to the campaign election cycle and a decrease of
$5.0 million and $7.3 million, respectively, in demand for national advertising
that began in the third quarter of 2000 and has continued into the third quarter
of 2001.
Operating Costs and Expenses
Our direct operating expenses, consisting primarily of news, engineering,
programming and music licensing costs for the three and six-month periods ended
June 30, 2001 increased 6.0% to $20.9 million and increased 7.5% to $40.6
million, respectively, compared to direct operating expenses of $19.7 million
and $37.8 million, respectively, for the same periods last year. The increase in
the three and six-month periods ended June 30, 2001 is primarily due to the
startup costs of the low power television stations in Grand Rapids, Michigan and
the LMA in Buffalo, New York of $332,000 and $656,000, respectively, and to the
impact of the acquisitions of WLFI-TV and WWLP-TV, partially offset by the
disposition of WAND-TV, a net impact of $1.2 million and $2.0 million for the
three and six-month periods ended June 30, 2001, respectively.
Our selling, general and administrative expenses, consisting primarily of
employee salaries, sales commissions and other employee benefit costs,
advertising and promotional expenses for the three and six-month periods ending
June 30, 2001 decreased 4.3% to $16.3 million and increased 2.8% to $32.0
million, respectively, compared to selling, general and administrative expenses
of $17.1 million and $31.1 million, respectively, for the same periods last
year. The decrease is primarily due to favorable terms on an operating agreement
of $765,000 and $1.5 million for the three and six-month periods ended June 30,
2001, respectively, offset by an increase of $339,000 in advertising costs
associated with the network affiliation switch from the WB network to the UPN
network of WCTX-TV in New Haven, Connecticut for the three and six-month periods
ended June 30, 2001, respectively, as well as the impact of the acquisitions of
WLFI-TV and WWLP-TV, partially offset by the disposition of WAND-TV, a net
impact of $1.3 million and $2.0 million for the three and six-month periods
ended June 30, 2001.
Our corporate expenses, representing costs associated with the centralized
management of the Company's stations for the three and six-month periods ending
June 30, 2001 increased 3.7% to $2.1 million and decreased 1.1% to $4.5 million,
respectively, compared to corporate expenses of $2.0 million and $4.5 million,
respectively, for the same periods last year.
Our amortization of program rights, representing costs associated with the
acquisition of syndicated programming, features and specials for the three and
six-month periods ending June 30, 2001 increased 1.6% to $5.4 million and 4.4%
to $10.8 million, respectively, compared to amortization of program rights of
$5.3 million and $10.3 million, respectively, for the same periods last year.
The increase is primarily due to the acquisitions of WLFI-TV and WWLP-TV
partially offset by the disposition of WAND-TV.
39
Our depreciation and amortization of intangible assets for the three and
six-month periods ending June 30, 2001 increased 6.8% to $17.0 million and
increased 6.4% to $33.3 million, respectively, compared to depreciation and
amortization of intangible assets of $16.0 million and $31.3 million,
respectively, for the same periods last year. The increase is primarily due to
the increase in equipment and intangible assets associated with the acquisitions
of WLFI-TV and WWLP-TV, partially offset by the disposition of WAND-TV.
Other Expenses
Our interest expense for the three and six-month periods ended June 30,
2001 increased 2.3% to $23.9 million and increased 11.7% to $48.2 million,
respectively, compared to interest expense of $23.4 million and $43.1 million,
respectively, for the same periods last year. The increase is primarily the
result of losses of $119,000 and $2.0 million on derivative instruments for the
three and six-month periods ended June 30, 2001, respectively, and increased
borrowings associated with the acquisition of WWLP-TV on March 31, 2000.
The interest expense for LIN Television for the three and six-month periods
ended June 30, 2001 decreased 2.8% to $16.5 million and increased 11.2% to $34.0
million, respectively, compared to interest expense of $17.0 million and $30.6
million, respectively, for the same periods last year. The increase is primarily
the result of losses of $119,000 and $2.0 million on derivative instruments for
the three and six-month periods ended June 30, 2001, respectively, and increased
borrowings associated with the acquisition of WWLP-TV on March 31, 2000.
Our provision for income taxes for the three-month period ended June 30,
2001 changed to a benefit of approximately $3.9 million compared to a benefit of
$127,000 for the same period last year. Our provision for income taxes for the
six-month period ended June 30, 2001 changed to a benefit of $8.1 million
compared to a provision of $6.9 million for the same period last year. These
changes were primarily due to the disproportionate impact of non-deductible
goodwill relative to the projected annual pretax net loss from period to period.
LIN Television's benefit from income taxes for the three and six-month
periods ended June 30, 2001 is approximately $4.1 million and $1.8 million,
respectively, compared to a provision of approximately $2.8 million and a
benefit of $5.4 million for the same periods last year. These changes were
primarily due to the disproportionate impact of non-deductible goodwill relative
to the projected annual pretax net loss from period to period.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Net Revenues
Total net revenues for the year ended December 31, 2000 increased
approximately 31.7% to $295.7 million from $224.4 million for the same period in
the prior year. The increase is primarily due to an increase of $17.5 million in
political advertising due to the campaign election cycle, as well as a net
increase of approximately $51.0 million due to the impact of the acquisitions of
WOOD-TV, and its LMA for WOTV-TV, and WAPA-TV in 1999, and WLFI-TV in 2000, and
the dispositions of KXTX-TV in 1999 and WAND-TV in 2000. In addition, the
increase is also due to the continued revenue growth of $2.9 million in our LMA
stations.
Approximately 92% of our total net revenues for the year ended December 31,
2000, were derived from net advertising time sales compared to 89% in 1999. Net
advertising revenues for the year ended December 31, 2000 increased by 36%
compared to 1999. The increase is primarily due to the impact of political
advertising, as well as the impact of the acquisitions of WOOD-TV, and its LMA
for WOTV-TV, and WAPA-TV in 1999, and WLFI-TV in 2000, and the dispositions of
KXTX-TV in 1999 and WAND-TV in 2000, and the growth at the LMA stations.
Network revenue represents amounts paid to us for broadcasting network
programming provided by CBS, NBC and ABC. Network revenue for year ended
December 31, 2000 increased
40
4.3% to $10.4 million compared to $10.0 million in 1999. The increase is
primarily the result of the impact of the acquisitions of WOOD-TV, and its LMA
for WOTV-TV, and WAPA-TV in 1999, and WLFI-TV in 2000, and the dispositions of
KXTX-TV in 1999 and WAND-TV in 2000.
Operating Costs and Expenses
Direct operating expenses increased 37.3% to $78.7 million for the year
ended December 31, 2000, from $57.3 million in 1999. The increase is primarily
due to a net increase of $15.1 million due to the impact of the acquisitions of
WOOD-TV, and its LMA for WOTV-TV, and WAPA-TV in 1999, and WLFI-TV in 2000, and
the dispositions of KXTX-TV in 1999 and WAND-TV in 2000, and to $2.5 million in
news related expenditures.
Selling, general and administrative expenses increased by 30.7% to $64.2
million for the year ended December 31, 2000, compared to $49.1 million for the
same period in the prior year. The increase is primarily due to a net increase
of $10.9 million due to the impact of the acquisitions of WOOD-TV, and its LMA
for WOTV-TV, and WAPA-TV in 1999, and WLFI-TV in 2000, and the dispositions of
KXTX-TV in 1999 and WAND-TV in 2000 and to an increase of $3.6 million in
selling expenses related to the increase in advertising revenues.
Corporate expenses increased 17.3% to $9.3 million for the year ended
December 31, 2000, from $7.9 million in 1999. The increase is primarily due to
Internet startup costs of $243,000, cable retransmission costs of $359,000 and
an increase of $255,000 in fees under the Monitoring and Oversight Agreement
with Hicks Muse, which increased based on increases in broadcast cash flow.
Amortization of program rights represents costs associated with the
acquisition of syndicated programming, features and specials. Amortization of
program rights increased 41.2% to $21.2 million for the year ended December 31,
2000, compared to $15.0 million for the same period in the prior year. The
increase is primarily the result of the impact of the acquisitions of WOOD-TV,
and its LMA for WOTV-TV, and WAPA-TV in 1999, and WLFI-TV in 2000, and the
dispositions of KXTX-TV in 1999 and WAND-TV in 2000.
Depreciation and amortization of intangible assets increased 10.0% to $63.7
million for the year ended December 31, 2000 from $57.9 million for the same
period in the prior year. The increase was principally driven by the
amortization of goodwill and other intangible assets associated with the impact
of the acquisitions of WOOD-TV, and its LMA for WOTV-TV, and WAPA-TV in 1999,
and WLFI-TV in 2000, and the dispositions of KXTX-TV in 1999 and WAND-TV in
2000.
Other Expenses
Our interest expense increased $24.2 million to $92.9 million for the year
ended December 31, 2000, compared to $68.7 million for the same period in the
prior year. The increase for the year ended December 31, 2000 was the result of
increased borrowings associated with the acquisitions of WOOD-TV, and its LMA
for WOTV-TV, and WAPA-TV in 1999 and WWLP-TV in 2000.
LIN Television's interest expense increased $21.8 million to $67.1 million
for year ended December 31, 2000, compared to interest expense of $45.3 million
for same period in the prior year. The increase was primarily the result of
increased borrowings associated with the acquisitions of WOOD-TV, and its LMA
for WOTV-TV, and WAPA-TV in 1999 and WWLP-TV in 2000.
Our investment income increased $772,000 to $4.1 million for the year ended
December 31, 2000, compared to investment income of $3.3 million for the same
period in the prior year. The increase was the result of improvements to our
cash management systems, resulting in higher average investment balances in
2000.
41
Our share of income or loss in equity investments was income of $365,000
for the year ended December 31, 2000, compared to losses of $5.5 million for the
same period in the prior year. The increase is primarily the result of the
improved operating performance of the stations included in the joint venture
with NBC.
Our provision for income taxes increased approximately $4.6 million to $1.6
million for the year ended December 31, 2000, compared to a benefit of $3.0
million for the same period in the prior year. This increase was primarily due
to the effective tax rate being materially impacted by the non-deductible
goodwill relative to pre-tax net income. In addition, several of our
subsidiaries recorded taxable income, which increased the current provision for
taxes due.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net Revenues
Total net revenues for the year ended December 31, 1999 decreased
approximately 3.8% to $224.4 million from $233.3 million for the same period in
the prior year. The decrease is primarily due to a net decrease of $6.1 million
resulting from the acquisitions of WOOD-TV, and its LMA for WOTV-TV, and WAPA-TV
in 1999, the contribution of KXAS-TV to the joint venture with NBC and the
disposition of KXTX-TV in 1998, a decrease of $7.0 million in political
advertising due to the campaign election cycle. These decreases were offset by
continued revenue growth of $6.1 million in our LMA stations.
Approximately 89% of our total net revenues for the year ended December 31,
1999, was derived from net advertising time sales compared to 85% in 1998. Net
advertising revenues for the year ended December 31, 1999 increased by
approximately 1% compared to 1998. The increase is primarily due to net
advertising growth at the LMA stations offset by a decrease in political
advertising.
Network revenue for year ended December 31, 1999 decreased 15.3% to $10.0
million compared to $11.8 million in 1998. The decrease is primarily the result
of the loss of compensation resulting from the contribution of KXAS-TV to the
joint venture with NBC in connection with the acquisition on March 3, 1998.
Operating Costs and Expenses
Direct operating expenses decreased 4.4% to $57.3 million for the year
ended December 31, 1999, from $59.9 million in 1998. The decrease is primarily
driven by the disposition of KXTX-TV and partially offset by the subsequent
acquisition of WOOD-TV, its LMA for WOTV, and WAPA-TV in 1999.
Selling, general and administrative expenses decreased 8.8% to $49.1
million for the year ended December 31, 1999, compared to $53.9 million for the
same period in the prior year. The decrease is primarily driven by dispositions
offset in part by acquisitions for a net decrease of $2.0 million and expense
savings of $1.7 million associated with certain renegotiated operating
agreements.
Corporate expenses decreased 4.8% to $7.9 million for the year ended
December 31, 1999, from $8.3 million in 1998. The decrease was primarily due to
decreases in expenses for systems related issues, including the Year 2000 issue,
for which a majority of the expenses were incurred in 1998.
The KXTX management fee, representing fees paid to SSG for the management
and sub-programming of KXTX-TV, decreased to $1.2 million for the year ended
December 31, 1999 from $8.0 million in 1998, as a result of the disposition of
KXTX-TV on June 3, 1999.
Amortization of program rights increased 11.7% to $15.0 million for the
year ended December 31, 1999, compared to $13.5 million for the same period in
the prior year. The increase was primarily due to the impact of the acquisitions
of WOOD-TV, its LMA for WOTV, and WAPA-TV in 1999.
42
Depreciation and amortization of intangible assets increased 16.4% to $57.9
million for the year ended December 31, 1999 from $49.8 million for the same
period in the prior year. The increase was principally driven by the
amortization of goodwill and other intangible assets associated with the
acquisitions of WOOD-TV, its LMA for WOTV, and WAPA-TV in 1999, and increased
depreciation associated with equipment acquired in connection with the upcoming
transition to digital broadcasting.
Other Expenses
Our interest expense increased $12.4 million to $68.7 million for the year
ended December 31, 1999, compared to $56.3 million for the same period in the
prior year. The increase for the year ended December 31, 1999 was the result of
increased borrowings associated with the acquisitions of WOOD-TV, its LMA for
WOTV-TV, and WAPA-TV in 1999. The increase was also the result of new borrowings
under the senior credit facilities and the issuance of our existing senior
subordinated notes in connection with our acquisition by LIN Holdings, which did
not have a full year's impact in 1998.
Our investment income increased $2.0 million to $3.3 million for the year
ended December 31, 1999, compared to investment income of $1.3 million for the
same period in the prior year. The increase was principally due to the dividends
we received on our Series A Preferred Units of SSG.
Our share of losses in equity investments decreased to $5.5 million for the
year ended December 31, 1999, compared to $6.3 million for the same period in
the prior year. The decrease is primarily the result of the improved operating
performance of the stations included in the joint venture with NBC.
During the first half of 1998, LIN Television incurred financial and legal
advisory fees and regulatory filing fees of $8.6 million in connection with the
merger. These costs are reflected on our predecessor's consolidated statement of
operations as merger expense.
Our benefit from income taxes increased approximately $3.1 million to $3.0
million for the year ended December 31, 1999, compared to a provision of $58,000
for the same period in the prior year. The increase was primarily due to an
increase in the amount of deductible interest expense.
LIQUIDITY AND CAPITAL RESOURCES
It is our policy to carefully monitor the state of our business, cash
requirements and capital structure. From time to time, we may enter into
transactions, pursuant to which debt is extinguished, including sales of assets
or equity, joint ventures, reorganizations or recapitalizations. There can be no
assurance that any such transactions will be undertaken or, if undertaken, will
be favorable to holders of our securities.
Our principal sources of funds are our operations and our senior credit
facilities. At June 30, 2001, we had cash and cash equivalents of $50.0 million
and total debt of $1.1 billion.
Net cash provided by operating activities for the six months ended June 30,
2001 was $2.5 million compared to $17.3 million for the same period last year.
The decrease is primarily the result of the noted decrease in national and
political revenues and an increase in operating and interest expenses.
Net cash provided by investing activities was $6.6 million for the six
months ended June 30, 2001, compared to net cash used in investing activities of
$141.2 million for the same period last year. The change is primarily due to
amounts paid related to the WWLP-TV transaction in the first quarter of 2000.
43
Net cash used in financing activities for the six months ended June 30,
2001 was $46.3 million compared to net cash provided by financing activities of
$122.9 million for the same period last year. The change is primarily due to the
proceeds from long-term debt (net of partial repayment of the Senior Credit
Facilities) in 2001 and proceeds from a draw down of a credit facility in
connection with the WWLP-TV transaction in 2000.
As of June 30, 2001 we had indebtedness outstanding of approximately $200.3
million under the senior credit facilities. In addition to debt service
requirements under the senior credit facilities, we are making semi-annual
interest payments on our existing senior subordinated notes. Our existing senior
subordinated notes do not require cash interest payments to be made until after
March 1, 2003. Thereafter, cash interest will accrue at a rate of 10% per annum
and will be payable semi-annually in arrears. Interest payments on our existing
senior discount notes and our existing senior subordinated notes and interest
payments and amortization with respect to the senior credit facilities represent
significant cash requirements for us. Our existing senior subordinated notes
funded in connection with the acquisition will require increasing annual
interest payments, beginning at approximately $25.1 million. Beginning September
1, 2003, annual interest payments of approximately $20.0 million will be paid
under LIN Holdings' existing senior discount notes. The mandatory principal
redemption amount, expected to be $125 million as defined in the indenture
governing the existing senior discount notes, of the existing senior discount
notes will become due and payable in a lump sum on March 1, 2003. We must remain
in compliance with a series of financial covenants under the senior credit
facilities, the existing senior subordinated notes, and the existing senior
discount notes. As of June 30, 2001, we were in compliance with all covenants.
In March 2001, we announced that, based on prevailing weakness in the
national advertising category, we expected that pro forma net revenue for the
first half of 2001 would decline compared to the same period last year.
Our capital expenditures primarily include purchases of broadcasting
equipment, studio equipment, vehicles and office equipment to improve the
efficiency and quality of television broadcasting operations. Our capital
expenditures for the six months ended June 30, 2001 and the year ended December
31, 2000, were $7.8 million and $29.1 million, respectively, compared to $18.2
million and $22.7 million for the same periods in 1999 and 1998, respectively.
We have invested approximately $33.8 million over the past three years to
prepare our towers and transmitter buildings for the upcoming digital
transition. We expect that an additional $17.5 million over the next two years
will be required to convert all of our television stations to transmit digital
signals. We anticipate that we will be able to meet our currently anticipated
capital expenditure requirements with internally generated funds and borrowings.
Our future operating performance and ability to service or refinance the
new senior notes and existing senior subordinated notes and to extend or
refinance the senior credit facilities will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond our control. See "Risks Factors" and "Cautionary Statement Regarding
Forward Looking Statements."
LIN Holdings is a holding company whose only material asset is our capital
stock. LIN Holdings does not have any business other than in connection with its
ownership of our capital stock and the performance of its obligations with
respect to the existing senior discount notes and the senior credit facilities,
and will depend on the distributions from us to meet all its debt service
obligations, including interest and principal obligations with respect to the
existing senior discount notes. Because we are substantially leveraged, and the
dependence of LIN Holdings upon our operating performance to generate
distributions to LIN Holdings with respect to our common stock, there can be no
assurance that LIN Holdings will have adequate funds to fulfill its obligations
with respect to the existing senior discount notes. In addition, the
44
credit agreement governing the senior credit facilities, the indenture governing
the existing senior subordinated notes and applicable federal and state law will
impose restrictions on the payment of dividends and the making of loans by us to
LIN Holdings.
Accordingly, LIN Holdings' only source of cash to pay interest on the
principal of the existing senior discount notes is distributions with respect to
its ownership interest in us and our subsidiaries from the net earnings and the
cash flow generated by us and our subsidiaries. Prior to March 1, 2003, LIN
Holdings' interest expense on the existing senior discount notes will consist
solely of non-cash accretion of principal interest and the existing senior
discount notes will not require cash interest payments. The existing senior
discount notes mature on March 1, 2008 and require a mandatory redemption on
March 1, 2003 in the amount of $125,000,000.
GECC provided debt financing in connection with the formation of the joint
venture with NBC in the form of an $815.5 million 25-year non-amortizing senior
secured note bearing an initial interest rate of 8.0% per annum. We expect that
the interest payments on the GECC note will be serviced solely by the cash flow
of the joint venture. The GECC note is not our obligation and is recourse only
to the joint venture, our equity interests therein and Ranger B, pursuant to a
guarantee. Ranger B owns 63% of LIN Holdings. If the joint venture were unable
to pay principal or interest on the GECC note and GECC could not otherwise get
its money back from the joint venture, GECC could require Ranger B to pay the
shortfall of any outstanding amounts under the GECC note. If this happened, we
could experience material adverse consequences, including:
- since Ranger B has no assets other than its 63% ownership of LIN
Holdings, GECC could sell the stock of LIN Holdings to satisfy
outstanding amounts under the GECC note;
- if more than 50% of the ownership of LIN Holdings had to be sold to
satisfy the GECC Note, it could cause an acceleration of the senior
credit facilities, the notes, the existing senior discount notes and the
existing senior subordinated notes; and
- if the GECC note is prepaid because of an acceleration on default or
otherwise, we may incur a substantial tax liability.
The joint venture is approximately 80% owned by NBC, and NBC controls the
operations of the stations through a management contract. Therefore, the
operation and profitability of those stations, the amount of cash to be received
in the future as distributions on the approximately 20% interest, and the
likelihood of a default under the GECC note are primarily within NBC's control.
Based on the current level of operations and anticipated future growth,
both internally generated as well as through acquisitions, we believe that our
cash flows from operations, together with available borrowings under our senior
credit facilities, will be sufficient to meet our anticipated requirements for
working capital, capital expenditures, interest payments and scheduled principal
payments for at least the next 12 months.
INFLATION
We believe that our businesses are affected by inflation to an extent no
greater than other businesses generally.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations." SFAS 141 requires the purchase method of accounting to be applied
for business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interest method. The Company does not
45
expect the application of SFAS 141 to have a material impact on its financial
position or results of operations.
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which is generally
effective for the Company from January 1, 2002. SFAS 142 requires, among other
things, the discontinuance of goodwill amortization and the introduction of
impairment testing in its place. In addition, the standard includes provisions
for the reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairments of goodwill. SFAS 142 also requires the Company to complete a
transitional goodwill impairment test six months from the date of adoption. The
Company is currently assessing, but has not yet determined, the impact of SFAS
142 on its financial position and results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates
principally with respect to its senior credit facility, which bears interest
based on certain variable interest rate alternatives (see "Note 8 -- Long-Term
Debt" to our consolidated financial statements for the year ended December 31,
2000). There was approximately $200.3 million outstanding as of June 30, 2001
under our senior credit facility.
Accordingly, we are exposed to potential losses related to increases in
interest rates. A hypothetical increase of 1 percent to the floating rate used
as the basis for the interest charged on the senior credit facility in Fiscal
2001 would result in an estimated $2.0 million increase in annualized interest
expense assuming a constant balance outstanding of $200.3 million.
The Company uses derivative instruments to manage this exposure to interest
rate risks. The Company's objective for holding derivatives is to minimize these
risks using the most effective methods to eliminate or reduce the impacts of
these exposures.
The Company uses interest rate collar, cap and swap arrangements, not
designated as hedging instruments under SFAS No. 133, in the notional amount of
$160.0 million at June 30, 2001 to mitigate the impact of the variability in
interest rates in connection with its variable rate senior credit facility. The
aggregate fair value of the interest rate collar arrangements at June 30, 2001
was a liability of $2.0 million. Interest expense for the three and six-month
periods ended June 30, 2001 includes a loss of $119,000 and $2.0 million,
respectively, from the marking-to-market of these derivative instruments.
We are also exposed to market risk related to changes in interest rates
through our investing activities. In addition, our ability to finance future
acquisition transactions may be impacted if we are unable to obtain appropriate
financing at acceptable rates. Our cash equivalents consist solely of
investments in high-grade commercial bank money market accounts. We do not use
derivative financial instruments for speculative or trading purposes. A
hypothetical 10% increase or decrease in interest rates would not have a
material impact on the carrying value of our cash equivalents due to their
immediate available liquidity or their short term maturity.
46
BUSINESS
GENERAL
We are a leading television station group operator in the United States of
America and Puerto Rico that operates eighteen television stations and provides
consulting services to two additional television stations. Nine of these
stations are network affiliates and are in the top fifty DMAs, including:
Indianapolis, Indiana; New Haven-Hartford, Connecticut; Buffalo, New York;
Norfolk-Portsmouth, Virginia; and Grand Rapids-Kalamazoo-Battle Creek, Michigan.
These stations have an aggregate United States household reach of approximately
5%, ranking us among the top independent, "pure-play" television station group
operators in the United States.
We generated an aggregate BCF margin of approximately 43.7% for the fiscal
year ended December 31, 2000. Among the factors contributing to our favorable
BCF margins are strong network affiliations, leading local news programming and
tight cost controls. In addition, our management pioneered the "multi-channel
strategy," which involves the combination of an owned and operated television
station with an LMA or other station in the same market. The multi-channel
strategy has enhanced our revenue market shares and increased our BCF by
leveraging our fixed costs over a larger revenue base.
Our station portfolio is well diversified in terms of its network
affiliations, geographic coverage, net revenues and cash flow. We own and
operate four CBS affiliates, four NBC affiliates and one ABC affiliate which
accounted for 25.9%, 43.3% and 17.6%, respectively, of our BCF for the fiscal
year ended December 31, 2000. Our stations broadcast in ten different markets,
with no market representing more than 15.9% of our net revenues or BCF for the
fiscal year ended December 31, 2000. Our net revenues, BCF and EBITDA were
$295.7 million, $129.2 million and $120.7 million, respectively, for the fiscal
year ended December 31, 2000.
In March 1998, we formed a joint venture with NBC that owns two television
stations. The joint venture owns KXAS-TV, the Dallas-Fort Worth NBC affiliate,
and KNSD-TV, the San Diego NBC affiliate. A wholly owned subsidiary of NBC has
managerial control over the joint venture, and NBC operates the stations owned
by the joint venture pursuant to a management agreement. NBC holds an
approximate 80% equity interest, and we hold an approximate 20% equity interest,
in the joint venture.
We own an approximate 33% partnership interest in WAND (TV) Partnership.
WAND (TV) Partnership owns WAND-TV, an ABC affiliate in Decatur, Illinois, and
we operate WAND-TV pursuant to a management agreement. We also hold a 50% equity
interest in Banks Broadcasting, Inc., which owns and operates KWCV-TV, a WB
affiliate in Wichita, Kansas, and KNIN-TV, a UPN affiliate in Boise, Idaho.
OUR STRATEGY
Our business strategy is to maximize our BCF through both revenue growth
and the implementation of effective cost controls. To achieve these goals, we
seek, among other things, to:
Affiliate With National Television Networks. Most of the our owned or
managed stations are affiliated with one of the major networks, ABC, CBS, NBC,
Fox, UPN, or WB, pursuant to an affiliation agreement. These network
affiliations provide our stations with competitive programming, including
coverage of political events and high profile sporting events such as the
Olympic Games, Super Bowl and the NCAA Men's Basketball Tournament.
Emphasize Leading Local News. Our stations that are affiliated with ABC,
CBS, or NBC place substantial emphasis on the production of news programming. We
believe that a successful news operation is critical to the success of a
television station because news
47
audiences generally have the best demographic profiles from an advertising sales
perspective. In addition, news programming:
- enables us to purchase less syndicated programming, thereby maintaining
tight control over programming costs;
- serves as a strong lead-in to other programming; and
- fosters a high profile in the local community, which is critical to
maximizing local advertising sales.
Invest in Digital Technology. In accordance with current FCC regulations,
all commercial broadcasters will be required to transmit a digital signal by May
1, 2002. We believe that we are well positioned for the transition to digital
broadcasting. We have already begun the transmission of digital signals in
Austin, Indianapolis, New Haven, Norfolk and Grand Rapids, and we are among the
first television broadcasters in the United States to transmit digital signals.
We have already invested approximately $33.8 million to prepare our towers and
transmitter buildings for the transition. We estimate that an additional $17.5
million over the next two years to convert all of our television stations to
transmit digital signals.
Continue a Multi-Channel Strategy. We adopted a "multi-channel strategy"
in the early 1990s, which involved the combination of an owned and operated
television station with an LMA station in the same market. This multi-channel
strategy provides us with greater advertising opportunities and certain
operational synergies in our LMA markets. We have successfully implemented this
strategy in many of our television markets and intend to pursue our
multi-channel strategy in other markets.
Continue to Drive Revenue Share in Existing Markets. We have steadily
improved our share of revenue in our markets from 25.8%, in 1992, to 29.9%, in
2000. Our aggressive sales effort, combined with the broader audience reach
provided by LMA programming, has driven revenue growth in the past.
Reduce Leverage. We are focused on reducing leverage through a combination
of growing BCF, and applying available cash to reduce debt.
Control Costs. We have has achieved operating efficiencies by applying
group leverage for the purchase of programming, capital equipment and vendor
relationships.
Participate in Industry Consolidation. We continually:
- review merger and other combination opportunities within the industry
that would enhance our operating leverage;
- pursue opportunities for increased audience share; and
- target television markets that are projected to have attractive growth in
advertising revenue.
48
LISTING OF STATIONS:
<Table>
<Caption>
NETWORK AFFILIATION
-------------------- NO. OF
FCC COMMERCIAL
LICENCE STATIONS IN
EXPIRATION EXPIRATION DMA DMA % OF MARKET
STATUS DATE DATE RANK TVHH DMA -----------
MARKET (NOTE 1) CHANNEL (NOTE 5) NETWORK (NOTE 4) (NOTE 2) (NOTE 3) TVHH VHF UHF
------ -------- ---------- ---------- -------- ---------- -------- --------- ---- ---- ----
Indianapolis, IN
WISH-TV.................... O&O 8(VHF) 8/1/05 CBS 12/31/05 25 1,013,270 0.96% 4 5
WIIH-LP (Satellite)........ O&O 11(VHF) 8/1/05 CBS
Local Weather Station...... O&O Cable n/a
New Haven-Hartford, CT
WTNH-TV.................... O&O 8(VHF) 4/1/07 ABC 9/4/05 28 953,130 0.90% 2 5
WCTX-TV (Note 6)........... LMA 59(UHF) 4/1/07 UPN 1/15/06
Grand
Rapids-Kalamazoo-Battle
Creek, MI
WOOD-TV.................... O&O 8(VHF) 10/1/05 NBC 12/31/10 38 702,210 0.67% 3 5
WOTV-TV.................... LMA 41(UHF) 10/1/05 ABC 9/4/05
WXSP-TV (Note 7)........... O&O Various UPN 12/31/05
WZPX-TV (Note 12).......... JSA 43(UHF) 10/1/05 PAX 7/1/11
Norfolk-Portsmouth,VA
WAVY-TV.................... O&O 10(VHF) 10/1/04 NBC 12/31/10 42 654,150 0.62% 3 4
WVBT-TV.................... LMA 43(UHF) 10/1/04 FOX 8/31/08
Low Power Network (Note
8)....................... O&O Various IND
WPXV-TV (Note 12).......... JSA 49(UHF) 10/1/04 PAX 7/1/11
Buffalo, NY
WIVB-TV.................... O&O 4(VHF) 6/1/07 CBS 12/31/05 47 616,610 0.59% 3 3
WNLO-TV.................... O&O 23(UHF) 6/1/07 IND
Austin, TX
KXAN-TV.................... O&O 36(UHF) 8/1/06 NBC 12/31/10 54 555,840 0.53% 1 4
KXAM-TV (Satellite) (Note
9)....................... O&O 14(UHF) 8/1/06 NBC 12/31/10
KNVA-TV.................... LMA 54(UHF) 8/1/06 WB 12/31/03
Low Power Network.......... O&O Various IND
Local Weather Station...... O&O Cable n/a
Fort Wayne, IN
WANE-TV.................... O&O 15(UHF) 8/1/05 CBS 12/31/05 104 262,000 0.25% 0 5
Local Weather Station...... O&O Cable n/a
Springfield, MA
WWLP-TV.................... O&O 22(UHF) 4/1/07 NBC 1/1/06 105 254,020 0.24% 0 2
Lafayette, IN
WLFI-TV.................... O&O 18(UHF) 8/1/05 CBS 1/1/08 190 57,190 0.05% 0 1
San Juan, Puerto Rico
WAPA-TV.................... O&O 4(VHF) 2/1/05 IND n/a n/a 1,200,307 n/a 5 2
WTIN-TV (Satellite) (Note
10)...................... LMA 14(UHF) 2/1/05 IND
WNJX-TV (Satellite) (Note
10)...................... O&O 22(UHF) 2/1/05 IND
WJPX-TV.................... O&O 24(UHF) 2/1/05 IND
WKPV-TV (Satellite) (Note
10)...................... O&O 20(UHF) 2/1/05 IND
WJWN-TV (Satellite) (Note
10)...................... O&O 38(UHF) 2/1/05 IND
Low Power Network.......... O&O Various IND
</Table>
49
<Table>
<Caption>
NETWORK AFFILIATION
-------------------- NO. OF
FCC COMMERCIAL
LICENCE STATIONS IN
EXPIRATION EXPIRATION DMA DMA % OF MARKET
STATUS DATE DATE RANK TVHH DMA -----------
MARKET (NOTE 1) CHANNEL (NOTE 5) NETWORK (NOTE 4) (NOTE 2) (NOTE 3) TVHH VHF UHF
------ -------- ---------- ---------- -------- ---------- -------- --------- ---- ---- ----
Operated By NBC Joint Venture
Dallas-Fort Worth, TX
KXAS-TV.................... JV 5(VHF) 8/1/06 NBC 7 2,201,170 2.09% 4 9
San Diego, CA
KNSD-TV.................... JV 39(UHF) 12/1/06 NBC 26 975,690 0.92% 2 4
Operated by WAND (TV) Partnership
Decatur-Champaign, IL
WAND-TV.................... JV 17(UHF) 12/1/05 ABC 9/4/05 82 362,090 0.34% 1 4
Local Weather Station...... JV Cable n/a
Low Power Network.......... JV Various IND
Operated by Banks Broadcasting Inc.
Wichita, KS
KWCV-TV.................... JV 33(UHF) 6/1/06 WB 6/30/2002 65 452,770 0.43% 3 2
Boise, ID
KNIN-TV.................... JV 9(VHF) 10/1/06 UPN 1/15/2006 121 219,560 0.21% 5 0
</Table>
We are also the owner and operator of 28 low power television stations.
---------------
Explanations to Station table:
(1) "O&O" indicates stations we own and operate. "LMA" indicates stations that
we provide services under a local market agreement. An LMA is a programming
agreement between two separately owned television stations serving a common
service area. Under this agreement the licensee of one station provides
substantial portions of the broadcast programming for airing on the other
licensee's station, subject to ultimate editorial and other controls being
exercised by the second licensee, and sells advertising time during those
programming segments. "JV" indicates stations owned and operated by a joint
venture to which we are a party. "JSA" indicates stations under joint
services agreements pursuant to which we provide sales and operational
support for which we receive commissions and certain fees. Unlike LMA
stations, the licensee of the JSA station provides its own programming.
(2) Rankings are based on the relative size of a station's market among the 210
generally recognized television markets in the United States. Source:
Nielsen Station Index DMA Market Rankings, January 2001-2002 Broadcast
Season, A.C. Nielsen Company.
(3) Estimated Television Households or TVHH in each market. Source: Nielsen
Station Index DMA Market Rankings, January 2001-2002 Broadcast Season, A.C.
Nielsen Company.
(4) Network affiliation contracts are generally renewable by their terms for
successive periods, unless notice of termination is provided in advance of
its expiration date.
(5) Applications for renewal of FCC licenses must be filed with the FCC four
months before the expiration date of the license. FCC regulations permit
successive renewals of FCC licenses.
(6) WBNE-TV changed call letters to WCTX-TV on January 1, 2001 and, on the same
date, changed its network affiliation from the WB Network to the UPN
Network.
(7) We operate WOMS-LP, WOWD-LP, WOGC-LP, WOLP-LP, WOKZ-LP, WOBC-LP, and WOHO-
LP, a collection of six LPTVs, as one program service using the call
letters WXSP-TV. WXSP-TV has an affiliation agreement with the UPN Network.
50
(8) LPTVs and satellite broadcasting facilities provide simultaneous
broadcasting of the network programming of the station serving the same
market, unless a different network affiliation for the LPTV is indicated.
(9) Station KXAM-TV, Channel 14 in Llano, Texas, is operated as a satellite
station of KXAN-TV to extend that station's service area.
(10) WAPA-TV LMAs are currently programmed as satellite stations of WAPA-TV
unlike our other LMAs. Puerto Rico TVHH estimates from Mediafax, Inc.
Television Audience Measure for the Puerto Rico Television Market, October
2000.
(11) We signed a joint sales agreement to provide management, technical and
sales services to operate WZPX-TV in Battle Creek, Michigan and WPXV-TV in
Norfolk, Virginia. These two stations are owned by and will carry the
networking programming of Paxson Communications Corporation.
The following are descriptions of the stations we operate:
WISH-TV (Indianapolis, Indiana)
Station Profile. WISH-TV, a CBS affiliate, is the number one ranked
station in the Indianapolis market. Its current affiliation agreement expires on
December 31, 2005. The station broadcasts 38 hours of news per week and its late
news is ranked number two in the competitive Indianapolis market. The station is
currently broadcasting in both analog and digital.
Market Overview. Indianapolis, Indiana is the twenty-fifth largest DMA in
the United States of America, with a population of approximately 2,513,000 and
approximately 1,013,290 television households representing 0.961% of total
television households in the United States of America. Cable penetration in the
Indianapolis market is estimated at 64%. The Indianapolis television market
experienced revenue growth of 5.5% in 2000 and is expected to grow at a compound
annual rate of 2.7% through 2005.
<Table>
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
VHF OR ------------------------------------------
CALL LETTERS CITY OF LICENSE UHF AFFILIATION OWNER JUL-01 MAY-01 FEB-01 NOV-00 JUL-00
------------ --------------- ------ ----------- ------------------- ------ ------ ------ ------ ------
LIN
Television:
WISH-TV Indianapolis VHF CBS LIN Television 14 16 15 15 13
Other:
WTTV-TV Bloomington VHF WB Sinclair Bcst Group 4 5 6 6 6
WRTV-TV Indianapolis VHF ABC McGraw-Hill Bcstg 9 9 8 10 9
WTHR-TV Indianapolis VHF NBC Dispatch Printing 12 15 14 13 10
Co
WNDY-TV Marion UHF UPN CBS TV Stations Div 4 4 4 4 3
WXIN-TV Indianapolis UHF FOX Tribune Bcstg Co 5 7 7 6 6
WIPX-TV Bloomington UHF PAX Paxson Comm Corp -- -- -- 1 1
WTTK-TV Kokomo UHF WB Sinclair Bcst Group -- -- -- -- --
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
------------------------------------------
CALL LETTERS MAY-00 FEB-00 NOV-00 JUL-99 MAY-99
------------ ------ ------ ------ ------ ------
LIN
Television:
WISH-TV 15 16 17 13 14
Other:
WTTV-TV 8 7 8 6 8
WRTV-TV 11 11 10 9 11
WTHR-TV 15 13 13 12 17
WNDY-TV 4 4 3 4 4
WXIN-TV 6 7 7 6 6
WIPX-TV -- 1 -- -- --
WTTK-TV -- -- -- -- --
</Table>
WTNH-TV and WCTX-TV (Hartford-New Haven, Connecticut)
Station Profiles. WTNH-TV is the number three ranked station in the
Hartford-New Haven market. Its network affiliation agreement with the ABC
Network expires on September 4, 2005. The station broadcasts 24.5 hours of news
per week and its late newscast is ranked third in the Hartford-New Haven market.
The station is currently broadcasting in both analog and digital.
We operate WCTX-TV, an LMA station in the New Haven-Hartford market, from
the WTNH-TV television studio and office facility. WCTX-TV changed its network
affiliation from the WB Network to the UPN Network on January 1, 2001. Its
current affiliation agreement expires on January 15, 2006. The station
broadcasts 2 1/2 hours of news per week.
51
Market Overview. Hartford-New Haven, Connecticut is the twenty-eighth
largest DMA in the United States of America, with a population of approximately
2,450,000 and approximately 923,740 television households representing 0.904% of
total television households in the United States of America. Cable penetration
in the Hartford-New Haven market is estimated at 88%. The Hartford-New Haven
television market experienced revenue growth of 4.6% in 2000 and is expected to
grow at a compound annual rate of 3.1% through 2005.
<Table>
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
VHF OR ------------------------------------------
CALL LETTERS CITY OF LICENSE UHF AFFILIATION OWNER JUL-01 MAY-01 FEB-01 NOV-00 JUL-00
------------ --------------- ------ ----------- ------------------- ------ ------ ------ ------ ------
LIN
Television:
WTNH-TV New Haven VHF ABC LIN Television 9 10 10 10 10
WCTX-TV New Haven UHF UPN K-W Television 3 3 2 2 2
Other:
WFSB-TV Hartford VHF CBS Meredith Corp. 13 14 14 15 14
WUVN-TV Hartford UHF IND Entravision -- -- -- -- --
WTXX-TV Waterbury UHF WB Tribune Bcstg Co 2 2 3 2 2
WHPX-TV New London UHF PAX Paxson Comm Corp -- -- 1 -- --
WVIT-TV New Britain UHF NBC NBC/GE 10 12 11 12 10
WTIC-TV Hartford UHF FOX Tribune Bcstg Co 6 7 7 7 6
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
------------------------------------------
CALL LETTERS MAY-00 FEB-00 NOV-00 JUL-99 MAY-99
------------ ------ ------ ------ ------ ------
LIN
Television:
WTNH-TV 12 12 13 12 13
WCTX-TV 2 3 3 2 2
Other:
WFSB-TV 15 16 15 13 16
WUVN-TV -- -- -- -- --
WTXX-TV 3 3 2 2 3
WHPX-TV -- -- -- -- --
WVIT-TV 12 11 11 9 12
WTIC-TV 7 7 8 7 8
</Table>
WOOD-TV, WOTV-TV, WXSP-TV, and WZPX-TV (Grand Rapids-Kalamazoo, Battle Creek,
Michigan)
Station Profile. WOOD-TV is the number two-ranked station in the Grand
Rapids-Kalamazoo-Battle Creek market. The station is affiliated with the NBC
Network, and its network affiliation agreement expires on December 31, 2010. The
station broadcasts 32 hours of news per week and its late newscast is ranked
number one in the Grand Rapids-Kalamazoo-Battle Creek market. The station is
currently broadcasting in both analog and digital.
We operate WOTV-TV, an LMA station in the Battle Creek market, from the
WOOD-TV television studio and office facility in Grand Rapids. WOTV-TV maintains
a stand-alone sales and news operation located in Battle Creek. The station is
affiliated with the ABC Network under an affiliation agreement that expires on
September 4, 2005. The station broadcasts 2 1/2 hours of news per week.
In May 2000 we launched WOMS-LP, WOWD-LP, WOGC-LP, WOLP-LP, WOKZ-LP,
WOBC-LP, and WOHO-LP, a collection of six Low Power Television stations or
"LPTVs," as one program service using the call letters WXSP. WXSP has an
affiliation agreement with the UPN Network that expires on December 31, 2005.
These stations broadcast from the WOOD-TV television studio facility.
In April 2001, we signed a joint sales agreement to provide technical and
sales services to operate WZPX-TV in Battle Creek, Michigan from the WOOD-TV
television studio facility. This station is owned by and will carry the
networking programming of Paxson Communications Corporation and will carry
programming of the WB Network during certain day parts.
Market Overview. Grand Rapids-Kalamazoo-Battle Creek, Michigan is the
thirty-eighth largest DMA in the United States of America, with a population of
approximately 1,869,000 and approximately 702,210 television households
representing 0.666% of total television households in the United States of
America. Cable penetration in the Grand Rapids-Kalamazoo-Battle Creek market is
estimated at 62%. The Grand Rapids-Kalamazoo-Battle Creek television
52
market experienced revenue growth of 10.8% in 2000 and is expected to grow at a
compound annual rate of 2.4% through 2005.
<Table>
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
VHF OR ------------------------------------------
CALL LETTERS CITY OF LICENSE UHF AFFILIATION OWNER JUL-01 MAY-01 FEB-01 NOV-00 JUL-00
------------ --------------- ------ ----------- ----------------------------- ------ ------ ------ ------ ------
LIN
Television:
WOOD-TV Grand Rapids VHF NBC LIN Television 13 15 14 15 12
WOTV-TV Battle Creek UHF ABC Channel 41 Inc 4 5 4 6 5
WZPX-TV Battle Creek UHF PAX Paxson Comm Corp -- -- -- -- --
WXSP-TV LPTV UPN LIN Television -- -- -- -- --
Other:
WWMT-TV Kalamazoo VHF CBS Freedom Comm Inc 15 16 16 14 16
WZZM-TV Grand Rapids VHF ABC Gannett Co Inc 11 11 12 12 12
WXMI-TV Grand Rapids UHF FOX Tribune Bcstg Co 6 7 8 8 6
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
------------------------------------------
CALL LETTERS MAY-00 FEB-00 NOV-00 JUL-99 MAY-99
------------ ------ ------ ------ ------ ------
LIN
Television:
WOOD-TV 15 15 15 13 15
WOTV-TV 6 5 5 4 4
WZPX-TV -- -- -- -- --
WXSP-TV -- -- -- -- --
Other:
WWMT-TV 17 16 16 16 20
WZZM-TV 13 13 13 12 13
WXMI-TV 7 7 9 7 7
</Table>
WAVY-TV, WVBT-TV and WPXV-TV (Norfolk-Portsmouth-Newport News, Virginia)
Station Profile. WAVY-TV is tied for the number one ranked station in the
Norfolk-Portsmouth-Newport News market. The station is affiliated with the NBC
Network and its affiliation agreement expires on December 31, 2010. The station
broadcasts 34 hours of news per week and its late news is ranked number one in
the Norfolk-Portsmouth-Newport News market. The station is currently
broadcasting in both analog and digital.
We operate WVBT-TV, an LMA station in the Norfolk-Portsmouth-Newport News
market, from the WAVY-TV television studio and office facility. WVBT-TV is
affiliated with the FOX Network under an affiliation agreement that expires on
August 31, 2008. The station broadcasts 2 1/2 hours of news per week.
In April 2001, we signed a joint sales agreement to provide management,
technical and sales services to operate WPXV-TV in Norfolk-Portsmouth-Newport
News. This station will be broadcast from the WAVY-TV television studio
facility. This station is owned by and will carry the networking programming of
Paxson Communications Corporation.
Market Overview. Norfolk-Portsmouth-Newport News, Virginia is the
forty-second largest DMA in the United States of America, with a population of
approximately 1,752,000 and approximately 654,150 television households
representing 0.620% of total television households in the United States of
America. Cable penetration in the Norfolk-Portsmouth-Newport News market is
estimated at 77%. The Norfolk-Portsmouth-Newport News television market
experienced revenue growth of 3.5% in 2000 and is expected to grow at a compound
annual rate of 3.0% through 2005.
<Table>
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
VHF OR ------------------------------------------
CALL LETTERS CITY OF LICENSE UHF AFFILIATION OWNER JUL-01 MAY-01 FEB-01 NOV-00 JUL-00
------------ --------------- ------ ----------- ------------------------------- ------ ------ ------ ------ ------
LIN
Television:
WAVY-TV Portsmouth VHF NBC LIN Television 10 13 12 12 9
WVBT-TV Virginia UHF FOX Entravision 4 4 5 5 3
Beach
WPXV-TV Norfolk UHF PAX Paxson Comm Corp -- -- -- -- --
Other:
WTKR-TV Norfolk VHF CBS New York Times Co 10 12 12 12 12
WVEC-TV Hampton VHF ABC Belo Corp 10 11 11 11 10
WGNT-TV Portsmouth UHF UPN CBS TV Stations Div 7 7 8 8 7
WTVZ-TV Norfolk UHF WB Sinclair Bcst Group 4 5 5 5 5
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
------------------------------------------
CALL LETTERS MAY-00 FEB-00 NOV-00 JUL-99 MAY-99
------------ ------ ------ ------ ------ ------
LIN
Television:
WAVY-TV 12 12 12 10 14
WVBT-TV 4 4 6 4 4
WPXV-TV -- -- -- -- --
Other:
WTKR-TV 11 13 14 13 13
WVEC-TV 11 12 12 9 11
WGNT-TV 8 10 9 9 10
WTVZ-TV 6 6 5 5 5
</Table>
53
WIVB-TV and WNLO-TV (Buffalo, New York)
Station Profile. WIVB-TV is the number one ranked station in the Buffalo
market. The station, acquired by us in October 1995, is affiliated with the CBS
Network and its network affiliation agreement expires on December 31, 2005. The
station broadcasts 27 1/2 hours of news per week and its late news is ranked
number one in the Buffalo market. The station is currently broadcasting in
analog and is expected to be digital by the end of the year.
On July 25, 2001, the Company acquired the broadcast license and operating
assets of WNLO-TV (formerly called WNEQ-TV), an independent broadcast television
station located in Buffalo, New York. The Company has been operating WNLO-TV
since January 29, 2001 under a LMA agreement. The Company operates WNLO-TV from
WIVB-TV television studio and office facility. WNLO-TV currently has no network
affiliation. The station broadcasts 3 1/2 hours of news per week.
Market Overview. Buffalo, New York is the forty-seventh largest DMA in the
United States of America, with a population of approximately 1,623,000 and
approximately 616,610 television households representing 0.585% of total
television households in the United States of America. Cable penetration in the
Buffalo market is estimated at 77%. The Buffalo television market experienced
revenue growth of 5.9% in 2000 and is expected to grow at a compound annual rate
of 2.0% through 2005.
<Table>
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
CITY OF VHF OR --------------------------------------------
CALL LETTERS LICENSE UHF AFFILIATION OWNER JUL-01 MAY-01 FEB-01 NOV-00 JUL-00
------------ ----------- ------ ----------- ----------------------------- ------ ------- ------- ------ ------
LIN
Television:
WIVB-TV Buffalo VHF CBS LIN Television 13 14 15 16 11
WNLO-TV Buffalo UHF IND LIN Television 1 1 -- -- --
Other:
WGRZ-TV Buffalo VHF NBC Gannett Co Inc 9 11 10 11 9
WKBW-TV Buffalo VHF ABC Granite Bcstg Corp 11 14 13 14 14
WUTV-TV Buffalo UHF FOX BS&L Broadcasting 5 6 6 6 5
WNYO-TV Buffalo UHF WB Sinclair Bcst Group 4 4 4 4 5
WPXJ-TV Batavia UHF PAX Paxson Comm Corp -- -- -- -- --
WNGS-TV Springville UHF UPN Powley, Caroline K -- -- -- -- --
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
------------------------------------------
CALL LETTERS MAY-00 FEB-00 NOV-00 JUL-99 MAY-99
------------ ------ ------ ------ ------ ------
LIN
Television:
WIVB-TV 13 17 20 17 18
WNLO-TV -- -- -- -- --
Other:
WGRZ-TV 11 11 11 8 12
WKBW-TV 16 22 19 19 19
WUTV-TV 6 5 7 5 6
WNYO-TV 5 3 4 3 3
WPXJ-TV -- -- -- -- --
WNGS-TV -- -- -- -- --
</Table>
KXAN-TV, KXAM-TV, and KNVA-TV (Austin, Texas)
Station Profile. KXAN-TV, an NBC affiliate, is the number one ranked
station in the Austin market. Its current affiliation agreement expires on
December 31, 2010. The station broadcasts 20 hours of news per week and its late
news is ranked number one in the Austin market. The station is currently
broadcasting in both analog and digital.
We operate KXAM-TV, a satellite station in the Llano, Texas, from the
KXAN-TV television studio and office facility. As a satellite television
station, KXAM-TV retransmits KXAN-TV's television signal.
We operate KNVA-TV, an LMA station in the Austin market, from the KXAN-TV
television studio and office facility. KNVA-TV has been affiliated with the WB
Network since 1994, and its current affiliation agreement expires December 31,
2003.
Market Overview. Austin, Texas is the fifty-fourth largest DMA in the
United States of America, with a population of approximately 1,243,000 and
approximately 565,840 television households representing 0.527% of total
television households in the United States of America. The Austin market is
ranked thirty-ninth in terms of revenue. Cable penetration in the Austin
54
market is estimated at 66%. The Austin television market experienced revenue
growth of 12.4% in 2000 and is expected to grow at a compound annual rate of
3.7% through 2005.
<Table>
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
CITY OF VHF OR ------------------------------------------
CALL LETTERS LICENSE UHF AFFILIATION OWNER JUL-01 MAY-01 FEB-01 NOV-00 JUL-00
------------ ------------- ------ ----------- --------------- ------ ------ ------ ------ ------
LIN
Television:
KXAN-TV Austin UHF NBC LIN Television 10 13 16 14 12
KNVA-TV Austin UHF WB 54 Bcstg. Inc 6 6 5 4 5
KXAM-TV Llano UHF NBC LIN Television -- -- -- -- --
Other:
KTBC-TV Austin VHF FOX Fox Television 11 12 11 10 10
KVUE-TV Austin UHF ABC Belo Corp 10 10 13 16 13
KEYE-TV Austin UHF CBS CBS TV Station 8 9 12 11 10
Div
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
------------------------------------------
CALL LETTERS MAY-00 FEB-00 NOV-00 JUL-99 MAY-99
------------ ------ ------ ------ ------ ------
LIN
Television:
KXAN-TV 15 15 14 13 16
KNVA-TV 6 5 5 4 4
KXAM-TV -- -- -- -- --
Other:
KTBC-TV 11 11 13 9 9
KVUE-TV 15 15 17 14 13
KEYE-TV 11 11 12 11 14
</Table>
WANE-TV (Fort Wayne, Indiana)
Station Profile. WANE-TV is the number one ranked station in the Fort
Wayne market. The station is affiliated with the CBS Network under an
affiliation agreement that expires on December 31, 2005. The station broadcasts
21 1/2 hours of news per week and its late news is ranked number two in the Fort
Wayne market.
Market Overview. Fort Wayne, Indiana is the hundred and fourth largest DMA
in the United States of America, with a population of approximately 668,000 and
approximately 262,000 television households representing 0.248% of total
television households in the United States of America. Cable penetration in the
Fort Wayne market is estimated at 55%. The Fort Wayne television market
experienced revenue growth of 3.3% in 2000 and is expected to grow at a compound
annual rate of 2.0% through 2005.
<Table>
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
CITY OF VHF OR ---------------------------------
CALL LETTERS LICENSE UHF AFFILIATION OWNER MAY-01 FEB-01 NOV-00 JUL-00
------------ ------------- ------ ----------- ----------------- ------ ------ ------ ------
LIN
Television:
WANE-TV Fort Wayne UHF CBS LIN Television 16 17 17 16
Other:
WPTA-TV Fort Wayne UHF ABC Granite Bcstg 15 15 17 15
Corp
WKJG-TV Fort Wayne UHF NBC Cloutier Trust 13 13 13 11
WFFT-TV Fort Wayne UHF FOX Quorum Bcstg Co 7 8 6 6
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
------------------------------------------
CALL LETTERS MAY-00 FEB-00 NOV-00 JUL-99 MAY-99
------------ ------ ------ ------ ------ ------
LIN
Television:
WANE-TV 17 20 20 18 18
Other:
WPTA-TV 19 18 17 16 18
WKJG-TV 14 14 13 10 16
WFFT-TV 6 7 8 7 7
</Table>
WWLP-TV (Springfield-Holyoke, Massachusetts)
Station Profile. We acquired WWLP-TV in 2000. WWLP-TV is the number one
ranked station in the two-station Springfield-Holyoke market. The station is
affiliated with the NBC Network and its current affiliation agreement expires on
January 1, 2006. The station broadcasts 27 hours of news per week and its late
news is ranked number one in the Springfield-Holyoke market.
Market Overview. Springfield-Holyoke, Massachusetts is the one hundred and
fifth largest DMA in the United States of America, with a population of
approximately 658,000 and approximately 254,020 television households
representing 0.241% of total television households in the United States of
America. Cable penetration in the Springfield-Holyoke market is estimated at
85%. The Springfield-Holyoke television market experienced revenue growth of
3.5% in 2000 and is expected to grow at a compound annual rate of 2.0% through
2005.
<Table>
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
CITY OF VHF OR ---------------------------------
CALL LETTERS LICENSE UHF AFFILIATION OWNER JUL-01 MAY-01 FEB-01 NOV-00
------------ ------------- ------ ----------- ---------------- ------ ------ ------ ------
LIN
Television:
WWLP-TV Springfield UHF NBC LIN Television 17 18 17 18
Other:
WGGB-TV Springfield UHF ABC Sinclair Bcst 12 14 14 14
Group
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
------------------------------------------
CALL LETTERS JUL-00 MAY-00 FEB-00 NOV-00 JUL-99 MAY-99
------------ ------ ------ ------ ------ ------ ------
LIN
Television:
WWLP-TV 17 17 18 19 19 21
Other:
WGGB-TV 14 16 17 14 13 14
</Table>
55
WLFI-TV (Lafayette, Indiana)
Station Profile. We acquired WLFI-TV, a CBS affiliate, in April 2000. The
Lafayette market is a one-station market. The current affiliation agreement
expires on January 1, 2008. The station broadcasts 15 hours of news per week.
After we acquired WLFI-TV, we consolidated WLFI-TV's technical and
administrative operations with the WISH-TV studio facilities in Indianapolis.
WLFI-TV maintains separate news and sales operations in Lafayette.
Market Overview. Lafayette, Indiana is the one hundred and ninetieth
largest DMA in the United States of America, with a population of approximately
150,000 and approximately 57,190 television households representing 0.054% of
total television households in the United States of America. Cable penetration
in the Springfield market is estimated at 75%. The Springfield television market
experienced revenue growth of 9.5% in 2000 and is expected to grow at a compound
annual rate of 1.4% through 2005.
<Table>
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
CITY OF VHF OR ------------------------------------------
CALL LETTERS LICENSE UHF AFFILIATION OWNER JUL-01 MAY-01 FEB-01 NOV-00 JUL-00
------------ --------- ------ ----------- -------------- ------ ------ ------ ------ ------
LIN
Television:
WLFI-TV Lafayette UHF CBS LIN Television 19 21 23 20 17
<Caption>
SHARE SUMMARY 9AM TO MIDNIGHT (%)
------------------------------------------
CALL LETTERS MAY-00 FEB-00 NOV-00 JUL-99 MAY-99
------------ ------ ------ ------ ------ ------
LIN
Television:
WLFI-TV 20 24 23 22 24
</Table>
WAPA-TV (San Juan, Puerto Rico)
Station Profile. We acquired WAPA-TV in October 1999. The station is the
third ranked station in Puerto Rico. The station has no network affiliation. The
station acquires syndicated programming primarily from South America, Mexico and
the United States of America. In addition, the station produces 21.5 hours per
week of entertainment programming in its studios and produces 28 hours of news
programming per week. The station is the first station in Puerto Rico to install
a Doppler Weather Satellite radar in support of its news programming.
Due to the mountainous terrain of Puerto Rico, we own and operate WNJX-TV,
a television station in Mayaguez, Puerto Rico and operate an LMA station,
WTIN-TV, a television station in Ponce, Puerto Rico. These stations re-broadcast
the television signal of WAPA-TV.
On August 2, 2001, the Company acquired the broadcast license and operating
assets of WJPX-TV, an independent television station in San Juan, Puerto Rico,
WKPV-TV, an independent television station in Ponce, Puerto Rico and WJWN-TV, an
independent television station in San Sebastian, Puerto Rico. WKPV-TV and
WJWN-TV currently rebroadcast the programming carried on WJPX-TV.
56
Market Overview. Puerto Rico has a population of approximately 3,808,610
and approximately 1,205,348 television households. Based on its population,
Puerto Rico would have been the twentieth largest DMA in the United States of
America. Cable penetration in the Puerto Rico market is estimated at 29%. The
Puerto Rico television market experienced revenue growth of 4.2% and is expected
to grow at a compound annual rate of 3.2% through 2005.
<Table>
<Caption>
SHARES M-F (SIGN ON TO SIGN OFF)
------------------------------------------------
1999 2000
CITY OF VHF OR --------------------------- ------------------
CALL LETTERS LICENSE UHF AFFILIATION OWNER APR-JUN JUL-SEP OCT-DEC JAN-MAR APR-JUN
------------ -------- ------ ----------- ------------------- ------- ------- ------- ------- --------
LIN
Television:
WAPA-TV San Juan VHF IND LIN Television 26 27 26 28 27
WJPX-TV San Juan UHF IND LIN Television
<Caption>
SHARES M-F (SIGN ON TO SIGN OFF)
-------------------------------------
2000 2001
----------------- -----------------
CALL LETTERS JUL-SEP OCT-DEC JAN-MAR APR-JUN
------------ ------- ------- ------- -------
LIN
Television:
WAPA-TV 26 28 29 29
WJPX-TV
</Table>
The following stations are satellite stations of WAPA-TV.
<Table>
WTIN-TV Ponce UHF IND Nicolau, Laura
WNJX-TV Mayaguez UHF IND LIN Television
WKPV-TV Ponce UHF IND LIN Television
WJWN-TV San UHF IND LIN Television
Sabastian
Other:
WKAQ-TV San Juan VHF IND Telemundo Group Inc 26 27 27 27 24 26
WSTE-TV Ponce VHF IND Ch 7 WSTE
WLII-TV Caguas VHF IND Raycom Media Inc 35 35 33 34 35 36
WTIN-TV
WNJX-TV
WKPV-TV
WJWN-TV
Other:
WKAQ-TV 25 23 22
WSTE-TV
WLII-TV 34 37 36
</Table>
Each of these stations has satellite stations that broadcast their signal
throughout Puerto Rico.
INDUSTRY OVERVIEW
General Television Broadcasting. Commercial television broadcasting began
in the United States on a regular basis in the 1940s. Currently there are a
limited number of channels available for broadcasting in any one geographic
area. Television stations can be distinguished by the frequency on which they
broadcast. Television stations which broadcast over the VHF, very high frequency
band (channels 2-13) of the spectrum generally have some competitive advantage
over television stations which broadcast over the UHF, ultra-high frequency
band, which are channels 14 and higher, of the spectrum because the former
usually have better signal coverage and operate at a lower transmission cost.
However, the improvement of UHF transmitters and receivers, the complete
elimination from the marketplace of VHF-only receivers and carriage by cable
television systems have virtually equalized the reception of VHF and UHF
signals. Nonetheless, based on historical patterns, VHF stations continue to
have a competitive advantage over UHF stations.
All television stations in the country are grouped by A.C. Nielsen, a
national audience measuring service, into approximately 210 DMAs that are ranked
in size according to various formulae based upon actual or potential audience.
Each DMA is determined as an exclusive geographic area consisting of all
counties in which the home-market commercial stations receive the greatest
percentage of total viewing hours. Nielsen periodically publishes data on
estimated audiences for the television stations in the various television
markets throughout the country. The estimates are expressed in terms of the
percentage of the total potential audience in the market viewing a station,
which is the station's "rating," and of their percentage of the audience
actually watching television, which is the station's "share." Nine of our
affiliated stations in the continental United States are in top 50 DMAs, and
these stations have an aggregate United States household reach of 5%.
During a period of deregulation in the 1980s, inexpensive and abundant
capital allowed entrepreneurs to build television groups. In the late 1980s,
tighter lending practices began to shrink the size and volume of television
station acquisitions. In the early 1990s, a retail recession curtailed
advertising budgets and competition from cable and the emerging networks reduced
the value of traditional affiliate operators, triggering a new wave of
consolidation in the industry. Several other factors have influenced the
consolidation, the most significant of
57
which has been the relaxation of ownership restrictions in the mid-1990s. Prior
to the mid-1990s, station ownership was limited to 12 stations on a national
level with a maximum coverage of 25% of all U.S. households. As a result of
legislation enacted in 1996, the national limit on television station ownership
is now subject to a limitation of coverage of 35% of U.S. households, and UHF
station coverage is counted as 50% of the households in each market.
LMAs and duopolies have also changed the competitive profile of the
television industry. An LMA is a means of allowing a station owner to program a
second station in the same market through what amounts to a full-station
management agreement; a duopoly is the ownership of two stations in a single
market. LMAs and duopolies enable station operators to cut costs, broaden
audience reach through counterprogramming and improve their negotiating position
with programming distributors, networks and advertisers. We were one of the
first operators to utilize LMAs and now has four such operations.
The FCC has finalized its allotment of new digital television or "DTV"
channels to existing broadcast stations. A DTV station transmits a digital
television signal which delivers improved video and audio signals and also has
substantial multiplexing and data transmission capabilities. In 1996, the FCC
and Congress adopted a transition plan which calls for stations to provide dual
analog and digital transmissions over an eight year period with broadcasters
surrendering their analog channels in the year 2006, unless less than 85% of
households have the capability to receive DTV signals. Once analog service is
terminated, recovered spectrum will be auctioned by the government. Stations
were required to initiate digital transmissions by May 1999 in the largest
markets, with a rollout in all markets to be completed by approximately 2002.
Due to upgrades to our towers and transmitter buildings, we are well positioned
for the transition to digital broadcasting and has already begun the
transmission of digital signals in Austin, Indianapolis, New Haven, Norfolk and
Grand Rapids.
Broadcasting Revenues. Local television stations derive revenues primarily
from the sale of advertising time for spot advertisements to national and local
advertisers. Advertising contracts are generally short in duration and may
usually be canceled upon two weeks notice.
Networks. Network-affiliated television broadcast stations generally
operate under affiliation agreements that provide the affiliated station with
the right to broadcast all programs transmitted by the network with which the
station is affiliated. The major networks typically negotiate the right to sell
a majority of the advertising time during network broadcasts. The network then
traditionally pays the affiliated station a network compensation fee for every
hour of network programming that the station broadcasts, although in certain
instances, stations have been required to make payments to the network.
Generally, the fees paid by the networks vary according to the type of
programming and the time of day the programming is broadcast. For more
information see the discussion under the section entitled "Risk Factors --
Certain Affiliation Agreements."
The networks, pursuant to affiliation agreements, supply a significant
portion of our daily programming. During network time periods, stations are
dependent on the performance of the network programs in attracting viewers.
During time periods in which programming is not supplied by the networks, the
stations broadcast their own or syndicated non-network programs, as well as
news, sports, public affairs and other entertainment programming.
We believe that our network affiliations provide the stations with
competitive programming at a lower cost than is otherwise available. Under our
network affiliation agreements, certain advertising time during network programs
is available to the stations for sale to national and local advertisers. The
programming strength of its network may affect a network-affiliated station's
competitive position. We believe that local programming, particularly local news
coverage, and community involvement and promotion can augment network
programming to improve a station's audience share and financial performance. A
network's termination
58
of, or refusal to renew, one or more of the affiliation agreements could have a
material adverse effect on us depending on which stations were affected and
whether and upon what terms other network affiliations may be available in the
station's market.
Local Marketing Agreements. In four of our markets, we have entered into
LMAs with the FCC licensees of stand-alone UHF stations. Under our LMAs, we
provide marketing services and programming to stations KNVA-TV, Austin, Texas;
WCTX-TV, New Haven-Hartford, Connecticut; WVBT-TV, Norfolk-Portsmouth, Virginia;
and WOTV-TV, Battle Creek, Michigan. We have also entered into option and put
agreements that enable or require us to purchase these stations under certain
conditions.
Under our LMAs, we are required to pay fixed periodic fees and incur
programming and operating costs relating to our LMA stations, but retain all
advertising revenues. We believe that we can increase the likelihood of
financial viability of the stations served pursuant to an LMA by using our
negotiating expertise, operating efficiencies, and an experienced and skilled
management team, which provides programming, local news, and marketing support
to the LMA stations.
In accordance with FCC rules, regulations and policies, all of our LMAs
allow preemptions of our programming by the owner-operator and FCC licensee of
each station with which we have an LMA. Accordingly, we cannot be assured that
we will be able to air all of the programming expected to be aired on those
stations with which we have an LMA or that we will receive the anticipated
advertising revenue from the sale of advertising spots in such programming.
Although we believe that the terms and conditions of each of our LMAs will
enable us to air our programming and utilize the programming and other
non-broadcast license assets acquired for use on the LMA stations, early
terminations of the LMAs or unanticipated terminations of all or a significant
portion of the programming by the owner-operator and FCC licensee may occur. An
early termination of one of our LMAs, or repeated and material preemption of
programming thereunder, could have an adverse affect on our operations.
Low-Power Television Stations. We own and operate twenty-eight LPTVs in
several of our markets. LPTVs broadcast at lower transmitting power than other
stations and, accordingly, their over-the-air signals cover a much smaller
geographic area than the signals of other stations. LPTVs are secondary services
that, under FCC rules, must protect full power television stations in their
markets from interference and which may not receive rights to convert to digital
broadcast in the future. By operating a network of multiple LPTVs in one market,
we may be able to achieve over-the-air signal coverage of all, or nearly all, of
certain of the television markets served by our stations. We own and operate an
LPTV network in Austin, Texas; Norfolk-Portsmouth, Virginia; Grand Rapids,
Michigan; and Indianapolis, Indiana markets. The advent of digital television
has resulted in the "displacement" and possible loss or reduction in service
area of some of our LPTVs. Recent legislation may have also granted additional
service area protection to many of our LPTVs. See "-- Licensing and
Regulation -- Advanced Television Technology."
We are currently operating six Grand Rapids LPTVs under the call letters
WXSP-TV. The LPTVs, as a group, have an affiliation agreement with the UPN
Network.
Local Weather Station. In 1994, we launched the LWS, a local weather
station programming service, which provides Doppler radar or local travel and
aviation forecasts, weather trends and features. LWS is offered in some of our
television markets over local cable systems. We receive monthly payments from
certain contracting cable systems based on the number of subscribers to such
cable systems, as well as a share of each cable system's advertising revenues,
if any, generated by LWS.
59
Competition
Competition in the television industry is intense and takes place on
several levels: competition for audience, competition for programming, including
news, and competition for advertisers. Factors that are material to a television
station's competitive position include signal coverage and assigned frequency.
The broadcasting industry is faced with technological change and innovation, the
possible rise in popularity of competing entertainment and communications media,
and governmental restrictions or actions of federal regulatory bodies, including
the FCC and Federal Trade Commission, any of which could have a material effect
on our business and operations.
Audience. Stations compete for audience on the basis of program
popularity, which directly affects advertising rates. The growth of cable
television and Direct Broadcast Satellite or "DBS" companies has significantly
altered competition for audience in the television broadcasting industry. Other
sources of audience competition include home entertainment systems, including
DVDs, videocassette recorder and playback systems, and television game devices,
wireless cable, satellite master antenna television systems, computer on-line
services, the internet, telephone company video systems, LPTVs, low-power
satellite-to-home video distribution services, and other entertainment and
advertising media.
Further advances in technology may increase competition for household
audiences and advertisers. Video compression techniques, now in use with DBS and
in development for cable and "wireless cable," are expected to permit greater
numbers of channels to be carried with existing bandwidth. These compression
techniques, as well as other technological developments, have the potential to
provide expanded programming to highly targeted audiences. A reduction in the
cost of creating additional channel capacity could lower entry barriers for new
channels and encourage the development of increasingly specialized "niche"
programming. This ability to reach very specific audiences is expected to alter
the competitive dynamics for advertising expenditures and could have a material
adverse effect on our ability to generate revenues.
Programming. Competition for programming involves negotiating with
national program distributors or syndicators that sell first-run and rerun
programming. Our stations compete against in-market television broadcasting
station competitors for exclusive access to off-network reruns, such as
"Friends," and first-run products, such as "Wheel of Fortune," in their
respective markets. We may be exposed to volatile or increased programming costs
that may adversely affect our operating results. Further, because syndicated
programs are generally purchased well in advance of being broadcast, we may not
accurately predict how a program will perform. 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 broadcasting stations. Competition also occurs for exclusive news
stories and features and local sports programming.
Advertising. Television broadcasting stations compete for advertising
revenues with other stations in their respective markets, as well as with other
advertising media, such as newspapers, radio, magazines, outdoor advertising,
transit advertising, yellow page directories, internet, direct mail and local
cable systems. Competition for advertising dollars in the broadcasting industry
occurs primarily in individual markets. Generally, a television broadcasting
station in one market does not compete with stations in other markets.
The television broadcasting industry is undergoing a period of
consolidation and significant change. Many of our current and potential
competitors have significantly greater financial, marketing, programming and
broadcasting resources than we do. We, however, believe that our local news
programming, network affiliations and management of our sales resources have to
date enabled us to compete effectively in our markets. Nonetheless, we cannot
assure you that our strategy will continue to be effective or that the
introduction of new competitors for
60
television audiences will not have a material adverse effect on our financial
condition and results of operations.
LICENSING AND REGULATION
The following is a brief discussion of certain provisions of the
Communications Act of 1934, as amended, and of FCC regulations and policies that
affect the business operations of television broadcasting stations. Reference
should be made to the Communications Act, FCC rules and the public notices and
rulings of the FCC, on which this discussion is based, for further information
concerning the nature and extent of FCC regulation of television broadcasting
stations.
FCC Regulation. The ownership, operation and sale of television stations
are subject to the jurisdiction of the FCC by authority granted it under the
Communications Act. Matters subject to FCC oversight include, but are not
limited to:
- the assignment of frequency bands of broadcast television;
- the approval of a television station's frequency, location and operating
power;
- the issuance, renewal, revocation or modification of a television
station's FCC license;
- the approval of changes in the ownership or control of a television
station's licensee;
- the regulation of equipment used by television stations; and
- the adoption and implementation of regulations and policies concerning
the ownership and operation of television stations.
The FCC has the power to impose penalties, including fines or license
revocations, upon a licensee of a television station for violations of the
Communications Act and the FCC's rules and regulations.
License Renewal, Assignments and Transfers. Television broadcast licenses
are granted for a maximum term of eight years and are subject to renewal upon
application to the FCC. The FCC prohibits the assignment of a license or the
transfer of control of a broadcasting licensee without prior FCC approval. In
determining whether to grant or renew a broadcasting license, the FCC considers
a number of factors pertaining to the applicant, including compliance with a
variety of ownership limitations and compliance with character and technical
standards. During certain limited periods when a renewal application is pending,
petitions to deny a license renewal may be filed by interested parties,
including members of the public. Such petitions may raise various issues before
the FCC. The FCC is required to hold evidentiary, trial-type hearings on renewal
applications if a petition to deny renewal of such license raises a "substantial
and material question of fact" as to whether the grant of the renewal
application would be inconsistent with the public interest, convenience and
necessity. The FCC must grant the renewal application if, after notice and
opportunity for a hearing, it finds that the incumbent has served the public
interest and has not committed any serious violation of FCC requirements. If the
incumbent fails to meet that standard, and if it does not show other mitigating
factors warranting a lesser sanction, the FCC has authority to deny the renewal
application and consider a competing application.
Multiple- and Cross-Ownership Rules. On a national level, the FCC rules
generally prevent an entity or individual from having an "attributable" interest
in television stations with an aggregate audience reach in excess of 35% of all
U.S. households. For this purpose only 50% of the television households in a
market are counted towards the 35% national restriction if the station is a UHF
station. The television homes that our stations reach is well below the 35%
national limit.
61
On the local level, the FCC's "duopoly" rule prohibits or restricts
attributable interests in two or more television stations with overlapping
service areas. In August 1999, the FCC significantly relaxed the duopoly rule to
permit ownership of two television stations in a local market under certain
circumstances, primarily where a party is seeking to combine two stations where
at least one of the stations is not among the top four in audience and there are
a sufficient number of post-merger independently owned television operations. In
January 2001, the FCC again modified this rule on reconsideration of its 1999
order. Waivers of the rule are also available where one of the stations has
"failed" or is either "failing" or "unbuilt." The FCC also determined that
television LMAs were equivalent to ownership for purposes of the local ownership
rules and thus permissible only where ownership was permissible. The FCC
grandfathered television LMAs entered into prior to November 5, 1996, until at
least after the conclusion of a rulemaking that is expected to be initiated no
sooner than 2004, examining whether it would be in the public interest to permit
such combinations to continue. The FCC permitted the free transferability of
grandfathered LMAs during the grandfather period but held that dual licenses may
be transferred only where the two-station combination continues to qualify under
the revised duopoly rule.
We have options to purchase each of the stations with which we have an LMA.
We believe that the Grand Rapids and Norfolk LMAs now or soon will satisfy the
requirement for a sufficient number of post-merger independently owned
television stations and will not require waivers of the duopoly rule either for
conversion to ownership or subsequent transferability. We believe that the
grandfathered New Haven and Austin LMAs are likely eligible for waivers of the
duopoly rule. In the event that the FCC determines otherwise, we have the right
to assign our purchase options to third parties and believe we can arrange
alternative non-attributable operating arrangements with such parties, e.g.,
joint sales agreements, which will not be materially less favorable to us than
the current LMAs. There can be no assurances, however, that the rules will be
implemented or interpreted in such a manner. We are in the process of evaluating
whether and when to exercise the options with respect to the remaining LMAs.
The FCC generally applies its ownership limits only to "attributable"
interests held by an individual, corporation, partnership or other association.
In the case of corporations holding broadcast licenses, the interest of
officers, directors and those who, directly or indirectly, have the right to
vote 5% or more of the corporation's voting stock, or 20% or more of such stock
in the case of insurance companies, mutual funds, bank trust departments and
certain other passive investors that are holding stock for investment purposes
only, are generally deemed to be attributable, as are positions as an officer or
director of a corporate parent of a broadcast licensee. Debt and nonvoting stock
are generally nonattributable interests. However, under the recently adopted
"equity/debt plus" rule, the holder of an otherwise nonattributable stock or
debt interest in a licensee which is in excess of 33% of the total assets of the
licensee, debt and equity, will nonetheless be attributable where the holder is
either a major program supplier to that licensee or the holder has an
attributable interest in another broadcast station, cable system or newspaper in
the same market.
Because of these multiple and cross-ownership rules, any person or entity
that acquires an attributable interest in us may violate the FCC's rules if that
purchaser also has an attributable interest in other television or radio
stations, or in daily newspapers or cable systems, depending on the number and
location of those radio or television stations, daily newspapers, or cable
systems. Such person or entity also may be restricted in the companies in which
it may invest to the extent that those investments give rise to an attributable
interest. If the holder of an attributable interest violates any of these
ownership rules or if a proposed acquisition by us would cause such a violation,
we may be unable to obtain from the FCC one or more authorizations needed to
conduct its television station business and may be unable to obtain FCC consents
for certain future acquisitions.
62
Alien Ownership. The Communications Act restricts the ability of foreign
entities or individuals to own or vote certain interests in broadcast licenses.
Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." Since the early 1980s, the FCC gradually has
relaxed or eliminated many of the more formalized procedures it had developed to
promote the broadcast of certain types of programming responsive to the needs of
a station's community of license. Broadcast station licensees continue, however,
to be required to present programming that is responsive to community problems,
needs and interests and to maintain certain records demonstrating such
responsiveness. Complaints from viewers concerning a station's programming may
be considered by the FCC when it evaluates license renewal applications,
although such complaints may be filed, and generally may be considered by the
FCC, at any time. Stations also must follow various rules promulgated under the
Communications Act that regulate, among other things, children's television
programming, political advertising, sponsorship identifications, contest and
lottery advertising, obscene and indecent broadcasts, programming rating
guidelines and technical operations. The FCC's rules implementing the Children's
Television Act of 1990 require television stations to present programming
specifically directed to the "educational and informational" needs of children.
The FCC has also adopted standards for the exposure of the public and workers to
potentially harmful radio frequency radiation emitted by broadcast station
transmitting facilities.
Restrictions on Broadcast Advertising. The advertising of cigarettes on
broadcast stations has been banned for many years. The broadcast advertising of
smokeless tobacco products has more recently been banned by Congress. Certain
Congressional committees have examined legislative proposals to eliminate or
severely restrict the advertising of beer and wine. In addition, Congress is
considering proposals with respect to political campaign financing, which could
limit the rates we charge for political advertising if enacted. We cannot
predict whether any or all of the present proposals will be enacted into law
and, if so, what the final form of such law might be. The elimination of all
beer and wine advertising could have an adverse effect on our stations' revenues
and operating profits as well as the revenues and operating profits of other
stations that carry beer and wine advertising.
Cable "Must-Carry" or "Retransmission Consent" Rights. The 1992 Cable Act
requires television broadcasters to make an election to exercise either certain
"must-carry" or "retransmission consent" rights in connection with their
carriage by cable television systems in the station's local market. If a
broadcaster chooses to exercise its must-carry rights, it may demand carriage on
a specified channel on cable systems within its DMA. Must-carry rights are not
absolute, and their exercise is dependent on variables such as the number of
activated channels on, and the location and size of, the cable system, and the
amount of duplicative programming on a broadcast station. Under certain
circumstances, a cable system may decline to carry a given station. If a
broadcaster chooses to exercise its retransmission consent rights, it may
prohibit cable systems from carrying its signal, or permit carriage under a
negotiated compensation arrangement. Our stations have negotiated retransmission
consent agreements with cable television systems in their markets, with terms
generally ranging from three to 10 years, which in four markets provides for
carriage of the station's signal and the local weather station. The licensees of
the LMAs generally have opted for must-carry status. From time to time, various
of our stations and/or LMAs have been unable to reach agreement with cable
operators and have been carried pursuant to short-term agreements and in a few
instances have not been carried on those cable systems for periods ranging from
a few days to two years.
63
Network Affiliate Issues. Several FCC rules impose restrictions on network
affiliation agreements. Among other things, those rules prohibit a television
station from entering into any affiliation agreement that:
- requires the station to clear time for network programming that the
station had previously scheduled for other use; or
- precludes the preemption of any network programs that the station
believes are unsuitable for its audience and the substitution of network
programming with a program that it believes is of greater local or
national importance, the "right to reject rule".
The FCC is currently reviewing several of these rules governing the
relationship between broadcast television networks and their affiliates. We are
unable to predict when and how the FCC will resolve these proceedings.
Digital Television. At present, U.S. television stations broadcast signals
using the "NTSC" system, an analog transmission system named for the National
Television Systems Committee, an industry group established in 1940 to develop
the first U.S. television technical broadcast standards. The FCC in late 1996
approved a new digital television technical standard to be used by television
broadcasters, television set manufacturers, the computer industry and the motion
picture industry. This digital television standard will allow the simultaneous
transmission of multiple streams of video programming and data on the bandwidth
presently used by a single analog channel. On the multiple channels allowed by
DTV, it will be possible to broadcast one "high definition" channel or "HDTV"
with visual and sound quality superior to present-day television; or to transmit
several "standard definition" channels or "SDTV" with digital sound and pictures
of a quality of varying degrees better than present television; to provide
interactive data services, including visual or audio transmission; or to provide
some combination of these possibilities.
The FCC has already allocated to every existing television broadcaster one
additional channel to be used for DTV during the transition between present-day
analog television and DTV, and has established a timetable by which every
current station must initiate DTV operations. Broadcasters will not be required
to pay for this new DTV channel, but will be required to relinquish one of their
two channels when the transition to DTV is complete.
Broadcasters may be required to discontinue analog operations and to return
the channel to the FCC by as early as 2006, or as soon thereafter as 85% of U.S.
households have digital reception capability. Moreover, under current law the
FCC is required to auction the returned channels by 2002, at least four years
before they must be relinquished. The FCC has already undertaken to relocate all
broadcast stations from Channels 60-69 and could auction off that spectrum to
non-broadcast users as soon as later this year. The FCC has also proposed to
"clear" and auction Channels 52-59 in advance of the 2006 deadline.
The FCC has also declared that, absent an extension, all commercial DTV
stations must be constructed by May 1, 2002. The FCC has stated that stations
may initially construct DTV facilities that transmit at less than the full
authorized power. DTV stations that are not at full power by December 31, 2004,
however, may lose their ability to increase power to the full-authorized level.
We have built five DTV stations, one in each of Austin, Indianapolis, New Haven,
Norfolk and Grand Rapids. We believe we will meet the 2002 and 2004 deadlines.
Given the order and production backlogs of equipment manufacturers and the
scarcity of tower installation crews, we may, however, need extensions in some
markets.
The FCC recently rejected a petition supported by a number of other
broadcast companies that requested that the FCC adopt a different DTV
transmission standard which some companies believe would provide better
coverage. The broadcast industry, through its primary trade associations,
conducted extensive comparative field tests of the current system and the
proposed alternative and also determined not to seek any changes in the current
standard at
64
the present time. The field testing also revealed inadequacies in the
performance of the current system that we believe will require industry
investment in additional improvements in both transmission and reception
technology. We are unable to predict the timing or outcome of this investment.
The FCC recently initiated a rulemaking to determine what, if any,
additional public interest obligations, including programming, should be imposed
on DTV broadcasters. Pursuant to the Telecom Act, the FCC has already imposed
certain fees upon broadcasters if they choose to use the DTV channel to provide
paid subscription services to the public. The FCC also recently proposed
imposing fees on broadcasters who remain on their analog channels after 2002.
The FCC also issued a report and order concerning the extent to which cable
systems will be required to carry broadcast DTV signals and issued a further
rulemaking looking towards refining and completing these "digital must carry"
regulations. The FCC tentatively concluded that it did not have the authority to
require must carry of both analog and digital signals, and, if it did, that such
must carry would be limited to one video-programming service from each broadcast
station's "primary video." The broadcast industry is generally seeking
reconsideration of the tentative conclusion and a broader definition of the
material that must be carried. We are unable to predict the timing or outcome of
any of these proceedings.
In some cases, conversion to DTV operations may reduce a station's
geographical coverage area. Moreover, some of our stations have channels that
are in the spectrum to be "cleared" for resale by the FCC and there is no
guarantee that the replacement channels will fully replicate existing service.
In other instances, the digital service may exceed current service. In addition,
the FCC's current implementation plan would maintain the secondary status of
LPTVs with respect to DTV operations and many LPTVs, particularly in major
markets, will be displaced. We have already filed applications for new channel
allotments for eleven of our LPTVs, which will be at least partially displaced
by DTV channels and is in the process of locating alternative channels for two
others. It appears likely that the last two facilities, if granted, will require
operation with substantially reduced coverage areas. There is no assurance that
any of the applications will be granted.
Congress also recently enacted legislation granting additional interference
and displacement protection to certain LPTVs that produce local programming. A
significant number of our LPTVs have been granted this status. While the FCC has
proposed that these new protections remain subordinate to DTV operations, it is
unclear whether these operations will in fact further impede DTV implementation.
We have also applied for a temporary license to operate an LPTV in
northwest Michigan to remedy interference to our Grand Rapids NBC affiliate from
a new digital station in Milwaukee. There is no assurance that this application
will be granted. It also appears likely that additional interference will occur
to both analog and digital stations in other markets as new digital broadcast
stations are constructed. We are unable to assess at this time the magnitude of
such interference or the efficacy of possible remedies.
In addition, it is not yet clear:
- when and to what extent DTV or other digital technology will become
available through the various media;
- whether and how television broadcast stations will be able to avail
themselves of or profit by the transition to DTV;
- whether viewing audiences will make choices among services upon the basis
of such differences;
- whether and how quickly the viewing public will embrace the cost of new
digital television sets and monitors;
65
- to what extent the DTV standard will be compatible with the digital
standards adopted by cable and other multi-channel video programming
services;
- whether a satisfactory copy protection technology will be developed for
broadcasting and whether that technology will be compatible with copy
protection systems developed for cable and other media;
- whether cable systems will be required to carry DTV signals or, in the
absence of such mandate, broadcasters will succeed in negotiating
voluntary cable carriage arrangements;
- whether significant additional expensive equipment will be required for
television stations to provide digital service, including HDTV and
supplemental or ancillary data transmission services; or
- what additional public interest obligations digital broadcasters will be
required to fulfill.
Pursuant to the Telecom Act, the FCC must conduct a ten-year evaluation
regarding the public interest in advanced television, alternative uses for the
spectrum and reduction of the amount of spectrum each licensee utilizes. Many
segments of the industry are also intensely studying these advanced
technologies. There can be no assurances as to the answers to these questions or
the nature of future FCC regulation.
Direct Broadcast Satellite Systems. There are currently in operation two
DBS systems that serve the United States of America, (DirecTV and Echostar) and
it is anticipated that additional systems may become operational over the next
several years. DBS systems provide programming on a subscription basis to those
who have purchased and installed a satellite signal-receiving dish and
associated decoder equipment. DBS systems claim to provide visual picture
quality comparable to that found in movie theaters and aural quality comparable
to digital audio compact discs. Until recently, DBS systems did not have
sufficient channel capacity to carry local television stations and carried only
a few network affiliates which were distributed to dishes in every market and
thus were potential competitors of the local affiliates.
In 1998, Congress passed the Satellite Home Viewer Act or "SHVA," which
granted DBS a limited "compulsory copyright license" with respect to broadcast
signals. Under this license, in exchange for a relatively modest license fee set
by the Copyright Office, satellite operators have the right to provide non-local
network television signals but only to "unserved households." To be an unserved
household with respect to a particular network, the household must not be able
to receive, using a conventional rooftop antenna, the television signal of the
network's local affiliate at a specified intensity. Several broadcast companies
and organizations have sued satellite carriers in various federal courts
charging that the carriers have routinely and flagrantly violated the unserved
household restriction. Two courts have agreed, making findings which could have
significantly reduced the number of DBS households receiving distant network
stations.
Congress also recently amended SHVA in a number of important respects. DBS
operators now have the channel capacity to carry local signals in the largest
television markets and in the next few years will be able to utilize additional
satellite capacity and new "spot beam" technologies to extend the transmission
of local signals to most of the households in the country. To facilitate this
development, Congress extended the compulsory copyright license to cover "local
into local" transmissions, i.e., satellite transmission of local stations to
households in, and only in, the local markets of those stations. Broadcasters
were given the right to negotiate retransmission consent for these "local"
transmissions, provided that such negotiations are in "good faith," with the FCC
to determine the precise scope of this restriction by rulemaking. Moreover,
starting in 2002, in any market where one station is carried, all have the right
to be carried. The amended law also grandfathered many of the households
currently receiving distant signals until they are able to receive
local-into-local service. The law modified
66
the signal intensity standard to be considered in qualifying unserved households
and instructed the FCC within the next year to reexamine and advise Congress as
to what the standard should be going forward.
DBS companies have initiated carriage of local signals in the largest
markets and have initiated carriage of two of LIN Television's stations in
Indianapolis and Austin pursuant to retransmission consent agreements and have
given notice that a third station in Grand Rapids will be carried shortly. We
are unable to predict when such carriage will begin in other markets and whether
the revenues from such agreements will be significant. More generally, we are
unable to predict what the results of judicial, regulatory, and legislative
actions will be, or what effect they will have on our television broadcasting
business.
Recent Developments, Proposed Legislation and Regulation. Congress and the
FCC currently have under consideration, and may in the future adopt, new laws,
regulations and policies regarding a wide variety of matters that could affect,
directly or indirectly, the operation and ownership of our stations. In addition
to the changes and proposed changes noted above, these matters include, for
example, spectrum use fees, political advertising rates, potential restrictions
on the advertising of certain products like hard liquor, beer and wine, and
revised rules and policies governing equal employment opportunity. Other matters
that could affect the stations include technological innovations and development
generally affecting competition in the mass communications industry.
The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act, as amended by the Telecom Act, or of the
regulations and policies of the FCC under either act. Proposals for additional
or revised regulations and requirements are pending before and are being
considered by Congress and federal regulatory agencies from time to time. We are
unable at this time to predict the outcome of any of the pending FCC rulemaking
proceedings referenced above, the outcome of any reconsideration or appellate
proceedings concerning any changes in FCC rules or policies noted above, the
possible outcome of any proposed or pending Congressional legislation, or the
impact of any of those changes on our stations.
EMPLOYEES
As of December 31, 2000, we employed 1,645 employees. Of these employees,
371 were represented by unions. We believe that our employee relations are
generally good.
PROPERTIES
We maintain our corporate headquarters in Providence, Rhode Island. Each of
the stations we operate has facilities consisting of offices, studios, sales
offices and transmitter and tower sites. Transmitter and tower sites are located
to provide coverage of each station's market.
We own the offices where the stations are located and generally own all of
the property where our towers and primary transmitters are located. We lease the
remaining properties, consisting primarily of sales office locations and
microwave transmitter sites. While none of the properties that we own or lease
is individually material to our operations, if we were required to relocate any
of our towers, the cost could be significant because the number of sites in any
geographic area that permit a tower of reasonable height to provide good
coverage of the market is limited, and zoning and other land use restrictions,
as well as Federal Aviation Administration regulations, limit the number of
alternative sites or increase the cost of acquiring them for tower siting.
LEGAL PROCEEDINGS
We are involved in various claims and lawsuits that are generally
incidental to the conduct of our business. We are vigorously contesting all
these matters and believe that their ultimate resolution will not have a
material adverse effect on our consolidated financial position, or results of
operations or cash flows.
67
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF LIN HOLDINGS AND LIN TELEVISION
The following table provides information concerning the directors and
executive officers of LIN Holdings and LIN Television:
<Table>
<Caption>
NAME AGE POSITION
---- --- --------
Gary R. Chapman........................... 57 Director, Chairman, President and Chief
Executive Officer of LIN Holdings and
LIN Television
Randall S. Fojtasek....................... 38 Director of LIN Holdings and LIN
Television
Royal W. Carson III....................... 52 Director of LIN Holdings and LIN
Television
Paul Karpowicz............................ 48 Director, Vice President of Television of
LIN Holdings and LIN Television
Gregory M. Schmidt........................ 51 Vice President of New Development, General
Counsel and Secretary of LIN Holdings
and LIN Television
Deborah R. Jacobson....................... 41 Vice President of Corporate Development
and Treasurer of LIN Holdings and LIN
Television
Peter E. Maloney.......................... 46 Vice President of Finance of LIN Holdings
and LIN Television
C. Robert Ogren, Jr....................... 57 Vice President of Engineering and
Operations of LIN Holdings and LIN
Television
Denise M. Parent.......................... 37 Vice President, Deputy General Counsel of
LIN Holdings and LIN Television
William Cunningham........................ 44 Vice President, Controller of LIN Holdings
and LIN Television
</Table>
GARY R. CHAPMAN has been Chairman of LIN Television and LIN Holdings since
August 2000 and has been President of LIN Television since 1989 and a director
and CEO since November 1994 and became a director, the President and CEO of LIN
Television concurrently with the closing of the acquisition of LIN Television by
LIN Holdings. Mr. Chapman served as Joint Chairman of the National Association
of Broadcasters from 1991 to 1993 and serves as a board member of the Advanced
Television Test Center. Currently, Mr. Chapman serves on the Board of Directors
of the Association for Maximum Service Television and is Co-Chairman of the
Advisory Board of Governors for the National Association of Broadcasters
Education Foundation.
RANDALL S. FOJTASEK has been a director of LIN Holdings and LIN Television
since August 2000. Mr. Fojtasek is currently a founding partner of Brazos
Investment Partners LLC, a private equity investment firm focusing on middle
market buyouts and leveraged recapitalizations. Prior to joining Brazos in 1999,
Mr. Fojtasek served as President & Chief Executive Officer of Atrium Companies,
Inc., a manufacturer and distributor of building products. He joined Atrium in
1989, and was CEO from 1993 to 1999.
ROYAL W. CARSON, III has served as a director of LIN Holdings and LIN
Television since August 2000. He is Chairman and President of Carson Private
Capital and has over 28 years of experience in the origination, structuring, and
monitoring of private investments and investment funds. Mr. Carson served as
Chairman and Chief Executive Officer of Carson
68
Petroleum Corporation from 1977 to 1982. Mr. Carson serves on the Advisory Board
of Olympus Real Estate Fund II, L.P. and Hicks, Muse, Tate & Furst Europe Fund,
L.P. and also serves as a director of various privately held corporations and
community organizations.
PAUL KARPOWICZ has served director of LIN Holdings and LIN Television since
August of 1999 and as Vice President of Television of LIN Television since
January 1994 and became the Vice President of Television of LIN Television
concurrently with the closing of the acquisition of LIN Television by LIN
Holdings. Prior to January 1994, Mr. Karpowicz served as general manager of LIN
Television's Indianapolis CBS Affiliate station, WISH-TV, from July 1989 through
July 1995.
GREGORY M. SCHMIDT has been Vice President of New Development, General
Counsel and Secretary of LIN Television since March 1995. He became Vice
President of New Development, General Counsel and Secretary of LIN Television
concurrently with the closing of the acquisition of LIN Television by LIN
Holdings. From 1985 to 1995, he was a partner at Covington & Burling, a
Washington law firm with a high-profile presence in regulatory and
communications law.
DEBORAH R. JACOBSON has been Vice President of Corporate Development and
Treasurer of LIN Television since February 13, 1995. She became the Vice
President of Corporate Development and Treasurer concurrently with the closing
of the acquisition of LIN Television by LIN Holdings. For the period from
January 6, 1999 to June 1, 1999 Ms. Jacobson served as Senior Vice
President-Investor Relations for Chancellor Media Corporation. From 1981 to
1995, Ms. Jacobson was employed by The Bank of New York, where most recently she
served as Senior Vice President and Division Head of the Communications,
Entertainment and Publishing Lending Division.
PETER E. MALONEY has served as Vice President of Finance of LIN Television
since January 1995 and became the Vice President of Finance of LIN Television
concurrently with the closing of the acquisition of LIN Television by LIN
Holdings. Prior to January 1995, Mr. Maloney was employed by LIN Broadcasting as
Vice President of Taxation from June 1990 to December 1994 and as Director of
Taxation and Financial Planning from January 1983 to June 1990.
C. ROBERT OGREN, JR. has been Vice President of Engineering and Operations
of LIN Television since November 1990 and became the Vice President of
Engineering and Operations of LIN Television concurrently with the closing of
the acquisition of LIN Television by LIN Holdings. Prior to November 1990, Mr.
Ogren was Director of Engineering at WBAL-TV from June 1989 to October 1990 and
Director of Engineering for Freedom Newspapers, Inc. from June 1984 to May 1989.
DENISE M. PARENT has been Vice President-Deputy General Counsel of LIN
Television since March 1997 and became Vice President-Deputy General Counsel of
LIN Television concurrently with the closing of the acquisition of LIN
Television by LIN Holdings. From 1993 to 1997, Ms. Parent was employed by The
Providence Journal Company as Senior Corporate Counsel. Prior to 1993, Ms.
Parent was employed by Adler, Pollock & Sheehan, Incorporated, a law firm in
Providence, Rhode Island.
WILLIAM CUNNINGHAM has been Vice President-Controller of LIN Television
since November 2000 and became Controller of LIN Television in July 1998. From
1987 to 1994, Mr. Cunningham was employed by Fox Television as Vice President,
Finance and from 1994 to 1996, was employed by SF Broadcasting, LLC, a joint
venture of Fox Television and Savoy Pictures, as Senior Vice President and CFO.
COMPENSATION FOR EXECUTIVE OFFICERS
The following table sets forth the compensation earned or paid, including
deferred compensation, by LIN Television to the Chief Executive Officer of LIN
Television and the five
69
other most highly compensated executive officers of LIN Television or the "named
executive officers" for services rendered for the years ended December 31, 2000,
1999 and 1998.
<Table>
<Caption>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------- ---------------------------
OTHER ANNUAL
COMPENSATION
YEAR SALARY($) BONUS($) ($)(A) OPTIONS(#)
---- --------- --------- ------------ ------------
Gary R. Chapman............................ 2000 500,000 700,000 16,468 --
Chairman, President & CEO 1999 500,000 1,000,000 17,598 --
1998 500,000 500,000 13,863 13,248,600
Paul Karpowicz............................. 2000 350,000 175,000 8,030 --
Vice President, Television 1999 340,000 115,000 3,924 --
1998 330,000 135,000 1,930 4,263,500
Gregory M. Schmidt......................... 2000 345,000 100,000 12,611 --
Vice President, New Development, 1999 340,000 110,000 9,889 --
General Counsel & Secretary 1998 330,000 105,000 2,619 3,763,500
Deborah R. Jacobson(b)..................... 2000 195,000 90,000 5,507 --
Vice President, Corporate 1999 116,000 86,000 6,998 --
Development & Treasurer 1998 185,000 83,000 1,439 2,238,700
Peter E. Maloney........................... 2000 195,000 90,000 3,548 --
Vice President, Finance 1999 190,000 86,000 5,055 --
1998 180,000 83,000 2,112 2,738,700
C. Robert Ogren, Jr. ...................... 2000 195,000 80,000 5,878 --
Vice President, Engineering 1999 190,000 86,000 9,036 --
and Operations 1998 180,000 83,000 4,150 1,738,700
</Table>
---------------
(a) The amount set forth in Other Annual Compensation includes as to all named
executive officers the value of executive life and disability insurance and
to most named executive officers the personal use of Company automobiles
and nonqualified pension contributions.
(b) Deborah R. Jacobson resigned as an officer of LIN Television effective
January 6, 1999 simultaneously with her appointment as an officer of
Chancellor Media Corporation. Ms. Jacobson was reinstated as an officer of
LIN Television on June 1, 1999 as a result of the termination of the merger
agreement between Chancellor Media Corporation and LIN Television.
The following table discloses, for the CEO and the other named executive
officers, individual exercises of options during the year ended December 31,
2000, and the number and value of options held by such named executive officer
at December 31, 2000 based on a fair market value of LIN Television common stock
of $1.00 on such date.
AGGREGATE EXERCISES DURING THE 2000 FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES:
<Table>
<Caption>
SHARES SHARES
UNDERLYING UNDERLYING VALUE OF VALUE OF
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
SHARES OPTIONS/ OPTIONS/ IN THE MONEY IN THE MONEY
ACQUIRED SARS AT SARS AT OPTIONS AT OPTIONS AT
ON VALUE FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
NAME EXERCISE(#) REALIZED($) END(#) END(#) END($) END($)
---- ----------- ----------- ----------- ------------- ------------ -------------
Gary R. Chapman.................. -- -- 10,370,882 2,877,718 7,321,396 678,605
Paul Karpowicz................... -- -- 3,289,400 974,100 2,301,289 198,710
Gregory M. Schmidt............... -- -- 2,789,400 974,100 1,877,694 122,304
Peter E. Maloney................. 30,000 9,506 2,024,480 684,220 1,397,016 93,480
Deborah R. Jacobson.............. -- -- 1,554,480 684,220 1,000,000 --
C. Robert Ogren Jr............... -- -- 1,054,480 684,220 500,000 --
</Table>
70
STOCK OPTION PLAN AND PHANTOM STOCK PLAN
LIN Television participates in the Ranger Equity Holdings Corporation 1998
Stock Option Plan. Pursuant to the 1998 option plan nonqualified options have
been granted to certain directors, officers and key employees of LIN Television.
Prior to March 3, 1998, nonqualified options were granted to directors, officers
and key employees of LIN Television pursuant to the LIN Television Corporation
1994 Adjustment Stock Incentive Plan, the Amended and Restated 1994 Stock
Incentive Plan and the 1994 Nonemployee Director Stock Incentive each of which
were terminated and all options granted under each were exercised or cancelled
on March 3, 1998. LIN Television also participates in the Ranger Equity Holdings
1998 Phantom Stock Plan, pursuant to which phantom units, or stock appreciation
rights, with an exercise price of $0.0 have been granted to some of LIN
Television's officers and key employees.
Options granted pursuant to the 1998 option plan are generally not
exercisable until one year after grant, have vesting terms of four or five years
and expire ten years from the date of grant.
CHANGE IN CONTROL ARRANGEMENTS
We have entered into severance compensation agreements with Mr. Chapman and
the other named executive officers of LIN Television. Under these agreements, if
we terminate any employee's employment other than for cause, the employee will
be entitled to severance benefits in addition to any compensation otherwise
payable to the employee. The severance benefits include a lump sum payment
designed to provide the equivalent to the sum of:
- an amount equal to two times the employee's annual base salary on the
date of termination (as defined in the Severance Compensation
Agreements);
- an amount equal to two times the bonus compensation paid to the employee
with respect to the last complete fiscal year; and
- the present value as of the date of termination, of the sum of all
benefits which have accrued to the employee but have not vested under the
LIN Television Corporation Retirement Plan as of the date of termination
and all additional benefits which would have accrued to the employee
under the Retirement Plan if the employee had continued to be employed by
LIN Television on the same terms the employee was employed on the date of
termination.
- In addition to such cash payments, the employee is entitled to life,
health and disability and accident insurance benefits substantially
similar to those which the employee was receiving prior to the notice of
termination, as defined in the Severance Compensation Agreements, or, if
greater, immediately prior to a change in control, as defined in the
Severance Compensation Agreements, for a period of two years.
DIRECTOR COMPENSATION
Directors of LIN Holdings and LIN Television, who are also employees of LIN
Television serve without additional compensation. Messrs. Fojtasek and Carson
serve as independent directors of LIN Holdings and LIN Television. Total
compensation payments made to independent directors were $20,666 in 2000 and
$11,000 in 1999.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
LIN Television has 1,000 shares of common stock, par value $0.01 per share,
issued and outstanding, all of which are owned by LIN Holdings. LIN Holdings has
1,000 shares of common stock, par value $0.01 per share, issued and outstanding,
630 of which are owned by Ranger Equity Holdings B Corp. and 370 of which are
owned by Ranger Equity Holdings A Corp.
71
Ranger Equity Holdings Corporation holds all of the shares of capital stock of
Ranger Equity Holdings A Corp. and Ranger Equity Holdings B Corp. For a
description of the relationship between Hicks Muse and LIN Television, see
"Certain Relationships and Related Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Monitoring and Oversight Agreement. LIN Television is party to an
agreement with Hicks, Muse & Co. Partners, L.P., an affiliate of LIN
Television's ultimate parent, pursuant to which LIN Television pays Hicks Muse
Partners an annual fee, payable quarterly, for oversight and monitoring
services. The aggregate annual fee is adjustable, on a prospective basis, on
January 1 of each calendar year to an amount equal to 1% of the budgeted
consolidated annual EBITDA, earnings before interest, tax, depreciation and
amortization, of LIN Television for the then current fiscal year. Upon the
acquisition by LIN Television of another entity or business, the fee is adjusted
prospectively in the same manner using the pro forma consolidated annual EBITDA
of LIN Television. In no event will the annual fee be less than $1.0 million.
Hicks Muse Partners is also entitled to reimbursement for any expenses incurred
by it in connection with rendering services allocable to LIN Television. The fee
for the six months ended June 30, 2001 was $626,000. The annual fee was $1.3
million, $1.1 million, and $0.8 million for the years ended December 31, 2000,
1999 and 1998, respectively.
LIN Television has agreed to indemnify Hicks Muse Partners, its affiliates,
and their respective directors, officers, controlling persons, agents and
employees from and against all claims, liabilities, losses, damages, expenses
and fees related to the services rendered by Hicks Muse Partners under the
Monitoring and Oversight Agreement and not resulting primarily from the bad
faith, gross negligence, or willful misconduct of Hicks Muse Partners. The
Monitoring and Oversight Agreement makes available the resources of Hicks Muse
Partners concerning a variety of financial and operational matters. LIN
Television does not believe that the services that have been and will continue
to be provided to them by Hicks Muse Partners could otherwise be obtained by
them without the addition of personnel or the engagement of outside professional
advisors. In the opinion of LIN Television, the fees provided for under the
Monitoring and Oversight Agreement reasonably reflect the benefits received and
to be received by LIN Television.
Financial Advisory Agreement. LIN Television is also party to an agreement
with Hicks Muse Partners, pursuant to which Hicks Muse Partners receives a fee
equal to 1.5% of the total value of certain transactions in which LIN Television
is involved. Transactions subject to this agreement include a tender offer,
acquisition, sale, merger, exchange offer, recapitalization, restructuring or
other similar transaction. This fee for the year ended December 31, 2000 was
$1.8 million, relating to the acquisition of WWLP-TV, and was included in the
total cost of that acquisition. This fee for the year ended December 31, 1999
was approximately $3.0 million. There were no fees in the six months ended June
30, 2001 or fiscal 1998.
In addition, LIN Television has agreed to indemnify Hicks Muse Partners,
its affiliates, and their respective directors, officers, controlling persons,
agents and employees from and against all claims, liabilities, losses, damages,
expenses and fees related to or arising out of or in connection with the
services rendered by Hicks Muse Partners under the Financial Advisory Agreement
and not resulting primarily from the bad faith, gross negligence, or willful
misconduct of Hicks Muse Partners. The Financial Advisory Agreement makes
available the resources of Hicks Muse Partners concerning a variety of financial
and operation matters. LIN Television does not believe that the services that
will be provided by Hicks Muse Partners could otherwise be obtained by them
without the addition of personnel or engagement of outside professional
advisors. In the opinion of LIN Television, the fees provided for under the
Financial Advisory Agreement reasonably reflect the benefits received and to be
received by LIN Television.
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Securities Ownership. On August 30, 2000, the common equity of Ranger
Equity Holdings Corporation was converted into non-voting Class B Common Stock,
which is owned by affiliates of Hicks Muse, management and other co-investors,
except for 1,000,000 shares of voting Class A Common Stock, which is owned
equally by Carson/LIN SBS, L.P. and Fojtasek Capital Ltd. Co.
Under a stock agreement, Ranger Equity Holdings Corporation and its
subsidiaries, without the affirmative vote of a least the majority of the shares
of Class B Common Stock, will not be permitted to:
- effect any amendment to the Certificate of Incorporation;
- declare dividends on or distributions of equity securities of Ranger
Equity Holdings Corporation;
- issue, reclassify, recapitalize, or repurchase any equity securities of
Ranger Equity Holdings Corporation;
- enter into transactions with affiliates of Ranger Equity Holdings
Corporation or any of its subsidiaries;
- sell, lease, convey or acquire any asset with a value of 10% or more of
the fair market value of the common equity interest in Ranger Equity
Holdings Corporation ;
- effect a merger or consolidation of Ranger Equity Holdings Corporation;
- enter into any transaction not in the ordinary course of business;
- engage in any business or transaction that would require any upstream
entity to divest any interest in Ranger Equity Holdings Corporation;
- incur debt which has a value of 10% or more of the fair market value of
Ranger Equity Holdings Corporation;
- engage in any line of business other than the ownership or operation of
television stations;
- settle any proceeding, other than in the ordinary course of business,
which involves any material restrictions on the conduct of business or
the continued ownership of the assets owned by Ranger; and
- effect any dissolution, liquidation, or winding up of Ranger Equity
Holdings Corporation.
WWLP Holdings, Inc. Gary R. Chapman, Chairman, President and CEO of LIN
Television, formed three companies, WWLP Holdings Inc., and its subsidiaries
WWLP, Inc. and WGRC, Inc. to acquire the broadcast license and operating assets
of WWLP-TV, a station previously operated by Benedek Broadcasting Corporation,
on March 31, 2000. Pursuant to a Guarantee and Collateral Agreement with Chase
Manhattan Bank, as administrative agent, and the lenders named therein, dated
March 31, 2000, LIN Television was the guarantor of a $75 million credit
facility to WWLP, Inc. At that time, LIN Television did not own or control the
assets or FCC license of WGRC, Inc. Pursuant to Emerging Issues Task Force Topic
D-14, "Transactions Involving Special Purpose Entities," WWLP Holdings Inc.
satisfied the definition of a special purpose entity and LIN Television was
deemed to be the sponsor of WWLP Holdings Inc. Accordingly, the financial
results of operations of WWLP Holdings Inc. are consolidated with those of LIN
Television in its consolidated financial statements.
Mr. Chapman granted LIN Television a one-year purchase option to acquire
the stock of WWLP Holdings Inc. at an amount equal to Mr. Chapman's investment
in WWLP Holdings Inc. LIN Television acquired the outstanding stock of WWLP
Holdings Inc. on November 10, 2000.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR CREDIT FACILITIES
Concurrent with the consummation of the offerings of the old notes, LIN
Holdings and LIN Television entered into an amendment to the present credit
agreement with The Chase Manhattan Bank, as administrative agent, and the
lenders named therein. The following description of the credit agreement
reflects this amendment. The following is a summary description of the principal
terms of the senior credit facilities and is subject to and qualified in its
entirety by reference to the credit agreement.
Structure. Loans under the Credit Agreement consist of:
- Tranche B term loans in the amount of $87.0 million;
- a revolving credit facility in the amount of $160.0 million, a portion of
which will be available for letters of credit and in the form of
swingline loans; and
- incremental term loans under an incremental term loan facility in an
amount up to $85.3 million.
The term loans have been fully drawn. LIN Television may use the
incremental term loans to provide funding for permitted acquisitions or for the
mandatory principal redemption in respect of the existing senior discount notes
on March 1, 2003 or mandatory interest payments due subsequent to March 1, 2003.
LIN Television may use up to $60.0 million of the revolving credit facility for
general corporate purposes including, without limitation, permitted
acquisitions, and the remaining $100.0 million may only be used for the
mandatory principal redemption in respect of the existing senior discount notes
due March 1, 2003 or mandatory interest payments due subsequent to March 1,
2003. See "-- Existing Senior Discount Notes."
Security; Guaranty. The obligations of LIN Television under the senior
credit facilities are unconditionally and irrevocably guaranteed, jointly and
severally, by LIN Holdings and by each existing and subsequently acquired or
organized subsidiary of LIN Television. In addition, the senior credit
facilities and the guarantees thereunder are secured by substantially all of the
assets of LIN Television and its subsidiaries, including but not limited to:
- a first priority pledge of all the capital stock of LIN Television and of
each existing and subsequently acquired or organized subsidiary of LIN
Television; and
- a perfected first priority security interest in, and mortgage on,
substantially all tangible and intangible assets of LIN Television and
the guarantors, including but not limited to accounts receivable,
documents, inventory, equipment, intellectual property, investment
property, general intangibles, real property, cash and cash accounts and
proceeds of the foregoing, in each case subject to certain limited
exceptions.
The credit agreement provides for the release of guarantees under certain
limited circumstances.
Availability. The availability of the senior credit facilities is subject
to various conditions precedent typical of bank loans. Amounts under the
incremental facility may be drawn in up to seven drawings before March 3, 2003.
Amounts repaid or prepaid under the term loans and the incremental facility may
not be reborrowed. Amounts under the revolving credit facility will be available
on a revolving basis.
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Amortization, Interest. There is expected to be no required scheduled
amortization payments on the term loans until December 2005. The term loans will
bear interest at a rate per annum equal, at LIN Television's option, to:
- an adjusted London Inter-bank offered rate or "adjusted LIBOR," plus a
percentage based on LIN Television's financial performance; or
- a rate equal to the highest of the Agent's prime rate, a certificate of
deposit rate plus 1.00% and the Federal Funds effective rate plus 1/2 of
1.00% or the "Alternate Base Rate" plus a percentage based on LIN
Television's financial performance.
The Incremental Term Loans will be repayable based on an amortization
schedule determined at each time such loans are made; provided that such
amortization will have a weighted average life to maturity greater than the
maturity of the Tranche B term loans, and will bear interest at a rate per annum
equal, at LIN Television's option, to
- adjusted LIBOR plus a percentage based on LIN Television's financial
performance; or
- the alternate base rate plus a percentage based on LIN Television's
financial performance, in each case subject to certain reductions based
on LIN Television's financial performance.
The Revolving Credit Facility will be a five year facility and outstanding
balances thereunder bear interest at a rate per annum equal, at LIN Television's
option, to:
- adjusted LIBOR plus a percentage based on LIN Television's financial
performance, or
- the Alternate Base Rate plus a percentage based on LIN Television's
financial performance.
Amounts under the Senior Credit Facilities not paid when due bear interest
at a default rate equal to 2.00% above the otherwise applicable rate.
Prepayments. The senior credit facilities permit LIN Television to prepay
loans and to permanently reduce revolving credit commitments, in whole or in
part, at any time. In addition, LIN Television is required to make mandatory
prepayments of term loans, subject to certain exceptions, in amounts equal to:
- 75% of excess cash flow (as defined in the credit agreement); and
- 100% of the net cash proceeds of certain dispositions of assets or
issuances of debt or equity of LIN Holdings, LIN Television or any of its
subsidiaries, in each case, subject to certain exceptions and subject to
a reduction to zero based upon LIN Television's financial performance.
Mandatory and optional prepayments of the term loans are allocated pro rata
between the term loans and the incremental term loans, as applicable, and
applied ratably based on the number of remaining installments under each. Any
prepayment of adjusted LIBOR loans other than at the end of an interest period
will be subject to reimbursement of breakage costs.
Fees. LIN Television is required to pay the lenders, on a quarterly basis,
a commitment fee equal to 3/4 of 1.00% per annum on the undrawn portion of the
unused commitments, subject to reductions based upon LIN Television's financial
performance. LIN Television is required to pay:
- a commission on the face amount of all outstanding letters of credit
equal to the applicable margin then in effect for adjusted LIBOR loans
under the revolving credit facility, less amounts paid under the second
bullet point;
- a fronting fee in the amount of 0.25% per annum on each letter of credit,
to the issuing bank on a quarterly basis;
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- annual administration fees; and
- agent, arrangement and other similar fees.
Covenants. The senior credit facilities contain covenants that, among
other things, restrict the ability of LIN Holdings, LIN Television and its
subsidiaries to dispose of assets, incur additional indebtedness, incur
guarantee obligations, prepay other indebtedness or amend other debt
instruments, pay dividends, create liens on assets, enter into sale and
leaseback transactions, make investments, loans or advances, make acquisitions,
engage in mergers or consolidations, change the business conducted by LIN
Television, make capital expenditures, or engage in certain transactions with
affiliates and otherwise restrict certain corporate activities. In addition,
under the senior credit facilities, LIN Television will be required to comply
with specified financial ratios, including minimum interest coverage ratios,
maximum leverage ratios and minimum fixed charge coverage ratios.
The senior credit facilities also contain provisions that prohibit any
modification of the indentures governing the existing senior subordinated notes
and senior notes in any manner adverse to the lenders and that will limit LIN
Television's ability to refinance or otherwise prepay the senior notes or the
existing senior subordinated notes without the consent of such lenders.
Events of Default. The senior credit facilities contain customary events
of default, including payment defaults, breach of representations and
warranties, covenant defaults, cross-defaults to certain other indebtedness,
certain events of bankruptcy and insolvency, ERISA events, judgment defaults,
actual or asserted invalidity of any security interest and change of control.
EXISTING SENIOR SUBORDINATED NOTES
LIN Television has outstanding $300.0 million in aggregate principal amount
of 8 3/8% senior subordinated notes due March 1, 2008. Interest on such notes
accrues at a rate of 8 3/8% and is payable semi-annually on March 1 and
September 1 of each year.
These senior subordinated notes are general unsecured obligations
subordinated in right of payment to all of LIN Television's existing and future
senior indebtedness, including the senior notes and the senior credit facilities
and are guaranteed on a senior subordinated basis by each of the same
subsidiaries that guarantee, on a series bases, the senior notes. The indenture
governing the existing senior subordinated notes contains a change of control
provision and covenants substantially similar to those that govern the senior
notes.
EXISTING SENIOR DISCOUNT NOTES
LIN Holdings has outstanding $325.0 million in aggregate principal amount
of 10% senior discount notes due 2008. Cash interest does not accrue and is not
payable on such notes prior to March 1, 2003. Thereafter, cash interest on these
notes will be payable semi-annually in arrears on March 1 and September 1 of
each year.
LIN Holdings may not redeem the existing senior discount notes prior to
March 1, 2003. On March 1, 2003, LIN Holdings will be required to redeem such
notes with an aggregate principal amount at maturity equal to $125.0 million
multiplied by the quotient obtained by dividing the aggregate principal amount
at maturity of senior discount notes then outstanding, other than senior
discount notes then held by LIN Holdings or its subsidiaries or the entities
with respect to which LIN Holdings is a direct or indirect subsidiary, by $325.0
million, at a redemption price equal to 100% of the principal amount at maturity
of the senior discount notes so redeemed.
These senior discount notes are general unsecured obligations of LIN
Holdings, senior in right of payment to all of our existing and future senior
subordinated indebtedness and are
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not guaranteed by any present or future subsidiaries of LIN Holdings. Neither
the existing senior discount notes nor the senior discount notes are guaranteed
by LIN Television or its subsidiaries. The indenture governing the existing
senior discount notes contains a change of control provision and covenants
substantially similar to those that govern the senior discount notes.
LIN Holdings currently anticipates that after March 1, 2003, it would
offer, in an exchange offer, for the senior discount notes and the existing
senior discount notes, a new series of notes having substantially the same
economic and other terms as the senior discount notes.
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THE EXCHANGE OFFERS
PURPOSE AND EFFECT
The old notes were sold by us and LIN Holdings on June 14, 2001, in the
original offerings. In connection with the original offerings, LIN Television
entered into an Exchange and Registration Rights Agreement dated June 14, 2001
and LIN Holdings entered into an Exchange and Registration Rights Agreement
dated June 14, 2001. The Registration Rights Agreements require us and LIN
Holdings to file a registration statement under the Securities Act with respect
to the new notes and, upon the effectiveness of that registration statement,
offer to the holders of the old notes the opportunity to exchange their old
notes for a like principal amount, or principal amount at maturity, of new
notes, which will be issued without a restrictive legend and may be reoffered
and resold by the holder without registration under the Securities Act. The
Registration Rights Agreements further provide that we and LIN Holdings must use
our respective best efforts to cause the registration statement with respect to
the exchange offers to be declared effective on or before October 12, 2001.
Except as provided below, upon the completion of the exchange offers, our and
LIN Holdings' obligations with respect to the registration of the old notes and
the new notes will terminate. Copies of the Registration Rights Agreements have
been filed as an exhibit to the registration statement of which this prospectus
is a part and, although we and LIN Holdings believe that the summary herein of
certain provisions thereof describes all material elements of the Registration
Rights Agreements, this summary may not be complete and is subject to, and is
qualified in its entirety, by reference to the Registration Rights Agreements.
As a result of the filing and the effectiveness of the registration statement,
certain liquidated damages provided for in the Registration Rights Agreements
will not become payable by the issuers.
In order to participate in an exchange offer, a holder must represent to
the applicable issuer, among other things, that:
- the new notes acquired pursuant to the exchange offer are being obtained
in the ordinary course of business of the person receiving such new
notes, whether or not such person is the holder of the old notes;
- neither the holder nor any such other person is engaging in or intends to
engage in a distribution of the new notes;
- neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
new notes;
- neither the holder nor any such other person is an "affiliate," as
defined under Rule 405 promulgated under the Securities Act, of LIN
Holdings, LIN Television or any guarantor; and
- if such holder or other person is a broker-dealer, that it will receive
new notes for its own account in exchange for old notes that were
acquired as a result of market-making activities or other trading
activities and that it will be required to acknowledge that it will
deliver a prospectus in connection with any resale of such new notes.
Pursuant to the Registration Rights Agreements, each issuer is required to
file a "shelf" registration statement for a continuous offering pursuant to Rule
415 under the Securities Act in respect of the old notes if:
- because of any change in law or applicable interpretations of the staff
of the SEC, such Issuer is not permitted to effect its exchange offer;
- its exchange offer is not consummated within 225 days of the applicable
original offering;
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- any holder of Private Exchange Securities, as defined, requests within 60
days after the exchange offer;
- any applicable law or interpretations do not permit any holder of old
notes to participate in the applicable exchange offer;
- any holder of old notes participates in the applicable exchange offer and
does not receive freely transferable new notes in exchange for old notes;
or
- the applicable issuer so elects. In the event that an issuer is obligated
to file a "shelf' registration statement, it will be required to keep
such "shelf" registration statement effective for up to two years.
Other than as set forth in this paragraph, no holder will have the right to
participate in the "shelf" registration statement nor otherwise to require that
the applicable issuer register such holder's shares of old notes under the
Securities Act. See "-- Procedures for Tendering."
Based on an interpretation by the SEC's staff set forth in no-action
letters issued to third-parties unrelated to the issuers, the issuers believe
that new notes issued pursuant to the exchange offers in exchange for old notes
may be offered for resale, sold and otherwise transferred by any person
receiving such new notes, whether or not such person is the holder, other than
any such holder or such other person which is an "affiliate" of LIN Holdings,
LIN Television or any of the guarantors within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that:
- the new notes are acquired in the ordinary course of business of that
holder or such other person;
- neither the holder nor such other person is engaging in or intends to
engage in a distribution of the new notes; and
- neither the holder nor such other person has an arrangement or
understanding with any person to participate in the distribution of the
new notes.
Any holder who tenders in an exchange offer for the purpose of
participating in a distribution of new notes cannot rely on this interpretation
by the SEC's staff and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Each broker-dealer that receives new notes for its own account in
exchange for old notes, whether the old notes were acquired by that
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. See "-- Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the exchange offers, except as set forth in the
third paragraph under "-- Purpose and Effect" above, holders of old notes not
tendered will not have any further registration rights and those old notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for a holder's old notes could be adversely affected
upon completion of the exchange offers if the holder does not participate in the
exchange offers.
TERMS OF THE SENIOR NOTES EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the senior notes letter of transmittal, LIN Television will accept any
and all old senior notes validly tendered and not withdrawn prior to 5:00 p.m.,
New York City time, on the expiration date.
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LIN Television will issue $1,000 principal amount of new senior notes in
exchange for each $1,000 principal amount of outstanding old senior notes
accepted in the senior notes exchange offer. Holders may tender some or all of
their old senior notes pursuant to the senior notes exchange offer. However, old
senior notes may be tendered only in integral multiples of $1,000 in principal
amount.
The form and terms of the new senior notes will be substantially the same
as the form and terms of the old senior notes except that:
- interest on the new senior notes will accrue from the date of issuance of
the old senior notes or the date of the last periodic payment of interest
on such old senior note, whichever is later; and
- the new senior notes have been registered under the Securities Act and
will not bear legends restricting their transfer.
The new senior notes will evidence the same debt as the old senior notes
and will be issued pursuant to, and entitled to the benefits of, the indenture
governing the senior notes.
As of June 14, 2001, the old senior notes representing $210,000,000
aggregate principal amount were outstanding. This prospectus, together with the
senior notes letter of transmittal, is being sent to registered holders and to
others believed to have beneficial interests in the old senior notes. Holders of
old senior notes do not have any appraisal or dissenters' rights under the
General Corporation Law of the State of Delaware or the indenture governing the
senior note in connection with the senior notes exchange offer. LIN Television
intends to conduct the senior notes exchange offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of the
SEC promulgated thereunder.
LIN Television shall be deemed to have accepted validly tendered old senior
notes when, as, and if LIN Television has given oral or written notice thereof,
to the senior notes exchange agent. The senior notes exchange agent will act as
agent for the tendering holders for the purpose of receiving the new senior
notes from LIN Television. If any tendered old senior notes are not accepted for
exchange because of an invalid tender, the occurrence of certain other events
set forth herein or otherwise, certificates for any such unaccepted old senior
notes will be returned, without expense, to the tendering holder thereof as
promptly as practicable after the expiration date.
Holders who tender old senior notes in the senior notes exchange offer will
not be required to pay brokerage commissions or fees or, subject to the
instructions in the senior notes letter of transmittal, transfer taxes with
respect to the exchange of old senior notes pursuant to the senior notes
exchange offer, LIN Television will pay all charges and expenses, other than
certain applicable taxes, in connection with the senior notes exchange offer.
See "-- Fees and Expenses."
TERMS OF THE SENIOR DISCOUNT NOTES EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the senior discount notes letter of transmittal, LIN Holdings will accept
any and all old senior discount notes validly tendered and; not withdrawn prior
to 5:00 p.m., New York City time, on the expiration date. LIN Holdings will
issue $1,000 principal amount at maturity of new senior discount notes in
exchange for each $1,000 principal amount at maturity of outstanding old senior
discount notes accepted in the senior discount notes exchange offer. Holders may
tender some or all of their old senior discount notes pursuant to the senior
discount notes exchange offer. However, old senior discount notes may be
tendered only in integral multiples of $1,000 in principal amount at maturity.
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The form and terms of the new senior discount notes will be substantially
the same as the form and terms of the old senior discount notes except that:
- the accreted value of the new senior discount; notes will be calculated
from the date of issuance of the old senior discount notes; and
- the new senior discount notes have been registered under the Securities
Act and will not bear legends restricting their transfer.
The new senior discount notes will evidence the same debt as the old senior
discount notes and will be issued pursuant to, and entitled to the benefit of,
the indenture governing the senior discount notes.
As of June 14, 2001, old senior discount notes representing $100,000,000
aggregate principal amount at maturity were outstanding. This prospectus,
together with the senior discount notes letter of transmittal, is being sent to
registered holders and to others believed to have beneficial interests in the
old senior discount notes. Holders of old senior discount notes do not have any
appraisal or dissenters' rights under the General Corporation Law of the State
of Delaware or the indenture governing the senior discount notes in connection
with the senior discount notes exchange offer. LIN Holdings intends to conduct
the senior discount notes exchange offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder.
LIN Holdings shall be deemed to have accepted validly tendered old senior
discount notes when, as, and if LIN Holdings has given oral or written notice
thereof to the senior discount notes exchange agent. The senior discount notes
exchange agent will act as agent for the tendering holders for the purpose of
receiving the new senior discount notes from LIN Holdings. If any tendered old
senior discount notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
certificates for any such unaccepted old senior discount notes will be returned,
without expense, to the tendering holder thereof as practicable after the
expiration date.
Holders who tender old senior discount notes in the senior discount notes
exchange offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the senior discount notes letter of transmittal,
transfer taxes with respect to the exchange of old senior discount notes
pursuant to the senior discount notes exchange offer. LIN Holdings will pay all
charges and expenses, other than certain applicable taxes, in connection with
the senior discount notes exchange offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" shall mean, with respect to either exchange
offer, 5:00 p.m., New York City time, on November 26, 2001, unless an issuer, in
its sole discretion, extends the exchange offer applicable to its old notes, in
which case the term "expiration date" shall mean the latest date and time to
which such exchange offer is extended. In any event, each exchange offer will be
held open for at least thirty days. In order to extend its exchange offer, the
applicable issuer will issue a notice of any extension by press release or other
public announcement prior to 9:00 a.m., New York City time, on the next business
day after the previously scheduled expiration date. Each issuer reserves the
right, in its sole discretion:
- to delay accepting any old notes, to extend its exchange offer, or, if
any of the conditions set forth under "The Exchange Offers -- Certain
Conditions to Exchange Offers" shall not have been satisfied, to
terminate such exchange offer, by giving oral or written notice of such
delay, extension or termination to the applicable exchange agent, as the
case may be; or
- to amend the terms of its exchange offer in any manner.
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PROCEDURES FOR TENDERING
Only a holder of old notes may tender the old notes in an exchange offer.
Except as set forth under "-- Book Entry Transfer," to tender in an exchange
offer a holder must complete, sign and date the letter of transmittal applicable
to such exchange offer, or a copy thereof, have the signature thereon guaranteed
if required by such letter of transmittal, and mail or otherwise deliver such
letter of transmittal or copy to the exchange agent for such exchange offer
prior to the expiration date for such exchange offer. In addition, either:
- certificates for such old notes must be received by the exchange agent
for such exchange offer along with the letter of transmittal applicable
to such exchange offer; or
- a timely confirmation of a book-entry transfer of such old notes, if that
procedure is available, into the account of the exchange agent for such
exchange offer at the DTC pursuant to the procedure for book-entry
transfer described below, must be received by such exchange agent prior
to the expiration date; or
- the holder must comply with the guaranteed delivery procedures described
below. To be tendered effectively, a letter of transmittal and other
required documents must be received by the appropriate exchange agent at
its address set forth under "-- Exchange Agents" prior to the expiration
date.
The tender by a holder that is not withdrawn before the expiration date
will constitute an agreement between that holder and the applicable issuer in
accordance with the terms and subject to the conditions set forth herein and in
the letter of transmittal applicable to such issuer's exchange offer.
THE METHOD OF DELIVERY OF OLD NOTES, A LETTER OF TRANSMITTAL, AND ALL OTHER
REQUIRED DOCUMENTS TO AN EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO AN EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE ISSUERS. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose old notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the beneficial
owner wishes to tender on the owner's own behalf, the owner must, prior to
completing and executing a letter of transmittal and delivering the owner's old
notes, either make appropriate arrangements to register ownership of the old
notes in the beneficial owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an eligible institution listed below unless
old notes tendered pursuant thereto are tendered:
- by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on such
letter of transmittal; or
- for the account of an eligible institution.
If signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, the guarantee must be by any
eligible guarantor institution that is a member of or participant in the
Securities Transfer Agents Medallion Program, the New York
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Stock Exchange Medallion Signature Program, the Stock Exchange Medallion
Program, or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act.
If a letter of transmittal is signed by a person other than the registered
holder of any old notes listed therein, the old notes must be endorsed or
accompanied by a properly completed bond power, signed by the registered holder
as that registered holder's name appears on the old notes.
If a letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
relevant issuer of their authority to so act must be submitted with such letter
of transmittal unless waived by the relevant issuer.
All questions as to the validity, form eligibility, including time of
receipt, acceptance and withdrawal of tendered old notes will be determined by
the issuers in their sole discretion, which determination will be final and
binding. Each issuer reserves the absolute right to reject any and all old notes
not properly tendered or any old notes the acceptance of which would, in the
opinion of counsel for such issuer, be unlawful. Each issuer also reserves the
right to waive any defects, irregularities, or conditions of tender as to
particular old notes. An issuer's interpretation of the terms and conditions of
its exchange offer, including the instructions in a letter of transmittal, will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of old notes must be cured within such
time as the issuer of such old notes shall determine. Although each issuer
intends to notify holders of defects or irregularities with respect to tenders
of old notes, neither the issuers, the exchange agents, nor any other person
shall incur any liability for failure to give such notification. Tenders of old
notes will not be deemed to have been made until such defects or irregularities
have been cured or waived. Any old notes received by an exchange agent that are
not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by such exchange agent to the tendering
holders, unless otherwise provided in the letter of transmittal accompanying
such old notes, as soon as practicable following the expiration date.
In addition, each issuer reserves the right in its sole discretion to
purchase or make offers for any old notes that remain outstanding after the
expiration date or, as set forth under "-- Conditions to the Exchange Offer," to
terminate its exchange offer and, to the extent permitted by applicable law,
purchase old notes in the open market, in privately negotiated transactions, or
otherwise. The terms of any such purchases or offers could differ from the terms
of such issuer's exchange offer.
By tendering, each holder will represent that, among other things:
- the new notes acquired pursuant to such exchange offer are being obtained
in the ordinary course of business of the person receiving such new
notes, whether or not such person is the holder of the old notes;
- neither the holder nor any such other person is engaging or intends to
engage in a distribution of such new notes;
- neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
new notes within the meaning of the Securities Act;
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- neither the holder nor any such other person is an "affiliate," as
defined under Rule 405 promulgated under the Securities Act, of LIN
Holdings, LIN Television or any guarantor; and
- if such holder or other person is a broker-dealer, that it will receive
new notes for its own account in exchange for old notes that were
acquired as a result of market-making activities or other trading
activities and that it will be required to acknowledge that it will
deliver a prospectus in connection with any resale of such new notes.
In all cases, issuance of new notes for old notes that are accepted for exchange
pursuant to an exchange offer will be made only after timely receipt by the
exchange agent for such exchange offer of certificates for such old notes or a
timely book-entry confirmation of such old notes into such exchange agent's
account at the DTC, a properly completed and duly executed letter of transmittal
or, with respect to DTC and its participants, electronic instructions in which
the tendering holder acknowledges its receipt of and agreement to be bound by
the letter of transmittal for such exchange offer, and all other required
documents. If any tendered old notes are not accepted for any reason set forth
in the terms and conditions of the exchange offer for such old notes or if old
notes are submitted for a greater principal amount than the holder desires to
exchange, such unaccepted or non-exchanged old notes will be returned without
expense to the tendering holder thereof or, in the case of old notes tendered by
book-entry transfer into an exchange agent's account at DTC pursuant to the
book-entry transfer procedures described below, such non-exchanged old notes
will be credited to an account maintained with such DTC, as promptly as
practicable after the expiration or termination of the exchange offer for such
old notes.
BOOK-ENTRY TRANSFER
The exchange agents will make requests to establish accounts with respect
to the old notes at DTC for purposes of the exchange offers within two business
days after the date of this prospectus, and any financial institution that is a
participant in DTC's systems may make book-entry delivery of old notes being
tendered by causing DTC to transfer such old notes into the appropriate exchange
agent's account at DTC in accordance with such DTC's procedures for transfer.
However, although delivery of old notes may be effected through book-entry
transfer at DTC, a letter of transmittal or copy thereof, with any required
signature guarantees and any other required documents, must, in any case other
than as set forth in the following paragraph, be transmitted to and received by
the appropriate exchange agent at its address set forth under "-- Exchange
Agents" on or prior to the expiration date or the guaranteed delivery below must
be complied with.
DTC's Automated Tender Offer Program or "ATOP" is the only method of
processing exchange offers through DTC. To accept an exchange offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system in place of sending a signed, hard copy letter of
transmittal. DTC is obligated to communicate those electronic instructions to
the exchange agents. To tender old notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to an exchange agent must
contain the participant's acknowledgment of its receipt of and agreement to be
bound by the letter of transmittal for such old notes.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of old notes desires to tender such old notes and
the old notes are not immediately available, or time will not permit such
holder's old notes or other required documents to reach the appropriate exchange
agent before the expiration date, or the
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procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if:
- the tender if made through an eligible institution;
- prior to the expiration date, such exchange agent received from such
eligible institution a properly completed and duly executed letter of
transmittal or a facsimile thereof and notice of guaranteed delivery,
substantially in the form provided by the issuer of the old notes
tendered by telegram, telex, facsimile transmission, mail or hand
delivery, setting forth the name and address of the holder of such old
notes and the amount of old notes tendered, stating that the tender is
being made thereby and guaranteeing that within three New York Stock
Exchange trading days after the date of execution of the notice of
guaranteed delivery, the certificates for all physically tendered old
notes, in proper form for transfer, or a book-entry confirmation, as the
case may be, and any other documents required by the applicable letter of
transmittal will be deposited by the eligible institution with the
appropriate exchange agent; and
- the certificates for all physically tendered old notes, in proper form
for transfer, or a book entry confirmation, as the case may be, and all
other documents required by the applicable letter of transmittal, are
received by such exchange agent within three NYSE trading days after the
date of execution of the notice of delivery.
WITHDRAWAL RIGHTS
Tenders of old notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the expiration date.
For a withdrawal of a tender of old notes to be effective, a written or,
for a DTC participant, electronic ATOP transmission notice of withdrawal must be
received by the appropriate exchange agent at its address set forth in this
prospectus prior to 5:00 p.m., New York City time, on the expiration date. Any
such notice of withdrawal must:
- specify the name of the person having deposited the old notes to be
withdrawn;
- identify the old notes to be withdrawn, including the certificate number
or numbers and principal mount of such old notes;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such old notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the trustee of such old notes
register the transfer of such old notes into the name of the person
withdrawing the tender; and
- specify the name in which any such old notes are to be registered, if
different from that of the holder who tendered such old notes.
All questions as to the validity, form, and eligibility, including time of
receipt, of such notices will be determined by the issuer of the old notes
subject to such notice, whose determination shall be final and binding on all
parties. Any old notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the exchange offer relating to such old
notes. Any old notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender, or
termination of the exchange offer relating to such old notes. Properly withdrawn
old notes may be retendered by following one of the procedures under
"-- Procedures for Tendering" at any time on or prior to the expiration date.
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CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offers, an issuer shall
not be required to accept for exchange, or to issue new notes in exchange for,
any old notes and may terminate or amend such issuer's exchange offer if at any
time before the acceptance of such old notes for exchange or the exchange of the
new notes for such old notes, such issuer determines that its exchange offer
violates applicable law, any applicable interpretation of the staff of the SEC
or any order of any governmental agency or court of competent jurisdiction.
The foregoing conditions are for the sole benefit of the issuers and may be
asserted by the issuers regardless of the circumstances giving rise to any such
condition or may be waived by the issuers in whole or in part at any time and
from time to time in their sole discretion. The failure by an issuer at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, an issuer will not accept for exchange any old notes tendered,
and no new notes will be issued in exchange for any such old notes, if at such
time any stop order shall be threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indenture relating to such issuer's old notes under the
Trust Indenture Act of 1939, as amended. In any such event each issuer is
required to use every reasonable effort to obtain the withdrawal of any stop
order at the earliest possible time.
EXCHANGE AGENTS
All executed letters of transmittal should be directed to the applicable
exchange agent. The Bank of New York, successor to United States Trust Company
of New York, has been appointed as both the senior notes exchange agent and the
senior discount notes exchange agent. Questions, requests for assistance and
requests for additional copies of the prospectus or a letter of transmittal
should be directed to the applicable exchange agent addressed as follows:
To: THE BANK OF NEW YORK,
<Table>
By Overnight Courier and Hand Delivery By Hand Delivery to 4:30 p.m.:
after 4:30 p.m. on Expiration Date:
The Bank of New York
The Bank of New York c/o United States Trust Company of New York
c/o United States Trust Company of New York 30 Broad Street, B-Level
30 Broad Street, 14th Floor New York, New York 10004-2304
New York, New York 10004-2304
By Accredited Investors Holding Physical By Registered or Certified Mail:
Securities,
via Registered or Certified Mail: The Bank of New York
c/o United States Trust Company of New York
The Bank of New York P.O. Box 112
c/o United States Trust Company of New York Bowling Green Station
P.O. Box 84 New York, New York 10274-0084
Bowling Green Station
New York, New York 10274-0084
</Table>
Telephone Number: (800) 548-6565
Facsimile: (212) 422-0183 or (646) 458-8111
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FEES AND EXPENSES
The issuers will not make any payments to brokers, dealers, or other
soliciting acceptances of the exchange offers. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the issuers.
The estimated cash expenses to be incurred in connection with the exchange
offers will be paid by the issuers and are estimated in the aggregate to be
$550,000, which includes fees and expenses of the trustees for the old notes,
accounting, legal, printing, and related fees and expenses.
TRANSFER TAXES
Holders who tender their old notes for exchange will not be obligated to
pay any transfer taxes in connection with the exchange except that holders who
instruct an issuer to register new notes in the name of, or request that old
notes not tendered or not accepted in an exchange offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax thereon.
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DESCRIPTION OF THE NEW SENIOR NOTES
GENERAL
The new senior notes are to be issued under the indenture, dated as of June
14, 2001, between LIN Television, the guarantors and The Bank of New York,
successor to United States Trust Company of New York, as trustee, a copy of
which is available upon request to LIN Television. The old senior notes were
issued under the same indenture. The following summary of certain provisions of
the senior notes indenture and the senior notes does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the senior notes indenture, including the definitions of certain
terms therein and those terms made a part thereof by the Trust Indenture Act of
1939, as amended, and the senior notes. Capitalized terms used herein and not
otherwise defined shall have the meanings given to them in the senior notes
indenture. For definitions of certain terms used in this section, see
"-- Certain Definitions" below.
The senior notes will be unsecured obligations of LIN Television, ranking
pari passu in right of payment with all other senior unsecured obligations of
LIN Television.
Principal of, premium, if any, and interest on the senior notes will be
payable, and the senior notes may be exchanged or transferred, at the office or
agency of LIN Television in the Borough of Manhattan, The City of New York,
which initially shall be the corporate trust office of the senior notes trustee
in New York, New York, except that, at the option of LIN Television, payment of
interest may be made by check mailed to the address of the holders as such
address appears in the note register.
The senior notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the senior notes trustee will act as paying agent and registrar for the senior
notes. The senior notes may be presented for registration of transfer and
exchange at the offices of the registrar, which initially will be the senior
notes trustee's corporate trust office. LIN Television may change any paying
agent and registrar without notice to holders of the senior notes.
PRINCIPAL, MATURITY AND INTEREST
The senior notes will be unsecured, senior obligations of LIN Television,
having an aggregate principal amount of $210,000,000, and will mature on January
15, 2008. The senior notes indenture will permit LIN Television to issue an
unlimited amount of senior notes subject to compliance with the terms of the
covenants under "-- Limitation on Incurrence of Additional Indebtedness and
Issuance of Capital Stock." Interest on the senior notes will accrue at a rate
of 8% per annum and will be payable in cash semi-annually on each January 15 and
July 15, commencing on January 15, 2002, to the holders of record of senior
notes at the close of business on January 1 and July 1, respectively,
immediately preceding such interest payment date. Interest on the senior notes
will accrue from the most recent interest payment date to which interest has
been paid or, if no interest has been paid, from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
OPTIONAL REDEMPTION
The senior notes may be redeemed at any time on or after January 15, 2005,
in whole or in part, at the option of LIN Television, at the redemption prices,
expressed as a percentage of the principal amount thereof on the applicable
redemption date, set forth below, plus accrued
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and unpaid interest, if any, to the redemption date, if redeemed during the
12-month period beginning on January 15 of each of the years set forth below:
<Table>
<Caption>
YEAR PERCENTAGE
---- ----------
2005........................................................ 104%
2006........................................................ 102%
2007 and thereafter......................................... 100%
</Table>
In addition, prior to July 15, 2004, LIN Television may, at its option, use
the net cash proceeds of one or more Equity Offerings to redeem up to 35% of the
principal amount of the senior notes at a redemption price equal to 108% of the
principal amount thereof plus accrued and unpaid interest to the redemption
date; provided, however, that after any such redemption, at least 65% of the
aggregate principal amount of the senior notes would remain outstanding
immediately after giving effect to such redemption. Any such redemption will be
required to occur on or prior to the date that is one year after the receipt by
LIN Television of the proceeds of an Equity Offering. LIN Television shall
effect such redemption on a pro rata basis.
In addition, prior to March 1, 2003, LIN Television may, at its option,
redeem the senior notes upon a Change of Control. See "-- Change of Control."
SELECTION AND NOTICE
If less than all of the senior notes are to be redeemed at any time,
selection of senior notes for redemption will be made by the senior notes
trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the senior notes are listed or, in the absence of
such requirements or if the senior notes are not so listed, on a pro rata basis,
provided that no such senior notes of $1,000 or less shall be redeemed in part.
Notice of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each holder of senior notes to
be redeemed at its registered address. If any senior note is to be redeemed in
part only, the notice of redemption that relates to such senior note shall state
the portion of the principal amount thereof to be redeemed. A new senior note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the old senior note. On and
after the redemption date, interest ceases to accrue on senior notes or portions
of them called for redemption.
CHANGE OF CONTROL
Change of Control Offer. The senior notes indenture will provide that,
upon the occurrence of a Change of Control, each holder will have the right to
require that LIN Television purchase all or a portion of such holder's senior
notes in cash pursuant to the offer described below, at a purchase price equal
to 101% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase.
The senior notes indenture will provide that, prior to the mailing of the
notice referred to below, but in any event within 30 days following the date on
which LIN Television becomes aware that a Change of Control has occurred, if the
purchase of the senior notes would violate or constitute a default under any
other Indebtedness of LIN Television, then LIN Television shall, to the extent
needed to permit such purchase of senior notes, either:
- repay all such Indebtedness and terminate all commitments outstanding
thereunder; or
- obtain the requisite consents, if any, under such Indebtedness to permit
the purchase of the senior notes as provided below.
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LIN Television will first comply with the covenant in the preceding
sentence before it will be required to make the Change of Control offer or
purchase the senior notes pursuant to the provisions described below.
Within 30 days following the date on which LIN Television becomes aware
that a Change of Control has occurred, LIN Television must send, by first-class
mail postage prepaid, a notice to each holder of senior notes, which notice
shall govern the terms of the Change of Control offer. Such notice shall state,
among other things, the purchase date, which must be no earlier than 30 days nor
later than 45 days from the date such notice is mailed, other than as may be
required by law. Holders electing to have any senior notes purchased pursuant to
a Change of Control offer will be required to surrender such senior notes to the
paying agent and registrar for the senior notes at the address specified in the
notice prior to the close of business on the business day prior to the Change of
Control payment date.
Change of Control Redemption. In addition, the senior notes indenture will
provide that, prior to March 1, 2003, upon the occurrence of a Change of
Control, LIN Television will have the option to redeem the senior notes in whole
but not in part at a redemption price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to the redemption date plus the
Applicable Premium. In order to effect a Change of Control redemption, LIN
Television must send a notice to each holder of senior notes, which notice shall
govern the terms of the Change of Control redemption. Such notice must be mailed
to holders of the senior notes within 30 days following the date the Change of
Control occurred and state that LIN Television is effecting a Change of Control
redemption in lieu of a Change of Control offer.
LIN Television will comply with the requirements of Rule 14e-1 under the
Exchange Act, to the extent applicable in connection with the purchase of senior
notes pursuant to a Change of Control offer.
These "Change of Control" covenants will not apply in the event of:
- changes in a majority of the board of directors of LIN Television or LIN
Holdings so long as a majority of such board of directors continues to
consist of Continuing Directors; and
- certain transactions with Permitted Holders, including Hicks Muse, its
officers and directors, and their respective Affiliates.
In addition, the Change of Control offer requirement is not intended to
afford holders of senior notes protection in the event of certain highly
leveraged transactions, reorganizations, restructurings, mergers and other
similar transactions that might adversely affect the holders of senior notes,
but would not constitute a Change of Control. LIN Television could, in the
future, enter into certain transactions including certain recapitalizations of
LIN Television, that would not constitute a Change of Control with respect to
the Change of Control purchase feature of the senior notes, but would increase
the amount of Indebtedness outstanding at such time. However, the senior notes
indenture will contain limitations on the ability of LIN Television to incur
additional Indebtedness and to engage in certain mergers, consolidations and
sales of assets, whether or not a Change of Control is involved, subject, in
each case, to limitations and qualifications. See "-- Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness and Issuance of
Capital Stock" and "-- Certain Covenants -- Merger, Consolidation and Sale of
Assets" below.
With respect to the sale of "all or substantially all" the assets of LIN
Television, which would constitute a Change of Control for purposes of the
senior notes indenture, the meaning of the phrase "all or substantially all"
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of LIN Television and,
therefore, it may be unclear whether a
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Change of Control has occurred and whether the senior notes should be subject to
a Change of Control offer.
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the Senior Credit Facilities. Future
Indebtedness of LIN Television and its Subsidiaries may also contain
prohibitions of certain events that would constitute a Change of Control or
require such Indebtedness to be repurchased upon a Change of Control. Moreover,
the exercise by the holders of their right to require LIN Television to
repurchase the senior notes could cause a default under such Indebtedness, even
if the Change of Control itself does not, due to the financial effect of such
repurchase on LIN Television. Finally, LIN Television's ability to pay cash to
the holders upon a repurchase may be limited by LIN Television's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases. Even if sufficient
funds were otherwise available, the terms of the Senior Credit Facilities may
prohibit LIN Television's prepayment of senior notes prior to their scheduled
maturity. Consequently, if LIN Television is not able to prepay the Indebtedness
under the Senior Credit Facilities and any other Indebtedness containing similar
restrictions or obtain the requisite consents, as described above, LIN
Television will be unable to fulfill its repurchase obligations if holders of
senior notes exercise their repurchase rights following a Change of Control,
thereby resulting in a default under the senior notes indenture.
None of the provisions in the senior notes indenture relating to a purchase
of senior notes upon a Change of Control is waivable by the board of directors
of LIN Television. Without the consent of each holder of senior notes affected
thereby, after the mailing of the notice of a Change of Control offer, no
amendment to the senior notes indenture may, directly or indirectly, affect LIN
Television's obligation to purchase the outstanding senior notes or amend,
modify or change the obligation of LIN Television to consummate a Change of
Control offer or waive any default in the performance thereof or modify any of
the provisions of the definitions with respect to any such offer.
SUBSIDIARY GUARANTEES OF THE SENIOR NOTES
Each of the Guarantors will unconditionally guarantee on a joint and
several basis all of LIN Television's obligations under the senior notes,
including its obligations to pay principal, premium, if any, and interest with
respect to the senior notes. The Subsidiary Guarantees will be unsecured senior
obligations of the Guarantors. The obligations of each Guarantor under its
Guarantee will be pari passu in right of payment to the prior payment in full of
existing and future senior obligations of such Guarantor substantially to the
same extent as the senior notes are pari passu to all existing and future senior
obligations of LIN Television. The Guarantors will also guarantee all
obligations under the Senior Credit Facilities, and each Guarantor has granted a
security interest in all or substantially all of its assets to secure the
obligations under the Senior Credit Facilities. The obligations of each
Guarantor are limited to the maximum amount which, after giving effect to all
other contingent and fixed liabilities of such Guarantor and after giving effect
to any collections or payments from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under its
Subsidiary Guarantee or pursuant to its contribution obligations under the
senior notes indenture, will result in the obligations of such Guarantor under
its Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Guarantor that makes a payment or
distribution under a Subsidiary Guarantee shall be entitled to a contribution
from each other Guarantor in a pro rata amount, based on the net assets of each
Guarantor determined in accordance with GAAP.
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The senior notes indenture will provide that LIN Television shall cause
each Restricted Subsidiary issuing a Subsidiary Guarantee after the Senior Notes
Issue Date pursuant to "-- Certain Covenants -- Subsidiary Guarantees by
Restricted Subsidiaries" to:
- execute and deliver to the senior notes trustee a supplemental indenture
in a form reasonably satisfactory to the senior notes trustee pursuant to
which such Restricted Subsidiary shall become a party to the senior notes
indenture and thereby unconditionally guarantee all of LIN Television's
obligations under the senior notes and the senior notes indenture on the
terms set forth therein; and
- deliver to the senior notes trustee an Opinion of Counsel that such
supplemental indenture has been duly authorized, executed and delivered
by such Restricted Subsidiary and constitutes a valid, binding and
enforceable obligation of such Restricted Subsidiary, which opinion may
be subject to customary assumptions and qualifications.
Thereafter, such Restricted Subsidiary shall, unless released in accordance
with the terms of the senior notes indenture, be a Guarantor for all purposes of
the senior notes indenture.
Each Subsidiary Guarantee will be a continuing Guarantee and will:
- remain in full force and effect until payment of all of the obligations
covered thereby, except as provided below;
- be binding upon each Guarantor; and
- inure to the benefit of and be enforceable by the senior notes trustee,
holders of the senior notes and their successors, transferees and
assigns.
The senior notes indenture will provide that if the senior notes thereunder
are defeased in accordance with the terms of the senior notes indenture, or if
all or substantially all of the assets of any Guarantor or all of the equity
interest in any Guarantor are sold, including through merger, consolidation, by
issuance or otherwise, by LIN Television in a transaction constituting an Asset
Sale, and if:
- the Net Cash Proceeds from such Asset Sale are used in accordance with
the covenant described under "-- Certain Covenants -- Limitation on Asset
Sales;" or
- LIN Television delivers to the senior notes trustee an Officer's
Certificate to the effect that the Net Cash Proceeds from such Asset Sale
shall be used in accordance with the covenant described under "-- Certain
Covenants -- Limitation on Asset Sales" and within the time limits
specified by such covenant,
then such Guarantor, in the event of a sale or other disposition of all of the
equity interests of such Guarantor, or the Person acquiring the assets, in the
event of a sale or other disposition of all or substantially all of the assets
of such Guarantor, shall be released and discharged of its Subsidiary Guarantee
obligations in respect of the senior notes indenture and the senior notes.
Any Guarantor that is designated an Unrestricted Subsidiary shall upon such
designation be released and discharged of its Subsidiary Guarantee obligations
in respect of the senior notes indenture and the senior notes and any
Unrestricted Subsidiary that is redesignated as a Restricted Subsidiary shall
upon such redesignation be required to become a Guarantor.
CERTAIN COVENANTS
Limitation on Incurrence of Additional Indebtedness and Issuance of Capital
Stock. The senior notes indenture will provide that:
(1) LIN Television will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee
or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to, collectively, "incur" any
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Indebtedness, other than Permitted Indebtedness, and LIN Television will
not issue any Disqualified Capital Stock and its Restricted Subsidiaries
will not issue any Preferred Stock, except Preferred Stock issued to LIN
Television or a Restricted Subsidiary of LIN Television so long as it is so
held; provided, however, that LIN Television and its Restricted
Subsidiaries that are Guarantors may incur Indebtedness or issue shares of
such Capital Stock if, in either case, LIN Television's Leverage Ratio at
the time of incurrence of such Indebtedness or the issuance of such Capital
Stock, as the case may be, after giving pro forma effect to such incurrence
or issuance as of such date and to the use of proceeds therefrom is less
than 7.0 to 1.
(2) LIN Television will not incur or suffer to exist, or permit any of
its Restricted Subsidiaries to incur or suffer to exist, any Obligations
with respect to an Unrestricted Subsidiary that would violate the
provisions set forth in the definition of Unrestricted Subsidiary.
(3) LIN Television will not, and will not permit any Guarantor to,
directly or indirectly, incur any Indebtedness which by its terms, or by
the terms of any agreement governing such Indebtedness, is subordinated to
any other Indebtedness of LIN Television or such Guarantor, as the case may
be, unless such Indebtedness is also by its terms, or by the terms of any
agreement governing such Indebtedness, made expressly subordinate to the
senior notes or the Subsidiary Guarantee of such Guarantor to the same
extent and in the same manner as such Indebtedness is subordinated to other
Indebtedness of LIN Television or such Guarantor, as the case may be.
Limitation on Restricted Payments. The senior notes indenture will provide
that LIN Television will not, and will not cause or permit any of its Restricted
Subsidiaries, to, directly or indirectly, make any Restricted Payment if at the
time of such Restricted Payment and immediately after giving effect thereto:
(1) a Default or Event of Default shall have occurred and be
continuing; or
(2) LIN Television is not able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness and Issuance of
Capital Stock" covenant; or
(3) the aggregate amount of Restricted Payments made subsequent to
March 3, 1998, the amount expended for such purposes, if other than in
cash, being the fair market value of such property as determined by the
board of directors of LIN Television in good faith, exceeds the sum of:
(a) 100% of the aggregate Consolidated Cash Flow of LIN Television,
or, in the event such Consolidated Cash Flow shall be a deficit, minus
100% of such deficit, accrued subsequent to March 3, 1998 to the most
recent date for which financial information is available to LIN
Television, taken as one accounting period, less 1.4 times Consolidated
Interest Expense for the same period, plus
(b) 100% of the aggregate net proceeds, including the fair market
value of property other than cash as determined by the board of
directors of LIN Television in good faith, received subsequent to March
3, 1998 by LIN Television from any Person, other than a Restricted
Subsidiary of LIN Television, from the issuance and sale subsequent to
March 3, 1998 of Qualified Capital Stock of LIN Television (excluding
(i) any net proceeds from issuances and sales financed directly or
indirectly using funds borrowed from LIN Television or any Restricted
Subsidiary of LIN Television, until and to the extent such borrowing is
repaid, but including the proceeds from the issuance and sale of any
securities convertible into or exchangeable for Qualified Capital Stock
to the extent such securities are so converted or exchanged and
including any additional proceeds received by LIN Television upon such
conversion or exchange and
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(ii) any net proceeds received from issuances and sales that are used to
consummate a transaction described in clause (2) below, plus
(c) without duplication of any amount included in clause (3)(b)
above, 100% of the aggregate net proceeds, including the fair market
value of property other than cash, valued as provided in clause (3)(b)
above, received by LIN Television as a capital contribution subsequent
to March 3, 1998, plus
(d) the amount equal to the net reduction in Investments (other
than Permitted Investments) made by LIN Television or any of its
Restricted Subsidiaries in any Person resulting from, and without
duplication, (i) repurchases or redemptions of such Investments by such
Person, proceeds realized upon the sale of such Investment to an
unaffiliated purchaser and repayments of loans or advances or other
transfers of assets by such Person to LIN Television or any Restricted
Subsidiary of LIN Television or (ii) the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries, valued in each case as provided
in the definition of "Investment," not to exceed, in the case of any
Restricted Subsidiary, the amount of Investments previously made by LIN
Television or any of its Restricted Subsidiaries in such Unrestricted
Subsidiary, which amount was included in the calculation of Restricted
Payments; provided, however, that no amount shall be included under this
clause (d) to the extent it is already included in Consolidated Cash
Flow, plus
(e) the aggregate net cash proceeds received by a Person in
consideration for the issuance of such Person's Capital Stock, other
than Disqualified Capital Stock, that are held by such Person at the
time such Person is merged with and into LIN Television in accordance
with the "Merger, Consolidation and Sale of Assets" covenant subsequent
to March 3, 1998; provided, however, that concurrently with or
immediately following such merger LIN Television uses an amount equal to
such net cash proceeds to redeem or repurchase LIN Television's Capital
Stock, plus
(f) $15,000,000.
Notwithstanding the foregoing, these provisions will not prohibit:
(1) the payment of any dividend or the making of any distribution
within 60 days after the date of its declaration if such dividend or
distribution would have been permitted on the date of declaration;
(2) the purchase, redemption or other acquisition or retirement of any
Capital Stock of LIN Television or any warrants, options or other rights to
acquire shares of any class of such Capital Stock either (x) solely in
exchange for shares of Qualified Capital Stock or other rights to acquire
Qualified Capital Stock; (y) through the application of the net proceeds of
a substantially concurrent sale for cash, other than to a Restricted
Subsidiary of LIN Television, of shares of Qualified Capital Stock or
warrants, options or other rights to acquire Qualified Capital Stock; or
(z) in the case of Disqualified Capital Stock, solely in exchange for, or
through the application of the net proceeds of a substantially concurrent
sale for cash, other than to a Restricted Subsidiary of LIN Television, of,
Disqualified Capital Stock;
(3) payments made pursuant to any merger, consolidation or sale of
assets effected in accordance with the "Merger, Consolidation and Sale of
Assets" covenant; provided, however, that no such payment may be made
pursuant to this clause (3) unless, after giving effect to such
transaction, and the incurrence of any Indebtedness in connection therewith
and the use of the proceeds thereof, LIN Television would be able to incur
$1.00 of additional Indebtedness, other than Permitted Indebtedness, in
compliance with the "Limitation on Incurrence of Additional Indebtedness
and Issuance of Capital Stock"
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covenant such that after incurring that $1.00 of additional Indebtedness,
the Leverage Ratio would be less than 6.0 to 1;
(4) payments to enable LIN Television or a holding company to pay
dividends on its Capital Stock, other than Disqualified Capital Stock,
after the first Public Equity Offering in an annual amount not to exceed
6.0% of the gross proceeds, before deducting underwriting discounts and
commissions and other fees and expenses of the offering, received from
shares of Capital Stock, other than Disqualified Capital Stock, sold for
the account of the issuer thereof, and not for the account of any
stockholder, in such initial Public Equity Offering;
(5) payments by LIN Television to fund the payment by any company as
to which LIN Television is, directly or indirectly, a Subsidiary or a
"holding company" of audit, accounting, legal or other similar expenses, to
pay franchise or other similar taxes and to pay other corporate overhead
expenses, so long as such dividends are paid as and when needed by its
respective direct or indirect holding company and so long as the aggregate
amount of payments pursuant to this clause (5) does not exceed $1,000,000
in any calendar year;
(6) payments by LIN Television to repurchase, or to enable a holding
company to repurchase, Capital Stock or other securities from employees of
LIN Television or a holding company in an aggregate amount not to exceed
$15,000,000 since March 3, 1998;
(7) payments by LIN Television to redeem or repurchase, or to enable a
holding company to redeem or repurchase, stock purchase or similar rights
granted by LIN Television or a holding company with respect to its Capital
Stock in an aggregate amount not to exceed $500,000 since March 3, 1998;
(8) payments, not to exceed $200,000 in the aggregate since March 3,
1998, to enable LIN Television or a holding company to make cash payments
to holders of its Capital Stock in lieu of the issuance of fractional
shares of its Capital Stock;
(9) payments by LIN Television to fund taxes of a holding company for
a given taxable year in an amount equal to LIN Television's "separate
return liability," as if LIN Television were the parent of a consolidated
group, for purposes of this clause (9) "separate return liability" for a
given taxable year shall mean the hypothetical United States tax liability
of LIN Television defined as if LIN Television had filed its own U.S.
federal tax return for such taxable year;
(10) the payment of any dividend or the making of any distribution to
a holding company in amounts sufficient to permit a holding company (a) to
pay interest when due on the senior discount notes; and (b) to make any
mandatory redemptions or principal payments in respect of the senior
discount notes; and
(11) payments by LIN Television to Hicks Muse Partners in accordance
with the terms of the Financial Advisory Agreement and the Monitoring and
Oversight Agreement; provided, however, that in the case of clauses (3),
(4), (6), (7), (8) and (9), no Event of Default shall have occurred or be
continuing at the time of such payment or as a result thereof.
In determining the aggregate amount of Restricted Payments made subsequent
to March 3, 1998, amounts expended pursuant to clauses (1), (4), (6), (7) and
(8) shall be included in such calculation.
Limitation on Liens. The senior notes indenture will provide that LIN
Television will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur or assume or permit or
suffer to exist any Lien securing Indebtedness on any asset now owned or
hereafter acquired, or any income or profits therefrom, of any nature whatsoever
against any asset of LIN Television or any Restricted Subsidiary, including
Capital Stock of a
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Restricted Subsidiary, whether owned at the Senior Notes Issue Date or
thereafter acquired, or any proceeds therefrom, or assign or otherwise convey
any right to receive income or profits therefrom, except for Permitted Liens,
unless contemporaneously therewith:
(1) in the case of any Lien securing subordinated Indebtedness,
effective provision is made to secure the senior notes or such Subsidiary
Guarantee, as the case may be, with a Lien on the same collateral that is
prior to the Lien securing such subordinated Indebtedness; and
(2) in all other cases, the senior notes or such Subsidiary Guarantee,
as the case may be, are secured on an equal and ratable basis,
except clause (2) shall not restrict:
(a) Liens securing Indebtedness permitted to be incurred pursuant
to clause (2) of the definition of Permitted Indebtedness;
(b) any Lien securing any Interest Swap Agreements, Commodities
Agreements or Currency Agreements permitted to be incurred pursuant to
clause (4) of the definition of Permitted Indebtedness; or
(c) Liens securing Indebtedness described in clause (4) of the
definition of Permitted Indebtedness; provided that such Liens cover
only the property referred to in such definition.
Merger, Consolidation and Sale of Assets. The senior notes indenture will
provide that LIN Television shall not, in a single transaction or a series of
related transactions, consolidate with or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of LIN
Television's or any Guarantor's assets determined on a consolidated basis for
LIN Television to another Person or adopt a plan of liquidation unless:
(1) either (a) LIN Television is the Surviving Person or (b) the
Person, if other than LIN Television, formed by such consolidation or into
which LIN Television is merged or the Person that acquires by conveyance,
transfer or lease the properties and assets of LIN Television substantially
as an entirety or in the case of a plan of liquidation, the Person to which
assets of LIN Television have been transferred, shall be a corporation,
partnership, limited liability company or trust organized and existing
under the laws of the United States or any State thereof or the District of
Columbia;
(2) such Surviving Person shall assume all of the obligations of LIN
Television under the senior notes and the senior notes indenture pursuant
to a supplemental indenture in a form reasonably satisfactory to the senior
notes trustee;
(3) immediately after giving effect to such transaction and the use of
the proceeds therefrom, on a pro forma basis, including giving effect to
any Indebtedness incurred or anticipated to be incurred in connection with
such transaction:
(a) no Default or Event of Default shall have occurred and be
continuing; and
(b) LIN Television, in the case of clause (a) of the foregoing
clause (1), or such Person, in the case of clause (b) of the foregoing
clause (1), shall be able to incur $1.00 of additional Indebtedness,
other than Permitted Indebtedness, in compliance with the "Limitation on
Incurrence of Additional Indebtedness and Issuance of Capital Stock"
covenant; and
(4) LIN Television has delivered to the Senior Notes Trustee prior to
the consummation of the proposed transaction an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation, merger or
transfer complies with the senior notes
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indenture and that all conditions precedent in the senior notes indenture
relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer, by lease, assignment, sale or
otherwise, in a single transaction or series of related transactions, of all or
substantially all of the properties and assets of one or more Restricted
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
the properties or assets of LIN Television, will be deemed to be the transfer of
all or substantially all of the properties and assets of LIN Television.
Notwithstanding the foregoing clauses (2) and (3), any Restricted Subsidiary of
LIN Television may consolidate with, merge into or transfer all or part of its
properties and assets to LIN Television and LIN Television may merge with an
Affiliate thereof organized solely for the purpose of reorganizing LIN
Television in another jurisdiction in the U.S. to realize tax or other benefits.
In the event of any transaction, other than a lease, described in and
complying with the conditions listed in the immediately preceding paragraph in
which LIN Television, as the case may be, is not the Surviving Person and the
Surviving Person is to assume all the obligations of LIN Television under the
senior notes and the senior notes indenture pursuant to a supplemental
indenture, such Surviving Person shall succeed to, and be substituted for, and
may exercise every right and power of LIN Television, as the case may be, and
LIN Television shall be discharged from its Obligations under the senior notes
indenture and the senior notes.
Limitation on Asset Sales. The senior notes indenture will provide that
LIN Television will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) LIN Television or the applicable Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed of,
as determined in good faith by management of LIN Television or, if such
Asset Sale involves consideration in excess of $10,000,000, by the board of
directors of LIN Television, as evidenced by a board resolution;
(2) at least 75% of the consideration received by LIN Television or
such Restricted Subsidiary, as the case may be, from such Asset Sale is in
the form of cash or Cash Equivalents and is received at the time of such
disposition; and
(3) upon the consummation of an Asset Sale, LIN Television applies, or
causes such Restricted Subsidiary to apply, such Net Cash Proceeds within
180 days of receipt thereof either:
(a) to permanently reduce the Indebtedness of LIN Television or one
or more Restricted Subsidiaries of LIN Television under the Senior
Credit Facilities except that LIN Television may temporarily repay
Indebtedness under the revolving credit portion of the Senior Credit
Facilities using the Net Cash Proceeds from such Asset Sale and
thereafter use such funds to reinvest pursuant to clause (b) below
within the period set forth therein without having to obtain a
corresponding reduction in the commitments thereunder;
(b) to reinvest, or to be contractually committed to reinvest
pursuant to a binding agreement, in Productive Assets and, in the latter
case, to have so reinvested within 360 days of the date of receipt of
such Net Cash Proceeds; or
(c) to purchase senior notes and other senior indebtedness, pro
rata tendered to LIN Television for purchase at a price equal to 100% of
the principal amount thereof, or the accreted value of such other senior
indebtedness, if such other senior indebtedness is issued at a discount,
plus accrued interest thereon, if any, to the date of purchase pursuant
to an offer to purchase made by LIN Television as set forth below (a
"Net Proceeds Offer"); provided, however, that LIN Television may defer
making a
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Net Proceeds Offer until the aggregate Net Cash Proceeds from Asset
Sales not otherwise applied in accordance with this covenant equal or
exceed $15,000,000.
Subject to the deferral right set forth in the final proviso of the
preceding paragraph, each notice of a Net Proceeds Offer will be mailed, by
first-class mail, to holders of senior notes not more than 180 days after the
relevant Asset Sale or, in the event LIN Television or a Restricted Subsidiary
has entered into a binding agreement as provided in clause (b) above, within 180
days following the termination of such agreement but in no event later than 360
days after the relevant Asset Sale. Such notice will specify, among other
things, the purchase date, which will be no earlier than 30 days nor later than
45 days from the date such notice is mailed, except as otherwise required by
law, and will otherwise comply with the procedures set forth in the senior notes
indenture. Upon receiving notice of the Net Proceeds Offer, holders of senior
notes may elect to tender their senior notes in whole or in part in integral
multiples of $1,000. To the extent holders properly tender senior notes in an
amount which, together with all other Senior Indebtedness so tendered, exceeds
the Net Proceeds Offer, senior notes and other Senior Indebtedness of tendering
holders will be repurchased on a pro rata basis, based upon the aggregate
principal amount tendered, or, if applicable, the aggregate accreted value
tendered. To the extent that the aggregate principal amount of senior notes
tendered pursuant to any Net Proceeds Offer, which, together with the aggregate
principal amount or aggregate accreted value, as the case may be, of all other
Senior Indebtedness so tendered, is less than the amount of Net Cash Proceeds
subject to such Net Proceeds Offer, LIN Television may use any remaining portion
of such Net Cash Proceeds not required to fund the repurchase of tendered senior
notes and other Senior Indebtedness for any purposes not otherwise prohibited by
the senior notes indenture. Upon the consummation of any Net Proceeds Offer, the
amount of Net Cash Proceeds subject to any future Net Proceeds Offer from the
Asset Sales giving rise to such Net Cash Proceeds shall be deemed to be zero.
LIN Television will comply with the requirements of Rule 14e-1 under the
Exchange Act to the extent applicable in connection with the repurchase of
senior notes pursuant to a Net Proceeds Offer.
Limitation on Asset Swaps. The senior notes indenture will provide that
LIN Television will not, and will not permit any Restricted Subsidiary to,
engage in any Asset Swap unless:
(1) at the time of entering into such Asset Swap, and immediately
after giving effect to such Asset Swap, no Default or Event of Default
shall have occurred and be continuing;
(2) in the event such Asset Swap involves an aggregate amount in
excess of $10,000,000, the terms of such Asset Swap have been approved by a
majority of the members of the board of directors of LIN Television; and
(3) in the event such Asset Swap involves an aggregate amount in
excess of $50,000,000, LIN Television has received a written opinion from
an independent investment banking firm of nationally recognized standing
that such Asset Swap is fair to LIN Television or such Restricted
Subsidiary, as the case may be, from a financial point of view.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The senior notes indenture will provide that LIN Television will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause to permit to exist or become effective, by
operation of the charter of such Restricted Subsidiary or by reason of any
agreement, instrument, judgment, decree, rule, order, statute or governmental
regulation, any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital
Stock;
(2) make loans or advances or pay any Indebtedness or other obligation
owed to LIN Television or any of its Restricted Subsidiaries; or
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(3) transfer any of its property or assets to LIN Television, except
for such encumbrances or restrictions existing under or by reason of:
(a) applicable law;
(b) the senior notes indenture;
(c) customary non-assignment provisions of any lease governing a
leasehold interest of LIN Television or any Restricted Subsidiary;
(d) any instrument governing Acquired Indebtedness or Acquired
Preferred Stock, which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired;
(e) agreements existing on March 3, 1998, including the Senior
Credit Facilities and the existing senior subordinated notes, as such
agreements are from time to time in effect; provided, however, that any
amendments or modifications of such agreements that affect the
encumbrances or restrictions of the types subject to this covenant shall
not result in such encumbrances or restrictions being less favorable to
LIN Television in any material respect, as determined in good faith by
the board of directors of LIN Television, than the provisions as in
effect before giving effect to the respective amendment or modification;
(f) any restriction with respect to such a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or
disposition;
(g) an agreement effecting a refinancing, replacement or
substitution of Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (b), (d) or (e) above or any other
agreement evidencing Indebtedness permitted under the senior notes
indenture; provided, however, that the provisions relating to such
encumbrance or restriction contained in any such refinancing,
replacement or substitution agreement or any such other agreement are no
less favorable to LIN Television in any material respect as determined
in good faith by the board of directors of LIN Television than the
provisions relating to such encumbrance or restriction contained in
agreements referred to in such clause (b), (d) or (e);
(h) restrictions on the transfer of the assets subject to any Lien
imposed by the holder of such Lien;
(i) a licensing agreement to the extent such restrictions or
encumbrances limit the transfer of property subject to such licensing
agreement;
(j) restrictions relating to Subsidiary Preferred Stock that
require that due and payable dividends thereon to be paid in full prior
to dividends on such Subsidiary's common stock; or
(k) any agreement or charter provision evidencing Indebtedness or
Capital Stock permitted under the senior notes indenture; provided,
however, that the provisions relating to such encumbrance or restriction
contained in such agreement or charter provision are not less favorable
to LIN Television in any material respect as determined in good faith by
the board of directors of LIN Television than the provisions relating to
such encumbrance or restriction contained in the senior notes indenture.
Limitations on Transactions with Affiliates. The senior notes indenture
will provide that LIN Television will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction, including, without limitation, the
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purchase, sale, lease, contribution or exchange of any property or the rendering
of any service, with or for the benefit of any of its Affiliates, other than
transactions between LIN Television and a Restricted Subsidiary of LIN
Television or among Restricted Subsidiaries of LIN Television, (an "Affiliate
Transaction"), other than Affiliate Transactions on terms that are no less
favorable than those that might reasonably have been obtained in a comparable
transaction on an arm's-length basis from a person that is not an Affiliate;
provided, however, that for a transaction or series of related transactions
involving value of $5,000,000 or more, such determination will be made in good
faith by a majority of members of the board of directors of LIN Television and
by a majority of the disinterested members of the board of directors of LIN
Television, if any; provided, further, that for a transaction or series of
related transactions involving value of $15,000,000 or more, the board of
directors of LIN Television has received an opinion from an independent
investment banking firm of nationally recognized standing that such Affiliate
Transaction is fair, from a financial point of view, to LIN Television or such
Restricted Subsidiary. The foregoing restrictions will not apply to:
(1) reasonable and customary directors' fees, indemnification and
similar arrangements and payments thereunder;
(2) any obligations of LIN Television under any employment agreement,
noncompetition or confidentiality agreement with any officer of LIN
Television, as in effect on March 3, 1998, provided that each amendment of
any of the foregoing agreements shall be subject to the limitations of this
covenant;
(3) any Restricted Payment permitted to be made pursuant to the
covenant described under "Limitation on Restricted Payments";
(4) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the board
of directors of LIN Television;
(5) loans or advances to employees in the ordinary course of business
of LIN Television or any of its Restricted Subsidiaries consistent with
past practices; and
(6) payments by LIN Television to Hicks Muse Partners in accordance
with the terms of the Financial Advisory Agreement and the Monitoring and
Oversight Agreement.
Subsidiary Guarantees by Restricted Subsidiaries. The senior notes
indenture will provide that LIN Television will not create or acquire, nor cause
or permit any of its Restricted Subsidiaries, directly or indirectly, to create
or acquire, any Subsidiary other than:
(1) an Unrestricted Subsidiary in accordance with the other terms of
the senior notes indenture; or
(2) a Restricted Subsidiary that, simultaneously with such creation or
acquisition, executes and delivers a supplemental indenture to the senior
notes indenture pursuant to which it will become a Guarantor under the
senior notes indenture in accordance with "-- Subsidiary Guarantees of the
Senior Notes" above.
Reports. The senior notes indenture will provide that so long as any of
the senior notes are outstanding, LIN Television will provide to the senior
notes trustee and the holders of senior notes and file with the SEC, to the
extent such submissions are accepted for filing by the SEC, copies of the annual
reports and of the information, documents and other reports that LIN Television
would have been required to file with the SEC pursuant to Sections 13 or 15(d)
of the Exchange Act, regardless of whether LIN Television is then obligated to
file such reports.
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EVENTS OF DEFAULT
The following events are defined in the senior notes indenture as "Events
of Default":
(1) the failure to pay interest on the senior notes when the same
becomes due and payable and the Default continues for a period of 30 days;
(2) the failure to pay principal of or premium, if any, on any senior
notes when such principal or premium, if any, becomes due and payable, at
maturity, upon redemption or otherwise;
(3) a default in the observance or performance of any other covenant
or agreement contained in the senior notes or the senior notes indenture,
which default continues for a period of 30 days after LIN Television
receives written notice thereof specifying the default from the senior
notes trustee or holders of at least 25% in aggregate principal amount of
outstanding senior notes;
(4) the failure to pay at the stated maturity, giving effect to any
extensions thereof, the principal amount of any Indebtedness of LIN
Television or any Restricted Subsidiary of LIN Television, or the
acceleration of the final stated maturity of any such Indebtedness, if the
aggregate principal amount of such Indebtedness, together with the
aggregate principal amount of any other such Indebtedness in default for
failure to pay principal at the final stated maturity, giving effect to any
extensions thereof, or which has been accelerated, aggregates $10,000,000
or more at any time in each case after a 10-day period during which such
default shall not have been cured or such acceleration rescinded;
(5) one or more judgments in an aggregate amount in excess of
$15,000,000, which are not covered by insurance as to which the insurer has
not disclaimed coverage, being rendered against LIN Television or any of
its Significant Restricted Subsidiaries and such judgment or judgments
remain undischarged or unstayed for a period of 60 days after such judgment
or judgments become final and nonappealable; and
(6) certain events of bankruptcy, insolvency or reorganization
affecting LIN Television or any of its Significant Restricted Subsidiaries.
Upon the happening of any Event of Default specified in the senior notes
indenture, the senior notes trustee may, and the senior notes trustee upon the
request of holders of 25% in principal amount of the outstanding senior notes
shall, or the holders of at least 25% in principal amount of outstanding senior
notes may, declare the principal of all the senior notes, together with all
accrued and unpaid interest and premium, if any, to be due and payable by notice
in writing to LIN Television and the senior notes trustee specifying the
respective Event of Default and that it is a "notice of acceleration," and the
same:
(a) shall become immediately due and payable; or
(b) if there are any amounts outstanding under the Senior Credit
Facilities, will become due and payable upon the first to occur of an
acceleration under the Senior Credit Facilities or five Business Days after
receipt by LIN Television and the agent under the Senior Credit Facilities
of the acceleration notice, unless all Events of Default specified in the
Acceleration Notice have been cured or waived.
If an Event of Default with respect to bankruptcy proceedings relating to LIN
Television or any Significant Restricted Subsidiaries occurs and is continuing,
then such amount will ipso facto become and be immediately due and payable
without any declaration or other act on the part of the senior notes trustee or
any holder of the senior notes.
At any time after a declaration of acceleration with respect to the senior
notes as described in the preceding paragraph, the holders of a majority in
principal amount of the
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senior notes then outstanding, by notice to the senior notes trustee, may
rescind and cancel such declaration and its consequences if:
(1) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction;
(2) all existing Defaults and Events of Default have been cured or
waived except nonpayment of principal of or interest on the senior notes
that has become due solely by such declaration of acceleration;
(3) to the extent the payment of such interest is lawful, interest, at
the same rate specified in the senior notes, on overdue installments of
interest and overdue payments of principal, which has become due otherwise
than by such declaration of acceleration has been paid;
(4) LIN Television has paid the senior notes trustee its reasonable
compensation and reimbursed the senior notes trustee for its reasonable
expenses, disbursements and advances; and
(5) in the event of the cure or waiver of a Default or Event of
Default of the type described in clause (4) of the first paragraph of
"-- Events of Default" above, the senior notes trustee has received an
Officers' Certificate and Opinion of Counsel that such Default or Event of
Default has been cured or waived.
The holders of a majority in principal amount of the senior notes may waive any
existing Default or Event of Default under the senior notes indenture, and its
consequences, except a default in the payment of the principal of or interest on
any senior notes.
LIN Television is required to deliver to the senior notes trustee, within
120 days after the end of LIN Television's fiscal year, a certificate indicating
whether the signing officers know of any Default or Event of Default that
occurred during the previous year and whether LIN Television has complied with
its obligations under the senior notes indenture. In addition, LIN Television
will be required to notify the senior notes trustee of the occurrence and
continuation of any Default or Event of Default promptly after LIN Television
becomes aware of the same.
Subject to the provisions of the senior notes indenture relating to the
duties of the senior notes trustee in case an Event of Default thereunder should
occur and be continuing, the senior notes trustee will be under no obligation to
exercise any of the rights or powers under the senior notes indenture at the
request or direction of any of the holders of the senior notes unless such
holders have offered to the senior notes trustee reasonable indemnity or
security against any loss, liability or expense. Subject to such provision for
security or indemnification and certain limitations contained in the senior
notes indenture, the holders of a majority in principal amount of the
outstanding senior notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the senior notes trustee
or exercising any trust or power conferred on the senior notes trustee.
In addition, the senior notes indenture will contain a provision that
prohibits the trustee thereunder or the holders of the senior notes from
challenging:
(1) the existence, scope, equality, validity, enforceability,
perfection or priority of any security interest asserted by any lender or
the agent for the lenders under the Senior Credit Facilities; or
(2) the rights of any lender or the agent for the lenders under the
Senior Credit Facilities to realize the intended benefits of such security
interest.
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SATISFACTION AND DISCHARGE OF SENIOR NOTES INDENTURE; DEFEASANCE
LIN Television may terminate its obligations under the senior notes
indenture at any time by delivering all outstanding senior notes to the senior
notes trustee for cancellation and paying all sums payable by it thereunder. LIN
Television, at its option:
(1) will be discharged from any and all obligations with respect to
the senior notes, except for certain obligations of LIN Television to
register the transfer or exchange of such senior notes, replace stolen,
lost or mutilated senior notes, maintain paying agencies and hold moneys
for payment in trust; or
(2) need not comply with certain of the restrictive covenants with
respect to the senior notes indenture, if LIN Television deposits with the
senior notes trustee, in trust, U.S. legal tender or U.S. Government
Obligations or a combination thereof that, through the payment of interest
and premium thereon and principal in respect thereof in accordance with
their terms, will be sufficient to pay all the principal of and interest
and premium on the senior notes on the dates such payments are due or
through any date of redemption, if earlier than the dates such payments are
due, in any case in accordance with the terms of such senior notes, as well
as the senior notes trustee's fees and expenses.
To exercise either such option, LIN Television is required to deliver to the
senior notes trustee:
(a) an Opinion of Counsel or a private letter ruling issued to LIN
Television by the Internal Revenue Service to the effect that the holders
of the senior notes will not recognize income, gain or loss for federal
income tax purposes as a result of the deposit and related defeasance and
will be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such option had
not been exercised and, in the case of an Opinion of Counsel furnished in
connection with a discharge pursuant to clause (1) above, accompanied by a
private letter ruling issued to LIN Television by the IRS to such effect;
(b) subject to certain qualifications, an Opinion of Counsel to the
effect that funds so deposited will not be subject to avoidance under
applicable bankruptcy law; and
(c) an Officers' Certificate and an Opinion of Counsel to the effect
that LIN Television has complied with all conditions precedent to the
defeasance.
Notwithstanding the foregoing, the Opinion of Counsel required by clause
(a) above need not be delivered if all senior notes not theretofore delivered to
the senior notes trustee for cancellation: (i) have become due and payable, (ii)
will become due and payable on the maturity date within one year; or (iii) are
to be called for redemption within one year under arrangements satisfactory to
the senior notes trustee for the giving of notice of redemption by the senior
notes trustee in the name, and at the expense, of LIN Television.
MODIFICATION OF THE SENIOR NOTES INDENTURE
From time to time, LIN Television and the senior notes trustee, together,
without the consent of the holders of the senior notes, may amend or supplement
the senior notes indenture for certain specified purposes, including curing
ambiguities, defects or inconsistencies. Other modifications and amendments of
the senior notes indenture may be made with the consent of the holders of a
majority in principal amount of the then outstanding senior notes, except that,
without the consent of each holder of the senior notes affected thereby, no
amendment may, directly or indirectly:
(1) reduce the amount of senior notes whose holders must consent to an
amendment;
(2) reduce the rate of or change the time for payment of interest,
including defaulted interest, on any senior notes;
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(3) reduce the principal of or change the fixed maturity of any senior
notes, or change the date on which any senior notes may be subject to
redemption or repurchase, or reduce the redemption or repurchase price
therefor;
(4) make any senior notes payable in money other than that stated in
the senior notes and the senior notes indenture;
(5) make any change in provisions of the senior notes indenture
protecting the right of each holder of a senior note to receive payment of
principal of, premium on and interest on such senior note on or after the
due date thereof or to bring suit to enforce such payment or permitting
holders of a majority in principal amount of the senior notes to waive a
Default or Event of Default; or
(6) after LIN Television's obligation to purchase the senior notes
arises under the senior notes indenture, amend, modify or change the
obligation of LIN Television to make or consummate a Change of Control
Offer or a Net Proceeds Offer or waive any default in the performance
thereof or modify any of the provisions or definitions with respect to any
such offers.
CONCERNING THE SENIOR NOTES TRUSTEE
The senior notes indenture contains certain limitations on the rights of
the senior notes trustee, should it become a creditor of LIN Television, to
obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The senior notes
trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest, it must eliminate such conflict within 90
days, apply to the SEC for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
senior notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the senior
notes trustee, subject to certain exceptions. The senior notes indenture
provides that in case an Event of Default shall occur, which shall not be cured,
the senior notes trustee will be required, in the exercise of its power, to use
the degree of care of a prudent person in the conduct of such person's own
affairs. Subject to such provisions, the senior notes trustee will be under no
obligation to exercise any of its rights or powers under the senior notes
indenture at the request of any holder of senior notes, unless such holder shall
have offered to the senior notes trustee security and indemnity satisfactory to
it against any loss, liability or expense.
GOVERNING LAW
The senior notes indenture provides that it and the senior notes will be
governed by, and construed in accordance with, the laws of the State of New York
without giving effect to applicable principles of conflicts of law to the extent
that the application of the laws of another jurisdiction would be required
thereby.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
senior notes indenture. Reference is made to the senior notes indenture for the
full definition of all such terms, as well as any other terms used herein for
which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
LIN Television or at the time it merges or consolidates with LIN Television or
any of its Restricted Subsidiaries or assumed in connection with the acquisition
of assets from such Person and not incurred by such Person in
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connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of LIN Television or such acquisition, merger or
consolidation.
"Acquired Preferred Stock" means the Preferred Stock of any Person at such
time as such Person becomes a Restricted Subsidiary of LIN Television or at the
time it merges or consolidates with LIN Television or any of its Restricted
Subsidiaries and not issued by such Person in connection with, or in
anticipation or contemplation of, such acquisition, merger or consolidation.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Chase and its
Affiliates shall not be deemed Affiliates of LIN Television by reason of the
Senior Credit Facilities or their direct or indirect investments in any fund
managed by Hicks Muse or any Person in which any such fund is invested.
"Applicable Premium" means, with respect to a senior note at any Change of
Control redemption date, the greater of:
(1) 1.0% of the principal amount of such senior note; and
(2) the excess of (i) the present value at such time of the redemption
price of such senior note at March 1, 2003 (such redemption price being
described under "-- Optional Redemption") plus all semi-annual payments of
interest through, March 1, 2003 computed using a discount rate equal to the
Treasury Rate plus 75 basis points over (ii) the principal amount of such
senior note.
"Asset Acquisition" means (i) an Investment by LIN Television or any
Restricted Subsidiary of LIN Television in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of LIN Television or shall be
consolidated or merged with LIN Television or any Restricted Subsidiary of LIN
Television; or (ii) the acquisition by LIN Television or any Restricted
Subsidiary of LIN Television of assets of any Person comprising a division or
line of business of such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by LIN Television or any of
its Restricted Subsidiaries, excluding any sale and leaseback transaction or any
pledge of assets or stock by LIN Television or any of its Restricted
Subsidiaries, to any Person other than LIN Television or a Restricted Subsidiary
of LIN Television of:
(1) any Capital Stock of any Restricted Subsidiary of LIN Television;
or
(2) any other property or assets of LIN Television or any Restricted
Subsidiary of LIN Television other than in the ordinary course of business;
provided, however, that for purposes of the "Limitation on Asset Sales"
covenant, Asset Sales shall not include:
(a) a transaction or series of related transactions in which LIN
Television or any of its Restricted Subsidiaries receive aggregate
consideration of less than $1,000,000;
(b) transactions permitted under the "Limitation on Asset Swaps"
covenant;
(c) transactions covered by the "Merger, Consolidation and Sale of
Assets" covenant;
(d) a Restricted Payment that otherwise qualifies under the
"Limitation on Restricted Payments" covenant;
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(e) any disposition of obsolete or worn out equipment or equipment
that is no longer useful in the conduct of the business of LIN
Television and its Subsidiaries and that is disposed of, in each case,
in the ordinary course of business; and
(f) any transaction that constitutes a Change of Control.
Solely for purposes of the second to last paragraph of "-- Subsidiary
Guarantees of the senior notes" an Asset Sale is deemed to include a sale,
conveyance or transfer by the Representative following a foreclosure on such
assets.
"Asset Swap" means the execution of a definitive agreement, subject only to
FCC approval, if applicable, and other customary closing conditions that LIN
Television in good faith believes will be satisfied, for a substantially
concurrent purchase and sale, or exchange, of Productive Assets between LIN
Television or any of its Restricted Subsidiaries and another Person or group of
affiliated Persons; provided that any amendment to or waiver of any closing
condition that individually or in the aggregate is material to the Asset Swap
shall be deemed to be a new Asset Swap; it being understood that an Asset Swap
may include a cash equalization payment made in connection therewith provided
that such cash payment, if received by LIN Television or its Subsidiaries, shall
be deemed to be proceeds received from an Asset Sale and shall be applied in
accordance with "-- Certain Covenants -- Limitation on Asset Sales."
"Business Day" means any day, other than a day which is a Saturday, Sunday
or legal holiday in State of New York, on which banks are open for business in
New York, New York.
"Capital Stock" means with respect to any Person that is a corporation, any
and all shares, interests, participations or other equivalents, however
designated, of capital stock of such Person, and, with respect to any Person
that is not a corporation, any and all partnership or other equity interests of
such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligation of
such Person to pay rent or other amounts under a lease to which such Person is a
party that is required to be classified and accounted for as a capital lease
obligation under GAAP, and for purposes of this definition, the amount of such
obligation at any date shall be the capitalized amount of such obligation at
such date, determined in accordance with GAAP.
"Cash Equivalents" means:
(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc.;
(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Corporation or at least P-1 from Moody's
Investors Service, Inc.;
(4) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state
thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of
not less than $200,000,000;
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(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4)
above; and
(6) investments in money market funds that invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above.
"Change of Control" means the occurrence of one or more of the following
events:
(1) any sale, lease, exchange or other transfer, in one transaction or
a series of related transactions, of all or substantially all of the assets
of LIN Television to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group"), whether or not otherwise in
compliance with the provisions of the senior notes indenture, other than to
Hicks Muse or any of its Affiliates, officers or directors (the "Permitted
Holders"); or
(2) a majority of the board of directors of LIN Television or LIN
Holdings shall consist of Persons who are not Continuing Directors; or
(3) the acquisition by any Person or Group, other than the Permitted
Holders or any direct or indirect subsidiary of any Permitted Holder,
including without limitation LIN Holdings, of the power, directly or
indirectly, to vote or direct the voting of securities having more than 50%
of the ordinary voting power for the election of directors of LIN
Television.
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement.
"Consolidated Cash Flow" means, with respect to any Person, for any period,
the sum, without duplication, of:
(1) Consolidated Net Income,;
(2) to the extent Consolidated Net Income has been reduced thereby,
(i) all income taxes of such Person and its Restricted Subsidiaries paid or
accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary or nonrecurring gains or losses), (ii)
Consolidated Interest Expense and (iii) Consolidated Non-Cash Charges, all
as determined on a consolidated basis for such Person and its Restricted
Subsidiaries in conformity with GAAP; and
(3) the lesser of (i) dividends or distributions paid in cash to such
Person or its Restricted Subsidiary by another Person whose results are
reflected as a minority interest in the consolidated financial statements
of such first Person and (ii) such Person's equity interest in the
Consolidated Cash Flow of such other Person (but in no event less than
zero), except, that in the case of the Joint Venture, such amount shall not
exceed 10% of the Consolidated Cash Flow of LIN Television for such period
and such first Person shall be deemed to have received by dividend its
proportionate share of distributable cash retained by the Joint Venture to
fund the interest reserve.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of:
(1) the interest expense of such Person and its Restricted
Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation:
(a) any amortization of debt discount;
(b) the net cost under Interest Swap Agreements, including any
amortization of discounts;
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(c) the interest portion of any deferred payment obligation;
(d) all commissions, discounts and other fees and charges owed with
respect to letters of credit, bankers' acceptance financing or similar
facilities; and
(e) all accrued interest.
(2) the interest component of Capitalized Lease Obligations paid or
accrued by such Person and its Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income, or loss, of such Person and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided, however, that there shall be excluded therefrom, without duplication:
(1) gains and losses from Asset Sales, without regard to the
$1,000,000 limitation set forth in the definition thereof, or abandonments
or reserves relating thereto and the related tax effects;
(2) items classified as extraordinary or nonrecurring gains and
losses, and the related tax effects according to GAAP;
(3) the net income, or loss of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Restricted
Subsidiary of such first referred to Person or is merged or consolidated
with it or any of its Restricted Subsidiaries;
(4) the net income of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is restricted by contract, operation of law or
otherwise; and
(5) the net income or loss of any Person, other than a Restricted
Subsidiary;
and provided further, however, that (i) there shall be added to net income in an
amount equal to the consolidated cash flow losses attributable to stations which
LIN Television or any of its Restricted Subsidiaries operates pursuant to local
marketing agreements provided that such addback shall not exceed $3,000,000 in
any Four Quarter Period and (ii) in determining net income, pro forma effect
shall be given to the reimbursement of promotional expenses as if such
reimbursement obligation were in effect for the entire period with respect to
periods ending prior to March 31, 1999, but only if such reimbursement
obligation is then in effect.
"Consolidated Non-Cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such person and its Restricted Subsidiaries, excluding any such charges
constituting an extraordinary or nonrecurring item, reducing Consolidated Net
Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the board of directors of LIN Television or LIN Holdings
on March 3, 1998, (ii) was nominated for election or elected to the board of
directors of LIN Television or LIN Holdings, as the case may be, with the
affirmative vote of a majority of the Continuing Directors who were members of
such board of directors at the time of such nomination or election or (iii) is a
representative of a Permitted Holder.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
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"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person, whether or not such Person
is the Surviving Person, or the sale, assignment, or transfer, lease, conveyance
or other disposition of all or substantially all of such Person's assets.
"Disqualified Capital Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures, excluding any
maturity as the result of an optional redemption by the issuer thereof, or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, except, in each case,
upon the occurrence of a Change of Control, in whole or in part, on or prior to
the final maturity date of the senior notes; provided that only the portion of
Capital Stock which so matures or is mandatorily redeemable or is so redeemable
at the sole option of the holder thereof prior to January 15, 2008 shall be
deemed Disqualified Capital Stock.
"Equity Offering" means a private sale or public offering of Capital Stock,
other than Disqualified Capital Stock, of LIN Television or a Holding Company,
to the extent, in the case of a holding company, that the net cash proceeds
thereof are contributed to the common or non-redeemable preferred equity capital
of LIN Television.
"Financial Advisory Agreement" means the Financial Advisory Agreement by
and among LIN Television, LIN Holdings and Hicks Muse Partners, as in effect on
March 3, 1998.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of March 3, 1998, including those set forth in the
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 the Commission or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the senior notes indenture shall be computed in conformity with GAAP.
"Guarantee" means a guarantee, other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantor" means each of LIN Television's direct and indirect, existing
and future, Restricted Subsidiaries, other than a Subsidiary organized under the
laws of a jurisdiction other than the United States or any State thereof,
provided that such Subsidiary's assets and principal place of business are
located outside the United States and shall include each of LIN Television's
Subsidiaries that guarantee the Senior Credit Facilities.
"Indebtedness" means with respect to any Person, without duplication, any
liability of such Person:
(1) for borrowed money;
(2) evidenced by bonds, debentures, notes or other similar
instruments;
(3) constituting Capitalized Lease Obligations;
(4) incurred or assumed as the deferred purchase price of property, or
pursuant to conditional sale obligations and title retention agreements,
but excluding trade accounts payable arising in the ordinary course of
business;
(5) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction;
(6) for Indebtedness of others guaranteed by such Person;
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(7) for Interest Swap Agreements, Commodity Agreements and Currency
Agreements; and
(8) for Indebtedness of any other Person of the type referred to in
clauses (1) through (7) that is secured by any Lien on any property or
asset of such first referred to Person, the amount of such Indebtedness
being deemed to be the lesser of the value of such property or asset or the
amount of the Indebtedness so secured.
The amount of Indebtedness of any Person at any date shall be (i) the
outstanding principal amount of all unconditional obligations described above,
as such amount would be reflected on a balance sheet prepared in accordance with
GAAP, and the maximum liability at such date of such Person for any contingent
obligations described above, (ii) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount and (iii) the principal amount
thereof, together with any interest thereon that is more than 30 days past due,
in the case of any other Indebtedness.
"Interest Swap Agreements" means any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge or arrangement.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit, in each case, including by way of Guarantee or
similar arrangement, but excluding (i) any debt or extension of credit
represented by a bank deposit other than a time deposit and (ii) advances to
customers in the ordinary course of business, or capital contribution to, by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others, or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments issued
by such Person. For purposes of the "Limitation on Restricted Payments"
covenant:
(1) "Investment" shall include the portion, proportionate to LIN
Television's equity interest in a Restricted Subsidiary to be designated as
an Unrestricted Subsidiary, of the fair market value of the net assets of
such Restricted Subsidiary of LIN Television at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Unrestricted Subsidiary as a
Restricted Subsidiary, LIN Television shall be deemed to continue to have a
permanent "Investment" (if positive) equal to (x) LIN Television's
"Investment" in such Unrestricted Subsidiary at the time of such
redesignation less (y) the portion (proportionate to LIN Television's
equity interest in such Unrestricted Subsidiary) of the fair market value
of the net assets of such Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is so redesignated from an Unrestricted Subsidiary
to a Restricted Subsidiary; and
(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the board of directors of LIN
Television.
"Leverage Ratio" means, as to any Person, the ratio of (i) the aggregate
outstanding amount of Indebtedness of such Person and its Restricted
Subsidiaries as of the date of calculation on a consolidated basis in accordance
with GAAP plus the aggregate liquidation preference of all Disqualified Capital
Stock of such Person and of all outstanding Preferred Stock of Restricted
Subsidiaries of such Person (other than any such Disqualified Capital Stock or
Preferred Stock held by such Person or any of its Restricted Subsidiaries) to
(ii) the Consolidated Cash Flow of such Person for the four full fiscal quarters
(the "Four Quarter Period") ending on or prior to the date of determination.
For purposes of this definition, the aggregate outstanding principal amount
of Indebtedness of the Person and its Restricted Subsidiaries for which such
calculation is made shall be determined on a pro forma basis as if the
Indebtedness giving rise to the need to perform such
110
calculation had been incurred and the proceeds therefrom had been applied, and
all other transactions in respect of which such Indebtedness is being incurred
has occurred, on the last day of the Four Quarter Period. In addition to the
foregoing, for purposes of this definition, "Consolidated Cash Flow" shall be
calculated on a pro forma basis after giving effect to:
(1) the Transactions;
(2) the incurrence of the Indebtedness of such Person and its
Restricted Subsidiaries, and the application of the proceeds therefrom,
giving rise to the need to make such calculation and any incurrence, and
the application of the proceeds therefrom, or repayment of other
Indebtedness, other than the incurrence or repayment of Indebtedness
pursuant to working capital facilities, at any time subsequent to the
beginning of the Four Quarter Period and on or prior to the date of
determination, as if such incurrence, and the application of the proceeds
thereof, or the repayment, as the case may be, occurred on the first day of
the Four Quarter Period;
(3) any Asset Sales, including those excluded from the definition
thereof by clauses (b), (c) or (d) of the definition thereof, or Asset
Acquisitions, including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of such Person or one
of its Subsidiaries, including any Person that becomes a Restricted
Subsidiary as a result of such Asset Acquisition, incurring, assuming or
otherwise becoming liable for Indebtedness, or Asset Swaps at any time on
or subsequent to the first day of the Four Quarter Period and on or prior
to the date of determination, as if such Asset Sale, Asset Acquisition,
including the incurrence, assumption or liability for any such Indebtedness
and also including any Consolidated Cash Flow associated with such Asset
Acquisition, or Asset Swap occurred on the first day of the Four Quarter
Period; and
(4) cost savings resulting from employee termination, facilities
consolidations and closings, standardization of employee benefits and
compensation practices, consolidation of property, casualty and other
insurance coverage and policies, standardization of sales representation
commissions and other contract rates, and reductions in taxes other than
income taxes (collectively, "Cost Savings Measures"), which cost savings
LIN Television reasonably believes in good faith could have been achieved
during the Four Quarter Period as a result of such Asset Acquisition or
Asset Swap, regardless of whether such cost savings could then be reflected
in pro forma financial statements under GAAP, Regulation S-X promulgated by
the SEC or any other regulation or policy of the SEC, less the amount of
any additional expenses that LIN Television reasonably estimates would
result from anticipated replacement of any items constituting Cost Savings
Measures in connection with such Asset Acquisitions or Asset Swap;
provided, however, that both (A) such cost savings and Cost Savings
Measures were identified and such cost savings were quantified in an
officer's certificate delivered to the senior notes trustee at the time of
the consummation of the Asset Acquisition or Asset Swap and (B) with
respect to each Asset Acquisition or Asset Swap completed prior to the 90th
day preceding such date of determination, actions were commenced or
initiated by LIN Television within 90 days of such Asset Acquisition or
Asset Swap to effect the Cost Savings Measures identified in such officer's
certificate, regardless, however, of whether the corresponding cost savings
have been achieved.
Furthermore, in calculating "Consolidated Interest Expense" for purposes of the
calculation of "Consolidated Cash Flow," (i) interest on Indebtedness determined
on a fluctuating basis as of the date of determination, including Indebtedness
actually incurred on the date of the transaction giving rise to the need to
calculate the Leverage Ratio, and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness as in effect on the date of
determination and (ii) notwithstanding (i) above, interest determined on a
fluctuating basis, to the extent such
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interest is covered by Interest Swap Agreements, shall be deemed to accrue at
the rate per annum resulting after giving effect to the operation of such
agreements.
"Lien" means, with respect to any asset, any lien, mortgage, deed of trust,
pledge, security interest, charge or encumbrance of any kind, including any
conditional sale or other title retention agreement, any lease in the nature
thereof and any agreement to give any security interest.
"Monitoring and Oversight Agreement" means the Monitoring and Oversight
Agreement by and among LIN Television, LIN Holdings and Hicks Muse Partners, as
in effect on March 3, 1998.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents,
received by LIN Television or any of its Subsidiaries from such Asset Sale net
of:
(1) reasonable out-of-pocket expenses and fees relating to such Asset
Sale, including, without limitation, legal, accounting and investment
banking fees and sales commissions, recording fees, relocation costs, title
insurance premiums, appraisers fees and costs reasonably incurred in
preparation of any asset or property for sale;
(2) taxes paid or reasonably estimated to be payable, calculated based
on the combined state, federal and foreign statutory tax rates applicable
to LIN Television or the Restricted Subsidiary engaged in such Asset Sale;
(3) all distributions and other payments required to be made to any
Person owning a beneficial interest in the assets subject to sale or
minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Sale;
(4) any reserves established in accordance with GAAP for adjustment in
respect of the sales price of the asset or assets subject to such Asset
Sale or for any liabilities associated with such Asset Sale; and
(5) repayment of Indebtedness secured by assets subject to such Asset
Sale;
provided, however, that if the instrument or agreement governing such Asset Sale
requires the transferor to maintain a portion of the purchase price in escrow,
whether as a reserve for adjustment of the purchase price or otherwise, or to
indemnify the transferee for specified liabilities in a maximum specified
amount, the portion of the cash or Cash Equivalents that is actually placed in
escrow or segregated and set aside by the transferor for such indemnification
obligation shall not be deemed to be Net Cash Proceeds until the escrow
terminates or the transferor ceases to segregate and set aside such funds, in
whole or in part, and then only to the extent of the proceeds released from
escrow to the transferor or that are no longer segregated and set aside by the
transferor.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing, or otherwise relating to, any
Indebtedness.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the senior notes trustee. The counsel may be an
employee of or counsel to LIN Television or the senior notes trustee.
"Permitted Indebtedness" means, without duplication:
(1) Indebtedness outstanding on the Senior Notes Issue Date, including
the existing senior subordinated notes, the senior discount notes and the
existing senior discount notes;
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(2) Indebtedness of LIN Television and any of its Restricted
Subsidiaries that is a Guarantor (a) outstanding under the Senior Credit
Facilities, including letter of credit obligations; provided that the
aggregate principal amount at any time outstanding does not exceed
$570,000,000 or (b) incurred under the Senior Credit Facilities pursuant to
and in compliance with (x) clause (y) of this definition or (y) the proviso
in the covenant described under the caption "Limitation on Incurrence of
Additional Indebtedness and Issuance of Capital Stock" above;
(3) Indebtedness evidenced by or arising under the senior notes and
the senior notes indenture;
(4) Interest Swap Agreements, Commodity Agreements and Currency
Agreements; provided, however, that such agreements are entered into for
bona fide hedging purposes and not for speculative purposes;
(5) additional Indebtedness of LIN Television or any of its Restricted
Subsidiaries that is a Guarantor not to exceed $20,000,000 in principal
amount outstanding at any time, which amount may, but need not, be incurred
under the Senior Credit Facilities;
(6) Refinancing Indebtedness;
(7) Indebtedness owed by LIN Television to any Restricted Subsidiary
of LIN Television or by any Restricted Subsidiary of LIN Television to LIN
Television or any Restricted Subsidiary of LIN Television;
(8) guarantees by LIN Television or Restricted Subsidiaries of any
Indebtedness permitted to be incurred pursuant to the senior notes
indenture;
(9) Indebtedness in respect of performance bonds, bankers' acceptances
and surety or appeal bonds provided by LIN Television or any of its
Restricted Subsidiaries to their customers in the ordinary course of their
business;
(10) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of LIN Television or any of its Restricted
Subsidiaries pursuant to such agreements, in each case incurred in
connection with the disposition of any business assets or Restricted
Subsidiaries of LIN Television, other than guarantees of Indebtedness or
other obligations incurred by any Person acquiring all or any portion of
such business assets or Restricted Subsidiaries of LIN Television for the
purpose of financing such acquisition, in a principal amount not to exceed
the gross proceeds actually received by LIN Television or any of its
Restricted Subsidiaries in connection with such disposition; provided,
however, that the principal amount of any Indebtedness incurred pursuant to
this clause (10), when taken together with all Indebtedness incurred
pursuant to this clause (11) and similar provisions contained in the
indenture governing the existing senior subordinated notes and then
outstanding, shall not exceed $20,000,000; and
(11) Indebtedness represented by Capitalized Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property or assets used in a related
business or incurred to refinance any such purchase price or cost of
construction or improvement, in each case incurred no later than 365 days
after the date of such acquisition or the date of completion of such
construction or improvement; provided, however, that the principal amount
of any Indebtedness incurred pursuant to this clause (11) shall not exceed
$7,500,000 at any time outstanding.
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"Permitted Investments" means:
(1) Investments by LIN Television or any Restricted Subsidiary of LIN
Television to acquire the stock or assets of any Person, or Acquired
Indebtedness or Acquired Preferred Stock acquired in connection with a
transaction in which such Person becomes a Restricted Subsidiary of LIN
Television, engaged in the broadcast business or businesses reasonably
related thereto; provided, however, that if any such Investment or series
of related Investments involves an Investment by LIN Television in excess
of $10,000,000, LIN Television is able, at the time of such Investment and
immediately after giving effect thereto, to incur at least $1.00 of
additional Indebtedness, other than Permitted Indebtedness, in compliance
with the "Limitation on Incurrence of Additional Indebtedness and Issuance
of Capital Stock" covenant;
(2) Investments received by LIN Television or its Restricted
Subsidiaries as consideration for a sale of assets made in compliance with
the other terms of the senior notes indenture;
(3) Investments by LIN Television or any Restricted Subsidiary of LIN
Television in any Restricted Subsidiary of LIN Television, whether existing
on March 3, 1998 or created thereafter, or any Person that after such
Investments, and as a result thereof, becomes a Restricted Subsidiary of
LIN Television and Investments in LIN Television or any Restricted
Subsidiary by any Restricted Subsidiary of LIN Television;
(4) Investments in cash and Cash Equivalents;
(5) Investments in securities of trade creditors, wholesalers or
customers received pursuant to any plan of reorganization or similar
arrangement;
(6) loans or advances to employees of LIN Television or any Restricted
Subsidiary thereof for purposes of purchasing LIN Television's or a holding
company's Capital Stock and other loans and advances to employees made in
the ordinary course of business consistent with past practices of LIN
Television or such Restricted Subsidiary; and
(7) additional Investments in an aggregate amount not to exceed
$5,000,000 at any time outstanding.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Productive Assets" means assets of a kind used or usable by LIN Television
and its Restricted Subsidiaries in the broadcast business or businesses
reasonably related, ancillary or complementary thereto, and specifically
includes assets acquired through Asset Acquisitions, it being understood that
"assets" may include Capital Stock of a Person that owns such Productive Assets,
provided that after giving effect to such transaction, such Person would be a
Restricted Subsidiary of LIN Television.
"Public Equity Offering" means an underwritten public offering of Capital
Stock, other than Disqualified Capital Stock, of LIN Television or a holding
company, to the extent, in the case of a holding company, that the net cash
proceeds thereof are contributed to the common or non-redeemable preferred
equity capital of LIN Television, pursuant to an effective registration
statement filed with the SEC in accordance with the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
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"Refinancing Indebtedness" means any refinancing by LIN Television of
Indebtedness of LIN Television or any of its Restricted Subsidiaries incurred in
accordance with the "Limitation on Incurrence of Additional Indebtedness and
Issuance of Capital Stock" covenant, other than pursuant to clause (3) or (4) of
the definition of Permitted Indebtedness, that does not:
(1) result in an increase in the aggregate principal amount of
Indebtedness, such principal amount to include, for purposes of this
definition, any premiums, penalties or accrued interest paid with the
proceeds of the Refinancing Indebtedness, of such Person; or
(2) create Indebtedness with (i) a Weighted Average Life to Maturity
that is less than the Weighted Average Life to Maturity of the Indebtedness
being refinanced or (ii) a final maturity earlier than the final maturity
of the Indebtedness being refinanced.
"Restricted Payment" means:
(1) the declaration or payment of any dividend or the making of any
other distribution, other than dividends or distributions payable in
Qualified Capital Stock or in options, rights or warrants to acquire
Qualified Capital Stock, on shares of LIN Television's Capital Stock;
(2) the purchase, redemption, retirement or other acquisition for
value of any Capital Stock of LIN Television, or any warrants, rights or
options to acquire shares of Capital Stock of LIN Television, other than
through the exchange of such Capital Stock or any warrants, rights or
options to acquire shares of any class of such Capital Stock for Qualified
Capital Stock or warrants, rights or options to acquire Qualified Capital
Stock; or
(3) the making of any Investment, other than a Permitted Investment.
"Restricted Subsidiary" means a Subsidiary of LIN Television other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of LIN Television
existing as of the Senior Notes Issue Date. The board of directors of LIN
Television may designate any Unrestricted Subsidiary or any person that is to
become a Subsidiary as a Restricted Subsidiary if immediately after giving
effect to such action, and treating any Acquired Indebtedness as having been
incurred at the time of such action, LIN Television could have incurred at least
$1.00 of additional indebtedness, other than Permitted Indebtedness, pursuant to
the "Limitation on Incurrence of Additional Indebtedness and Issuance of Capital
Stock" covenant.
"Secured Indebtedness" means any Indebtedness of LIN Television or a
Restricted Subsidiary secured by a Lien.
"Senior Credit Facilities" means the Senior Credit Facilities under that
certain Credit Agreement dated as of March 3, 1998, as amended, among LIN
Holdings, LIN Television, The Chase Manhattan Bank, as administrative agent and
collateral agent, The Bank of New York, as syndication agent, Bank of America,
N.A., as successor documentation agent to National Westminster Bank PLC, and the
other financial institutions from time to time party thereto, together with the
related documents thereto, including, without limitation, any guarantee
agreements and security documents, in each case as such agreements may be
amended, including any amendment and restatement thereof, supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring, including by way
of adding Subsidiaries of LIN Television as additional borrowers or guarantors
thereunder, all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders, or other institutions.
"Senior Notes Issue Date" means the date of original issuance of the senior
notes.
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"Significant Restricted Subsidiary" means, at any date of determination,
any Restricted Subsidiary that would be a "significant subsidiary" as defined in
Article I, Rule 1-02 of Regulation S-X, promulgated under the Securities Act of
1933, as amended, as such rule is in effect on the Senior Notes Issue Date.
"Subsidiary," with respect to any Person, means:
(1) any corporation of which the outstanding Capital Stock having at
least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned, directly
or indirectly through one or more intermediaries, by such Person; or
(2) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, through one or more intermediaries, owned by such Person.
Notwithstanding anything in the senior notes indenture to the contrary, all
references to LIN Television and its consolidated Subsidiaries or to financial
information prepared on a consolidated basis in accordance with GAAP shall be
deemed to include LIN Television and its Subsidiaries as to which financial
statements are prepared on a combined basis in accordance with GAAP and to
financial information prepared on such a combined basis. Notwithstanding
anything in the senior notes indenture to the contrary, an Unrestricted
Subsidiary shall not be deemed to be a Restricted Subsidiary for purposes of the
senior notes indenture.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity, as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) that
has become publicly available at least two business days prior to the Change of
Control Redemption Date, or, if such Statistical Release is no longer published,
any publicly available source or similar market data, most nearly equal to the
period from the Change of Control Redemption Date to March 1, 2003; provided,
however, that if the period from the Change of Control Redemption Date to March
1, 2003 is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury Rate shall be
obtained by linear interpolation, calculated to the nearest one-twelfth of a
year, from the weekly average yields of United States Treasury securities for
which such yields are given except that if the period from the Change of Control
Redemption Date to March 1, 2003 is less than one year, the weekly average yield
on actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Unrestricted Subsidiary" means a Subsidiary of LIN Television created
after March 3, 1998 and so designated by a resolution adopted by the board of
directors of LIN Television; provided, however, that:
(1) neither LIN Television nor any of its other Restricted
Subsidiaries (i) provides any credit support for any Indebtedness or other
Obligations of such Subsidiary, including any undertaking, agreement or
instrument evidencing such Indebtedness, or (ii) is directly or indirectly
liable for any Indebtedness or other Obligations of such Subsidiary; and
(2) at the time of designation of such Subsidiary, such Subsidiary has
no property or assets, other than de minimis assets resulting from the
initial capitalization of such Subsidiary.
The board of directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation (x) LIN Television could incur $1.00 of additional
Indebtedness, other than Permitted Indebtedness, in compliance
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with the "Limitation on Incurrence of Additional Indebtedness and Issuance of
Capital Stock" covenant and (y) no Default or Event of Default shall have
occurred or be continuing. Any designation pursuant to this definition by the
board of directors of LIN Television shall be evidenced to the senior notes
trustee by the filing with the senior notes trustee of a certified copy of the
resolution of LIN Television's board of directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"U.S. Government Obligations" means direct obligations, or certificates
representing an ownership interest in such obligations, of the United States of
America, including any agency or instrumentality thereof, for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years, calculated to the nearest one-twelfth, which will elapse
between such date and the making of such payment.
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DESCRIPTION OF THE NEW SENIOR DISCOUNT NOTES
GENERAL
The new senior discount notes are to be issued under the indenture, dated
as of July 14, 2001, between LIN Holdings and The Bank of New York, successor to
United States Trust Company of New York, as trustee, a copy of which is
available upon request to LIN Holdings. The old senior discount notes were also
issued under the senior discount notes indenture. The following summary of
certain provisions of the senior discount notes indenture and the senior
discount notes does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the senior
discount notes indenture, including the definitions of certain terms therein and
those terms made a part thereof by the Trust Indenture Act of 1939, as amended,
and the senior discount notes. Capitalized terms used herein and not otherwise
defined shall have the meanings given to them in the senior discount notes
indenture. For definitions of certain terms used in this section, see
"-- Certain Definitions" below.
Principal of, premium, if any, and interest on the senior discount notes
will be payable, and the senior discount notes may be exchanged or transferred,
at the office or agency of LIN Holdings in the Borough of Manhattan, The City of
New York, which initially shall be the corporate trust office of the senior
discount notes trustee in New York, New York, except that, at the option of LIN
Holdings, payment of interest may be made by check mailed to the address of the
holders as such address appears in the note register.
The senior discount notes will be issued in fully registered form only,
without coupons, in denominations of $1,000 (in principal amount at maturity)
and integral multiples thereof. Initially, the senior discount notes trustee
will act as paying agent and registrar for the senior discount notes. The senior
discount notes may be presented for registration of transfer and exchange at the
offices of the registrar, which initially will be the senior discount notes
trustee's corporate trust office. LIN Holdings may change any paying agent and
registrar without notice to holders of the senior discount notes.
LIN Holdings currently anticipates that after March 1, 2003, it would
offer, in an exchange offer, for the senior discount notes and its existing
senior discount notes, a new series of notes having substantially the same
economic and other terms as the senior discount notes.
PRINCIPAL, MATURITY AND INTEREST
The senior discount notes will be unsecured, senior obligations of LIN
Holdings, having an aggregate principal amount at maturity of $100,000,000, and
will mature on March 1, 2008. The senior discount notes indenture will permit
LIN Holdings to issue an unlimited amount of senior discount notes subject to
compliance with the terms of the covenants under "-- Limitation on Incurrence of
Additional Indebtedness and Issuance of Capital Stock." The senior discount
notes will be issued at a discount to their aggregate principal amount at
maturity and will generate gross proceeds to LIN Holdings of $73.85 million.
Based on the issue price thereof, the yield to maturity of the senior discount
notes is 12.5%, computed on a semi-annual bond equivalent basis, calculated from
the original date of issuance. Cash interest will not accrue or be payable on
the senior discount notes prior to March 1, 2003. Thereafter, cash interest on
the senior discount notes will accrue at a rate of 10% per annum and will be
payable semi-annually in arrears on March 1 and September 1 of each year,
commencing on September 1, 2003 to the holder of record of senior discount notes
at the close of business on February 15 and August 15, respectively, immediately
preceding such interest payment date. Interest on the senior discount notes will
accrue from the most recent interest payment date to which interest has been
paid or, if no interest has been paid, from the date of original
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issuance. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
OPTIONAL REDEMPTION
The senior discount notes may be redeemed at any time on or after March 1,
2003, in whole or in part, at the option of LIN Holdings, at the redemption
prices, expressed as a percentage of the principal amount thereof on the
applicable redemption date, set forth below, plus accrued and unpaid interest,
if any, to the redemption date, if redeemed during the 12-month period beginning
on March 1 of each of the years set forth below:
<Table>
<Caption>
YEAR PERCENTAGE
---- ----------
2003........................................................ 105.000%
2004........................................................ 103.333%
2005........................................................ 101.667%
2006 and thereafter......................................... 100.000%
</Table>
In addition, prior to March 1, 2003, LIN Holdings may, at its option,
redeem the senior discount notes upon a Change of Control. See "-- Change of
Control."
SELECTION AND NOTICE
If less than all of the senior discount notes are to be redeemed at any
time, selection of senior discount notes for redemption will be made by the
senior discount notes trustee in compliance with the requirements of the
principal national securities exchange, if any, on which the senior discount
notes are listed or, in the absence of such requirements or if the senior
discount notes are not so listed, on a pro rata basis, provided that no such
notes of $1,000 principal amount at maturity or less shall be redeemed in part.
Notice of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each holder of senior discount
notes to be redeemed at its registered address. If any senior discount note is
to be redeemed in part only, the notice of redemption that relates to such note
shall state the portion of the principal amount thereof to be redeemed. A new
senior discount note in principal amount at maturity equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the old senior discount note. On and after the redemption date,
interest ceases to accrue on senior discount notes or portions of them called
for redemption.
CHANGE OF CONTROL
Change of Control Offer. The senior discount notes indenture will provide
that, upon the occurrence of a Change of Control, each holder will have the
right to require that LIN Holdings purchase all or a portion of such holder's
senior discount notes in cash pursuant to the offer described below, at a
purchase price equal to:
- 101% of the Accreted Value thereof if redeemed on or before March 1,
2003; and
- 101% of the principal amount thereof plus accrued and unpaid interest, if
any, thereon, if purchased after March 1, 2003.
Prior to the mailing of the notice referred to below, but in any event
within 30 days following the date on which LIN Holdings becomes aware that a
Change of Control has occurred, if the purchase of the senior discount notes
would violate or constitute a default under any other Indebtedness of LIN
Holdings or its Subsidiaries, or not be permitted by, including because
Subsidiaries of LIN Holdings could not provide adequate funds therefor, then
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LIN Holdings shall and shall cause its Subsidiaries, to the extent needed to
permit such purchase of senior discount notes, either:
- to repay all such Indebtedness and terminate all commitments outstanding
thereunder; or
- to obtain the requisite consents, if any, under such Indebtedness to
permit the purchase of the senior discount notes as provided below.
LIN Holdings will first comply with the covenant in the preceding sentence
before it will be required to make the Change of Control Offer or purchase the
senior discount notes pursuant to the provisions described below.
Within 30 days following the date on which LIN Holdings becomes aware that
a Change of Control has occurred, LIN Holdings must send, by first-class mail
postage prepaid, a notice to each holder of senior discount notes, which notice
shall govern the terms of the Change of Control offer. Such notice shall state,
among other things, the purchase date, which must be no earlier than 30 days nor
later than 45 days from the date such notice is mailed, other than as may be
required by law. Holders electing to have any senior discount notes purchased
pursuant to a Change of Control offer will be required to surrender such senior
discount notes to the paying agent and registrar for the senior discount notes
at the address specified in the notice prior to the close of business on the
business day prior to the Change of Control payment date.
Change of Control Redemption. In addition, the senior discount notes
indenture will provide that, prior to March 1, 2003, upon the occurrence of a
Change of Control, LIN Holdings will have the option to redeem the senior
discount notes in whole but not in part at a redemption price equal to 100% of
the Accreted Value thereof plus the Applicable Premium. In order to effect a
Change of Control redemption, LIN Holdings must send a notice to each holder of
senior discount notes, which notice shall govern the terms of the Change of
Control redemption. Such notice must be mailed to holders of the senior discount
notes within 30 days following the date the Change of Control occurred and state
that LIN Holdings is effecting a Change of Control redemption in lieu of a
Change of Control offer.
LIN Holdings will comply with the requirements of Rule 14e-1 under the
Exchange Act to the extent applicable in connection with the purchase of senior
discount notes pursuant to a Change of Control offer.
These "Change of Control" covenants will not apply in the event of:
- changes in a majority of the board of directors of LIN Television or LIN
Holdings so long as a majority of such board of directors continues to
consist of Continuing Directors; and
- certain transactions with Permitted Holders, including Hicks Muse, its
officers and directors, and their respective Affiliates.
In addition, the Change of Control offer requirement is not intended to afford
holders of senior discount notes protection in the event of certain highly
leveraged transactions, reorganizations, restructurings, mergers and other
similar transactions that might adversely affect the holders of senior discount
notes, but would not constitute a Change of Control. LIN Holdings could, in the
future, enter into certain transactions including certain recapitalizations of
LIN Holdings, that would not constitute a Change of Control with respect to the
Change of Control purchase feature of the senior discount notes, but would
increase the amount of Indebtedness outstanding at such time. However, the
senior discount notes indenture will contain limitations on the ability of LIN
Holdings to incur additional Indebtedness and to engage in certain mergers,
consolidations and sales of assets, whether or not a Change of Control is
involved, subject, in each case, to limitations and qualifications. See
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"-- Certain Covenants -- Limitation on Incurrence of Additional Indebtedness and
Issuance of Capital Stock" and "-- Certain Covenants -- Merger, Consolidation
and Sale of Assets" below.
With respect to the sale of "all or substantially all" the assets of LIN
Holdings, which would constitute a Change of Control for purposes of the senior
discount notes indenture, the meaning of the phrase "all or substantially all"
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of LIN Holdings and,
therefore, it may be unclear whether a Change of Control has occurred and
whether the senior discount notes should be subject to a Change of Control
offer.
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the Senior Credit Facilities. Future
Senior Indebtedness of LIN Holdings and its Restricted Subsidiaries may also
contain prohibitions of certain events that would constitute a Change of Control
or require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the holders of their right to require LIN Holdings to
repurchase the senior discount notes could cause a default under such Senior
Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on LIN Holdings. Finally, LIN Holdings'
ability to pay cash to the holders upon a repurchase may be limited by LIN
Holdings' then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases. Even if sufficient funds were otherwise available, the terms of the
Senior Credit Facilities may prohibit LIN Holdings' prepayment of senior
discount notes prior to their scheduled maturity. Consequently, if LIN Holdings
is not able to prepay the Indebtedness under the Senior Credit Facilities and
any other Senior Indebtedness containing similar restrictions or obtain the
requisite consents, as described above, LIN Holdings will be unable to fulfill
its repurchase obligations if holders of senior discount notes exercise their
repurchase rights following a Change of Control, thereby resulting in a default
under the senior discount notes indenture.
None of the provisions in the senior discount notes indenture relating to a
purchase of senior discount notes upon a Change of Control is waivable by the
board of directors of LIN Holdings. Without the consent of each holder of senior
discount notes affected thereby, after the mailing of the notice of a Change of
Control offer, no amendment to the senior discount notes indenture may, directly
or indirectly, affect LIN Holdings' obligation to purchase the outstanding
senior discount notes or amend, modify or change the obligation of LIN Holdings
to consummate a Change of Control offer or waive any default in the performance
thereof or modify any of the provisions of the definitions with respect to any
such offer.
GUARANTEES OF THE SENIOR DISCOUNT NOTES
The senior discount notes will not be guaranteed by any present or future
Subsidiaries of LIN Holdings. See "Risk Factors -- Ranking Senior Discount
Notes."
CERTAIN COVENANTS
Limitation on Incurrence of Additional Indebtedness and Issuance of Capital
Stock. The senior discount notes indenture will provide that:
(1) LIN Holdings will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, incur any Indebtedness, other than
Permitted Indebtedness, and LIN Holdings will not issue any Disqualified
Capital Stock and its Restricted Subsidiaries will not issue any Preferred
Stock, except Preferred Stock issued to LIN Holdings or a Restricted
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Subsidiary of LIN Holdings so long as it is so held; provided, however,
that LIN Holdings and its Restricted Subsidiaries may incur Indebtedness or
issue shares of such Capital Stock if, in either case, LIN Holdings'
Leverage Ratio at the time of incurrence of such Indebtedness or the
issuance of such Capital Stock, as the case may be, after giving pro forma
effect to such incurrence or issuance as of such date and to the use of
proceeds therefrom is less than 8.75 to 1 and, provided further, that if
such Indebtedness is Indebtedness of LIN Holdings, such Indebtedness is
pari passu with the senior discount notes as to right of payment and such
Indebtedness shall not have the benefit of any security except to the
extent that the senior discount notes are equally and ratably secured
therewith.
(2) LIN Holdings will not incur or suffer to exist, or permit any of
its Subsidiaries to incur or suffer to exist, any Obligations with respect
to an Unrestricted Subsidiary that would violate the provisions set forth
in the definition of Unrestricted Subsidiary.
Limitation on Restricted Payments. The senior discount notes indenture
will provide that LIN Holdings will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment
if at the time of such Restricted Payment and immediately after giving effect
thereto:
(1) a Default or Event of Default shall have occurred; or
(2) LIN Holdings would not be able to incur $1.00 of additional
Indebtedness, other than Permitted Indebtedness, in compliance with the
"Limitation on Incurrence of Additional Indebtedness and Issuance of
Capital Stock" covenant; or
(3) the aggregate amount of Restricted Payments made subsequent to
March 3, 1998, the amount expended for such purposes, if other than in
cash, being the fair market value of such property as determined by the
board of directors of LIN Holdings in good faith, exceeds the sum of:
(a) (x) 100% of the aggregate Consolidated Cash Flow of LIN
Holdings, or, in the event such Consolidated Cash Flow shall be a
deficit, minus 100% of such deficit, accrued subsequent to March 3, 1998
to the most recent date for which financial information is available to
LIN Holdings, taken as one accounting period, less (y) 1.4 times
Consolidated Interest Expense for the same period; plus
(b) 100% of the aggregate net proceeds, including the fair market
value of property other than cash as determined by the board of
directors of LIN Television in good faith, received subsequent to March
3, 1998 by LIN Holdings from any Person, other than a Restricted
Subsidiary of LIN Holdings, from the issuance and sale subsequent to
March 3, 1998 of Qualified Capital Stock of LIN Holdings, excluding (i)
any net proceeds from issuances and sales financed directly or
indirectly using funds borrowed from LIN Holdings or any Restricted
Subsidiary of LIN Holdings, until and to the extent such borrowing is
repaid, but including the proceeds from the issuance and sale of any
securities convertible into or exchangeable for Qualified Capital Stock
to the extent such securities are so converted or exchanged and
including any additional proceeds received by LIN Holdings upon such
conversion or exchange and (ii) any net proceeds received from issuances
and sales that are used to consummate a transaction described in clause
(2) below; plus
(c) without duplication of any amount included in clause (3)(b)
above, 100% of the aggregate net proceeds, including the fair market
value of property other than cash, valued as provided in clause (3)(b)
above, received by LIN Holdings as a capital contribution subsequent to
March 3, 1998; plus
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(d) the amount equal to the net reduction in Investments, other
than Permitted Investments, made by LIN Holdings or any of its
Restricted Subsidiaries in any Person resulting from, and without
duplication, (i) repurchases or redemptions of such Investments by such
Person, proceeds realized upon the sale of such Investment to an
unaffiliated purchaser and repayments of loans or advances or other
transfers of assets by such Person to LIN Holdings or any Restricted
Subsidiary of LIN Holdings or (ii) the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided
in the definition of "Investment," not to exceed, in the case of any
Restricted Subsidiary, the amount of Investments previously made by LIN
Holdings or any Restricted Subsidiary in such Unrestricted Subsidiary,
which amount was included in the calculation of Restricted Payments;
provided, however, that no amount shall be included under this clause
(d) to the extent it is already included in Consolidated Cash Flow; plus
(e) the aggregate net cash proceeds received by a Person in
consideration for the issuance of such Person's Capital Stock, other
than Disqualified Capital Stock, that are held by such Person at the
time such Person is merged with and into LIN Television in accordance
with the "Merger, Consolidation and Sale of Assets" covenant subsequent
to March 3, 1998; provided, however, that concurrently with or
immediately following such merger LIN Television uses an amount equal to
such net cash proceeds to redeem or repurchase LIN Television's Capital
Stock; plus
(f) $15,000,000.
Notwithstanding the foregoing, these provisions will not prohibit:
(1) the payment of any dividend or the making of any distribution
within 60 days after the date of its declaration if such dividend or
distribution would have been permitted on the date of declaration;
(2) the purchase, redemption or other acquisition or retirement of any
Capital Stock of LIN Holdings or any warrants, options or other rights to
acquire shares of any class of such Capital Stock either (x) solely in
exchange for shares of Qualified Capital Stock or other rights to acquire
Qualified Capital Stock or (y) through the application of the net proceeds
of a substantially concurrent sale for cash, other than to a Restricted
Subsidiary of LIN Holdings, of shares of Qualified Capital Stock or
warrants, options or other rights to acquire Qualified Capital Stock or (z)
in the case of Disqualified Capital Stock, solely in exchange for, or
through the application of the net proceeds of a substantially concurrent
sale for cash, other than to a Restricted Subsidiary of LIN Holdings, of,
Disqualified Capital Stock;
(3) payments made pursuant to any merger, consolidation or sale of
assets effected in accordance with the "Merger, Consolidation and Sale of
Assets" covenant; provided, however, that no such payment may be made
pursuant to this clause (3) unless, after giving effect to such
transaction, and the incurrence of any Indebtedness in connection therewith
and the use of the proceeds thereof, LIN Holdings would be able to incur
$1.00 of additional Indebtedness, other than Permitted Indebtedness, in
compliance with the "Limitation on Incurrence of Additional Indebtedness
and Issuance of Capital Stock" covenant such that after incurring that
$1.00 of Additional Indebtedness, the Leverage Ratio would be less than
7.75 to 1;
(4) payments to enable LIN Holdings or any holding company as to which
LIN Holdings is, directly or indirectly, a Restricted Subsidiary to pay
dividends on its Capital Stock, other than Disqualified Capital Stock,
after the first Public Equity Offering in an annual amount not to exceed
6.0% of the gross proceeds, before deducting underwriting discounts and
commissions and other fees and expenses of the offering, received from
shares of Capital
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Stock, other than Disqualified Capital Stock, sold for the account of the
issuer thereof, and not for the account of any stockholder, in such initial
Public Equity Offering;
(5) payments by LIN Holdings to fund the payment by any holding
company of audit, accounting, legal or other similar expenses, to pay
franchise or other similar taxes and to pay other corporate overhead
expenses, so long as such dividends are paid as and when needed by its
respective direct or indirect holding company and so long as the aggregate
amount of payments pursuant to this clause (5) does not exceed $1,000,000
in any calendar year;
(6) payments by LIN Holdings to repurchase, or to enable a holding
company to repurchase, Capital Stock or other securities from employees of
LIN Television or a holding company in an aggregate amount not to exceed
$15,000,000 since March 3, 1998;
(7) payments by LIN Holdings to redeem or repurchase or to enable a
holding company to redeem or repurchase stock purchase or similar rights
granted by LIN Holdings with respect to its Capital Stock in an aggregate
amount not to exceed $500,000 since March 3, 1998;
(8) payments, not to exceed $200,000 in the aggregate since March 3,
1998, to enable LIN Holdings or a holding company to make cash payments to
holders of its Capital Stock in lieu of the issuance of fractional shares
of its Capital Stock;
(9) payments by LIN Holdings to fund taxes of a holding company for a
given taxable year in an amount equal to LIN Holdings' "separate return
liability," as if LIN Television were the parent of a consolidated group,
for purposes of this clause (9) "separate return liability" for a given
taxable year shall mean the hypothetical United States tax liability of LIN
Holdings defined as if LIN Holdings had filed its own U.S. federal tax
return for such taxable year; and
(10) payments by LIN Holdings to Hicks Muse Partners in accordance
with the terms of the Financial Advisory Agreement and the Monitoring and
Oversight Agreement; provided, however, that in the case of clauses (3),
(4), (6), (7) and (8), no Event of Default shall have occurred or be
continuing at the time of such payment or as a result thereof.
In determining the aggregate amount of Restricted Payments made subsequent to
March 3, 1998, amounts expended pursuant to clauses (1), (4), (6), (7) and (8)
shall be included in such calculation.
Merger, Consolidation and Sale of Assets. The senior discount notes
indenture will provide that LIN Holdings shall not, in a single transaction or a
series of related transactions, consolidate with or merge with or into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its assets to, another Person or adopt a plan of liquidation unless:
(1) either (a) LIN Holdings is the surviving Person or (b) the Person,
if other than LIN Holdings, formed by such consolidation or into which LIN
Holdings is merged or the person that acquires by conveyance, transfer or
lease the properties and assets of LIN Holdings substantially as an
entirety or in the case of a plan of liquidation, the Person to which
assets of LIN Holdings have been transferred, shall be a corporation,
partnership, limited liability company or trust organized and existing
under the laws of the United States or any State thereof or the District of
Columbia;
(2) such surviving person shall assume all of the obligations of LIN
Holdings under the senior discount notes and the senior discount notes
indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the senior discount notes trustee;
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(3) immediately after giving effect to such transaction and the use of
the proceeds therefrom, on a pro forma basis, including giving effect to
any Indebtedness incurred or anticipated to be incurred in connection with
such transaction: (a) no Default or Event of Default shall have occurred
and be continuing; and (b) LIN Holdings, in the case of clause (a) of the
foregoing clause (1), or such Person, in the case of clause (b) of the
foregoing clause (1), shall have a Leverage Ratio that would be less than
8.75 to 1; and
(4) LIN Holdings has delivered to the senior discount notes trustee
prior to the consummation of the proposed transaction an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer complies with the senior discount notes
indenture and that all conditions precedent in the senior discount notes
indenture relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer, by lease, assignment, sale or
otherwise, in a single transaction or series of related transactions, of all or
substantially all of the properties and assets of one or more Restricted
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
the properties or assets of LIN Holdings, will be deemed to be the transfer of
all or substantially all of the properties and assets of LIN Holdings.
Notwithstanding the foregoing clauses (2) and (3), (a) any Restricted Subsidiary
of LIN Holdings may consolidate with, merge into or transfer all or part of its
properties and assets to LIN Holdings and (b) LIN Holdings may merge with an
Affiliate thereof organized solely for the purpose of reorganizing LIN Holdings
in another jurisdiction in the U.S. to realize tax or other benefits.
In the event of any transaction, other than a lease, described in and
complying with the conditions listed in the immediately preceding paragraph in
which LIN Holdings, as the case may be, is not the Surviving Person and the
Surviving Person is to assume all the obligations of LIN Holdings under the
senior discount notes and the senior discount notes indenture pursuant to a
supplemental indenture, such Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of LIN Holdings, as the
case may be, and LIN Holdings shall be discharged from its Obligations under the
senior discount notes indenture and the senior discount notes.
Limitation on Asset Sales. The senior discount notes indenture will
provide that LIN Holdings will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) LIN Holdings or the applicable Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed of,
as determined in good faith by management of LIN Holdings or, if such Asset
Sale involves consideration in excess of $10,000,000, by the board of
directors of LIN Holdings, as evidenced by a board resolution;
(2) at least 75% of the consideration received by LIN Holdings or such
Restricted Subsidiary, as the case may be, from such Asset Sale is in the
form of cash or Cash Equivalents and is received at the time of such
disposition; and
(3) upon the consummation of an Asset Sale, LIN Holdings applies, or
causes such Restricted Subsidiary to apply, such Net Cash Proceeds within
180 days of receipt thereof either:
(a) to repay any Indebtedness of a Restricted Subsidiary of LIN
Holdings, and, to the extent such Indebtedness relates to principal
under a revolving credit or similar facility, to obtain a corresponding
reduction in the commitments thereunder, except that LIN Television may
temporarily repay Senior Indebtedness using the Net Cash Proceeds from
such Asset Sale and thereafter use such funds to reinvest pursuant to
clause (b) below within the period set forth therein without having to
obtain a corresponding reduction in the commitments thereunder;
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(b) to reinvest, or to be contractually committed to reinvest
pursuant to a binding agreement, in Productive Assets and, in the latter
case, to have so reinvested within 360 days of the date of receipt of
such Net Cash Proceeds; or
(c) to purchase senior discount notes, or existing senior discount
notes),tendered to LIN Holdings for purchase at a price equal to (i)
101% of the Accreted Value thereof if redeemed on or before March 1,
2003, and (ii) 100% of the principal amount thereof plus accrued
interest thereon, if any, if redeemed after March 1, 2003, pursuant to
an offer to purchase made by LIN Holdings as set forth below (a "Net
Proceeds Offer"); provided, however, that LIN Holdings may defer making
a Net Proceeds Offer until the aggregate Net Cash Proceeds from Asset
Sales not otherwise applied in accordance with this covenant equal or
exceed $15,000,000.
To the extent that the aggregate principal amount of senior discount notes
tendered pursuant to any Net Proceeds Offer is less than the amount of Net Cash
Proceeds subject to such Net Proceeds Offer, LIN Holdings may use any remaining
portion of such Net Cash Proceeds not required to fund the repurchase of
tendered senior discount notes for any purposes not otherwise prohibited by the
senior discount notes indenture. Upon the consummation of any Net Proceeds
Offer, the amount of Net Cash Proceeds subject to any future Net Proceeds Offer
from the Asset Sales giving rise to such Net Cash Proceeds shall be deemed to be
zero.
LIN Holdings will comply with the requirements of Rule 14e-1 under the
Exchange Act to the extent applicable in connection with the repurchase of
senior discount notes pursuant to a Net Proceeds Offer.
Limitation on Asset Swaps. The senior discount notes indenture will
provide that LIN Holdings will not, and will not permit any Restricted
Subsidiary to, engage in any Asset Swap, unless:
(1) at the time of entering into such Asset Swap, and immediately
after giving effect to such Asset Swap, no Default or Event of Default
shall have occurred and be continuing;
(2) in the event such Asset Swap involves an aggregate amount in
excess of $10,000,000, the terms of such asset Swap have been approved by a
majority of the members of the board of directors of LIN Holdings; and
(3) in the event such Asset Swap involves an aggregate amount in
excess of $50,000,000, LIN Holdings has received a written opinion from an
independent investment banking firm of nationally recognized standing that
such Asset Swap is fair to LIN Holdings or such Restricted Subsidiary, as
the case may be, from a financial point of view.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The senior discount notes indenture will provide that LIN Holdings
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause to permit to exist or become effective, by
operation of the charter of such Restricted Subsidiary or by reason of any
agreement, instrument, judgment, decree, rule, order, statute or governmental
regulation, any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital
Stock;
(2) make loans or advances or pay any Indebtedness or other obligation
owed to LIN Holdings or any of its Restricted Subsidiaries; or
(3) transfer any of its property or assets to LIN Holdings, except for
such encumbrances or restrictions existing under or by reason of:
(a) applicable law;
(b) the senior discount notes indenture;
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(c) customary non-assignment provisions of any lease governing a
leasehold interest of LIN Holdings or any Restricted Subsidiary;
(d) any instrument governing Acquired Indebtedness or Acquired
Preferred Stock, which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired;
(e) agreements existing on March 3, 1998, including the existing
senior discount notes, the existing senior subordinated notes and the
Senior Credit Facilities, as such agreements are from time to time in
effect; provided, however, that any amendments or modifications of such
agreements that affect the encumbrances or restrictions of the types
subject to this covenant shall not result in such encumbrances or
restrictions being less favorable to LIN Holdings in any material
respect, as determined in good faith by the board of directors of LIN
Holdings, than the provisions as in effect before giving effect to the
respective amendment or modification;
(f) any restriction with respect to such a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or
disposition;
(g) an agreement effecting a refinancing, replacement or
substitution of Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (b), (e) or (e) above or any other
agreement evidencing Indebtedness permitted under the senior discount
notes indenture; provided, however, that the provisions relating to such
encumbrance or restriction contained in any such refinancing,
replacement or substitution agreement or any such other agreement are no
less favorable to LIN Holdings in any material respect as determined in
good faith by the board of directors of LIN Holdings than the provisions
relating to such encumbrance or restriction contained in agreements
referred to in such clause (b), (d) or (e);
(h) restrictions on the transfer of the assets subject to any Lien
imposed by the holder of such Lien;
(i) a licensing agreement to the extent such restrictions or
encumbrances limit the transfer of property subject to such licensing
agreement;
(j) restrictions relating to Subsidiary Preferred Stock that
require that due and payable dividends thereon to be paid in full prior
to dividends on such Subsidiary's common stock; or
(k) any agreement or charter provision evidencing Indebtedness or
Capital Stock permitted under the senior discount notes indenture;
provided, however, that the provisions relating to such encumbrance or
restriction contained in such agreement or charter provision are not
less favorable to LIN Holdings in any material respect as determined in
good faith by the board of directors of LIN Holdings than the provisions
relating to such encumbrance or restriction contained in the senior
discount notes indenture.
Limitations on Transactions with Affiliates. The senior discount notes
indenture will provide that LIN Holdings will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction, including, without limitation, the purchase, sale, lease,
contribution or exchange of any property or the rendering of any service, with
or for the benefit of any of its Affiliates, other than transactions between LIN
Holdings and a Restricted Subsidiary of LIN Holdings or among Restricted
Subsidiaries of LIN Holdings (an "Affiliate Transaction"), other than Affiliate
Transactions on terms that are no
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less favorable than those that might reasonably have been obtained in a
comparable transaction on an arm's-length basis from a person that is not an
Affiliate; provided, however, that for a transaction or series of related
transactions involving value of $5,000,000 or more, such determination will be
made in good faith by a majority of members of the board of directors of LIN
Holdings and by a majority of the disinterested members of the board of
directors of LIN Holdings, if any; provided, further, that for a transaction or
series of related transactions involving value of $15,000,000 or more, the board
of directors of LIN Holdings has received an opinion from an independent
investment banking firm of nationally recognized standing that such Affiliate
Transaction is fair, from a financial point of view, to LIN Holdings or such
Restricted Subsidiary. The foregoing restrictions will not apply to:
(1) reasonable and customary directors' fees, indemnification and
similar arrangements and payments thereunder;
(2) any obligations of LIN Holdings under any employment agreement,
noncompetition or confidentiality agreement with any officer of LIN
Holdings as in effect on March 13, 1998, provided that each amendment of
any of the foregoing agreements shall be subject to the limitations of this
covenant;
(3) any Restricted Payment permitted to be made pursuant to the
covenant described under "Limitation on Restricted Payments";
(4) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the board
of directors of LIN Holdings;
(5) loans or advances to employees in the ordinary course of business
of LIN Holdings or any of its Restricted Subsidiaries consistent with past
practices; and
(6) payments by LIN Holdings to Hicks Muse Partners in accordance with
the terms of the Financial Advisory Agreement and the Monitoring and
Oversight Agreement.
Reports. The senior discount notes indenture will provide that so long as
any of the senior discount notes are outstanding, LIN Holdings will provide to
the senior discount notes trustee and the holders of senior discount notes and
file with the SEC, to the extent such submissions are accepted for filing by the
SEC, copies of the annual reports and of the information, documents and other
reports that LIN Holdings would have been required to file with the SEC pursuant
to Sections 13 or 15(d) of the Exchange Act, regardless of whether LIN Holdings
is then obligated to file such reports.
EVENTS OF DEFAULT
The following events are defined in the senior discount notes indenture as
"Events of Default":
(1) the failure to pay interest on the senior discount notes when the
same becomes due and payable and the Default continues for a period of 30
days;
(2) the failure to pay principal of or premium, if any, on any senior
discount notes when such principal or premium, if any, becomes due and
payable, at maturity, upon redemption or otherwise;
(3) a default in the observance or performance of any other covenant
or agreement contained in the senior discount notes or the senior discount
notes indenture, which default continues for a period of 30 days after LIN
Holdings receives written notice thereof specifying the default from the
senior discount notes trustee or holders of at least 25% in aggregate
principal amount of outstanding senior discount notes;
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(4) the failure to pay at the stated maturity, giving effect to any
extensions thereof, the principal amount of any Indebtedness of LIN
Holdings or any Restricted Subsidiary of LIN Holdings, or the acceleration
of the final stated maturity of any such Indebtedness, if the aggregate
principal amount of such Indebtedness, together with the aggregate
principal amount of any other such Indebtedness in default for failure to
pay principal at the final stated maturity (giving effect to any extensions
thereof) or which has been accelerated, aggregates $10,000,000 or more at
any time in each case after a 10-day period during which such default shall
not have been cured or such acceleration rescinded;
(5) one or more judgments in an aggregate amount in excess of
$15,000,000, which are not covered by insurance as to which the insurer has
not disclaimed coverage, being rendered against LIN Holdings or any of its
Significant Restricted Subsidiaries and such judgment or judgments remain
undischarged or unstayed for a period of 60 days after such judgment or
judgments become final and nonappealable;
(6) LIN Holdings ceasing for any reason to own directly all of the
outstanding capital stock, including shares issuable upon conversion or
exchange of other instruments or obligations, of LIN Television; and
(7) certain events of bankruptcy, insolvency or reorganization
affecting LIN Holdings or any of its Significant Restricted Subsidiaries.
Upon the happening of any Event of Default specified in the senior discount
notes indenture, the senior discount notes trustee may, and the senior discount
notes trustee upon the request of holders of 25% in principal amount at maturity
of the outstanding senior discount notes shall, or the holders of at least 25%
in principal amount at maturity of outstanding senior discount notes may,
declare:
(a) the Accreted Value of all the senior discount notes, if on or
before March 1, 2003; and
(b) the principal amount of all the senior discount notes, together
with all accrued and unpaid interest and premium, if any, if after March 1,
2003, to be due and payable by notice in writing to LIN Holdings and the
senior discount notes trustee specifying the respective Event of Default
and that it is a "notice of acceleration," and the same shall become
immediately due and payable.
If an Event of Default with respect to bankruptcy proceedings relating to LIN
Holdings or any Significant Restricted Subsidiaries occurs and is continuing,
then such amount will ipso facto become and be immediately due and payable
without any declaration or other act on the part of the senior discount notes
trustee or any holder of the senior discount notes.
At any time after a declaration of acceleration with respect to the senior
discount notes as described in the preceding paragraph, the holders of a
majority in principal amount at maturity of the senior discount notes then
outstanding, by notice to the senior discount notes trustee, may rescind and
cancel such declaration and its consequences if:
(1) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction;
(2) all existing Defaults and Events of Default have been cured or
waived except nonpayment of principal of or interest on the senior discount
notes that has become due solely by such declaration of acceleration;
(3) to the extent the payment of such interest is lawful, interest at
the same rate specified in the senior discount notes. on overdue
installments of interest and overdue payments of principal, which has
become due otherwise than by such declaration of acceleration has been
paid;
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(4) LIN Holdings has paid the senior discount notes trustee its
reasonable compensation and reimbursed the senior discount notes trustee
for its reasonable expenses, disbursements and advances; and
(5) in the event of the cure or waiver of a Default or Event of
Default of the type described in clause (6) of the first paragraph of
"-- Events of Default" above, the senior discount notes trustee has
received an Officers' Certificate and Opinion of Counsel that such Default
or Event of Default has been cured or waived.
The holders of a majority in principal amount at maturity of the senior discount
notes may waive any existing Default or Event of Default under the senior
discount notes indenture, and its consequences, except a default in the payment
of the principal of or interest on any senior discount notes.
LIN Holdings is required to deliver to the senior discount notes trustee,
within 120 days after the end of LIN Holdings' fiscal year, a certificate
indicating whether the signing officers know of any Default or Event of Default
that occurred during the previous year and whether LIN Holdings has complied
with its obligations under the senior discount notes indenture. In addition, LIN
Holdings will be required to notify the senior discount notes trustee of the
occurrence and continuation of any Default or Event of Default promptly after
LIN Holdings becomes aware of the same.
Subject to the provisions of the senior discount notes indenture relating
to the duties of the senior discount notes trustee in case an Event of Default
thereunder should occur and be continuing, the senior discount notes trustee
will be under no obligation to exercise any of the rights or powers under the
senior discount notes indenture at the request or direction of any of the
holders of the senior discount notes unless such holders have offered to the
senior discount notes trustee reasonable indemnity or security against any loss,
liability or expense. Subject to such provision for security or indemnification
and certain limitations contained in the senior discount notes indenture, the
holders of a majority in principal amount at maturity of the outstanding senior
discount notes have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the senior discount notes trustee or
exercising any trust or power conferred on the senior discount notes trustee.
SATISFACTION AND DISCHARGE OF SENIOR DISCOUNT NOTES INDENTURE; DEFEASANCE
LIN Holdings may terminate its obligations under the senior discount notes
indenture at any time by delivering all outstanding senior discount notes to the
senior discount notes trustee for cancellation and paying all sums payable by it
thereunder. LIN Holdings, at its option:
(1) will be discharged from any and all obligations with respect to
the senior discount notes, except for certain obligations of LIN Holdings
to register the transfer or exchange of such senior discount notes, replace
stolen, lost or mutilated senior discount notes, maintain paying agencies
and hold moneys for payment in trust, or
(2) need not comply with certain of the restrictive covenants with
respect to the senior discount notes indenture, if LIN Holdings deposits
with the senior discount notes trustee, in trust, U.S. legal tender or U.S.
Government Obligations or a combination thereof that, through the payment
of interest and premium thereon and principal in respect thereof in
accordance with their terms, will be sufficient to pay all the principal of
and interest and premium on the senior discount notes on the dates such
payments are due or through any date of redemption, if earlier than the
dates such payments are due, in any case in accordance with the terms of
such senior discount notes, as well as the senior discount notes trustee's
fees and expenses.
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To exercise either such option, LIN Holdings is required to deliver to the
senior discount notes trustee:
(a) an Opinion of Counsel or a private letter ruling issued to LIN
Holdings by the IRS to the effect that the holders of the senior discount
notes will not recognize income, gain or loss for federal income tax
purposes as a result of the deposit and related defeasance and will be
subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such option had not been
exercised and, in the case of an Opinion of Counsel furnished in connection
with a discharge pursuant to clause (1) above, accompanied by a private
letter ruling issued to LIN Holdings by the IRS to such effect;
(b) subject to certain qualifications, an Opinion of Counsel to the
effect that funds so deposited will not be subject to avoidance under
applicable bankruptcy law; and
(c) an Officers' Certificate and an Opinion of Counsel to the effect
that LIN Holdings has complied with all conditions precedent to the
defeasance.
Notwithstanding the foregoing, the Opinion of Counsel required by clause (a)
above need not be delivered if all senior discount notes not theretofore
delivered to the senior discount notes trustee for cancellation (i) have become
due and payable, (ii) will become due and payable on the maturity date within
one year, or (iii) are to be called for redemption within one year under
arrangements satisfactory to the senior discount notes trustee for the giving of
notice of redemption by the senior discount notes trustee in the name, and at
the expense, of LIN Holdings.
MODIFICATION OF THE SENIOR DISCOUNT NOTES INDENTURE
From time to time, LIN Holdings and the senior discount notes trustee,
together, without the consent of the holders of the senior discount notes, may
amend or supplement the senior discount notes indenture for certain specified
purposes, including curing ambiguities, defects or inconsistencies. Other
modifications and amendments of the senior discount notes indenture may be made
with the consent of the holders of a majority in principal amount at maturity of
the then outstanding senior discount notes, except that, without the consent of
each holder of the senior discount notes affected thereby, no amendment may,
directly or indirectly:
(1) reduce the amount of senior discount notes whose holders must
consent to an amendment;
(2) reduce the rate of or change the time for payment of interest,
including defaulted interest, on any senior discount notes;
(3) reduce the principal of or change the fixed maturity of any senior
discount notes, or change the date on which any senior discount notes may
be subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor;
(4) make any senior discount notes payable in money other than that
stated in the senior discount notes and the senior discount notes
indenture;
(5) make any change in provisions of the senior discount notes
indenture protecting the right of each holder of a senior discount note to
receive payment of principal of, premium on and interest on such senior
discount note on or after the due date thereof or to bring suit to enforce
such payment or permitting holders of a majority in principal amount of the
senior discount notes to waive a Default or Event of Default; or
(6) after LIN Holdings' obligation to purchase the senior discount
notes arises under the senior discount notes indenture, amend, modify or
change the obligation of LIN Holdings to make or consummate a Change of
Control offer or a Net Proceeds Offer or
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waive any default in the performance thereof or modify any of the
provisions or definitions with respect to any such offers.
CONCERNING THE SENIOR DISCOUNT NOTES TRUSTEE
The senior discount notes indenture contains certain limitations on the
rights of the senior discount notes trustee, should it become a creditor of LIN
Holdings, to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
senior discount notes trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest, it must eliminate such
conflict within 90 days, apply to the SEC for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
senior discount notes will have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available to the senior
discount notes trustee, subject to certain exceptions. The senior discount notes
indenture provides that in case an Event of Default shall occur, which shall not
be cured, the senior discount notes trustee will be required, in the exercise of
its power, to use the degree of care of a prudent person in the conduct of such
person's own affairs. Subject to such provisions, the senior discount notes
trustee will be under no obligation to exercise any of its rights or powers
under the senior discount notes indenture at the request of any holder of senior
discount notes, unless such holder shall have offered to the senior discount
notes trustee security and indemnity satisfactory to it against any loss,
liability or expense.
GOVERNING LAW
The senior discount notes indenture provides that it and the senior
discount notes will be governed by, and construed in accordance with, the laws
of the State of New York without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
senior discount notes indenture. Reference is made to the senior discount notes
indenture for the full definition of all such terms, as well as any other terms
used herein for which no definition is provided.
"Accreted Value" as of any date (the "Specified Date") means, with respect
to each $1,000 principal amount at maturity of senior discount notes:
(1) if the Specified Date is one of the following dates (each, a
"Semi-Annual Accretion Date"), the amount set forth opposite such date
below:
<Table>
<Caption>
SEMI-
ANNUAL
ACCRETION
DATE
---------
September 1, 2001...................................... $ 863.84
March 1, 2002.......................................... $ 907.03
September 1, 2002...................................... $ 952.38
March 1, 2003.......................................... $1,000.00
</Table>
(2) if the Specified Date occurs between two Semi-Annual Accretion
Dates, the sum of (a) the Accreted Value for the Semi-Annual Accretion Date
immediately preceding the Specified Date and (b) an amount equal to the
product of (x) the Accreted Value for the immediately following Semi-Annual
Accretion Date less the Accreted Value for the
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immediately preceding Semi-Annual Accretion Date and (y) a fraction, the
numerator of which is the number of days actually elapsed from the
immediately preceding Semi-Annual Accretion Date to the Specified Date and
the denominator of which is 180; and
(3) if the Specified date is after March 1, 2003, $1,000.00.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Restricted Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of LIN Holdings or at the time it merges or consolidates with LIN
Holdings or any of its Restricted Subsidiaries or assumed in connection with the
acquisition of assets from such Person and not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of LIN Holdings or such acquisition, merger or
consolidation.
"Acquired Preferred Stock" means the Preferred Stock of any Person at such
time as such Person becomes a Restricted Subsidiary of LIN Holdings or at the
time it merges or consolidates with LIN Holdings or any of its Restricted
Subsidiaries and not issued by such Person in connection with, or in
anticipation or contemplation of, such acquisition, merger or consolidation.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Chase and its
Affiliates shall not be deemed Affiliates of LIN Television by reason of the
Senior Credit Facilities or their direct or indirect investments in any fund
managed by Hicks Muse or any Person in which such fund is invested.
"Applicable Premium" means, with respect to a senior discount note at any
Change of Control redemption date, the greater of:
(1) 1.0% of the accreted value of such senior discount note; and
(2) the excess of (i) the present value at such time of the redemption
price of such senior discount note at March 1, 2003 (such redemption price
being described under "-- Optional Redemption") computed using a discount
rate equal to the Treasury Rate plus 87.5 basis points over (ii) the
accreted value of such senior discount note.
"Asset Acquisition" means (i) an Investment by LIN Holdings or any
Restricted Subsidiary of LIN Holdings in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of LIN Holdings or shall be
consolidated or merged with LIN Holdings or any Restricted Subsidiary of LIN
Holdings or (ii) the acquisition by LIN Holdings or any Restricted Subsidiary of
LIN Holdings of assets of any Person comprising a division or line of business
of such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, other than operating leases entered into in the ordinary course
of business, assignment or other transfer for value by LIN Holdings or any of
its Restricted Subsidiaries, excluding any Sale and Leaseback Transaction or any
pledge of assets or stock by LIN Holdings or any of its Restricted
133
Subsidiaries, to any Person other than LIN Holdings or a Restricted Subsidiary
of LIN Holdings of:
(1) any Capital Stock of any Restricted Subsidiary of LIN Holdings; or
(2) any other property or assets of LIN Holdings or any Restricted
Subsidiary of LIN Holdings other than in the ordinary course of business;
provided, however, that for purposes of the "Limitation on Asset Sales"
covenant, Asset Sales shall not include:
(a) a transaction or series of related transactions in which LIN
Holdings or its Restricted Subsidiaries receive aggregate consideration
of less than $1,000,000;
(b) transactions permitted under the "Limitation on Asset Swaps"
covenant;
(c) transactions covered by the "Merger, Consolidation and Sale of
Assets" covenant;
(d) a Restricted Payment that otherwise qualifies under the
"Limitation on Restricted Payment" covenant;
(e) any disposition of obsolete or worn out equipment or equipment
that is no longer useful in the conduct of the business of LIN Holdings
and its Subsidiaries and that is disposed of, in each case, in the
ordinary course of business; and
(f) any transaction that constitutes a Change of Control.
"Asset Swap" means the execution of a definitive agreement, subject only to
FCC approval, if applicable, and other customary closing conditions that LIN
Holdings in good faith believes will be satisfied for a substantially concurrent
purchase and sale, or exchange, of Productive Assets between LIN Holdings and
any of its Restricted Subsidiaries and another Person or group of affiliated
Persons; provided that any amendment to or waiver of any closing condition that
individually or in the aggregate is material to the Asset Swap shall be deemed
to be a new Asset Swap; it being understood that an Asset Swap may include a
cash equalization payment made in connection therewith provided that such cash
payment, if received by LIN Holdings or its Subsidiaries, shall be deemed to be
proceeds received from an Asset Sale and shall be applied in accordance with
"-- Certain Covenants -- Limitation on Asset Sales."
"Business Day" means any day, other than a day which is a Saturday, Sunday
or legal holiday in the State of New York, on which banks are open for business
in New York, New York.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents, however
designated, of capital stock of such Person and (ii) with respect to any Person
that is not a corporation, any and all partnership or other equity interests of
such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligation of
such Person to pay rent or other amounts under a lease to which such Person is a
party that is required to be classified and accounted for as a capital lease
obligation under GAAP, and for purposes of this definition, the amount of such
obligation at any date shall be the capitalized amount of such obligation at
such date, determined in accordance with GAAP.
"Cash Equivalents" means:
(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
134
(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc.;
(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Corporation or at least P-1 from Moody's
Investors Service, Inc.;
(4) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state
thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of
not less than $200,000,000;
(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4)
above; and
(6) investments in money market funds that invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above.
"Change of Control" means the occurrence of one or more of the following
events:
(1) any sale, lease, exchange or other transfer, in one transaction or
a series of related transactions, of all or substantially all of the assets
of LIN Holdings to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group") (whether or not otherwise in
compliance with the provisions of the senior discount notes indenture),
other than to Hicks Muse or any of its Affiliates, officers or directors
(the "Permitted Holders"); or
(2) a majority of the board of directors of LIN Holdings or LIN
Holdings shall consist of Persons who are not Continuing Directors; or
(3) the acquisition by any Person or Group, other than the Permitted
Holders or any direct or indirect Subsidiary of any Permitted Holder, of
the power, directly or indirectly, to vote or direct the voting of
securities having more than 50% of the ordinary voting power for the
election of directors of LIN Television or LIN Holdings.
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement.
"Consolidated Cash Flow" means, with respect to any Person, for any period,
the sum, without duplication, of:
(1) Consolidated Net Income;
(2) to the extent Consolidated Net Income has been reduced thereby,
(i) all income taxes of such Person and its Restricted Subsidiaries paid or
accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary or nonrecurring gains or losses), (ii)
Consolidated Interest Expense and (iii) Consolidated Non-Cash Charges, all
as determined on a consolidated basis for such Person and its Restricted
Subsidiaries in conformity with GAAP; and
(3) the lesser of (i) dividends or distributions paid to such first
referred to Person or its Restricted Subsidiary by another Person whose
results are reflected as a minority interest in the consolidated financial
statements of such Person and (ii) such Person's equity interest in the
Consolidated Cash Flow of such other Person (but in no event less than
zero), except,
135
that in the case of the Joint Venture, (x) such amount shall not exceed 10%
of the Consolidated Cash Flow of such Person for such period and (y) such
first Person shall be deemed to have received by dividend its proportionate
share of distributable cash retained by the Joint Venture to fund the
interest reserve.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of:
(1) the interest expense of such Person and its Restricted
Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation:
(a) any amortization of debt discount;
(b) the net cost under Interest Swap Agreements, including any
amortization of discounts;
(c) the interest portion of any deferred payment obligation;
(d) all commissions, discounts and other fees and charges owed with
respect to letters of credit, bankers' acceptance financing or similar
facilities; and
(e) all accrued interest; and
(2) the interest component of Capitalized Lease Obligations paid or
accrued by such Person and its Restricted Subsidiaries during such period
as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income, or loss, of such Person and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided, however, that there shall be excluded therefrom, without duplication:
(1) gains and losses from Asset Sales, without regard to the
$1,000,000 limitation set forth in the definition thereof, or abandonments
or reserves relating thereto and the related tax effects;
(2) items classified as extraordinary or nonrecurring gains and
losses, and the related tax effects according to GAAP;
(3) the net income, or loss, of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Restricted
Subsidiary of such first referred to Person or is merged or consolidated
with it or any of its Restricted Subsidiaries;
(4) the net income of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is restricted by contract, operation of law or
otherwise; and
(5) the net income or loss of any Person, other than a Restricted
Subsidiary; and
provided further, however, that (i) there shall be added to net income
Consolidated Cash Flow losses attributable to stations which LIN Holdings or any
of its Restricted Subsidiaries operates pursuant to local market agreements
provided that such addback shall not exceed $3,000,000 in any four quarter
period and (ii) in determining net income, pro forma effect shall be given to
the reimbursement of promotional expenses as if such reimbursement obligation
were in effect for the entire period with respect to periods ending prior to
March 31, 1999, but only if such reimbursement obligation is then in effect.
"Consolidated Non-Cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries, excluding any such charges
constituting an extraordinary or nonrecur-
136
ring item, reducing Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the board of directors of LIN Television or LIN Holdings
on March 3, 1998, (ii) was nominated for election or elected to the board of
directors of LIN Television or LIN Holdings, as the case may be, with the
affirmative vote of a majority of the Continuing Directors who were members of
such board of directors at the time of such nomination or election or (iii) is a
Representative of a Permitted Holder.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Disqualified Capital Stock" means any Capital Stock that, by its terms, or
by the terms of any security into which it is convertible or for which it is
exchangeable, or upon the happening of any event, matures, excluding any
maturity as the result of an optional redemption by the issuer thereof, or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, except, in each case,
upon the occurrence of a Change of Control, in whole or in part, on or prior to
the final maturity date of the senior discount notes; provided that only the
portion of Capital Stock which so matures or is mandatorily redeemable or is so
redeemable at the sole option of the holder thereof prior to March 1, 2008 shall
be deemed Disqualified Capital Stock.
"Equity Offering" means a private sale or public offering of Capital Stock,
other than Disqualified Capital Stock, of LIN Holdings or a Holding Company, to
the extent, in the case of a Holding Company, that the net cash proceeds thereof
are contributed to the common or non-redeemable preferred equity capital of LIN
Holdings.
"Financial Advisory Agreement" means the Financial Advisory Agreement by
and among LIN Television, LIN Holdings and Hicks Muse Partners, as in effect on
March 3, 1998.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of March 3, 1998, including those set forth in the
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 the Commission or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the senior discount notes indenture shall be computed in conformity with GAAP.
"Guarantee" means a guarantee, other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantor" means a Guarantor under the senior notes indenture.
"Indebtedness" means with respect to any Person, without duplication, any
liability of such Person:
(1) for borrowed money;
(2) evidenced by bonds, debentures, notes or other similar
instruments;
(3) constituting Capitalized Lease Obligations;
137
(4) incurred or assumed as the deferred purchase price of property, or
pursuant to conditional sale obligations and title retention agreements,
but excluding trade accounts payable arising in the ordinary course of
business;
(5) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction;
(6) for Indebtedness of others guaranteed by such Person;
(7) for Interest Swap Agreements, Commodity Agreements and Currency
Agreements; and
(8) for Indebtedness of any other Person of the type referred to in
clauses (1) through (7), which is secured by any Lien on any property or
asset of such first referred to Person, the amount of such Indebtedness
being deemed to be the lesser of the value of such property or asset or the
amount of the Indebtedness so secured.
The amount of Indebtedness of any Person at any date shall be (i) the
outstanding principal amount of all unconditional obligations described above,
as such amount would be reflected on a balance sheet prepared in accordance with
GAAP, and the maximum liability at such date of such Person for any contingent
obligations described above, (ii) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount and (iii) the principal amount
thereof, together with any interest thereon that is more than 30 days past due,
in the case of any other Indebtedness.
"Interest Swap Agreements" means any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge or arrangement.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (in each case, including by way of Guarantee or
similar arrangement, but excluding (i) any debt or extension of credit
represented by a bank deposit other than a time deposit and (ii) advances to
customers in the ordinary course of business) or capital contribution to, by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others, or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments issued
by such Person. For purposes of the "Limitation on Restricted Payments"
covenant:
(1) "Investment" shall include the portion, proportionate to LIN
Holdings' equity interest in a Restricted Subsidiary to be designated as an
Unrestricted Subsidiary, of the fair market value of the net assets of such
Restricted Subsidiary of LIN Holdings at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Unrestricted Subsidiary as a Restricted
Subsidiary, LIN Holdings shall be deemed to continue to have a permanent
"Investment," if positive, equal to (x) LIN Holdings' "Investment" in such
Unrestricted Subsidiary at the time of such redesignation less (y) the
portion, proportionate to LIN Holdings' equity interest in such Subsidiary,
of the fair market value of the net assets of such Unrestricted Subsidiary
at the time that such Unrestricted Subsidiary is so redesignated from an
Unrestricted Subsidiary to a Restricted Subsidiary; and
(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the board of directors of LIN
Holdings.
"Leverage Ratio" means, as to any Person, the ratio of (i) the aggregate
outstanding amount of Indebtedness of such Person and its Restricted
Subsidiaries as of the date of calculation on a consolidated basis in accordance
with GAAP plus the aggregate liquidation preference of all Disqualified Capital
Stock of such Person and of all outstanding Preferred
138
Stock of Restricted Subsidiaries of such Person, other than any such
Disqualified Capital Stock or Preferred Stock held by such Person or any of its
Restricted Subsidiaries, to (ii) the Consolidated Cash Flow of such Person for
the four full fiscal quarters (the "Four Quarter Period") ending on or prior to
the date of determination.
For purposes of this definition, the aggregate outstanding principal amount
of Indebtedness of the Person and its Restricted Subsidiaries for which such
calculation is made shall be determined on a pro forma basis as if the
Indebtedness giving rise to the need to perform such calculation had been
incurred and the proceeds therefrom had been applied, and all other transactions
in respect of which such Indebtedness is being incurred has occurred, on the
last day of the Four Quarter Period. In addition to the foregoing, for purposes
of this definition, "Consolidated Cash Flow" shall be calculated on a pro forma
basis after giving effect to:
(1) the Transactions;
(2) the incurrence of the Indebtedness of such Person and its
Restricted Subsidiaries, and the application of the proceeds therefrom,
giving rise to the need to make such calculation and any incurrence, and
the application of the proceeds therefrom, or repayment of other
Indebtedness, other than the incurrence or repayment of Indebtedness
pursuant to working capital facilities, at any time subsequent to the
beginning of the Four Quarter Period and on or prior to the date of
determination, as if such incurrence, and the application of the proceeds
thereof, or the repayment, as the case may be, occurred on the first day of
the Four Quarter Period;
(3) any Asset Sales, including those excluded from the definitions
thereof by clauses (b), (c) or (d) of the definition thereof, or Asset
Acquisitions, including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of such Person or one
of its Restricted Subsidiaries, including any Person that becomes a
Restricted Subsidiary as a result of such Asset Acquisition, incurring,
assuming or otherwise becoming liable for Indebtedness, or Asset Swaps at
any time on or subsequent to the first day of the Four Quarter Period and
on or prior to the date of determination, as if such Asset Sale, Asset
Acquisition, including the incurrence, assumption or liability for any such
Indebtedness and also including any Consolidated Cash Flow associated with
such Asset Acquisition, or Asset Swap occurred on the first day of the Four
Quarter Period; and
(4) cost savings resulting from employee terminations, facilities
consolidations and closings, standardization of employee benefits and
compensation practices, consolidation of property, casualty and other
insurance coverage and policies, standardization of sales representation
commissions and other contract rates, and reductions in taxes other than
income taxes (collectively, "Cost Savings Measures"), which cost savings
such Person reasonably believes in good faith could have been achieved
during the Four Quarter Period as a result of such Asset Acquisition or
Asset Swap, regardless of whether such cost savings could then be reflected
in pro forma financial statements under GAAP, Regulation S-X promulgated by
the Commission or any other regulation or policy of the SEC, less the
amount of any additional expenses that such Person reasonably estimates
would result from anticipated replacement of any items constituting Cost
Savings Measures in connection with such Asset Acquisitions or Asset Swap;
provided, however, that both (A) such cost savings and Cost Savings
Measures were identified and such cost savings were quantified in an
officer's certificate delivered to the senior discount notes trustee at the
time of the consummation of the Asset Acquisition or Asset Swap and (B)
with respect to each Asset Acquisition or Asset Swap completed prior to the
90th day preceding such date of determination, actions were commenced or
initiated by LIN Holdings within 90 days of such Asset Acquisition or Asset
Swap to effect the Cost Savings Measures identified in such officer's
certificate, regardless, however, of whether the corresponding cost savings
have been achieved.
139
Furthermore, in calculating "Consolidated Interest Expense" for purposes of the
calculation of "Consolidated Cash Flow," (i) interest on Indebtedness determined
on a fluctuating basis as of the date of determination, including Indebtedness
actually incurred on the date of the transaction giving rise to the need to
calculate the Leverage Ratio, and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness as in effect on the date of
determination and (ii) notwithstanding (i) above, interest determined on a
fluctuating basis, to the extent such interest is covered by Interest Swap
Agreements, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Lien" means, with respect to any asset, any lien, mortgage, deed of trust,
pledge, security interest, charge or encumbrance of any kind, including any
conditional sale or other title retention agreement, any lease in the nature
thereof and any agreement to give any security interest.
"Monitoring and Oversight Agreement" means the Monitoring and Oversight
Agreement by and among LIN Television, LIN Holdings and Hicks Muse Partners, as
in effect on March 3, 1998.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents,
received by LIN Holdings or any of its Restricted Subsidiaries from such Asset
Sale net of:
(1) reasonable out-of-pocket expenses and fees relating to such Asset
Sale, including, without limitation, relocation costs, legal, accounting
and investment banking fees and sales commissions, recording fees,
relocation costs, title insurance premiums, appraisers, fees and costs
reasonably incurred in preparation of any asset or property for sale;
(2) taxes paid or reasonably estimated to be payable, calculated based
on the combined state, federal and foreign statutory tax rates applicable
to LIN Holdings or the Restricted Subsidiary engaged in such Asset Sale;
(3) all distributions and other payments required to be made to any
Person owning a beneficial interest in the assets subject to sale or
minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Sale;
(4) any reserves established in accordance with GAAP for adjustment in
respect of the sales price of the asset or assets subject to such Asset
Sale or for any liabilities associated with such Asset Sale; and
(5) repayment of Indebtedness secured by assets subject to such Asset
Sale;
provided, however, that if the instrument or agreement governing such Asset Sale
requires the transferor to maintain a portion of the purchase price in escrow,
whether as a reserve for adjustment of the purchase price or otherwise, or to
indemnify the transferee for specified liabilities in a maximum specified
amount, the portion of the cash or Cash Equivalents that is actually placed in
escrow or segregated and set aside by the transferor for such indemnification
obligation shall not be deemed to be Net Cash Proceeds until the escrow
terminates or the transferor ceases to segregate and set aside such funds, in
whole or in part, and then only to the extent of the proceeds released from
escrow to the transferor or that are no longer segregated and set aside by the
transferor.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing, or otherwise relating to, any
Indebtedness.
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"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the senior discount notes trustee. The counsel may be
an employee of or counsel to LIN Holdings or the senior discount notes trustee.
"Permitted Indebtedness" means, without duplication:
(1) Indebtedness outstanding on the Senior Discount Notes Issue Date,
including the senior notes, the existing senior subordinated notes and the
existing senior discount notes;
(2) Indebtedness of LIN Holdings, LIN Television and any of its
Restricted Subsidiaries that is a Guarantor (a) outstanding under the
Senior Credit Facilities, including letter of credit obligations; provided
that the aggregate principal amount at any time outstanding does not exceed
$570,000,000; or (b) incurred under the Senior Credit Facilities pursuant
to and in compliance with either (x) clause (5) of this definition or (y)
the proviso in the covenant described under the caption "Limitation on
Incurrence of Additional Indebtedness and Issuance of Capital Stock" above;
(3) Indebtedness evidenced by or arising under the senior discount
notes and the senior discount notes indenture;
(4) Interest Swap Agreements, Commodity Agreements and Currency
Agreements; provided, however, that such agreements are entered into for
bona fide hedging purposes and not for speculative purposes;
(5) additional Indebtedness of LIN Holdings or any of its Restricted
Subsidiaries that is a Guarantor not to exceed $20,000,000 in principal
amount outstanding at any time, which amount may, but need not, be incurred
under the Senior Credit Facilities;
(6) Refinancing Indebtedness;
(7) Indebtedness owed by LIN Holdings to any Subsidiary of LIN
Holdings or by any Restricted Subsidiary of LIN Holdings to LIN Holdings or
any Subsidiary of LIN Holdings;
(8) guarantees by Restricted Subsidiaries of any Indebtedness
permitted to be incurred pursuant to the senior discount notes indenture;
(9) Indebtedness in respect of performance bonds, bankers' acceptances
and surety or appeal bonds provided by LIN Holdings or any of its
Restricted Subsidiaries to their customers in the ordinary course of their
business;
(10) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of LIN Holdings or any of its Restricted
Subsidiaries pursuant to such agreements, in each case incurred in
connection with the disposition of any business assets or Restricted
Subsidiaries of LIN Holdings, other than guarantees of Indebtedness or
other obligations incurred by any Person acquiring all or any portion of
such business assets or Restricted Subsidiaries of LIN Holdings for the
purpose of financing such acquisition, in a principal amount not to exceed
the gross proceeds actually received by LIN Holdings or any of its
Restricted Subsidiaries in connection with such disposition; provided,
however, that the principal amount of any Indebtedness incurred pursuant to
this clause (10), when taken together with all Indebtedness incurred
pursuant to this clause (10) and similar provisions contained in the
indenture governing the existing senior discount notes and then
outstanding, shall not exceed $20,000,000; and
(11) Indebtedness represented by Capitalized Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property or assets used in a related
business or incurred to refinance any such purchase price or cost of
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construction or improvement, in each case incurred no later than 365 days
after the date of such acquisition or the date of completion of such
construction or improvement; provided, however, that the principal amount
of any Indebtedness incurred pursuant to this clause (11) shall not exceed
$7,500,000 at any time outstanding.
"Permitted Investments" means:
(1) Investments by LIN Holdings or any Restricted Subsidiary of LIN
Holdings to acquire the stock or assets of any Person, or Acquired
Indebtedness or Acquired Preferred Stock acquired in connection with a
transaction in which such Person becomes a Restricted Subsidiary of LIN
Holdings, engaged in the broadcast business or businesses reasonably
related thereto; provided, however, that if any such Investment or series
of related Investments involves an Investment by LIN Holdings in excess of
$10,000,000, at the time of such Investment and immediately after giving
effect thereto (i) LIN Holdings has incurred no additional Indebtedness and
(ii) LIN Holdings is able to incur at least $1.00 of additional
Indebtedness, other than Permitted Indebtedness, in compliance with the
"Limitation on Incurrence of Additional Indebtedness and Issuance of
Capital Stock" covenant;
(2) Investments received by LIN Holdings or its Restricted
Subsidiaries as consideration for a sale of assets made in compliance with
the other terms of the senior discount notes indenture;
(3) Investments by LIN Holdings or any Restricted Subsidiary of LIN
Holdings in any Restricted Subsidiary of LIN Holdings, whether existing on
the Senior Discount Notes Issue Date or created thereafter, or any Person
that after such Investments, and as a result thereof, becomes a Restricted
Subsidiary of LIN Holdings and Investments in LIN Holdings or any
Restricted Subsidiary by any Restricted Subsidiary of LIN Holdings;
(4) Investments in cash and Cash Equivalents;
(5) Investments in securities of trade creditors, wholesalers or
customers received pursuant to any plan of reorganization or similar
arrangement;
(6) loans or advances to employees of LIN Holdings or any Restricted
Subsidiary thereof for purposes of purchasing LIN Holdings' or a holding
company's Capital Stock and other loans and advances to employees made in
the ordinary course of business consistent with past practices of LIN
Holdings or such Restricted Subsidiary; and
(7) additional Investments in an aggregate amount not to exceed
$5,000,000 at any time outstanding.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Productive Assets" means assets of a kind used or usable by LIN Holdings
and its Restricted Subsidiaries in broadcast business or businesses reasonably
related, ancillary or complementary thereto, and specifically includes assets
acquired through Asset Acquisitions, it being understood that "assets" may
include Capital Stock of a Person that owns such Productive Assets, provided
that after giving effect to such transaction, such Person would be a Restricted
Subsidiary of LIN Holdings.
"Public Equity Offering" means an underwritten public offering of Capital
Stock, other than Disqualified Capital Stock, of LIN Holdings or a holding
company, to the extent, in the case of a holding company, that the net cash
proceeds thereof are contributed to the common
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or non-redeemable preferred equity capital of LIN Holdings, pursuant to an
effective registration statement filed with the SEC in accordance with the
Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinancing Indebtedness" means any refinancing of Indebtedness incurred
in accordance with the "Limitation on Incurrence of Additional Indebtedness and
Issuance of Capital Stock" covenant, other than pursuant to clause (3) or (4) of
the definition of Permitted Indebtedness, that does not
(1) result in an increase in the aggregate principal amount of
Indebtedness (such principal amount to include, for purposes of this
definition, any premiums, penalties or accrued interest paid with the
proceeds of the Refinancing Indebtedness) of such Person; or
(2) create Indebtedness with (i) a Weighted Average Life to Maturity
that is less than the Weighted Average Life to Maturity of the Indebtedness
being refinanced or (ii) a final maturity earlier than the final maturity
of the Indebtedness being refinanced.
"Representative" means the indenture senior discount notes trustee or other
senior discount notes trustee, agent or representative in respect of any Senior
Indebtedness; provided, however, that if, and for so long as, any issue of
Senior Indebtedness lacks such a representative, then the Representative for
such issue of Senior Indebtedness shall at all times constitute the holders of a
majority in outstanding principal amount of such issue of Senior Indebtedness.
"Restricted Payment" means:
(1) the declaration or payment of any dividend or the making of any
other distribution, other than dividends or distributions payable in
Qualified Capital Stock or in options, rights or warrants to acquire
Qualified Capital Stock, on shares of LIN Holdings' Capital Stock;
(2) the purchase, redemption, retirement or other acquisition for
value of any Capital Stock of LIN Holdings, or any warrants, rights or
options to acquire shares of Capital Stock of LIN Holdings, other than
through the exchange of such Capital Stock or any warrants, rights or
options to acquire shares of any class of such Capital Stock for Qualified
Capital Stock or warrants, rights or options to acquire Qualified Capital
Stock; or
(3) the making of any Investment, other than a Permitted Investment.
"Restricted Subsidiary" means a Subsidiary of LIN Holdings other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of LIN Holdings
existing as of the Senior Discount Notes Issue Date. The board of directors of
LIN Holdings may designate any Unrestricted Subsidiary or any person that is to
become a Subsidiary as a Restricted Subsidiary if immediately after giving
effect to such action, and treating any Acquired Indebtedness as having been
incurred at the time of such action, LIN Holdings could have incurred at least
$1.00 of additional indebtedness, other than Permitted Indebtedness, pursuant to
the "Limitation on Incurrence of Additional Indebtedness and Issuance of Capital
Stock" covenant.
"Senior Credit Facilities" means the Senior Credit Facilities under that
certain Credit Agreement, dated as of March 1, 1998, as amended, among LIN
Holdings, LIN Television, The Chase Manhattan Bank, as administrative agent and
collateral agent, The Bank of New York, as syndication agent, Bank of America,
N.A. as successor documentation agent to National Westminster Bank PLC, and any
other financial institutions from time to time party thereto, together with the
related documents thereto, including, without limitation, any guarantee
agreements and security documents, in each case as such agreements may be
amended, including any amendment and restatement thereof, supplemented or
otherwise
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modified from time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring, including by way of adding
Restricted Subsidiaries of LIN Holdings as additional borrowers or guarantors
thereunder, all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders, or other institutions.
"Senior Discount Notes Issue Date" means the date of original issuance of
the senior discount notes.
"Senior Indebtedness" means, whether outstanding on March 3, 1998 or
thereafter issued, (x) the senior discount notes and the existing holdings notes
and (y) all other Indebtedness of LIN Holdings, including interest, including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to LIN Holdings or any Restricted Subsidiary whether or
not a claim for post-filing interest is allowed in such proceeding, and premium,
if any, thereon, and other monetary amounts, including fees, expenses,
reimbursement obligations under letters of credit and indemnities, owing in
respect thereof unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that the obligations
in respect of such Indebtedness ranks pari passu with the senior discount notes;
provided, however, that Senior Indebtedness will not include:
(1) any obligation of LIN Holdings to any Restricted Subsidiary;
(2) any liability for federal, state, foreign, local or other taxes
owed or owing by LIN Holdings;
(3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities);
(4) any Indebtedness, Guarantee, or obligation of LIN Holdings that is
expressly subordinate or junior in right of payment to any other
Indebtedness, guarantee or obligation of LIN Holdings, including any Senior
Subordinated Indebtedness and any Subordinated Obligations; or
(5) obligations in respect of any Capital Stock.
"Significant Restricted Subsidiary" means, at any date of determination,
any Restricted Subsidiary that would be a "significant subsidiary" as defined in
Article I, Rule 1-02 of Regulation S-X, promulgated under the Securities Act of
1933, as amended, as such rule is in effect on the Senior Discount Notes Issue
Date.
"Subsidiary," with respect to any Person, means:
(1) any corporation of which the outstanding Capital Stock having at
least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned, directly
or indirectly, through one or more intermediaries, by such Person; or
(2) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, through one or more intermediaries, owned by such Person.
Notwithstanding anything in the senior discount notes indenture to the contrary,
all references to LIN Holdings and its consolidated Restricted Subsidiaries or
to financial information prepared on a consolidated basis in accordance with
GAAP shall be deemed to include LIN Holdings and its Restricted Subsidiaries as
to which financial statements are prepared on a combined basis in accordance
with GAAP and to financial information prepared on such a combined basis.
Notwithstanding anything in the senior discount notes indenture to the contrary,
an Unrestricted Subsidiary shall not be deemed to be a Restricted Subsidiary for
purposes of the senior discount notes indenture.
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"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity, as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) that
has become publicly available at least two business days prior to the Change of
Control Redemption Date, or, if such Statistical Release is no longer published,
any publicly available source or similar market data, most nearly equal to the
period from the Change of Control Redemption Date to March 1, 2003; provided,
however, that if the period from the Change of Control Redemption Date to March
1, 2003 is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury Rate shall be
obtained by linear interpolation, calculated to the nearest one-twelfth of a
year, from the weekly average yields of United States Treasury securities for
which such yields are given except that if the period from the Change of Control
Redemption Date to March 1, 2003 is less than one year, the weekly average yield
on actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Unrestricted Subsidiary" means a Subsidiary of LIN Holdings created after
March 3, 1998 and so designated by a resolution adopted by the board of
directors of LIN Holdings; provided, however, that:
(1) neither LIN Holdings nor any of its other Restricted Subsidiaries
(i) provides any credit support for any Indebtedness or other Obligations
of such Subsidiary, including any undertaking, agreement or instrument
evidencing such Indebtedness, or (ii) is directly or indirectly liable for
any Indebtedness or other Obligations of such Subsidiary; and
(2) at the time of designation of such Subsidiary, such Subsidiary has
no property or assets, other than de minimis assets resulting from the
initial capitalization of such Subsidiary.
The board of directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation (i) (x) LIN Holdings has incurred no additional Indebtedness
and (y) LIN Television could incur $1.00 of additional Indebtedness, other than
Permitted Indebtedness, in compliance with the "Limitation on Incurrence of
Additional Indebtedness and Issuance of Capital Stock" covenant and (ii) no
Default or Event of Default shall have occurred or be continuing. Any
designation pursuant to this definition by the board of directors of LIN
Holdings shall be evidenced to the senior discount notes trustee by the filing
with the senior discount notes trustee of a certified copy of the resolution of
LIN Holdings' board of directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"Unsubordinated Indebtedness" means the senior discount notes and any other
Indebtedness of LIN Holdings that specifically provides that such Indebtedness
is to rank pari passu with the senior discount notes in right of payment and is
not subordinated by its terms in right of payment to any Senior Indebtedness of
LIN Holdings.
"U.S. Government Obligations" means direct obligations, or certificates
representing an ownership interest in such obligations, of the United States of
America, including any agency or instrumentality thereof, for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years, calculated to the nearest one-twelfth, which will elapse
between such date and the making of such payment.
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BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, both the new senior notes and
the new senior discount notes initially will be represented by one or more
permanent global certificates in definitive, duly registered form. The global
notes will be deposited on their date of issue with, or on behalf of, The
Depository Trust Company, New York, New York or "DTC" and registered in the name
of a nominee of DTC.
The Global Notes. The issuers expect that pursuant to procedures
established by DTC:
- upon the issuance of the global notes, DTC or its custodian will credit,
on its internal system, the principal amount of new notes of the
individual beneficial interests represented by such global notes to the
respective accounts of persons who have accounts with such depositary;
and
- ownership of beneficial interests in the global notes will be shown on,
and the transfer of such ownership will be effected only through, records
maintained by DTC or its nominee, with respect to interests of
participants, and the records of participants, with respect to interests
of persons other than participants. Ownership of beneficial interests in
the global notes will be limited to persons who have accounts with DTC or
"participants" or persons who hold interests through participants.
So long as DTC, or its nominee, is the registered owner or holder of the
new notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the new notes represented by such global notes for all
purposes under the indentures. No beneficial owner of any interest in the global
notes will be able to transfer that interest except in accordance with DTC's
procedures.
Payments of the principal of, premium, if any, and interest on, the global
notes will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of LIN Television, LIN Holdings, the trustees or any paying
agent will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in the
global notes or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interest.
The issuers expect that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, and interest on the global notes, will credit
participants' accounts with payments in amounts proportionate to their
beneficial interests in the principal amount of the global notes as shown on the
records of DTC or its nominee. The issuers also expect that payments by
participants to owners of beneficial owners in the global notes held through
such participants will be governed by standing instructions and customary
practice, as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds. If a holder requires physical delivery of a
certificated note for any reason, including to sell notes to persons in states
which require physical delivery of the notes, or to pledge such securities, such
holder must transfer its interest in a global note, in accordance with the
normal procedures of DTC.
DTC has advised the issuers that it will take any action permitted to be
taken by a holder of notes, including the presentation of new notes for exchange
as described below, only at the direction of one or more participants to whose
account the DTC interests in the global notes are credited and only in respect
of such portion of the aggregate principal amount of new notes as to which such
participant or participants has or have given such direction.
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DTC has advised the issuers as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global notes among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither of the issuers nor the trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Notes. If DTC is at any time unwilling or unable to continue
as a depositary for the global notes and a successor depositary is not appointed
by the issuer within 90 days, certificates notes will be issued in exchange for
the global notes.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired as a result of market-making activities or other
trading activities. LIN Television and LIN Holdings have agreed that, for a
period of 90 days after the expiration date, it will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
The issuers will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options in the new notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any new notes. Any broker-dealer that resells
new notes that were received by it for its own account pursuant to the exchange
offer and any broker or dealer that participates in a distribution of such new
notes may be deemed to be an "underwriter" within the meaning of the Securities
Act, and any profit on any such resale of new notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that by
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities act.
For a period of 90 days after the expiration date, LIN Television will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the applicable letter of transmittal. The issuers have agreed to pay all
expenses incident to the exchange offers, including the expenses of one counsel
for the holders of the notes, other than commissions or concessions of any
broker-dealers and will indemnify holders of the old notes, including any
broker-dealers, against certain liabilities, including certain liabilities under
the Securities Act.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is based upon the provisions of the Internal
Revenue Code of 1986, as amended, the applicable Treasury Regulations
promulgated and proposed thereunder, judicial authority and current
administrative rulings and practice, all of which are subject to change,
possibly with retroactive effect. Except as specifically provided below, the
following discussion is limited to the U.S. federal income tax consequences
relevant to a holder of a note who or which is:
- a citizen or resident of the United States;
- a corporation (or other entity, other than a partnership, estate or
trust) created or organized under the laws of the United States, or any
political subdivision thereof;
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust.
This discussion does not purport to deal with all aspects of U.S. federal
income taxation that might be relevant to particular holders in light of their
personal investment circumstances or status, nor does it discuss the U.S.
federal income tax consequences to certain types of holders subject to special
treatment under the U.S. federal income tax laws, for example, financial
institutions, insurance companies, dealers in securities, tax-exempt
organizations, or taxpayers holding the Notes through a partnership or similar
pass-thru entity or as part of a "straddle," "hedge" or "conversion
transaction." Moreover, the effect of any applicable state, local or foreign tax
laws is not discussed.
Except as otherwise indicated below, this discussion assumes that the notes
are held as capital assets, as defined in Section 1221 of the Code, by the
holders thereof. This discussion is limited to the U.S. federal income tax
consequences to holders acquiring notes on original issue for cash. The issuers
will treat the notes as indebtedness for U.S. federal income tax purposes, and
the balance of the discussion is based on the assumption that such treatment
will be respected.
Prospective holders are urged to consult their own tax advisors regarding
the federal, state, local and other tax considerations of the acquisition,
ownership and disposition of the notes.
U.S. HOLDERS
Stated Interest on the Senior Notes. The stated interest on the senior
notes will be included in income by a U.S. holder in accordance with such U.S.
holder's usual method of tax accounting.
Stated Interest on the Senior Discount Notes. The stated interest on the
senior discount notes will be included in the amount of OID, the original issue
discount, on such senior discount notes. A U.S. holder will not be required to
report separately as taxable income actual payments of stated interest with
respect to the senior discount notes.
Original Issue Discount on the Notes. For the reasons discussed below, the
notes will be deemed to have been issued with OID. Accordingly, each U.S. holder
will be required to include in income, regardless of whether such U.S. holder is
a cash or accrual basis taxpayer, in each taxable year, in advance of the
receipt of cash payments on such notes attributable to such OID, that portion of
the OID, computed on a constant yield basis, attributable to each day
149
during such year on which the holder held the notes. See "-- Taxation of
Original Issue Discount" below.
The amount of OID with respect to each note will be equal to the excess of
its "stated redemption price at maturity" over its "issue price." The "issue
price" of a note will be equal to the first price at which a substantial amount
of the notes are sold. For purposes of determining the issue price of the Notes,
sales to bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents or wholesalers are ignored.
Under the Treasury Regulations, the "stated redemption price at maturity"
of a note will equal the sum of all cash payments required to be made on such
note (other than, in the case of the senior notes, payments of stated interest)
and the excess of the aggregate of such amounts over the issue price of such
note would be included in the holder's income as OID.
Taxation of Original Issue Discount. A U.S. holder of a debt instrument
issued with OID is required to include in gross income for U.S. federal income
tax purposes an amount equal to the sum of the "daily portions" of such OID for
all days during the taxable year on which such holder holds the debt instrument.
The daily portions of OID required to be included in a U.S. holder's gross
income in a taxable year will be determined under a constant yield method by
allocating to each day during the taxable year on which the U.S. holder holds
the debt instrument a pro rata portion of the OID on such debt instrument which
is attributable to the "accrual period" in which such day is included. The
amount of the OID attributable to each accrual period will be the product of the
"adjusted issue price" of the note at the beginning of such accrual period
multiplied by the "yield to maturity" of the note, properly adjusted for the
length of the accrual period, minus, in the case of the senior notes, stated
interest allocable to the accrual period. The note's "yield to maturity" is that
discount rate which, when used in computing the present value of all principal
and stated interest payments to be made under a note, produces an amount equal
to the issue price of the note. The "adjusted issue price" of the note at the
beginning of an accrual period will generally be its issue price plus the
aggregate amount of OID that accrued in all prior accrual periods less any cash
payments on the note other than payments of stated interest on a senior note. An
"accrual period" may be of any length and may vary in length over the term of
the debt instrument, provided that each accrual period is not longer than one
year and each scheduled payment of principal or interest occurs either on the
final day or the first day of an accrual period.
The notes may be redeemed prior to their stated maturity at the issuers'
option. For purposes of computing the yield on the notes, the issuer will be
deemed to exercise its option to redeem in a manner that minimizes the yield on
the notes. It is not anticipated that the ability to redeem the notes will
affect their yield to maturity.
The failure of LIN Television, in the case of the senior notes, or LIN
Holdings, in the case of the senior discount notes, to comply with certain of
its obligations with respect to the exchange offer will give rise to the payment
of liquidated damages to the holders of the notes. According to applicable
Treasury regulations, the possibility of a change in interest rate on the notes
will not affect the amount or timing of interest income recognized by a U.S.
holder of a note if the likelihood of the change, as of the date the notes are
issued, is remote. LIN Television, with respect to the senior notes, and LIN
Holdings, with respect to the senior discount notes, intend to take the position
that the likelihood of payment of liquidated damages is remote and do not intend
to treat the possibility of a change in interest rate as affecting the yield to
maturity on the notes. Accordingly, any liquidated damages payable to U.S.
holders of notes should be includible in gross income by a U.S. holder at the
time the payment is paid or accrues in accordance with such holder's usual
method of tax accounting. Similarly, LIN Television, with respect to the Senior
Notes, and LIN Holdings, with respect to the senior discount notes, intend to
take the position that the likelihood of a redemption or
150
repurchase in the event of a Change of Control is remote under applicable
Treasury regulations and do not intend to treat this possibility as affecting
the yield to maturity on the notes.
Tax Basis. A U.S. holder's initial tax basis in a note will be equal to
the purchase price paid by such holder for such note.
A U.S. holder's tax basis in a note will be increased by the amount of OID
that is included in such U.S. holder's income pursuant to the foregoing rules
through the day preceding the day of disposition and will be decreased by the
amount of any cash payments received, other than payments of stated interest on
a senior note.
Sale, Exchange, Redemption or Repayment. Unless a nonrecognition provision
applies, the sale, exchange, redemption or other disposition of notes will be a
taxable event for U.S. federal income tax purposes. In such event, a U.S. holder
will recognize gain or loss equal to the difference between:
- the amount of cash plus the fair market value of any property received
(except to the extent that amounts received are attributable to accrued
interest not previously included in income, which portion of the
consideration would be taxed as ordinary income); and
- the holder's adjusted tax basis therein.
Such gain or loss will be capital gain or loss and will be long-term capital
gain or loss if the notes have been held for more than one year at the time of
disposition. Noncorporate taxpayers are generally subject to a maximum regular
U.S. federal income tax rate of 20% on net long term capital gains. The
deductibility of capital losses is subject to certain limitations.
Exchange Offer. The exchange of senior notes or senior discount notes for
exchange notes pursuant to the exchange offer should not constitute a
significant modification of the terms of the notes and, therefore, such exchange
should not constitute an exchange for U.S. federal income tax purposes.
Accordingly, such exchange should have no U.S. federal income tax consequences
to U.S. holders of notes.
Applicable High-Yield Debt Obligations. The senior discount notes will be
treated as "applicable high yield debt obligations" or "AHYDOs" for U.S. federal
income tax purposes because:
- the yield to maturity on the senior discount notes, computed as of the
issue date, equals or exceeds the sum of the "applicable federal rate" in
effect for the month in which the senior discount notes are issued plus
5%; and
- the senior discount notes bear "significant OID".
Because the senior discount notes are considered to be AHYDOs, LIN Holdings will
not be permitted to deduct accrued OID on the senior discount notes for U.S.
federal income tax purposes until LIN Holdings actually pays the OID in cash.
Moreover, to the extent that the yield to maturity exceeds the sum of the
applicable federal rate and 6%, the deduction for OID on the senior discount
notes will be permanently disallowed for U.S. federal income tax purposes to the
extent of such excess yield, regardless of whether LIN Holdings actually pays
the OID. For purposes of the dividends-received deduction generally available to
corporations, payments of that excess yield will be treated as dividends to the
extent deemed paid out of current or accumulated earnings and profits as
determined for U.S. federal income tax purposes. Corporate U.S. holders should
consult with their tax advisors as to the applicability of the
dividends-received deduction and its effect on their adjusted tax basis in the
their senior discount notes.
Backup Withholding and Information Reporting. Under the Code, U.S. holders
of notes may be subject, under certain circumstances, to information reporting
and "backup withhold-
151
ing" at a 31% rate with respect to cash payments in respect of principal, and
premium, if any, OID, interest, and the gross proceeds from dispositions
thereof. Backup withholding applies only if the U.S. holder:
- fails to furnish its social security or other taxpayer identification
number or "TIN" within a reasonable time after a request therefor;
- furnishes an incorrect TIN;
- fails to report properly interest or dividends; or
- fails, under certain circumstances, to provide a certified statement,
signed under penalty of perjury, that the TIN provided is its correct
number and that it is not subject to backup withholding.
Any amount withheld from a payment to a U.S. holder under the backup
withholding rules is allowable as a credit (and may entitle such holder to a
refund) against such U.S. holder's U.S. federal income tax liability, provided
that the required information is furnished to the Service. Certain persons are
exempt from backup withholding, including corporations and financial
institutions. U.S. holders of Notes should consult their tax advisors as to
their qualification for exemption from backup withholding and the procedure for
obtaining such exemption.
LIN Holdings and LIN Television will furnish annually to the Internal
Revenue Service and to record holders of the notes, to whom it is required to
furnish such information, information relating to the amount of OID and
interest. Because this information will be based upon the adjusted issue price
of the senior discount notes as if the holder were an original holder,
purchasers who purchase senior discount notes for an amount other than the
adjusted issue price at the time of purchase will be required to determine for
themselves the amount of OID, if any, that they are required to report.
THE FOREGOING DISCUSSION IS BASED ON THE PROVISIONS OF THE CODE,
REGULATIONS, RULINGS AND JUDICIAL DECISIONS NOW IN EFFECT, ALL OF WHICH ARE
SUBJECT TO CHANGE. ANY SUCH CHANGES MAY BE APPLIED RETROACTIVELY IN A MANNER
THAT COULD ADVERSELY AFFECT U.S. HOLDERS OF NOTES. EACH PURCHASER OF ANY OF THE
NOTES SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO
IT, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS, OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a non-U.S. holder of a note.
For purposes of the following discussion, interest and gain on the sale,
exchange or other disposition of a note will be considered to be "U.S. trade or
business income" if such income or gain is:
- effectively connected with the conduct of a U.S. trade or business; and
- in the case of a treaty resident, attributable to a permanent
establishment (or, in the case of an individual, a fixed base) in the
United States.
152
Stated Interest and OID on Notes. Generally any interest or OID paid to a
non-U.S. holder of a note that is not U.S. trade or business income will not be
subject to U.S. federal income tax if the interest or OID qualifies as
"portfolio interest." Generally interest and OID on the notes will qualify as
portfolio interest if:
- the non-U.S. holder does not actually or constructively own 10% or more
of the total voting power of all voting stock of LIN Television (in the
case of the senior notes) or LIN Holdings (in the case of the senior
discount notes); and
- such holder is not a "controlled foreign corporation" with respect to
which LIN Television or LIN Holdings, as the case may be, is a "related
person" within the meaning of the Code; and
- either the beneficial owner, under penalty of perjury, certifies that the
beneficial owner is not a United States person and such certificate
provides the beneficial owner's name and address, or a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business and
holds the Notes certifies under penalties of perjury, that such statement
has been received from the beneficial owner by it or by a financial
institution between it and the beneficial owner; and
- the non-U.S. holder is not a bank receiving interest on the extension of
credit made pursuant to a loan agreement made in the ordinary course of
its trade or business.
The gross amount of payments to a non-U.S. holder of interest or OID that
do not qualify for the portfolio interest exception and that are not effectively
connected with the conduct of a U.S. trade or business will be subject to U.S.
federal income tax at the rate of 30%, unless a U.S. income tax treaty applies
to reduce or eliminate withholding. U.S. trade or business income will be taxed
on a net basis at regular U.S. rates rather than the 30% gross rate. In the case
of a non-U.S. holder that is a corporation, such United States trade or business
income may also be subject to the branch profits tax (which is generally imposed
on a foreign corporation on the actual or deemed repatriation from the United
States of earnings and profits attributable to United States trade or business
income) at a 30% rate. The branch profits tax may not apply (or may apply at a
reduced rate) if a recipient is a qualified resident of certain countries with
which the United States has an income tax treaty. To claim the benefit of a tax
treaty or to claim exemption from withholding because the income is U.S. trade
or business income, the non-U.S. holder must provide a properly executed Form
W-8BEN or W-8ECI, or such successor forms as the Internal Revenue Service
designates, as applicable, prior to the payment of interest. These forms must be
periodically updated. Also under these regulations, a non-U.S. holder who is
claiming the benefits of a treaty may be required in certain instances to obtain
a U.S. taxpayer identification number and to provide certain documentary
evidence issued by foreign governmental authorities to prove residence in the
foreign country. Although the senior discount notes are AHYDOs, the
recharacterization of a portion of OID as dividends as described above will not
apply for purposes of U.S. withholding tax.
Sale, Exchange or Redemption of Notes. A non-U.S. holder will generally
not be subject to U.S. federal income tax recognized on a sale, redemption or
other disposition of a note unless:
- the gain is effectively connected with the conduct of a trade or business
within the United States by the non-U.S. holder;
- in the case of a non-U.S. holder who is a nonresident alien individual
and holds such note as a capital asset, such holder is present in the
United States for 183 or more days in the taxable year and certain other
requirements are met; or
153
- the non-U.S. holder is subject to the special rules applicable to former
citizens and residents of the United States.
Federal Estate Tax. If interest on the notes is exempt from withholding of
U.S. federal income tax as portfolio interest described above, the notes will
not be included in the estate of a deceased non-U.S. holder for U.S. federal
estate tax purposes.
Information Reporting and Backup Withholding. LIN Television and LIN
Holdings must report annually to the Internal Revenue Service and to each
non-U.S. holder any interest or OID that is subject to withholding, or that is
exempt from U.S. withholding tax pursuant to a tax treaty, or interest or OID
that is exempt from United States tax under the portfolio interest exception.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement to the tax authorities of the
country in which the non-U.S. holder resides.
In the case of payments of interest, including OID, to non-U.S. holders,
Treasury Regulations provide that information reporting and backup withholding
at a rate of 31% will not apply to such payments with respect to which either
the requisite certification has been received or an exemption has otherwise been
established, provided that neither the payor nor its paying agent has actual
knowledge that the holder is a U.S. person or the conditions of any other
exemption are not, in fact, satisfied.
The Treasury Regulations provide that backup withholding and information
reporting will not apply to payments of principal on the notes by LIN Television
or LIN Holdings to a non-U.S. holder, if the Holder certifies as to its non-U.S.
status under penalties of perjury or otherwise establishes an exemption,
provided that neither LIN Television nor LIN Holdings nor their paying agents
has actual knowledge that the holder is a United States person or that the
conditions of any other exemption are not, in fact, satisfied.
The payment of the proceeds from the disposition of the notes to or through
the United States office of any broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding unless the owner certifies
as to its non-U.S. status under penalty of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a U.S. person or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a note
to or through a non-U.S. office of a non-U.S. broker that is not a U.S. related
person will not be subject to information reporting or backup withholding. For
this purpose, a "U.S. related person" is:
- a "controlled foreign corporation" for U.S. federal income tax purposes;
or
- a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding
the payment, or for such part of the period that the broker has been in
existence, is derived from activities that are effectively connected with
the conduct of a United States trade or business.
In the case of the payment of proceeds from the disposition of notes to or
through a non-U.S. office of a broker that is either a U.S. person or a U.S.
related person, the regulations require information reporting on the payment
unless the broker has documentary evidence in its files that the owner is a
non-U.S. holder and the broker has no knowledge to the contrary. Backup
withholding will not apply to payments made through foreign offices of a broker
that is not a U.S. person or a U.S. related person (absent actual knowledge that
the payee is a U.S. person).
The Treasury Department recently promulgated final Treasury Regulations
regarding the withholding and information reporting rules discussed above. In
general, the final regulations do not significantly alter the substantive
withholding and information reporting requirements
154
but rather unify current certification procedures and forms and clarify reliance
standards. non-U.S. holders should consult their own tax advisors with respect
to the impact, if any, of the new final Treasury Regulations.
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder will be allowed as a refund or a credit against such non-U.S.
holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY,
EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISER AS TO PARTICULAR TAX
CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY
PROPOSED CHANGES IN APPLICABLE LAWS.
LEGAL MATTERS
The validity of the new notes offered hereby will be passed upon for the
Issuers by Weil Gotshal & Manges LLP, Dallas, Texas.
EXPERTS
The financial statements of LIN Holdings Corp. as of December 31, 2000 and
1999 and for each of the years ended December 31, 2000 and 1999, and for the
period from March 3, 1998 (date of acquisition) to December 31, 1998, and the
financial statements of LIN Television Corporation as of December 31, 2000 and
1999, and for each of the years ended December 31, 2000 and 1999, the period
from March 3, 1998 (date of acquisition) to December 31, 1998, and the period
from January 1, 1998 to March 2, 1998, included in this prospectus, have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
155
INDEX TO FINANCIAL STATEMENTS
<Table>
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 AND 1999, AND
FOR THE PERIOD ENDED DECEMBER 31, 2000
LIN Holdings Corp.
Reports of Independent Accountants..................... F-2
Consolidated Balance Sheets............................ F-4
Consolidated Statements of Operations.................. F-5
Consolidated Statements of Stockholders' Equity........ F-6
Consolidated Statements of Cash Flows.................. F-7
Notes to Consolidated Financial Statements............. F-8
LIN Television Corporation
Reports of Independent Accountants..................... F-29
Consolidated Balance Sheets............................ F-31
Consolidated Statements of Operations.................. F-32
Consolidated Statements of Stockholders' Equity........ F-33
Consolidated Statements of Cash Flows.................. F-34
Notes to Consolidated Financial Statements............. F-35
FINANCIAL STATEMENTS AS OF, AND FOR THE SIX MONTHS ENDED,
JUNE 30, 2001
LIN Holdings Corp.
Condensed Consolidated Balance Sheets.................. F-57
Condensed Consolidated Statements of Operations........ F-58
Condensed Consolidated Statements of Cash Flows........ F-59
Notes to Condensed Consolidated Financial Statements... F-60
LIN Television Corporation
Condensed Consolidated Balance Sheets.................. F-66
Condensed Consolidated Statements of Operations........ F-67
Condensed Consolidated Statements of Cash Flows........ F-68
Notes to Condensed Consolidated Financial Statements... F-69
FINANCIAL STATEMENT SCHEDULES
Schedule I -- Condensed Financial Information of the
Registrant ............................................ F-75
Schedule II -- Valuation and Qualifying Accounts ......... F-79
</Table>
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of LIN Holdings Corp.:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows present fairly, in all material respects, the financial position of LIN
Holdings Corp. and its subsidiaries at December 31, 2000 and 1999, and the
results of their operations and their cash flows for the years ended December
31, 2000 and 1999, and for the period from March 3, 1998 (date of acquisition)
to December 31, 1998, in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the
accompanying financial statement schedules present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedules are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 8, 2001, except as to
Note 16 which is as of
March 26, 2001
F-2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of LIN Holdings Corp.:
In our opinion, the accompanying consolidated statements of operations and
of cash flows present fairly, in all material respects, the results of
operations and cash flows of LIN Television Corporation and its subsidiaries
(the "Predecessor") for the period from January 1, 1998 to March 2, 1998, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the accompanying financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audit. We conducted our
audit of these financial statements in accordance with generally accepted
auditing standards, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 17, 1999
F-3
LIN HOLDINGS CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<Table>
<Caption>
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents................................... $ 7,832 $ 17,699
Accounts receivable, less allowance for doubtful accounts
(2000 -- $1,679; 1999 -- $1,918).......................... 58,826 55,515
Program rights.............................................. 13,614 13,601
Other current assets........................................ 4,302 6,988
---------- ----------
Total current assets.............................. 84,574 93,803
Property and equipment, net................................. 164,738 144,882
Deferred financing costs.................................... 36,298 41,553
Equity investments.......................................... 91,798 65,771
Investment in Southwest Sports Group, at cost plus accrued
interest.................................................. 53,000 50,000
Program rights.............................................. 4,155 4,552
Intangible assets, net...................................... 1,600,882 1,546,392
Other assets................................................ 9,918 5,732
---------- ----------
Total Assets...................................... $2,045,363 $1,952,685
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 7,226 $ 7,477
Program obligations......................................... 13,491 13,336
Accrued income taxes........................................ 5,578 4,750
Current portion of long-term debt........................... 19,572 15,805
Accrued interest expense.................................... 10,809 10,494
Accrued sales volume discount............................... 4,728 4,269
Other accrued expenses...................................... 16,604 17,626
---------- ----------
Total current liabilities......................... 78,008 73,757
Long-term debt, excluding current portion................... 968,685 841,821
Deferred income taxes....................................... 521,494 524,323
Program obligations......................................... 3,984 5,819
Other liabilities........................................... 7,002 7,050
---------- ----------
Total liabilities................................. 1,579,173 1,452,770
---------- ----------
Commitments and Contingencies (Note 4, Note 12 and Note 13)
Stockholders' equity:
Preferred stock, $0.01 par value: no shares authorized...... -- --
Common stock, $0.01 par value: 1,000 shares authorized,
issued and outstanding.................................... -- --
Additional paid-in capital.................................. 561,669 561,200
Accumulated deficit......................................... (95,479) (61,285)
---------- ----------
Total stockholders' equity........................ 466,190 499,915
---------- ----------
Total liabilities and stockholders' equity........ $2,045,363 $1,952,685
========== ==========
</Table>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
LIN HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<Table>
<Caption>
PREDECESSOR
-----------
PERIOD FROM PERIOD FROM
YEAR ENDED DECEMBER 31, MARCH 3 - JANUARY 1 -
----------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
---------- ---------- ------------ -----------
Net revenues................................. $295,706 $224,446 $189,536 $43,804
Operating costs and expenses:
Direct operating........................... 78,693 57,292 48,812 11,117
Selling, general and administrative........ 64,193 49,123 42,168 11,701
Corporate.................................. 9,270 7,900 7,130 1,170
KXTX Management Fee........................ -- 1,178 8,033 --
Amortization of program rights............. 21,214 15,029 10,712 2,743
Depreciation and amortization of intangible
assets.................................. 63,734 57,934 45,199 4,581
-------- -------- -------- -------
Total operating costs and expenses........... 237,104 188,456 162,054 31,312
-------- -------- -------- -------
Operating income............................. 58,602 35,990 27,482 12,492
Other (income) expense:
Interest expense........................... 92,868 68,689 53,576 2,764
Investment income.......................... (4,052) (3,280) (1,220) (98)
Share of (income) loss in equity
investments............................. (365) 5,488 6,037 244
Loss on WAND-TV exchange................... 2,720 -- -- --
Loss on disposition of KXTX-TV............. -- 2,212 -- --
Merger expense............................. -- -- -- 8,616
Other, net................................. 44 (54) -- --
-------- -------- -------- -------
Total other expense, net..................... 91,215 73,055 58,393 11,526
-------- -------- -------- -------
Income (loss) before provision for (benefit
from) income taxes......................... (32,613) (37,065) (30,911) 966
Provision for (benefit from) income taxes.... 1,581 (3,039) (3,652) 3,710
-------- -------- -------- -------
Net loss..................................... $(34,194) $(34,026) $(27,259) $(2,744)
======== ======== ======== =======
</Table>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
LIN HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<Table>
<Caption>
COMMON STOCK ADDITIONAL TOTAL
---------------- TREASURY PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT STOCK CAPITAL DEFICIT EQUITY
------- ------ -------- ---------- ----------- -------------
Balance at December 31, 1997
(Predecessor)................. 29,857 $ 299 $(3) $ 283,177 $(90,908) $ 192,565
Net loss (Jan 1 - Mar 2)...... -- -- -- -- (2,744) (2,744)
Proceeds from exercises of
stock options and issuance
of Employee Stock Purchase
Plan shares (Jan 1 - Mar
2)......................... 29 -- -- 1,071 -- 1,071
Tax benefit from exercises of
stock options (Jan 1 - Mar
2)......................... -- -- -- 10,714 -- 10,714
------- ----- --- --------- -------- ---------
Balance at March 2, 1998
(Predecessor)................. 29,886 299 (3) 294,962 (93,652) 201,606
Net loss...................... -- -- -- -- (27,259) (27,259)
Acquisition of LIN Television
Corporation and
contribution of KXAS-TV to
NBC Joint Venture.......... (29,886) (299) 3 (294,962) 93,652 (201,606)
Proceeds from sale of Common
Stock...................... 1 -- -- 558,123 -- 558,123
Proceeds from capital
contribution............... -- -- -- 1,000 -- 1,000
Payments on exercises of
phantom stock units........ -- -- -- (250) -- (250)
Tax benefit from exercises of
stock options.............. -- -- -- 795 -- 795
------- ----- --- --------- -------- ---------
Balance at December 31, 1998.... 1 -- -- 559,668 (27,259) 532,409
Net loss...................... -- -- -- -- (34,026) (34,026)
Tax benefit from exercises of
stock options.............. -- -- -- 1,532 -- 1,532
------- ----- --- --------- -------- ---------
Balance at December 31, 1999.... 1 -- -- 561,200 (61,285) 499,915
Net loss...................... -- -- -- -- (34,194) (34,194)
Payments on exercises of
phantom stock units........ -- -- -- (133) -- (133)
Tax benefit from exercises of
stock options.............. -- -- -- 602 -- 602
------- ----- --- --------- -------- ---------
Balance at December 31, 2000.... 1 $ -- $ 561,669 $(95,479) $ 466,190
======= ===== === ========= ======== =========
</Table>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
LIN HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<Table>
<Caption>
PREDECESSOR
-----------
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
--------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
--------- --------- ------------ -----------
Net loss.................................................... $ (34,194) $ (34,026) $ (27,259) $ (2,744)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization (including amortization of
financing costs and note discounts)..................... 95,311 85,346 66,563 4,714
Amortization of program rights............................ 21,214 15,029 10,712 2,743
Interest on SSG preferred units........................... (3,000) (3,000) -- --
Loss on disposition of stations........................... 2,722 2,212 -- --
Tax benefit from exercises of stock options............... 602 1,532 795 10,714
Deferred income taxes..................................... (3,025) (8,537) (4,792) 1,907
Net loss (gain) on disposition of assets.................. 220 (545) (49) 19
Program payments.......................................... (22,750) (15,293) (10,497) (4,157)
Share of (income) loss of equity investments.............. (365) 5,488 6,037 244
Provision for doubtful accounts........................... 239 38 (108) 98
Changes in operating assets and liabilities, net of
acquisitions and disposals:
Accounts receivable..................................... (3,072) (10,786) (7,836) 7,695
Program rights, net of program obligations.............. 239 (247) 436 (45)
Other assets............................................ 5,604 (15,837) 20,163 (19,102)
Accounts payable........................................ 1,796 (1,606) 1,209 1,187
Accrued income taxes.................................... 828 (5,326) 366 1,777
Accrued interest expense................................ 315 (194) 9,154 74
KXTX management fee payable............................. -- (4,175) 4,175 --
Accrued sales volume discount........................... 459 4,269 -- --
Other accrued expenses.................................. (4,907) 7,375 (3,623) 3,292
--------- --------- ----------- --------
Net cash provided by operating activities................... 58,236 21,717 65,446 8,416
--------- --------- ----------- --------
Investing activities:
Capital expenditures........................................ (29,126) (18,191) (21,498) (1,221)
Proceeds from asset disposals............................... -- 6,560 64 3
Liquidating dividend on investment in SSDB.................. -- 7,125 (7,125) --
Investment in joint ventures................................ -- -- (250) (250)
Investment in Banks Broadcasting, Inc. ..................... (11,145) (2,229) -- --
Other investments........................................... (3,000) -- -- --
Capital distributions from equity investments............... 815 -- -- --
Acquisition of WWLP-TV, net of cash acquired................ (128,000) -- -- --
Acquisition of WOOD-TV and WOTV-TV, net of cash acquired.... -- (119,985) -- --
Acquisition of WAPA-TV, net of cash acquired................ -- (69,909) -- --
Acquisition of LIN Television Corporation, net of cash
acquired.................................................. -- -- (1,724,281) --
Local marketing agreement expenditures...................... (3,625) (640) (775) --
--------- --------- ----------- --------
Net cash used in investing activities....................... (174,081) (197,269) (1,753,865) (1,468)
--------- --------- ----------- --------
Financing activities:
Net payments on exercises of phantom stock units and
issuance of employee stock purchase plan shares........... (133) -- (250) 1,071
Principal payments on long-term debt........................ (41,389) (19,098) (262,323) --
Proceeds from long-term debt................................ 147,000 153,000 668,929 --
Proceeds from revolver debt................................. 500 18,000 -- --
Loan fees incurred on long-term debt........................ -- -- (51,211) --
Proceeds from GECC note..................................... -- -- 815,500 --
Proceeds for sale of common stock........................... -- -- 558,123 --
Proceeds from capital contribution.......................... -- -- 1,000 --
--------- --------- ----------- --------
Net cash provided by financing activities................... 105,978 151,902 1,729,768 1,071
========= ========= =========== ========
Net (decrease) increase in cash and cash equivalents........ (9,867) (23,650) 41,349 8,019
Cash and cash equivalents at the beginning of the period.... 17,699 41,349 -- 8,046
--------- --------- ----------- --------
Cash and cash equivalents at the end of the period.......... $ 7,832 $ 17,699 $ 41,349 $ 16,065
========= ========= =========== ========
</Table>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BACKGROUND:
LIN Holdings Corp. ("Holdings"), together with its subsidiaries, including
LIN Television Corporation ("LIN Television"), the predecessor business prior to
March 3, 1998, (together, the "Company") was formed on July 18, 1997. On March
3, 1998, Holdings acquired LIN Television.
The Company is a television station group operator in the United States and
Puerto Rico that owns ten television stations, nine of which are
network-affiliated television stations. Additionally, the Company has local
marketing agreements ("LMAs") under which it programs five other stations in the
markets in which it operates.
The Company owns and operates four CBS affiliates, four NBC affiliates, one
ABC affiliate and one independent station in San Juan, Puerto Rico. The Company
also programs four additional network-affiliated television stations and one
independent television station pursuant to LMAs. Additionally, the Company has
investments in a number of ventures with third parties, through which it has an
interest in television stations in locations throughout the United States of
America. The Company is also the owner and operator of 28 low-power television
stations.
All of the Company's consolidated subsidiaries fully and unconditionally
guarantee the Company's Senior Subordinated Notes and Senior Credit Facilities
(see Note 8) on a joint and several basis.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying consolidated financial statements reflect the application
of certain significant accounting policies as described below:
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries, all of which are wholly owned. All significant
intercompany accounts and transactions have been eliminated. The Company
conducts its business through its subsidiaries and has no operations or
significant assets other than its investment in its subsidiaries. Accordingly,
no separate or additional financial information about the subsidiaries is
provided.
USE OF 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 consolidated financial
statements and the notes thereto. The Company's actual results could differ from
these estimates. Estimates are used when accounting for the collectability of
receivables and valuing intangible assets and net assets of business acquired.
CASH AND CASH EQUIVALENTS:
Cash equivalents consist of highly liquid, short-term investments that have
an original maturity of three months or less when purchased. The Company's
excess cash is invested primarily in short-term U.S. Government securities.
PROPERTY AND EQUIPMENT:
Property and equipment is recorded at cost and is depreciated using the
straight-line method over the estimated useful lives of the assets, generally 20
to 30 years for building and
F-8
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
fixtures, and 3 to 15 years for broadcast and other equipment. Upon retirement
or other disposition, the cost and related accumulated depreciation of the
assets are removed from the accounts and the resulting gain or loss is reflected
in the determination of net income or loss. Expenditures for maintenance and
repairs are expensed as incurred.
EQUITY INVESTMENTS:
The Company's equity investments are accounted for on the equity method, as
the Company does not have a controlling interest. Accordingly, the Company's
share of the net loss or income of its equity investments is included in
consolidated net income (loss).
REVENUE RECOGNITION:
Broadcast revenue is recognized during the period in which advertising is
aired. Barter revenue is accounted for at the fair value of the assets or
services received or the advertising time surrendered, whichever is more clearly
evident. Revenue from barter agreements is recorded at the time the advertising
is broadcast, and barter expense is recorded at the time the services are used.
The Company recognized barter revenue in the amount of $9.3 million and $12.4
million in the years ended December 31, 2000 and 1999, respectively, $1.9
million for the period from January 1, 1998 to March 2, 1998, and $5.6 million
for the period from March 3, 1998 to December 31, 1998. The Company incurred
barter expense in the amount of $9.0 million and $12.2 million in the years
ended December 31, 2000 and 1999, respectively, $1.9 million for the period from
January 1, 1998 to March 2, 1998, and $5.6 million for the period from March 3,
1998 to December 31, 1998.
ADVERTISING EXPENSE:
The cost of advertising is expensed as incurred. The Company incurred
advertising costs in the amount of $4.9 million and $4.2 million in the years
ended December 31, 2000 and 1999, respectively, $1.7 million for the period from
January 1, 1998 to March 2, 1998, and $3.1 million for the period from March 3,
1998 to December 31, 1998.
INTANGIBLE ASSETS:
Intangible assets include FCC licenses, network affiliations and goodwill,
all of which are being amortized over a period of 40 years.
LONG LIVED-ASSETS:
The Company periodically evaluates the net realizable value of long-lived
assets, including tangible and intangible assets, relying on a number of factors
including operating results, business plans, economic projections and
anticipated future cash flows. An impairment in the carrying value of an asset
is recognized when the expected future operating cash flow derived from the
asset is less than its carrying value.
An impairment assessment of enterprise level goodwill could be triggered by
significant operating or cash flow losses at one or more of the Company's
television stations, or a forecast of such losses, a significant adverse change
in the advertising marketplaces in which the Company's television stations
operate, or by adverse changes to FCC ownership rules, amongst others. Goodwill
is recorded at the television station level and, in the event that an impairment
assessment is triggered, impairment would be measured by comparing the net book
value of
F-9
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the related station to anticipated future operating cashflows from that station
on an undiscounted basis.
The future value of the Company's FCC licenses could be significantly
impaired by the loss of corresponding network affiliation agreements, or vice
versa. Accordingly, such an event would trigger an assessment of the carrying
value of the FCC license and network affiliation agreement recorded for each
station effected by such an event.
PROGRAM RIGHTS:
Program rights are recorded as assets when the license period begins and
the programs are available for broadcasting, at the gross amount of the related
obligations. Costs incurred in connection with the purchase of programs to be
broadcast within one year are classified as current assets, while costs of those
programs to be broadcast subsequently are considered noncurrent. The program
costs are charged to operations over their estimated broadcast periods using the
straight-line method. Program obligations are classified as current or
noncurrent in accordance with the payment terms of the license agreement.
ACCOUNTING FOR STOCK-BASED COMPENSATION:
The Company accounts for stock-based awards to employees using the
intrinsic value method as prescribed by Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts and with fixed exercise prices at least equal to the fair
market value of the underlying common stock at the date of grant. The Company
has adopted the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," through disclosure only (see Note 9).
INCOME TAXES:
Deferred income taxes are recognized based on temporary differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect in the years in which the temporary differences are expected
to reverse. A valuation allowance is applied against net deferred tax assets if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized.
CONCENTRATIONS OF CREDIT RISK:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and trade receivables. Concentration of credit risk with respect to cash and
cash equivalents is limited as the Company maintains its primary banking
relationships with only large nationally recognized institutions. Credit risk
with respect to trade receivables is limited, as the trade receivables are
primarily from advertising revenues generated from a large diversified group of
local and nationally recognized advertisers. The Company does not require
collateral or other security against trade receivable balances; however, it does
maintain reserves for potential credit losses and such losses have been within
management's expectations for all years presented.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
Financial instruments, including cash and cash equivalents, accounts
receivable, accounts payable and debt are carried in the consolidated financial
statements at amounts that
F-10
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximate fair value at December 31, 2000 and 1999, unless otherwise
disclosed. Fair values are based on quoted market prices and assumption
concerning the amount and timing of estimated future cash flows and assumed
discount rates, reflecting varying degrees of perceived risk.
RECLASSIFICATION:
Certain reclassifications have been made to the prior period financial
statements to conform to the current period financial statement presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In September 2000, the FASB issued SFAS No. 140 ("SFAS 140"), "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities -- a replacement of FASB Statement No. 125." SFAS 140 revises the
standards for accounting for securitizations and other transfers of financial
assets and collateral and requires certain disclosures, but it carries over most
of SFAS No. 125's provisions without reconsideration. This statement is
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after March 31, 2001. This statement is effective for
recognition and reclassification of collateral and for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000. The Company does not expect the application of SFAS 140 to
have a material impact on its financial position or results of operations.
NOTE 3 -- BUSINESS COMBINATIONS AND DISPOSITIONS:
WAND-TV Exchange. On April 1, 2000, the Company exchanged, with Block
Communications, a 66.7% interest in certain assets of its television station
WAND-TV, including its FCC license and network affiliation agreement, for
substantially all of the assets and certain liabilities of WLFI-TV, Inc. The
exchange was accounted for as a business combination under the purchase method
of accounting and, accordingly, the acquired assets and liabilities of WLFI-TV,
Inc. have been recorded at fair value. The excess of the fair value of the
acquired assets and liabilities of $23.7 million over the book value of the
interest in the assets of WAND-TV of $26.4 million has been recorded as a
non-operating loss. In connection with the exchange, the Company has indemnified
the seller for certain contingencies.
The result of operations associated with the acquired assets and
liabilities of WLFI-TV, Inc. have been included in the accompanying consolidated
financial statements from the date of acquisition. The acquisition is summarized
as follows (in thousands):
<Table>
Assets acquired and liabilities assumed
Working capital deficit..................................... $ (75)
Property and equipment...................................... 4,406
FCC license and network affiliation......................... 19,338
Other noncurrent assets, net................................ 76
-------
Total acquisition........................................... $23,745
=======
</Table>
Immediately after the WAND-TV exchange the Company and Block Communications
contributed their respective interests in the WAND-TV assets to a new
partnership, with the Company receiving a 33.3% interest in the new partnership.
The Company accounts for its interest using the equity method, as the Company
does not have a controlling interest. In
F-11
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
addition, the Company has entered into a management services agreement with
WAND-TV to provide certain management, engineering, and related services for a
fixed fee.
WWLP-TV. On November 10, 2000, the Company acquired the broadcast license
and operating assets of WWLP-TV, an NBC affiliate in Springfield, MA. The total
purchase price for the acquisition was approximately $128.0 million, including
direct costs of the acquisition. The acquisition was funded by borrowings under
the Company's term loan facility.
The acquisition was accounted for as a purchase and accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed
based on their fair values at the date of acquisition. The transaction is
summarized as follows (in thousands):
<Table>
Assets acquired and liabilities assumed
Working capital............................................. $ 4,664
Property and equipment...................................... 9,600
FCC license and network affiliation......................... 113,736
--------
Total acquisition........................................... $128,000
========
</Table>
Although the Company did not own or control the assets or FCC license of
WWLP-TV prior to November 10, 2000, pursuant to Emerging Issues Task Force Topic
D-14, "Transactions Involving Special Purpose Entities," WWLP Holdings, Inc.,
the parent of WWLP-TV, satisfied the definition of a special purpose entity, as
a result of a $75 million guarantee of WWLP Holdings, Inc. debt by the Company
and other factors, and the Company was deemed to be the sponsor of WWLP
Holdings, Inc.
Accordingly, the financial results of operations of WWLP Holdings, Inc.
have been consolidated with those of the Company since March 31, 2000, when WWLP
Holdings, Inc. acquired WWLP-TV from Benedek Broadcasting Corporation.
Unaudited Pro Forma Results of Acquisitions. The following summarizes
unaudited pro forma consolidated results of operations as if the acquisition of
LIN Television, the formation of the NBC joint venture, the acquisitions of
WOOD-TV, its LMA for WOTV, and WAPA-TV in prior periods had taken place as of
January 1, 1998, and the acquisitions of WLFI-TV and WWLP-TV in 2000 had taken
place as of January 1, 1999 (in thousands):
<Table>
<Caption>
2000 1999 1998
-------- -------- --------
Net revenues............................... $300,463 $287,809 $283,507
Operating income........................... 59,625 47,495 37,183
Net loss................................... (34,239) (37,396) (38,326)
</Table>
The pro forma data give effect to actual operating results prior to the
acquisition and adjustments to interest expense, amortization and income taxes.
No effect has been given to cost reductions and operating synergies in this
presentation. The pro forma results do not necessarily represent results that
would have occurred if the acquisition had taken place as of the beginning of
the periods presented, nor are they necessarily indicative of the results of
future operations.
NOTE 4 -- RELATED PARTY TRANSACTIONS:
Monitoring and Oversight Agreement. The Company is party to an agreement
with Hicks, Muse & Co. Partners, L.P. ("Hicks Muse Partners"), an affiliate of
the Company's ultimate parent, pursuant to which the Company agreed to pay Hicks
Muse Partners an annual fee
F-12
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(payable quarterly) for oversight and monitoring services. The aggregate annual
fee is adjustable, on a prospective basis, on January 1 of each calendar year to
an amount equal to 1% of the budgeted consolidated annual EBITDA of the Company
for the then current fiscal year. Upon the acquisition by the Company of another
entity or business, the fee is adjusted prospectively in the same manner using
the pro forma consolidated annual EBITDA of the Company. In no event shall the
annual fee be less than $1.0 million. Hicks Muse Partners is also entitled to
reimbursement for any expenses incurred by it in connection with rendering
services allocable to the Company. The annual fee was $1.3 million, $1.1
million, and $0.8 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
Financial Advisory Agreement. The Company is also party to an agreement
with Hicks Muse Partners, pursuant to which Hicks Muse Partners receives a fee
equal to 1.5% of the total value of certain transactions in which the Company is
involved. Transactions subject to this agreement include a tender offer,
acquisition, sale, merger, exchange offer, recapitalization, restructuring or
other similar transaction. This fee for the year ended December 31, 2000 was
$1.8 million, relating to the acquisition of WWLP-TV, and was included in the
total cost of that acquisition. This fee for the year ended December 31, 1999
was approximately $3.0 million. There were no fees in 1998.
NOTE 5 -- EQUITY INVESTMENTS:
The Company has investments in a number of ventures with third parties,
through which it has an interest in television stations in locations throughout
the United States of America. The following presents the Company's basis in
these ventures at December 31 (in thousands):
<Table>
<Caption>
2000 1999
-------- --------
NBC joint venture..................................... $ 65,886 $ 65,771
WAND (TV) Partnership................................. 13,784 --
Banks Broadcasting, Inc............................... 12,128 --
-------- --------
91,798 65,771
Southwest Sports Group................................ 53,000 50,000
-------- --------
$144,798 $115,771
======== ========
</Table>
Southwest Sports Group Holdings LLC. The Company owns 500,000 units of
Southwest Sports Group Holdings LLC ("SSG") Series A Preferred Units, par value
of $100 per unit. The Series A Preferred Units are entitled to receive
non-liquidating distributions prior to any junior ranked units of SSG in an
amount equal to $100 per Series A Preferred Unit, minus the amount of previously
made distributions, plus an amount of interest thereon at a rate of 6% per annum
compounded annually. The Company carries its investment in the Series A
Preferred Units at cost and has recorded $6.0 million of interest on the Series
A Preferred Units through December 31, 2000. As of December 31, 2000, no
distributions have been made with respect to the Series A Preferred Units.
SSG has the option at any time to redeem in whole or in part the
outstanding Series A Preferred Units for an amount equal to par plus imputed
interest at the rate of 6% from January 1, 1999 to the redemption date. The
Company has the right to convert its Series A Preferred Units into Class A Units
at the earlier of (a) the date of consumption of an underwritten initial public
offering of the Class A Units, (b) a change of control, or (c) the date that is
three years following the date of the first issuance of the Series A Preferred
Units.
F-13
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NBC Joint Venture. The Company owns a 20.38% interest in a joint venture
with NBC and accounts for its interest using the equity method, as the Company
does not have a controlling interest. The following presents the summarized
financial information of the joint venture (in thousands):
<Table>
<Caption>
PERIOD FROM
INCEPTION
(MARCH 3, 1998)
YEAR ENDED DECEMBER 31, TO
----------------------- DECEMBER 31,
2000 1999 1998
---------- ---------- ---------------
Net revenues........................... $171,349 $142,578 $119,849
Operating income....................... 78,823 40,830 28,438
Net income (loss)...................... 4,562 (24,144) (26,044)
</Table>
<Table>
<Caption>
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
Current assets.................................... $ 32,716 $ 159
Non-current assets................................ 241,408 249,692
Current liabilities............................... 1,087 725
Non-current liabilities........................... 815,500 815,500
</Table>
WAND (TV) Partnership: The following presents the summarized financial
information of the WAND (TV) Partnership as of December 31, 2000 and from April
1, 2000 (date of inception) to December 31, 2000 (in thousands):
<Table>
<Caption>
PERIOD FROM
INCEPTION
(APRIL 1) TO
DECEMBER 31,
2000
------------
Net revenues................................................ $ 6,363
Operating income............................................ 1,294
Net income.................................................. 1,294
</Table>
<Table>
<Caption>
DECEMBER 31,
2000
------------
Current assets.............................................. $ 2,825
Non-current assets.......................................... 35,143
Current liabilities......................................... 858
</Table>
Banks Broadcasting, Inc.: On August 15, 2000, the Company, 21st Century
Group LLC, an entity in which Hicks Muse, the Company's ultimate parent, has a
substantial economic interest, and BancAmerica Capital Investors SBIC I, L.P.
acquired non-voting Series A Convertible Preferred Stock in Banks Broadcasting,
Inc. Banks Broadcasting, Inc. is a broadcast station operator that owns and
operates KWCV-TV, a WB affiliate, in Wichita, Kansas and has a local marketing
agreement for KNIN-TV, a UPN affiliate serving the Boise, Idaho area.
The Company's preferred stock gives it a 50% non-voting interest in Banks
Broadcasting, Inc. The Company is able to exercise significant, but not
controlling, influence over the activities of Banks Broadcasting, Inc. through
representation on the Board of Directors and, therefore, accounts for its
investment using the equity method. The Company has also entered into a
management services agreement with Banks Broadcasting, Inc. to provide certain
F-14
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
management, engineering, and related services for a fixed fee. Included in this
is a cash management arrangement and at December 31, 2000 the amount due to the
Company from Banks Broadcasting, Inc. under this arrangement was approximately
$1.2 million.
The following presents the summarized financial information of Banks
Broadcasting, Inc. (in thousands):
<Table>
<Caption>
PERIOD FROM
INCEPTION
(AUGUST 15) TO
DECEMBER 31,
2000
--------------
Net revenues................................................ $1,990
Operating loss.............................................. (998)
Net loss.................................................... (632)
</Table>
<Table>
<Caption>
DECEMBER 31,
2000
------------
Current assets.............................................. $ 7,708
Non-current assets.......................................... 21,805
Current liabilities......................................... 2,530
Non-current liabilities..................................... 850
Redeemable preferred stock.................................. 26,765
</Table>
NOTE 6 -- PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31 (in
thousands):
<Table>
<Caption>
2000 1999
-------- --------
Land and improvements................................. $ 10,971 $ 10,555
Buildings and fixtures................................ 66,666 47,039
Broadcasting equipment and other...................... 135,930 117,224
-------- --------
213,567 174,818
Less: accumulated depreciation........................ (48,829) (29,936)
-------- --------
$164,738 $144,882
======== ========
</Table>
The Company recorded amortization and depreciation expense in the amount of
$21.3 million and $19.2 million in the years ended December 31, 2000 and 1999,
respectively, $2.3 million for the period from January 1, 1998 to March 2, 1998,
and $14.5 million for the period from March 3, 1998 to December 31, 1998.
F-15
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- INTANGIBLE ASSETS:
Intangible assets consisted of the following at December 31 (in thousands):
<Table>
<Caption>
2000 1999
---------- ----------
FCC licenses and network affiliations.............. $1,055,653 $ 943,270
Goodwill........................................... 652,508 670,397
LMA purchase options............................... 1,125 750
---------- ----------
1,709,286 1,614,417
Less: accumulated amortization..................... (108,404) (68,025)
---------- ----------
$1,600,882 $1,546,392
========== ==========
</Table>
NOTE 8 -- LONG-TERM DEBT:
Long-term debt consisted of the following at December 31 (in thousands):
<Table>
<Caption>
2000 1999
-------- --------
Senior Credit Facilities.............................. $425,690 $319,579
$300,000, 8 3/8% Senior Subordinated Notes due 2008
(net of discount of $558)........................... 299,442 299,387
$325,000, 10% Senior Discount Notes due 2008 (net of
discount of $61,875)................................ 263,125 238,660
-------- --------
Total debt............................................ 988,257 857,626
Less: current portion................................. (19,572) (15,805)
-------- --------
Total long-term debt.................................. $968,685 $841,821
======== ========
</Table>
SENIOR CREDIT FACILITIES:
On March 3, 1998, the Company entered into a Credit Agreement with the
Chase Manhattan Bank as administrative agent (the "Agent") and the lenders named
therein. Under the Credit Agreement, the Company established a $295 million term
loan facility, a $50 million revolving facility, and a $225 million incremental
term loan facility (collectively, the "Senior Credit Facilities").
Borrowings under the Senior Credit Facilities bear interest at a rate
based, at the option of the Company, on an adjusted LIBOR rate ("Adjusted
LIBOR"), or the highest of the Agent's prime rates, certificate of deposits rate
plus 1.00%, or the Federal Funds effective rate plus 1/2 of 1.00% plus an
incremental rate based on the Company's financial performance. As of December
31, 2000, the interest rates ranged from 8.00% to 9.04%, based on the Adjusted
LIBOR. As of December 31, 1999, the interest rates ranged from 7.00% to 8.35%,
based on the Adjusted LIBOR. The Company is required to pay quarterly commitment
fees ranging from 0.25% to 0.50%, based upon the Company's leverage ratio for
that particular quarter on the unused portion of the loan commitment, in
addition to annual agency and other administration fees.
The revolving credit facility (up to $50 million) is available until
maturity on March 31, 2005. The Tranche A Term Loan (approximately $111 million)
amortizes in increasing quarterly installments until maturity on March 31, 2005.
The Tranche B Term Loans (approximately $113 million) amortize in quarterly
installments beginning March 31, 2005 until the final
F-16
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
maturity of March 31, 2007. The Incremental Term Loans (approximately $187
million) amortize 1% annually until final maturity on September 30, 2007.
The obligations of the Company under the Senior Credit Facilities are
unconditionally and irrevocably guaranteed, jointly and severally, by LIN
Holdings and by each existing and subsequently acquired or organized subsidiary
of the Company. In addition, substantially all of the assets of the Company and
its subsidiaries are pledged as collateral against the performance of these
obligations. The Senior Credit Facilities are subject to compliance with certain
financial covenants, such as consolidated leverage and interest coverage, and
other conditions set forth in the Credit Agreement.
SENIOR SUBORDINATED NOTES:
On March 3, 1998, LIN Television issued $300 million aggregate principal
amount of 8 3/8% Senior Subordinated Notes due 2008 in a private placement for
net proceeds of $290.3 million. Such Senior Subordinated Notes were subsequently
registered with the SEC pursuant to a Registration Statement filed on August 12,
1998. The Senior Subordinated Notes are unsecured obligations of LIN Television
without collateral rights, subordinated in right of payment to all existing and
any future senior indebtedness of LIN Television. The Senior Subordinated Notes
are fully and unconditionally guaranteed, on a joint and several basis, by all
wholly owned subsidiaries of LIN Television. Interest on the Senior Subordinated
Notes accrues at a rate of 8 3/8% per annum and is payable in cash,
semi-annually in arrears, commencing on September 1, 1998. The Company is
subject to compliance with certain financial covenants and other conditions set
forth in the Registration Statement.
SENIOR DISCOUNT NOTES:
On March 3, 1998, the Company issued $325 million aggregate principal
amount at maturity of 10% senior discount notes due 2008 in a private placement.
Such senior discount notes were subsequently registered with the SEC pursuant to
a Registration Statement filed on August 12, 1998. The senior discount notes
were issued at a discount and generated net proceeds of $192.6 million. The
senior discount notes are unsecured senior obligations and are not guaranteed.
Cash interest will not accrue or be payable on the senior discount notes prior
to March 1, 2003. Thereafter, cash interest will accrue at a rate of 10% per
annum and will be payable semi-annually in arrears commencing on September 1,
2003. The Company is subject to compliance with certain financial covenants and
other conditions set forth in the Registration Statement.
A mandatory principal redemption amount (expected to be $125 million) of
the senior discount notes will become due and payable in a lump sum on March 1,
2003.
The fair values of the Company's long-term debt are estimated based on
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
The carrying amounts and fair values of long-term debt were as follows at
December 31 (in thousands):
<Table>
<Caption>
2000 1999
-------- --------
Carrying amount....................................... $988,257 $857,626
Fair value............................................ 932,565 824,142
</Table>
See Note 16 -- Subsequent Events for Bank Covenants.
F-17
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- STOCKHOLDERS' EQUITY:
Stock Option Plans. The Company participates in the Ranger Equity Holdings
Corporation 1998 Stock Option Plan (the "1998 Option Plan"). Pursuant to the
1998 Option Plan, nonqualified options in Ranger common stock have been granted
to certain directors, officers and key employees of the Company. Prior to March
3, 1998, nonqualified options in the stock of LIN Television were granted to
certain directors, officers and key employees of the Predecessor pursuant to the
LIN Television 1994 Adjustment Stock Incentive Plan, the LIN Television Amended
and Restated 1994 Stock Incentive Plan and the LIN Television 1994 Nonemployee
Director Stock Incentive Plan (collectively, the "Predecessor Stock Option
Plans"), each of which was terminated, and all options granted under each
cancelled, effective March 3, 1998. The Company also participates in the Ranger
Equity Holdings 1998 Phantom Stock Plan ("Phantom Stock Units Plan"), pursuant
to which phantom units, or stock appreciation rights, with a $0 exercise price,
have been granted to officers and key employees.
Options granted under the 1998 Option Plan and the Predecessor Stock Option
Plans have exercise prices equal to the fair market value of the underlying
common stock at the date of grant. The Board of Directors, in assessing the fair
market value of common stock, considered factors relevant at the time, including
recent third-party transactions, composition of the management team, recent
hiring results, financial condition and operating results and the lack of a
public market for the Company's common stock.
Options granted pursuant to the 1998 Option Plan generally have
straight-line vesting terms over four or five years and expire ten years from
the date of grant. At December 31, 2000, there were 1,389,000 shares available
for future grant under the 1998 Option Plan. Phantom Units granted pursuant to
the Phantom Stock Units Plan expire ten years from the date of grant, are
non-forfeitable, and are exercisable at a date selected by the employee within
the 10-year term.
Pro Forma information regarding net loss as required by SFAS No. 123 has
been determined as if the Company had accounted for its employee stock options
under the fair value method. The fair value for these options was estimated at
the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions for grants in 1998, 1999 and 2000: a risk
free interest rate of 5.18%, 5.96% and 5.92%, respectively, and a
weighted-average expected life of the options of seven years. No expected
dividend yield was included in the option-pricing model. If the Company had
elected to adopt the optional recognition provisions of SFAS No. 123 for its
stock option grants, net loss would have been changed to the pro forma amounts
indicated below (in thousands):
<Table>
<Caption>
PREDECESSOR
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
-------- -------- ------------ -----------
Pro forma net loss.................... $(36,658) $(36,225) $(28,956) $(2,744)
</Table>
F-18
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table provides additional information regarding the
Predecessor Stock Option Plans, the 1998 Option Plan and the Phantom Stock Units
Plan (shares in thousands):
<Table>
<Caption>
PREDECESSOR STOCK
OPTION PLANS
------------------ 1998 OPTION PLAN
PERIOD FROM ------------------------------------------------------------
JANUARY 1 TO PERIOD FROM YEAR ENDED DECEMBER 31,
MARCH 2, MARCH 3 TO ---------------------------------------
1998 DECEMBER 31, 1998 1999 2000
------------------ ------------------ ------------------ ------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
------ --------- ------ --------- ------ --------- ------ ---------
Outstanding at beginning of
period.......................... 2,372 $26.75 -- 33,614 $0.88 34,362 $0.88
Granted........................... -- 35,101 $0.85 2,047 1.00 5,474 1.19
Exercised......................... -- (1,000) 1.00 -- (30) 0.68
Forfeited......................... -- (487) 0.83 (1,299) 1.00 (1,527) 1.00
Acquisition of LIN Television..... (2,372) 26.75 -- -- --
------ ------ ------ ------
Outstanding at end of period...... -- 33,614 0.88 34,362 0.88 38,279 0.92
====== ====== ====== ======
Options exercisable at
period-end...................... 5,098 10,932 17,100
Weighted-average fair value of
options granted during the
period.......................... $ 0.36 $ 0.33 $ 0.40
</Table>
<Table>
<Caption>
PHANTOM STOCK UNITS PLAN
--------------------------------------
YEAR ENDED
DECEMBER 31,
PERIOD FROM MARCH 3 ---------------
TO DECEMBER 31, 1998 1999 2000
-------------------- ------ ------
SHARES SHARES SHARES
-------------------- ------ ------
Outstanding at beginning of period............. -- 14,074 14,074
Granted........................................ 14,324 -- --
Exercised...................................... (250) -- (133)
------ ------ ------
Outstanding at end of period................... 14,074 14,074 13,941
====== ====== ======
</Table>
The following table summarizes information about the 1998 Option Plan at
December 31, 2000 (shares in thousands):
<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- ------------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
NUMBER REMAINING EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
------------------------ ----------- ---------------- ---------------- ----------- ----------------
$0.50 to $0.99......... 11,270 7.2 years $0.55 8,168 $0.54
$1.00 to $1.25......... 27,009 8.1 1.07 8,932 1.00
</Table>
NOTE 10 -- INCOME TAXES:
The Company has been included in the consolidated federal income tax return
filed by Ranger. Pursuant to the tax-sharing agreement between the Company and
Ranger, tax liabilities and benefits were determined as if Ranger and the
Company were each separate and independent entities. As of December 31, 2000, no
amounts were due to or receivable from the Company under the tax sharing
agreement.
F-19
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Provision for (benefit from) income taxes included in the accompanying
consolidated statements of operations consisted of the following (in thousands):
<Table>
<Caption>
PREDECESSOR
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
------------------ DECEMBER 31, MARCH 2,
2000 1999 1998 1998
------- ------- ------------ -----------
Current:
Federal............................ $ -- $ -- $ -- $1,740
State.............................. 1,102 340 1,140 63
Foreign............................ 315
------- ------- ------- ------
1,417 340 1,140 1,803
------- ------- ------- ------
Deferred:
Federal............................ (1,788) (3,550) (4,197) 1,815
State.............................. (133) (825) (595) 92
Foreign............................ 2,085 996 -- --
------- ------- ------- ------
164 (3,379) (4,792) 1,907
------- ------- ------- ------
$ 1,581 $(3,039) $(3,652) $3,710
======= ======= ======= ======
</Table>
The components of the income (loss) before income taxes were as follows (in
thousands):
<Table>
<Caption>
PREDECESSOR
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
-------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
-------- -------- ------------ -----------
United States of America........... $(40,839) $(40,784) $(30,911) $966
Foreign............................ 8,226 3,719 -- --
-------- -------- -------- ----
Income (loss) before income
taxes............................ $(32,613) $(37,065) $(30,911) $966
======== ======== ======== ====
</Table>
The following table reconciles the amount that would be provided
(benefited) by applying the 35% federal statutory rate to income (loss) before
income taxes to the actual provision for (benefit from) income taxes (in
thousands):
<Table>
<Caption>
PREDECESSOR
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
-------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
-------- -------- ------------ -----------
Provision (benefit) assuming
federal statutory rate........... $(11,415) $(12,973) $(10,693) $ 338
State taxes, net of federal tax
benefit.......................... 630 (315) 354 41
Amortization....................... 9,948 9,379 5,431 180
Foreign taxes...................... 2,290 996 -- --
Merger expenses.................... -- -- -- 3,017
Other.............................. 128 (126) 1,256 134
-------- -------- -------- ------
$ 1,581 $ (3,039) $ (3,652) $3,710
======== ======== ======== ======
</Table>
F-20
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the deferred tax liability are as follows at December 31
(in thousands):
<Table>
<Caption>
2000 1999
-------- --------
Deferred tax liabilities:
Intangible assets................................... $506,071 $506,376
Property and equipment.............................. 22,642 21,834
Investments......................................... 12,258 11,208
-------- --------
540,971 539,418
-------- --------
Deferred tax assets:
Net operating loss carryforwards.................... (20,701) (16,647)
Valuation allowance................................. 5,576 7,661
Other............................................... (4,352) (6,109)
-------- --------
(19,477) (15,095)
-------- --------
Net deferred tax liabilities.......................... $521,494 $524,323
======== ========
</Table>
The valuation allowance relates to certain acquired net operating loss
carryovers in Puerto Rico. At December 31, 1999, the Company had determined that
it was more likely than not that these deferred tax assets would not be
realized. During the year ended December 31, 2000, the Company reduced the
valuation allowance by approximately $2.1 million to reflect the usage of a
portion of these losses. The Company, under the applicable accounting standards,
has concluded that it is more likely than not that the remaining losses will not
be realized and, therefore, has retained a valuation allowance of $5.6 million
as of December 31, 2000. All reductions to the valuation allowance are recorded
as a decrease to acquisition related intangible assets, rather than a tax
provision benefit, as the net operating loss carryovers were fully reserved at
the time of the related business combination. The Company reevaluates positive
and negative evidence relating to the need for a valuation allowance
periodically.
At December 31, 2000, the Company had a federal net operating loss
carryforward of approximately $43.2 million that begins to expire in 2019. The
net operating loss carryforward in Puerto Rico of approximately $19.6 million
will expire between 2001 and 2005.
NOTE 11 -- RETIREMENT PLANS:
401(k) Plan. The Company provides a defined contribution plan ("401(k)
Plan") to substantially all employees. The Company makes contributions to
employee groups that are not covered by another retirement plan sponsored by the
Company. Contributions made by the Company vest based on the employee's years of
service. Vesting begins after six months of service in 20% annual increments
until the employee is 100% vested after five years. The Company matches 50% of
the employee's contribution up to 6% of the employee's total annual
compensation. The Company contributed $1.1 million and $891,000 to the 401(k)
Plan in the years ended December 31, 2000 and 1999, respectively. For the period
from inception (March 2, 1998) to December 31, 1998, the Company contributed
$469,000 and for the period from January 1, 1998 to March 2, 1998, the Company
contributed $98,000.
Retirement Plan. The Company is the sponsor of the LIN Television
Corporation Retirement Plan (the "Retirement Plan"). The Retirement Plan is a
noncontributory defined benefit retirement plan that covers employees of the
Company who meet certain requirements, including length of service and age.
Pension benefits vest on completion of five years of service
F-21
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and are computed, subject to certain adjustments, by multiplying 1.25% of the
employee's last three years' average annual compensation by the number of years
of credited service. The assets of the pension plan are invested primarily in
long-term fixed income securities, large and small cap U.S. equities, and
international equities. The Company's policy is to fund at least the minimum
requirement and is further based on legal requirements and tax considerations.
No funding was required for the Retirement Plan during 2000, 1999 and 1998.
The components of the net pension expense included in the financial
statements and information with respect to the change in benefit obligation,
change in plan assets, the funded status of the Retirement Plan and underlying
assumptions are as follows:
RETIREMENT PLAN
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<Table>
<Caption>
PREDECESSOR
PERIOD
YEAR ENDED PERIOD FROM FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
-------- -------- ------------ -----------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation, beginning of period....... $ 53,425 $ 60,048 $53,252 $ 52,440
Service cost.................................. 763 955 615 176
Interest cost................................. 3,971 3,942 3,044 600
Plan amendments............................... (246) -- -- --
Actuarial loss (gain)......................... -- (10,052) 5,298 296
Curtailments.................................. -- -- (682) --
Benefits paid................................. (1,899) (1,468) (1,479) (260)
-------- -------- ------- --------
Benefit obligation, end of period............. $ 56,014 $ 53,425 $60,048 $ 53,252
======== ======== ======= ========
CHANGE IN PLAN ASSETS
Fair value of plan assets, beginning of
period...................................... $ 69,279 $ 63,965 $61,686 $ 58,015
Actual return on plan assets.................. (556) 6,782 3,758 3,931
Benefits paid................................. (1,899) (1,468) (1,479) (260)
-------- -------- ------- --------
Fair value of plan assets, end of period...... $ 66,824 $ 69,279 $63,965 $ 61,686
======== ======== ======= ========
Funded status of the plan..................... $ 10,810 $ 15,854 $ 3,917 $ 8,434
Unrecognized actuarial gain................... (13,104) (19,363) (7,039) (11,898)
Unrecognized prior service (credit) cost...... (216) 9 228 988
Unrecognized net transition asset............. (313) (627) (940) (1,201)
-------- -------- ------- --------
Total amount recognized and accrued benefit
liability................................... $ (2,823) $ (4,127) $(3,834) $ (3,677)
======== ======== ======= ========
ASSUMPTIONS AS OF PERIOD END
Discount rate................................. 7.50% 7.50% 6.50% 7.00%
Expected return on plan assets................ 8.25% 8.25% 8.25% 8.00%
Rate of compensation increase................. 5.00% 5.00% 5.00% 5.00%
Health care cost trend rate................... n/a n/a n/a n/a
</Table>
F-22
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
PREDECESSOR
PERIOD
YEAR ENDED PERIOD FROM FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
-------- -------- ------------ -----------
NET PERIODIC COST
Service cost.................................. $ 763 $ 955 $ 615 $ 176
Interest cost................................. 3,971 3,942 3,044 600
Expected return on assets..................... (5,087) (4,510) (3,319) (650)
Prior service cost amortization............... (22) 219 503 136
Actuarial gain recognized..................... (616) -- -- --
Transition amount recognized.................. (313) (313) (261) (52)
Curtailment gain.............................. -- -- (426) --
-------- -------- ------- --------
Net periodic (credit) cost.................... $ (1,304) $ 293 $ 156 $ 210
======== ======== ======= ========
</Table>
SUPPLEMENTAL BENEFITS RETIREMENT PLAN
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<Table>
<Caption>
PREDECESSOR
PERIOD
YEAR ENDED PERIOD FROM FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
----------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
------- ------- ------------ -----------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation, beginning of period......... $ 1,688 $ 1,891 $ 1,987 $ 1,801
Service cost.................................... 169 180 118 34
Interest cost................................... 137 127 93 22
Plan amendments................................. (25) -- -- --
Actuarial loss (gain)........................... -- (510) 204 130
Curtailments.................................... -- -- (511) --
------- ------- ------- -------
Benefit obligation, end of period............... $ 1,969 $ 1,688 $ 1,891 $ 1,987
======= ======= ======= =======
Funded status of the plan....................... $(1,969) $(1,688) $(1,891) $(1,987)
Unrecognized actuarial (gain) loss.............. (58) (58) 468 785
Unrecognized prior service (credit) cost........ (14) 6 8 12
Unrecognized net transition asset............... (16) (33) (49) (62)
------- ------- ------- -------
Total amount recognized and accrued benefit
liability..................................... $(2,057) $(1,773) $(1,464) $(1,252)
======= ======= ======= =======
ASSUMPTIONS AS OF PERIOD END
Discount rate................................... 7.50% 7.50% 6.50% 7.00%
Expected return on plan assets.................. 8.25% 8.25% 8.25% 8.00%
Rate of compensation increase................... 5.00% 5.00% 5.00% 5.00%
Health care cost trend rate..................... n/a n/a n/a n/a
</Table>
F-23
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
PREDECESSOR
PERIOD
YEAR ENDED PERIOD FROM FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
----------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
------- ------- ------------ -----------
NET PERIODIC COST
Service cost.................................... $ 169 $ 180 $ 118 $ 34
Interest cost................................... 137 127 93 22
Prior service (credit) cost amortization........ (5) 2 2 --
Actuarial Loss Recognized....................... -- 16 10 10
Transition amount recognized.................... (16) (16) (14) (3)
Curtailment gain................................ -- -- 3 --
------- ------- ------- -------
Net periodic cost............................... $ 285 $ 309 $ 212 $ 63
======= ======= ======= =======
</Table>
NOTE 12 -- COMMITMENTS & CONTINGENCIES:
COMMITMENTS:
The Company leases land, buildings, vehicles and equipment under
noncancelable operating lease agreements that expire at various dates through
2011. Commitments for noncancelable operating lease payments at December 31,
2000 are as follows (in thousands):
<Table>
<Caption>
YEAR
----
2001........................................................ $1,566
2002........................................................ 1,387
2003........................................................ 757
2004........................................................ 286
2005........................................................ 120
Thereafter.................................................. 148
------
$4,264
======
</Table>
Rent expense included in the consolidated statements of operations was $1.3
million and $1.4 million for the years ended December 31, 2000 and 1999,
respectively, $100,000 for the period from January 1, 1998 to March 2, 1998, and
$1.1 million for the period from March 3, 1998 to December 31, 1998.
The Company has also entered into commitments for future syndicated news,
entertainment, and sports programming. Future payments associated with these
commitments at December 31, 2000 are as follows (in thousands):
<Table>
<Caption>
YEAR RECORDED CONTRACTS
---- -------- ---------
2001............................................ $13,491 $ 3,369
2002............................................ 2,591 11,215
2003............................................ 1,129 8,614
2004............................................ 248 8,098
2005............................................ 16 2,235
------- -------
$17,475 $33,531
======= =======
</Table>
F-24
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONTINGENCIES:
Changes in FCC Ownership Rules. Effective November 16, 2000, the FCC
significantly revised certain of its broadcast ownership regulations. Among the
FCC actions were: 1) relaxing the current "duopoly" rule to permit substantially
more frequent waivers of the rule and permitting ownership of two television
stations in a local market under certain circumstances; 2) determining that
television LMAs were equivalent to ownership for purposes of the local ownership
rules and thus permissible only where ownership was permissible; 3)
grandfathering television LMAs entered into prior to November 5, 1996, until at
least after the conclusion of a rulemaking, to be initiated no sooner than 2004,
examining whether it would be in the public interest to permit such combinations
to continue; 4) permitting the free transferability of grandfathered LMAs during
the grandfather period but limiting the transferability of television duopolies
where one entity owns both stations; and 5) modifying the FCC's radio-television
cross-ownership rules to permit the possession of "attributable" ownership
interests in a maximum of two television stations and six radio stations in
larger markets and two television and four radio stations in smaller markets.
Under the new rules, management believes that: 1) the four LMAs the
Company has entered into in the Grand Rapids, New Haven, Austin and Norfolk
markets are grandfathered; and 2) these four combinations are probably eligible
for waivers of the duopoly rule and the Company will likely be able to convert
those LMAs to ownership interests through the exercise of option rights with
respect to each of those stations prior to the expiration of the grandfather
period.
Litigation. On September 4, 1997, the Company announced that it had
learned of four lawsuits regarding the then proposed acquisition of LIN
Television. The Company and all of its then present directors were defendants in
all of the lawsuits. AT&T was a defendant in three of the lawsuits, and an AT&T
affiliate and Hicks Muse were defendants in one of the lawsuits. Each of the
lawsuits was filed by a purported shareholder of the Company seeking to
represent a putative class of all the Company's public stockholders. Three of
these lawsuits have been dismissed and the Company believes the remaining
lawsuit is unlikely to have a material adverse effect on the financial position,
results of operations or cash flows of the Company.
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. In the opinion of the Company's
management, none of such litigation as of December 31, 2000 is likely to have a
material adverse effect on the financial position, results of operations or cash
flows of the Company.
NOTE 13 -- LOCAL MARKETING AGREEMENTS:
The Company has entered into option and put agreements that would enable or
require the Company to purchase its LMAs for a fixed amount under certain
conditions. Given the recent changes in FCC ownership rules, the Company, at the
option of the parties involved in the LMA contracts, could be required to
purchase certain of the LMA stations. Potential commitments for fulfilling the
put options totaled a maximum of $34.9 million, subject to adjustments for
monthly rental payments and outstanding loans, at December 31, 2000. In
connection with its LMAs, the Company is required to pay fixed periodic fees.
F-25
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum fees required under the LMAs at December 31, 2000 are as
follows (in thousands):
<Table>
<Caption>
YEAR
----
2001...................................................... $ 3,212
2002...................................................... 3,114
2003...................................................... 2,576
2004...................................................... 2,307
2005...................................................... 1,536
Thereafter................................................ 2,748
-------
$15,493
=======
</Table>
NOTE 14 -- UNAUDITED QUARTERLY DATA (IN THOUSANDS):
<Table>
<Caption>
QUARTER ENDED
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
2000 2000 2000 2000
--------- -------- ------------- ------------
Net revenues........................ $ 59,274 $77,798 $72,094 $86,540
Operating income.................... 4,291 17,724 11,204 25,383
Net income (loss)................... (22,566) (6,606) (7,331) 2,309
</Table>
<Table>
<Caption>
MARCH 31, 1999 JUNE 30, 1999 SEPTEMBER 30, 1999 DECEMBER 31, 1999
-------------- ------------- ------------------ -----------------
Net revenues................. $ 44,610 $ 56,629 $ 52,377 $70,830
Operating income (loss)...... (1,011) 11,738 6,333 18,930
Net loss..................... (15,171) (6,797) (10,662) (1,396)
</Table>
NOTE 15 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (IN THOUSANDS):
<Table>
<Caption>
PERIOD FROM PREDECESSOR
YEAR ENDED DECEMBER 31, MARCH 3 - JANUARY 1 -
----------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
---------- ---------- ------------ -----------
Cash paid for interest..................... $ 63,082 $ 43,732 $ 23,059 $2,895
Cash paid for income taxes................. 1,011 599 1,075 46
NONCASH INVESTING ACTIVITIES:
Value of preferred units received on
disposal of KXTX-TV...................... -- 47,000 -- --
CASH INVESTING ACTIVITIES:
On March 3, 1998, Ranger acquired LIN
Television Corporation for approximately
$1.7 billion. In conjunction with this
acquisition, liabilities were assumed as
follows:
Fair value of assets acquired and
intangible assets..................... -- -- 1,798,652 --
Cash paid................................ -- -- (1,176,359) --
--------- --------- ----------- ------
Liabilities assumed................... -- -- 622,293 --
========= ========= =========== ======
</Table>
F-26
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
PERIOD FROM PREDECESSOR
YEAR ENDED DECEMBER 31, MARCH 3 - JANUARY 1 -
----------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
---------- ---------- ------------ -----------
On June 30, 1999, the Company acquired
WOOD-TV and its LMA WOTV-TV for
approximately $142.4 million. In
conjunction with this acquisition,
liabilities were assumed as follows:
Fair value of assets acquired and
intangible assets..................... -- 158,146 -- --
Cash paid................................ -- (142,385) -- --
--------- --------- ----------- ------
Liabilities assumed................... -- 15,761 -- --
========= ========= =========== ======
On October 19, 1999, the Company acquired
Pegasus Broadcasting of San Juan, LLC for
approximately $71.8 million. In
conjunction with this acquisition,
liabilities were assumed as follows:
Fair value of assets acquired and
intangible assets..................... -- 89,575 -- --
Cash paid................................ -- (71,800) -- --
--------- --------- ----------- ------
Liabilities assumed................... -- 17,775 -- --
========= ========= =========== ======
On April 1, 2000, the Company exchanged
two-thirds of WAND-TV for WLFI-TV, Inc.
valued at approximately $23.7 million. In
conjunction with this acquisition,
liabilities were assumed as follows:
Fair value of assets acquired and
intangible assets..................... 23,820 -- -- --
2/3 of WAND-TV........................... (23,745) -- -- --
--------- --------- ----------- ------
Liabilities assumed................... 75 -- -- --
========= ========= =========== ======
On November 10, 2000, the Company acquired
WWLP-TV for approximately $128.0 million.
In conjunction with this acquisition,
liabilities were assumed as follows:
Fair value of assets acquired and
intangible assets..................... 128,635 -- -- --
Cash paid................................ (128,000) -- -- --
--------- --------- ----------- ------
Liabilities assumed................... 635 -- -- --
========= ========= =========== ======
</Table>
NOTE 16 -- SUBSEQUENT EVENTS:
Acquisition of WNLO-TV (WNEQ-TV). On November 7, 2000, the Company agreed
to acquire from the Western New York Public Broadcasting Association certain
assets of WNEQ-TV, a noncommercial independent broadcast television station
located in Buffalo, New York. On January 29, 2001 the Company began operating
WNEQ-TV under a LMA agreement and subsequently changed the station's call
letters to WNLO-TV. The Company expects to close on the acquisition of WNLO-TV
in the second quarter of 2001. The total purchase price is
F-27
LIN HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $26.2 million, and will be funded by a combination of operating
funds and additional term loans. The Company intends to account for the business
combination under the purchase method of accounting.
Acquisition of WNAC-TV. On January 3, 2001, the Company and STC
Broadcasting, Inc., an entity in which Hicks Muse has a substantial economic
interest, and its affiliates, Smith Acquisition Company, Smith Acquisition
License Company and STC License Company, executed an Asset Purchase Agreement
whereby the Company will acquire the FCC license and certain related assets of
WNAC-TV, the Fox affiliate serving the Providence-New Bedford DMA, for
approximately $2.5 million. After the Company acquires WNAC-TV, the station will
be operated by STC Broadcasting, Inc. under an existing LMA agreement dated June
10, 1996. The transaction will be entirely financed through a Loan Agreement
with STC Broadcasting, Inc. and the Company. The Company expects to close on the
acquisition of WNAC-TV in second quarter of 2001. The Company intends to account
for the acquisition under the purchase method of accounting.
Form 8-K. On March 26, 2001, the Company filed a current report on Form
8-K with the Securities and Exchange Commission. In this Form 8-K, the Company
announced that revenues and broadcast cash flow for 2001 were forecast to
decline from the equivalent results in 2000, after adjustment to reflect
acquisitions and disposals. The Company also reported that it intended to engage
in discussions with its senior lenders to adjust certain covenant levels in
order to reflect the weaker business environment.
F-28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of LIN Television Corporation:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows present fairly, in all material respects, the financial position of LIN
Television Corporation and its subsidiaries at December 31, 2000 and 1999, and
the results of their operations and their cash flows for the years ended
December 31, 2000 and 1999, and for the period from March 3, 1998 (date of
acquisition) to December 31, 1998, in conformity with accounting principles
generally accepted in the United States of America. 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 of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 8, 2001, except
as to Note 16 which is
as of March 26, 2001.
F-29
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of LIN Television Corporation:
In our opinion, the accompanying consolidated statements of operations and
of cash flows present fairly, in all material respects, the results of
operations and cash flows of LIN Television Corporation and its subsidiaries
(the "Predecessor") for the period from January 1, 1998 to March 2, 1998, in
conformity with generally accepted accounting principles. 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 audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 17, 1999
F-30
LIN TELEVISION CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<Table>
<Caption>
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents................................... $ 7,832 $ 17,699
Accounts receivable, less allowance for doubtful accounts
(2000 -- $1,679; 1999 -- $1,918).......................... 58,826 55,515
Program rights.............................................. 13,614 13,601
Other current assets........................................ 4,302 6,988
---------- ----------
Total current assets...................................... 84,574 93,803
Property and equipment, net................................. 164,738 144,882
Deferred financing costs.................................... 27,142 31,120
Equity investments.......................................... 91,798 65,771
Investment in Southwest Sports Group, at cost plus accrued
interest.................................................. 53,000 50,000
Program rights.............................................. 4,155 4,552
Intangible assets, net...................................... 1,600,882 1,546,392
Other assets................................................ 9,918 5,732
---------- ----------
Total Assets...................................... $2,036,207 $1,942,252
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 7,226 $ 7,477
Program obligations......................................... 13,491 13,336
Accrued income taxes........................................ 5,578 4,750
Current portion of long-term debt........................... 19,572 15,805
Accrued interest expense.................................... 10,809 10,494
Accrued sales volume discount............................... 4,728 4,269
Other accrued expenses...................................... 16,604 23,120
---------- ----------
Total current liabilities................................. 78,008 79,251
Long-term debt, excluding current portion................... 705,560 603,161
Deferred income taxes....................................... 536,619 533,309
LIN Holdings tax sharing obligations........................ 8,364 --
Program obligations......................................... 3,984 5,819
Other liabilities........................................... 7,002 7,050
---------- ----------
Total liabilities................................. 1,339,537 1,228,590
---------- ----------
Commitments and Contingencies (Note 4, Note 12 and Note 13)
Stockholders' equity:
Preferred stock, $0.01 par value: no shares authorized.... -- --
Common stock, $0.01 par value: 1,000 shares authorized,
issued and outstanding................................. -- --
Additional paid-in capital................................ 748,523 748,054
Accumulated deficit....................................... (51,853) (34,392)
---------- ----------
Total stockholders' equity........................ 696,670 713,662
---------- ----------
Total liabilities and stockholders' equity........ $2,036,207 $1,942,252
========== ==========
</Table>
The accompanying notes are an integral part of the consolidated financial
statements.
F-31
LIN TELEVISION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<Table>
<Caption>
PREDECESSOR
PERIOD FROM PERIOD FROM
YEAR ENDED DECEMBER 31, MARCH 3 - JANUARY 1 -
----------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
---------- ---------- ------------ -----------
Net revenues................................ $295,706 $224,446 $189,536 $43,804
Operating costs and expenses:
Direct operating.......................... 78,693 57,292 48,812 11,117
Selling, general and administrative....... 64,193 49,123 42,168 11,701
Corporate................................. 9,270 7,900 7,130 1,170
KXTX Management Fee....................... -- 1,178 8,033 --
Amortization of program rights............ 21,214 15,029 10,712 2,743
Depreciation and amortization of
intangible assets...................... 63,734 57,934 45,199 4,581
-------- -------- -------- -------
Total operating costs and expenses.......... 237,104 188,456 162,054 31,312
-------- -------- -------- -------
Operating income............................ 58,602 35,990 27,482 12,492
Other (income) expense:
Interest expense.......................... 67,126 45,315 35,577 2,764
Investment income......................... (4,052) (3,280) (1,220) (98)
Share of (income) loss in equity
investments............................ (365) 5,488 6,037 244
Loss on WAND-TV exchange.................. 2,720 -- -- --
Loss on disposition of KXTX-TV............ -- 2,212 -- --
Merger expense............................ -- -- -- 8,616
Other, net................................ 44 (54) -- --
-------- -------- -------- -------
Total other expense, net.................... 65,473 49,681 40,394 11,526
-------- -------- -------- -------
Income (loss) before provision for (benefit
from) income taxes........................ (6,871) (13,691) (12,912) 966
Provision for (benefit from) income taxes... 10,590 5,141 2,648 3,710
-------- -------- -------- -------
Net income (loss)........................... $(17,461) $(18,832) $(15,560) $(2,744)
======== ======== ======== =======
</Table>
The accompanying notes are an integral part of the consolidated financial
statements.
F-32
LIN TELEVISION CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<Table>
<Caption>
COMMON STOCK ADDITIONAL TOTAL
---------------- TREASURY PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT STOCK CAPITAL DEFICIT EQUITY
------- ------ -------- ---------- ----------- -------------
Balance at December 31, 1997
(Predecessor).................. 29,857 $ 299 $ (3) $ 283,177 $(90,908) $ 192,565
Net loss (Jan 1 - Mar 2)....... -- -- -- -- (2,744) (2,744)
Proceeds from exercises of
stock options and issuance
of Employee Stock Purchase
Plan shares (Jan 1 - Mar
2).......................... 29 -- -- 1,071 -- 1,071
Tax benefit from exercises of
stock options (Jan 1 - Mar
2).......................... -- -- -- 10,714 -- 10,714
------- ----- ---- --------- -------- ---------
Balance at March 2, 1998
(Predecessor).................. 29,886 299 (3) 294,962 (93,652) 201,606
Net loss....................... -- -- -- -- (15,560) (15,560)
Acquisition of LIN Television
Corporation and contribution
of KXAS-TV to NBC Joint
Venture..................... (29,886) (299) 3 (294,962) 93,652 (201,606)
Equity contribution............ 1 -- -- 744,977 -- 744,977
Proceeds from capital
contributions............... -- -- -- 1,000 -- 1,000
Payments on exercises of
phantom stock units......... -- -- -- (250) -- (250)
Tax benefit from exercises of
stock options............... -- -- -- 795 -- 795
------- ----- ---- --------- -------- ---------
Balance at December 31, 1998..... 1 -- -- 746,522 (15,560) 730,962
Net loss....................... -- -- -- -- (18,832) (18,832)
Tax benefit from exercises of
stock options............... -- -- -- 1,532 -- 1,532
------- ----- ---- --------- -------- ---------
Balance at December 31, 1999..... 1 -- -- 748,054 (34,392) 713,662
Net loss....................... -- -- -- -- (17,461) (17,461)
Payments on exercises of
phantom stock units......... -- -- -- (133) -- (133)
Tax benefit from exercises of
stock options.................. -- -- -- 602 -- 602
------- ----- ---- --------- -------- ---------
Balance at December 31, 2000..... 1 $ -- $ 748,523 $(51,853) $ 696,670
======= ===== ==== ========= ======== =========
</Table>
The accompanying notes are an integral part of the consolidated financial
statements.
F-33
LIN TELEVISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<Table>
<Caption>
PREDECESSOR
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
--------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
--------- --------- ------------ -----------
Net loss.................................................... $ (17,461) $ (18,832) $ (15,560) $ (2,744)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization (including amortization of
financing costs and note discounts)..................... 69,569 62,072 48,564 4,714
Amortization of program rights............................ 21,214 15,029 10,712 2,743
Interest on SSG preferred units........................... (3,000) (3,000) -- --
Loss on disposition of stations........................... 2,722 2,212 -- --
Tax benefit from exercises of stock options............... 602 1,532 795 10,714
Deferred income taxes..................................... (2,380) (8,537) (4,112) 1,907
Net loss (gain) on disposition of assets.................. 220 (545) (49) 19
Program payments.......................................... (22,750) (15,293) (10,497) (4,157)
Share of (income) loss of equity investments.............. (365) 5,488 6,037 244
Provision for doubtful accounts........................... 239 38 (108) 98
Changes in operating assets and liabilities, net of
acquisitions and disposals:
Accounts receivable....................................... (3,072) (10,786) (7,836) 7,695
Program rights, net of program obligations................ 239 (247) 436 (45)
Other assets.............................................. 5,604 (15,837) 20,163 (19,102)
Accounts payable.......................................... 1,796 (1,606) 1,209 1,187
Accrued income taxes...................................... 828 (2,741) 6,666 1,777
Accrued interest expense.................................. 315 (194) 4,175 74
KXTX management fee payable............................... -- (4,175) 9,154 --
Accrued sales volume discount............................. 459 4,269
Other Accrued expenses.................................... (4,907) 12,870 (4,303) 3,292
--------- --------- ----------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 49,872 21,717 65,446 8,416
--------- --------- ----------- --------
INVESTING ACTIVITIES:
Capital expenditures........................................ (29,126) (18,191) (21,498) (1,221)
Proceeds from asset disposals............................... -- 6,560 64 3
Liquidating dividend on investment in SSDB.................. -- 7,125 (7,125) --
Investment in joint ventures................................ -- -- (250) (250)
Investment in Banks Broadcasting, Inc. ..................... (11,145) (2,229) -- --
Other investments........................................... (3,000) -- -- --
Capital distributions from equity investments............... 815 -- -- --
Acquisition of WWLP-TV, net of cash acquired................ (128,000) -- -- --
Acquisition of WOOD-TV and WOTV-TV, net of cash acquired.... -- (119,985) -- --
Acquisition of WAPA-TV, net of cash acquired................ -- (69,909) -- --
Acquisition of the LIN Television Corporation, net of cash
acquired.................................................. -- -- (1,724,281) --
Local marketing agreement expenditures...................... (3,625) (640) (775) --
--------- --------- ----------- --------
NET CASH USED IN INVESTING ACTIVITIES....................... (174,081) (197,269) (1,753,865) (1,468)
--------- --------- ----------- --------
FINANCING ACTIVITIES:
Net payments on exercises of phantom stock units and
issuance of employee stock purchase plan shares........... (133) -- (250) 1,071
LIN Holdings tax sharing obligations........................ 8,364 -- -- --
Principal payments on long-term debt........................ (41,389) (19,098) (262,323) --
Proceeds from revolver debt................................. 500 18,000 -- --
Proceeds from long-term debt................................ 147,000 153,000 668,929 --
Loan fees incurred on long-term debt........................ -- -- (51,211) --
Proceeds from GECC note..................................... -- -- 815,500 --
Proceeds for sale of common stock........................... -- -- 558,123 --
Proceeds from capital contribution.......................... -- -- 1,000 --
--------- --------- ----------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 114,342 151,902 1,729,768 1,071
--------- --------- ----------- --------
Net (decrease) increase in cash and cash equivalents........ (9,867) (23,650) 41,349 8,019
Cash and cash equivalents at the beginning of the period.... 17,699 41,349 -- 8,046
--------- --------- ----------- --------
Cash and cash equivalents at the end of the period.......... $ 7,832 $ 17,699 $ 41,349 $ 16,065
========= ========= =========== ========
</Table>
The accompanying notes are an integral part of the consolidated financial
statements.
F-34
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BACKGROUND:
LIN Television Corporation ("LIN Television"), together with its
subsidiaries, the predecessor business prior to March 3, 1998 (together, the
"Company") was formed on July 18, 1997. On March 3, 1998, LIN Holdings Corp.
("LIN Holdings") acquired the Company.
The Company is a television station group operator in the United States and
Puerto Rico that owns ten television stations, nine of which are
network-affiliated television stations. Additionally, the Company has local
marketing agreements ("LMAs") under which it programs five other stations in the
markets in which it operates.
The Company owns and operates four CBS affiliates, four NBC affiliates, one
ABC affiliate and one independent station in San Juan, Puerto Rico. The Company
also programs four additional network-affiliated television stations and one
independent television station pursuant to LMAs. Additionally, the Company has
investments in a number of ventures with third parties, through which it has an
interest in television stations in locations throughout the United States of
America. The Company is also the owner and operator of 28 low-power television
stations.
All of the Company's consolidated subsidiaries fully and unconditionally
guarantee the Company's Senior Subordinated Notes and Senior Credit Facilities
(see Note 8) on a joint and several basis.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying consolidated financial statements reflect the application
of certain significant accounting policies as described below:
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries, all of which are wholly owned. All significant
intercompany accounts and transactions have been eliminated. The Company
conducts its business through its subsidiaries and has no operations or
significant assets other than its investment in its subsidiaries. Accordingly,
no separate or additional financial information about the subsidiaries is
provided.
USE OF 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 consolidated financial
statements and the notes thereto. The Company's actual results could differ from
these estimates. Estimates are used when accounting for the collectibility of
receivables and valuing intangible assets and net assets of business acquired.
CASH AND CASH EQUIVALENTS:
Cash equivalents consist of highly liquid, short-term investments that have
an original maturity of three months or less when purchased. The Company's
excess cash is invested primarily in short-term U.S. Government securities.
PROPERTY AND EQUIPMENT:
Property and equipment is recorded at cost and is depreciated using the
straight-line method over the estimated useful lives of the assets, generally 20
to 30 years for buildings and
F-35
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
fixtures, and 3 to 15 years for broadcast and other equipment. Upon retirement
or other disposition, the cost and related accumulated depreciation of the
assets are removed from the accounts and the resulting gain or loss is reflected
in the determination of net income or loss. Expenditures for maintenance and
repairs are expensed as incurred.
EQUITY INVESTMENTS:
The Company's equity investments are accounted for on the equity method, as
the Company does not have a controlling interest. Accordingly, the Company's
share of the net loss or income of its equity investments is included in
consolidated net income (loss).
REVENUE RECOGNITION:
Broadcast revenue is recognized during the period in which advertising is
aired. Barter revenue is accounted for at the fair value of the assets or
services received or the advertising time surrendered, whichever is more clearly
evident. Revenue from barter agreements is recorded at the time the advertising
is broadcast, and barter expense is recorded at the time the services are used.
The Company recognized barter revenue in the amount of $9.3 million and $12.4
million in the years ended December 31, 2000 and 1999, respectively, $1.9
million for the period from January 1, 1998 to March 2, 1998, and $5.6 million
for the period from March 3, 1998 to December 31, 1998. The Company incurred
barter expense in the amount of $9.0 million and $12.2 million in the years
ended December 31, 2000 and 1999, respectively, $1.9 million for the period from
January 1, 1998 to March 2, 1998, and $5.6 million for the period from March 3,
1998 to December 31, 1998.
ADVERTISING EXPENSE:
The cost of advertising is expensed as incurred. The Company incurred
advertising costs in the amount of $4.9 million and $4.2 million in the years
ended December 31, 2000 and 1999, respectively, $1.7 million for the period from
January 1, 1998 to March 2, 1998, and $3.1 million for the period from March 3,
1998 to December 31, 1998.
INTANGIBLE ASSETS:
Intangible assets include FCC licenses, network affiliations and goodwill,
all of which are being amortized over a period of 40 years.
LONG LIVED-ASSETS:
The Company periodically evaluates the net realizable value of long-lived
assets, including tangible and intangible assets, relying on a number of factors
including operating results, business plans, economic projections and
anticipated future cash flows. An impairment in the carrying value of an asset
is recognized when the expected future operating cash flow derived from the
asset is less than its carrying value.
An impairment assessment of enterprise level goodwill could be triggered by
significant operating or cash flow losses at one or more of the Company's
television stations, or a forecast of such losses, a significant adverse change
in the advertising marketplaces in which the Company's television stations
operate, or by adverse changes to FCC ownership rules, amongst others. Goodwill
is recorded at the television station level and, in the event that an impairment
assessment is triggered, impairment would be measured by comparing the net book
value of
F-36
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the related station to anticipated future operating cashflows from that station
on an undiscounted basis.
The future value of the Company's FCC licenses could be significantly
impaired by the loss of corresponding network affiliation agreements, or vice
versa. Accordingly, such an event would trigger an assessment of the carrying
value of the FCC license and network affiliation agreement recorded for each
station effected by such an event.
PROGRAM RIGHTS:
Program rights are recorded as assets when the license period begins and
the programs are available for broadcasting, at the gross amount of the related
obligations. Costs incurred in connection with the purchase of programs to be
broadcast within one year are classified as current assets, while costs of those
programs to be broadcast subsequently are considered noncurrent. The program
costs are charged to operations over their estimated broadcast periods using the
straight-line method. Program obligations are classified as current or
noncurrent in accordance with the payment terms of the license agreement.
ACCOUNTING FOR STOCK-BASED COMPENSATION:
The Company accounts for stock-based awards to employees using the
intrinsic value method as prescribed by Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts and with fixed exercise prices at least equal to the fair
market value of the underlying common stock at the date of grant. The Company
has adopted the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," through disclosure only (see Note 9).
INCOME TAXES:
Deferred income taxes are recognized based on temporary differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect in the years in which the temporary differences are expected
to reverse. A valuation allowance is applied against net deferred tax assets if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized.
CONCENTRATIONS OF CREDIT RISK:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and trade receivables. Concentration of credit risk with respect to cash and
cash equivalents is limited as the Company maintains its primary banking
relationships with only large nationally recognized institutions. Credit risk
with respect to trade receivables is limited, as the trade receivables are
primarily from advertising revenues generated from a large diversified group of
local and nationally recognized advertisers. The Company does not require
collateral or other security against trade receivable balances; however, it does
maintain reserves for potential credit losses and such losses have been within
management's expectations for all years presented.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
Financial instruments, including cash and cash equivalents, accounts
receivable, accounts payable and debt are carried in the consolidated financial
statements at amounts that
F-37
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximate fair value at December 31, 2000 and 1999, unless otherwise
disclosed. Fair values are based on quoted market prices and assumption
concerning the amount and timing of estimated future cash flows and assumed
discount rates, reflecting varying degrees of perceived risk.
RECLASSIFICATION:
Certain reclassifications have been made to the prior period financial
statements to conform to the current period financial statement presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In September 2000, the FASB issued SFAS No. 140 ("SFAS 140"), "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities -- a replacement of FASB Statement No. 125." SFAS 140 revises the
standards for accounting for securitizations and other transfers of financial
assets and collateral and requires certain disclosures, but it carries over most
of SFAS No. 125's provisions without reconsideration. This statement is
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after March 31, 2001. This statement is effective for
recognition and reclassification of collateral and for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000. The Company does not expect the application of SFAS 140 to
have a material impact on its financial position or results of operations.
NOTE 3 -- BUSINESS COMBINATIONS AND DISPOSITIONS:
WAND-TV Exchange. On April 1, 2000, the Company exchanged, with Block
Communications, a 66.7% interest in certain assets of its television station
WAND-TV, including its FCC license and network affiliation agreement, for
substantially all of the assets and certain liabilities of WLFI-TV, Inc. The
exchange was accounted for as a business combination under the purchase method
of accounting and, accordingly, the acquired assets and liabilities of WLFI-TV,
Inc. have been recorded at fair value. The excess of the fair value of the
acquired assets and liabilities of $23.7 million over the book value of the
interest in the assets of WAND-TV of $26.4 million has been recorded as a
non-operating loss. In connection with the exchange, the Company has indemnified
the seller for certain contingencies.
The result of operations associated with the acquired assets and
liabilities of WLFI-TV, Inc. have been included in the accompanying consolidated
financial statements from the date of acquisition. The acquisition is summarized
as follows (in thousands):
<Table>
Assets acquired and liabilities assumed
Working capital deficit..................................... $ (75)
Property and equipment...................................... 4,406
FCC license and network affiliation......................... 19,338
Other noncurrent assets, net................................ 76
-------
Total acquisition........................................... $23,745
=======
</Table>
Immediately after the WAND-TV exchange the Company and Block Communications
contributed their respective interests in the WAND-TV assets to a new
partnership, with the Company receiving a 33.3% interest in the new partnership.
The Company accounts for its interest using the equity method, as the Company
does not have a controlling interest. In
F-38
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
addition, the Company has entered into a management services agreement with
WAND-TV to provide certain management, engineering, and related services for a
fixed fee.
WWLP-TV. On November 10, 2000, the Company acquired the broadcast license
and operating assets of WWLP-TV, an NBC affiliate in Springfield, MA. The total
purchase price for the acquisition was approximately $128.0 million, including
direct costs of the acquisition. The acquisition was funded by borrowings under
the Company's term loan facility.
The acquisition was accounted for as a purchase and accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed
based on their fair values at the date of acquisition. The transaction is
summarized as follows (in thousands):
<Table>
Assets acquired and liabilities assumed
Working capital............................................. $ 4,664
Property and equipment...................................... 9,600
FCC license and network affiliation......................... 113,736
--------
Total acquisition........................................... $128,000
========
</Table>
Although the Company did not own or control the assets or FCC license of
WWLP-TV prior to November 10, 2000, pursuant to Emerging Issues Task Force Topic
D-14, "Transactions Involving Special Purpose Entities," WWLP Holdings, Inc.,
the parent of WWLP-TV, satisfied the definition of a special purpose entity, as
a result of a $75 million guarantee of WWLP Holdings, Inc. debt by the Company
and other factors, and the Company was deemed to be the sponsor of WWLP
Holdings, Inc.
Accordingly, the financial results of operations of WWLP Holdings, Inc.
have been consolidated with those of the Company since March 31, 2000, when WWLP
Holdings, Inc. acquired WWLP-TV from Benedek Broadcasting Corporation.
Unaudited Pro Forma Results of Acquisitions. The following summarizes
unaudited pro forma consolidated results of operations as if the acquisition of
LIN Television, the formation of the NBC joint venture, the acquisitions of
WOOD-TV, its LMA for WOTV, and WAPA-TV in prior periods had taken place as of
January 1, 1998, and the acquisitions of WLFI-TV and WWLP-TV in 2000 had taken
place as of January 1, 1999 (in thousands):
<Table>
<Caption>
2000 1999 1998
-------- -------- --------
Net revenues............................... $300,463 $287,809 $283,507
Operating income........................... 59,625 47,495 37,183
Net loss................................... (17,506) (37,396) (22,391)
</Table>
The pro forma data give effect to actual operating results prior to the
acquisition and adjustments to interest expense, amortization and income taxes.
No effect has been given to cost reductions and operating synergies in this
presentation. The pro forma results do not necessarily represent results that
would have occurred if the acquisition had taken place as of the beginning of
the periods presented, nor are they necessarily indicative of the results of
future operations.
NOTE 4 -- RELATED PARTY TRANSACTIONS:
Monitoring and Oversight Agreement. The Company is party to an agreement
with Hicks, Muse & Co. Partners, L.P. ("Hicks Muse Partners"), an affiliate of
the Company's ultimate parent, pursuant to which the Company agreed to pay Hicks
Muse Partners an annual fee
F-39
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(payable quarterly) for oversight and monitoring services. The aggregate annual
fee is adjustable, on a prospective basis, on January 1 of each calendar year to
an amount equal to 1% of the budgeted consolidated annual EBITDA of the Company
for the then current fiscal year. Upon the acquisition by the Company of another
entity or business, the fee is adjusted prospectively in the same manner using
the pro forma consolidated annual EBITDA of the Company. In no event shall the
annual fee be less than $1.0 million. Hicks Muse Partners is also entitled to
reimbursement for any expenses incurred by it in connection with rendering
services allocable to the Company. The annual fee was $1.3 million, $1.1
million, and $0.8 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
Financial Advisory Agreement. The Company is also party to an agreement
with Hicks Muse Partners, pursuant to which Hicks Muse Partners receives a fee
equal to 1.5% of the total value of certain transactions in which the Company is
involved. Transactions subject to this agreement include a tender offer,
acquisition, sale, merger, exchange offer, recapitalization, restructuring or
other similar transaction. This fee for the year ended December 31, 2000 was
$1.8 million, relating to the acquisition of WWLP-TV, and was included in the
total cost of that acquisition. This fee for the year ended December 31, 1999
was approximately $3.0 million. There were no fees in 1998.
NOTE 5 -- EQUITY INVESTMENTS:
The Company has investments in a number of ventures with third parties,
through which it has an interest in television stations in locations throughout
the United States of America. The following presents the Company's basis in
these ventures at December 31 (in thousands):
<Table>
<Caption>
2000 1999
-------- --------
NBC joint venture..................................... $ 65,886 $ 65,771
WAND (TV) Partnership................................. 13,784 --
Banks Broadcasting, Inc............................... 12,128 --
-------- --------
91,798 65,771
Southwest Sports Group................................ 53,000 50,000
-------- --------
$144,798 $115,771
======== ========
</Table>
Southwest Sports Group Holdings LLC: The Company owns 500,000 units of
Southwest Sports Group Holdings LLC ("SSG") Series A Preferred Units, par value
of $100 per unit. The Series A Preferred Units are entitled to receive
non-liquidating distributions prior to any junior ranked units of SSG in an
amount equal to $100 per Series A Preferred Unit, minus the amount of previously
made distributions, plus an amount of interest thereon at a rate of 6% per annum
compounded annually. The Company carries its investment in the Series A
Preferred Units at cost and has recorded $6.0 million of interest on the Series
A Preferred Units through December 31, 2000. As of December 31, 2000, no
distributions have been made with respect to the Series A Preferred Units.
SSG has the option at any time to redeem in whole or in part the
outstanding Series A Preferred Units for an amount equal to par plus imputed
interest at the rate of 6% from January 1, 1999 to the redemption date. The
Company has the right to convert its Series A Preferred Units into Class A Units
at the earlier of (a) the date of consumption of an underwritten initial public
offering of the Class A Units, (b) a change of control, or (c) the date that is
three years following the date of the first issuance of the Series A Preferred
Units.
F-40
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NBC Joint Venture: The Company owns a 20.38% interest in a joint venture
with NBC and accounts for its interest using the equity method, as the Company
does not have a controlling interest. The following presents the summarized
financial information of the joint venture (in thousands):
<Table>
<Caption>
PERIOD FROM
INCEPTION
(MARCH 3, 1998)
YEAR ENDED DECEMBER 31, TO
----------------------- DECEMBER 31,
2000 1999 1998
---------- ---------- ---------------
Net revenues........................... $171,349 $142,578 $119,849
Operating income....................... 78,823 40,830 28,438
Net income (loss)...................... 4,562 (24,144) (26,044)
</Table>
<Table>
<Caption>
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
Current assets.................................... $ 32,716 $ 159
Non-current assets................................ 241,408 249,692
Current liabilities............................... 1,087 725
Non-current liabilities........................... 815,500 815,500
</Table>
WAND (TV) Partnership: The following presents the summarized financial
information of the WAND (TV) Partnership as of December 31, 2000 and from April
1, 2000 (date of inception) to December 31, 2000 (in thousands):
<Table>
<Caption>
PERIOD FROM
INCEPTION
(APRIL 1) TO
DECEMBER 31,
2000
------------
Net revenues................................................ $6,363
Operating income............................................ 1,294
Net income.................................................. 1,294
</Table>
<Table>
<Caption>
DECEMBER 31,
2000
------------
Current assets.............................................. $ 2,825
Non-current assets.......................................... 35,143
Current liabilities......................................... 858
</Table>
Banks Broadcasting, Inc.: On August 15, 2000, the Company, 21st Century
Group LLC, an entity in which Hicks Muse, the Company's ultimate parent, has a
substantial economic interest, and BancAmerica Capital Investors SBIC I, L.P.
acquired non-voting Series A Convertible Preferred Stock in Banks Broadcasting,
Inc. Banks Broadcasting, Inc. is a broadcast station operator that owns and
operates KWCV-TV, a WB affiliate, in Wichita, Kansas and has a local marketing
agreement for KNIN-TV, a UPN affiliate serving the Boise, Idaho area.
The Company's preferred stock gives it a 50% non-voting interest in Banks
Broadcasting, Inc. The Company is able to exercise significant, but not
controlling, influence over the activities of Banks Broadcasting, Inc. through
representation on the Board of Directors and, therefore, accounts for its
investment using the equity method. The Company has also entered into a
management services agreement with Banks Broadcasting, Inc. to provide certain
management, engineering, and related services for a fixed fee. Included in this
is a cash
F-41
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
management arrangement and at December 31, 2000 the amount due to the Company
from Banks Broadcasting, Inc. under this arrangement was approximately $1.2
million.
The following presents the summarized financial information of Banks
Broadcasting, Inc. (in thousands):
<Table>
<Caption>
PERIOD FROM
INCEPTION
(AUGUST 15) TO
DECEMBER 31,
2000
---------------
Net revenues................................................ $1,990
Operating loss.............................................. (998)
Net loss.................................................... (632)
</Table>
<Table>
<Caption>
DECEMBER 31,
2000
------------
Current assets.............................................. $ 7,708
Non-current assets.......................................... 21,805
Current liabilities......................................... 2,530
Non-current liabilities..................................... 850
Redeemable preferred stock.................................. 26,765
</Table>
NOTE 6 -- PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31 (in
thousands):
<Table>
<Caption>
2000 1999
-------- --------
Land and improvements................................. $ 10,971 $ 10,555
Buildings and fixtures................................ 66,666 47,039
Broadcasting equipment and other...................... 135,930 117,224
-------- --------
213,567 174,818
Less: accumulated depreciation........................ (48,829) (29,936)
-------- --------
$164,738 $144,882
======== ========
</Table>
The Company recorded amortization and depreciation expense in the amount of
$21.3 million and $19.2 million in the years ended December 31, 2000 and 1999,
respectively, $2.3 million for the period from January 1, 1998 to March 2, 1998,
and $14.5 million for the period from March 3, 1998 to December 31, 1998.
F-42
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- INTANGIBLE ASSETS:
Intangible assets consisted of the following at December 31 (in thousands):
<Table>
<Caption>
2000 1999
---------- ----------
FCC licenses and network affiliations.............. $1,055,653 $ 943,270
Goodwill........................................... 652,508 670,397
LMA purchase options............................... 1,125 750
---------- ----------
1,709,286 1,614,417
Less: accumulated amortization..................... (108,404) (68,025)
---------- ----------
$1,600,882 $1,546,392
========== ==========
</Table>
NOTE 8 -- LONG-TERM DEBT:
Long-term debt consisted of the following at December 31 (in thousands):
<Table>
<Caption>
2000 1999
-------- --------
Senior Credit Facilities.............................. $425,690 $319,579
$300,000, 8 3/8% Senior Subordinated Notes due 2008
(net of discount of $558)........................... 299,442 299,387
-------- --------
Total debt............................................ 725,132 618,966
Less: current portion................................. (19,572) (15,805)
-------- --------
Total long-term debt.................................. $705,560 $603,161
======== ========
</Table>
SENIOR CREDIT FACILITIES:
On March 3, 1998, the Company entered into a Credit Agreement with the
Chase Manhattan Bank as administrative agent ("the Agent"), and the lenders
named therein. Under the Credit Agreement, the Company established a $295
million term loan facility, a $50 million revolving facility, and a $225 million
incremental term loan facility (collectively, the "Senior Credit Facilities").
Borrowings under the Senior Credit Facilities bear interest at a rate
based, at the option of the Company, on an adjusted LIBOR rate ("Adjusted
LIBOR"), or the highest of the Agent's prime rates, certificate of deposits rate
plus 1.00%, or the Federal Funds effective rate plus 1/2 of 1.00% plus an
incremental rate based on the Company's financial performance. As of December
31, 2000, the interest rates ranged from 8.00% to 9.04%, based on the Adjusted
LIBOR. As of December 31, 1999, the interest rates ranged from 7.00% to 8.35%,
based on the Adjusted LIBOR. The Company is required to pay quarterly commitment
fees ranging from 0.25% to 0.50%, based upon the Company's leverage ratio for
that particular quarter on the unused portion of the loan commitment, in
addition to annual agency and other administration fees.
The revolving credit facility (up to $50 million) is available until
maturity on March 31, 2005. The Tranche A Term Loan (approximately $111 million)
amortizes in increasing quarterly installments until maturity on March 31, 2005.
The Tranche B Term Loans (approximately $113 million) amortize in quarterly
installments beginning March 31, 2005 until the final maturity of March 31,
2007. The Incremental Term Loans (approximately $187 million) amortize 1%
annually until final maturity on September 30, 2007.
F-43
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The obligations of the Company under the Senior Credit Facilities are
unconditionally and irrevocably guaranteed, jointly and severally, by Holdings
and by each existing and subsequently acquired or organized subsidiary of the
Company. In addition, substantially all of the assets of the Company and its
subsidiaries are pledged as collateral against the performance of these
obligations. The Senior Credit Facilities are subject to compliance with certain
financial covenants, such as consolidated leverage and interest coverage, and
other conditions set forth in the Credit Agreement.
SENIOR SUBORDINATED NOTES:
On March 3, 1998, LIN Television issued $300 million aggregate principal
amount of 8 3/8% Senior Subordinated Notes due 2008 in a private placement for
net proceeds of $290.3 million. These senior subordinated notes were
subsequently registered with the SEC pursuant to a Registration Statement filed
on August 12, 1998. The senior subordinated notes are unsecured obligations of
LIN Television without collateral rights, subordinated in right of payment to
all existing and any future senior indebtedness of LIN Television. The senior
subordinated notes are fully and unconditionally guaranteed, on a joint and
several basis, by all wholly owned subsidiaries of LIN Television. Interest on
the Senior Subordinated Notes accrues at a rate of 8 3/8% per annum and is
payable in cash, semi-annually in arrears, commencing on September 1, 1998. The
Company is subject to compliance with certain financial covenants and other
conditions set forth in the Registration Statement.
The fair values of the Company's long-term debt are estimated based on
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
The carrying amounts and fair values of long-term debt were as follows at
December 31 (in thousands):
<Table>
<Caption>
2000 1999
-------- --------
Carrying amount....................................... $725,132 $618,966
Fair value............................................ $700,190 $602,329
</Table>
See Note 16 -- Subsequent Events for Bank Covenants.
NOTE 9 -- STOCKHOLDERS' EQUITY:
Stock Option Plans: The Company participates in the Ranger Equity Holdings
Corporation 1998 Stock Option Plan (the "1998 Option Plan"). Pursuant to the
1998 Option Plan, nonqualified options in Ranger common stock have been granted
to certain directors, officers and key employees of the Company. Prior to March
3, 1998, nonqualified options in the stock of LIN Television were granted to
certain directors, officers and key employees of the Predecessor pursuant to the
LIN Television 1994 Adjustment Stock Incentive Plan, the LIN Television Amended
and Restated 1994 Stock Incentive Plan and the LIN Television 1994 Nonemployee
Director Stock Incentive Plan (collectively, the "Predecessor Stock Option
Plans"), each of which was terminated, and all options granted under each
cancelled, effective March 3, 1998. The Company also participates in the Ranger
Equity Holdings 1998 Phantom Stock Plan ("Phantom Stock Units Plan"), pursuant
to which phantom units, or stock appreciation rights, with a $0 exercise price,
have been granted to officers and key employees.
Options granted under the 1998 Option Plan and the Predecessor Stock Option
Plans have exercise prices equal to the fair market value of the underlying
common stock at the date of
F-44
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
grant. The Board of Directors, in assessing the fair market value of common
stock, considered factors relevant at the time, including recent third-party
transactions, composition of the management team, recent hiring results,
financial condition and operating results and the lack of a public market for
the Company's common stock.
Options granted pursuant to the 1998 Option Plan generally have
straight-line vesting terms over four or five years and expire ten years from
the date of grant. At December 31, 2000, there were 1,389,000 shares available
for future grant under the 1998 Option Plan. Phantom Units granted pursuant to
the Phantom Stock Units Plan expire ten years from the date of grant, are
non-forfeitable, and are exercisable at a date selected by the employee within
the 10-year term.
Pro Forma information regarding net loss as required by SFAS No. 123 has
been determined as if the Company had accounted for its employee stock options
under the fair value method. The fair value for these options was estimated at
the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions for grants in 1998, 1999 and 2000: a risk
free interest rate of 5.18%, 5.96% and 5.92%, respectively, and a
weighted-average expected life of the options of seven years. No expected
dividend yield was included in the option-pricing model. If the Company had
elected to adopt the optional recognition provisions of SFAS No. 123 for its
stock option grants, net loss would have been changed to the pro forma amounts
indicated below (in thousands):
<Table>
<Caption>
PREDECESSOR
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
-------- -------- ------------ -----------
Pro forma net loss................... $(19,925) $(21,031) $(17,257) $(2,744)
</Table>
F-45
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table provides additional information regarding the
Predecessor Stock Option Plans, the 1998 Option Plan and the Phantom Stock Units
Plan (shares in thousands):
<Table>
<Caption>
PREDECESSOR
STOCK OPTION
PLANS 1998 OPTION PLAN
------------------ ---------------------------------------------------------------
PERIOD FROM PERIOD FROM
JANUARY 1 MARCH 3 YEAR ENDED DECEMBER 31,
TO MARCH 2 TO DECEMBER 31, -----------------------------------------
1998 1998 1999 2000
------------------ ------------------- ------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
------ --------- ------- --------- ------- --------- ------- ---------
Outstanding at
beginning of period.. 2,372 $26.75 -- 33,614 $0.88 34,362 $0.88
Granted................ -- 35,101 $0.85 2,047 1.00 5,474 1.19
Exercised.............. -- (1,000) 1.00 -- (30) 0.68
Forfeited.............. -- (487) 0.83 (1,299) 1.00 (1,527) 1.00
Acquisition of LIN
Television........... (2,372) 26.75 -- -- --
------ ------- ------- -------
Outstanding at end of
period............... -- 33,614 0.88 34,362 0.88 38,279 0.92
======= ======= =======
Options exercisable at
period-end........... 5,098 10,932 17,100
Weighted-average fair
value of options
granted during the
period............... $ 0.36 $ 0.33 $ 0.40
</Table>
<Table>
<Caption>
PHANTOM STOCK UNITS PLAN
--------------------------------------
YEAR ENDED
DECEMBER 31,
PERIOD FROM MARCH 3 ---------------
TO DECEMBER 31, 1998 1999 1998
-------------------- ------ ------
SHARES SHARES SHARES
-------------------- ------ ------
Outstanding at beginning of period..... -- 14,074 14,074
Granted................................ 14,324 -- --
Exercised.............................. (250) -- (133)
------ ------ ------
Outstanding at end of period........... 14,074 14,074 13,941
====== ====== ======
</Table>
The following table summarizes information about the 1998 Option Plan at
December 31, 2000 (shares in thousands):
<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- ------------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
NUMBER REMAINING EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
------------------------ ----------- ---------------- ---------------- ----------- ----------------
$0.50 to $0.99........... 11,270 7.2 years $0.55 8,168 $0.54
$1.00 to $1.25........... 27,009 8.1 1.07 8,932 1.00
</Table>
F-46
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- INCOME TAXES:
The Company has been included in the consolidated federal income tax return
filed by Ranger. Pursuant to the tax-sharing agreement between the Company and
Ranger, tax liabilities and benefits were determined as if Ranger and the
Company were each separate and independent entities. As of December 31, 2000, no
amounts were due to or receivable from the Company under the tax sharing
agreement.
Provision for (benefit from) income taxes included in the accompanying
consolidated statements of operations consisted of the following (in thousands):
<Table>
<Caption>
PREDECESSOR
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
---------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
------- ------ ------------ -----------
Current:
Federal.............................. $ 2,821 $3,389 $ 5,620 $1,740
State................................ 1,102 340 1,140 63
Foreign.............................. 315 -- -- --
------- ------ ------- ------
4,238 3,729 6,760 1,803
------- ------ ------- ------
Deferred:
Federal.............................. 4,400 1,241 (3,517) 1,815
State................................ (133) (825) (595) 92
Foreign.............................. 2,085 996 -- --
------- ------ ------- ------
6,352 1,412 (4,112) 1,907
------- ------ ------- ------
$10,590 $5,141 $ 2,648 $3,710
======= ====== ======= ======
</Table>
The components of the income (loss) before income taxes were as follows (in
thousands):
<Table>
<Caption>
PREDECESSOR
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
-------- -------- ------------ -----------
United States of America............. $(15,097) $(17,410) $(12,912) $966
Foreign.............................. 8,226 3,719 -- --
-------- -------- -------- ----
Loss before income taxes............. $ (6,871) $(13,691) $(12,912) $966
======== ======== ======== ====
</Table>
F-47
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reconciles the amount that would be provided
(benefited) by applying the 35% federal statutory rate to income (loss) before
income taxes to the actual provision for (benefit from) income taxes (in
thousands):
<Table>
<Caption>
PREDECESSOR
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
----------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
------- ------- ------------ -----------
Provision (benefit) assuming federal
statutory rate....................... $(2,405) $(4,793) $(4,519) $ 338
State taxes, net of federal tax
benefit.............................. 630 (315) 354 41
Amortization........................... 9,948 9,379 5,431 180
Merger expenses........................ -- -- -- 3,017
Foreign taxes.......................... 2,290 996 -- --
Other.................................. 127 (126) 1,382 134
------- ------- ------- ------
Loss before income taxes............... $10,590 $ 5,141 $ 2,648 $3,710
======= ======= ======= ======
</Table>
The components of the deferred tax liability are as follows at December 31
(in thousands):
<Table>
<Caption>
2000 1999
-------- --------
Deferred tax liabilities:
Intangible assets................................... $506,071 $506,376
Property and equipment.............................. 22,642 21,834
Investments......................................... 12,258 11,208
-------- --------
540,971 539,418
-------- --------
Deferred tax assets:
Net operating loss carryforwards.................... (5,576) (7,661)
Valuation allowance................................. 5,576 7,661
Other............................................... (4,352) (6,109)
-------- --------
(4,352) (6,109)
-------- --------
Net deferred tax liabilities.......................... $536,619 $533,309
======== ========
</Table>
The valuation allowance relates to certain acquired net operating loss
carryovers in Puerto Rico. At December 31, 1999, the Company had determined that
it was more likely than not that these deferred tax assets would not be
realized. During the year ended December 31, 2000, the Company reduced the
valuation allowance by approximately $2.1 million to reflect the usage of a
portion of these losses. The Company, under the applicable accounting standards,
has concluded that it is more likely than not that the remaining losses will not
be realized and, therefore, has retained a valuation allowance of $5.6 million
as of December 31, 2000. All reductions to the valuation allowance are recorded
as a decrease to acquisition related intangible assets, rather than a tax
provision benefit, as the net operating loss carryovers were fully reserved at
the time of the related business combination. The Company reevaluates positive
and negative evidence relating to the need for a valuation allowance
periodically.
At December 31, 2000, the Company had a federal net operating loss
carryforward of approximately $43.2 million that begins to expire in 2019. The
net operating loss carryforward in Puerto Rico of approximately $19.6 million
will expire between 2001 and 2005.
F-48
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11 -- RETIREMENT PLANS:
401(k) Plan. The Company provides a defined contribution plan ("401(k)
Plan") to substantially all employees. The Company makes contributions to
employee groups that are not covered by another retirement plan sponsored by the
Company. Contributions made by the Company vest based on the employee's years of
service. Vesting begins after six months of service in 20% annual increments
until the employee is 100% vested after five years. The Company matches 50% of
the employee's contribution up to 6% of the employee's total annual
compensation. The Company contributed $1.1 million and $891,000 to the 401(k)
Plan in the years ended December 31, 2000 and 1999, respectively. For the period
from inception (March 2, 1998) to December 31, 1998, the Company contributed
$469,000 and for the period from January 1, 1998 to March 2, 1998, the Company
contributed $98,000.
Retirement Plan. The Company is the sponsor of the LIN Television
Corporation Retirement Plan (the "Retirement Plan"). The Retirement Plan is a
noncontributory defined benefit retirement plan that covers employees of the
Company who meet certain requirements, including length of service and age.
Pension benefits vest on completion of five years of service and are computed,
subject to certain adjustments, by multiplying 1.25% of the employee's last
three years' average annual compensation by the number of years of credited
service. The assets of the pension plan are invested primarily in long-term
fixed income securities, large and small cap U.S. equities, and international
equities. The Company's policy is to fund at least the minimum requirement and
is further based on legal requirements and tax considerations. No funding was
required for the Retirement Plan during 2000, 1999 and 1998.
F-49
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the net pension expense included in the financial
statements and information with respect to the change in benefit obligation,
change in plan assets, the funded status of the Retirement Plan and underlying
assumptions are as follows:
RETIREMENT PLAN
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<Table>
<Caption>
PREDECESSOR
PERIOD
YEAR ENDED PERIOD FROM FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
-------- -------- ------------ -----------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation, beginning of period....... $ 53,425 $ 60,048 $53,252 $ 52,440
Service cost................................ 763 955 615 176
Interest cost............................... 3,971 3,942 3,044 600
Plan amendments............................. (246) -- -- --
Actuarial loss (gain)....................... -- (10,052) 5,298 296
Curtailments................................ -- -- (682) --
Benefits paid............................... (1,899) (1,468) (1,479) (260)
-------- -------- ------- --------
Benefit obligation, end of period............. $ 56,014 $ 53,425 $60,048 $ 53,252
======== ======== ======= ========
CHANGE IN PLAN ASSETS
Fair value of plan assets, beginning of
period................................... $ 69,279 $ 63,965 $61,686 $ 58,015
Actual return on plan assets................ (556) 6,782 3,758 3,931
Benefits paid............................... (1,899) (1,468) (1,479) (260)
-------- -------- ------- --------
Fair value of plan assets, end of period.... $ 66,824 $ 69,279 $63,965 $ 61,686
======== ======== ======= ========
Funded status of the plan..................... $ 10,810 $ 15,854 $ 3,917 $ 8,434
Unrecognized actuarial gain................... (13,104) (19,363) (7,039) (11,898)
Unrecognized prior service (credit) cost...... (216) 9 228 988
Unrecognized net transition asset............. (313) (627) (940) (1,201)
-------- -------- ------- --------
Total amount recognized and accrued benefit
liability................................... $ (2,823) $ (4,127) $(3,834) $ (3,677)
======== ======== ======= ========
ASSUMPTIONS AS OF PERIOD END
Discount rate............................... 7.50% 7.50% 6.50% 7.00%
Expected return on plan assets.............. 8.25% 8.25% 8.25% 8.00%
Rate of Compensation increase............... 5.00% 5.00% 5.00% 5.00%
Health care cost trend rate................. n/a n/a n/a n/a
NET PERIOD COST
Service cost................................ $ 763 $ 955 $ 615 $ 176
Interest cost............................... 3,971 3,942 3,044 600
Expected return on assets................... (5,087) (4,510) (3,319) (650)
Prior service cost amortization............. (22) 219 503 136
Actuarial gain recognized................... (616) -- -- --
Transition amount recognized................ (313) (313) (261) (52)
Curtailment gain............................ -- -- (426) --
-------- -------- ------- --------
Net periodic (credit) cost.................... $ (1,304) $ 293 $ 156 $ 210
======== ======== ======= ========
</Table>
F-50
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL BENEFITS RETIREMENT PLAN
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<Table>
<Caption>
PREDECESSOR
PERIOD
YEAR ENDED PERIOD FROM FROM
DECEMBER 31, MARCH 3 - JANUARY 1 -
----------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
------- ------- ------------ -----------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation, beginning of period......... $ 1,688 $ 1,891 $ 1,987 $ 1,801
Service cost.................................. 169 180 118 34
Interest cost................................. 137 127 93 22
Plan amendments............................... (25) -- -- --
Actuarial loss (gain)......................... -- (510) 204 130
Curtailments.................................. -- -- (511) --
------- ------- ------- -------
Benefit obligation, end of period............... $ 1,969 $ 1,688 $ 1,891 $ 1,987
======= ======= ======= =======
Funded status of the plan....................... $(1,969) $(1,688) $(1,891) $(1,987)
Unrecognized actuarial (gain) loss.............. (58) (58) 468 785
Unrecognized prior service (credit) cost........ (14) 6 8 12
Unrecognized net transition asset............... (16) (33) (49) (62)
------- ------- ------- -------
Total amount recognized and accrued benefit
liability..................................... $(2,057) $(1,773) $(1,464) $(1,252)
======= ======= ======= =======
ASSUMPTIONS AS OF PERIOD END
Discount rate................................. 7.50% 7.50% 6.50% 7.00%
Expected return on plan assets................ 8.25% 8.25% 8.25% 8.00%
Rate of compensation increase................. 5.00% 5.00% 5.00% 5.00%
Health care cost trend rate................... n/a n/a n/a n/a
NET PERIODIC COST
Service cost.................................. $ 169 $ 180 $ 118 $ 34
Interest cost................................. 137 127 93 22
Prior service (credit) cost amortization...... (5) 2 2 --
Actuarial Loss Recognized..................... -- 16 10 10
Transition amount recognized.................. (16) (16) (14) (3)
Curtailment gain.............................. -- -- 3 --
------- ------- ------- -------
Net periodic cost............................... $ 285 $ 309 $ 212 $ 63
======= ======= ======= =======
</Table>
F-51
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- COMMITMENTS & CONTINGENCIES:
COMMITMENTS:
The Company leases land, buildings, vehicles and equipment under
noncancelable operating lease agreements that expire at various dates through
2011. Commitments for noncancelable operating lease payments at December 31,
2000 are as follows (in thousands):
<Table>
<Caption>
YEAR
----
2001....................................................... $1,566
2002....................................................... 1,387
2003....................................................... 757
2004....................................................... 286
2005....................................................... 120
Thereafter................................................. 148
------
$4,264
======
</Table>
Rent expense included in the consolidated statements of operations was $1.3
million and $1.4 million for the years ended December 31, 2000 and 1999,
respectively, $100,000 for the period from January 1, 1998 to March 2, 1998, and
$1.1 million for the period from March 3, 1998 to December 31, 1998.
The Company has also entered into commitments for future syndicated news,
entertainment, and sports programming. Future payments associated with these
commitments at December 31, 2000 are as follows (in thousands):
<Table>
<Caption>
YEAR RECORDED CONTRACTS
---- -------- ---------
2001............................................ $13,491 $ 3,369
2002............................................ 2,591 11,215
2003............................................ 1,129 8,614
2004............................................ 248 8,098
2005............................................ 16 2,235
------- -------
$17,475 $33,531
======= =======
</Table>
CONTINGENCIES:
Changes in FCC Ownership Rules. Effective November 16, 2000, the FCC
significantly revised certain of its broadcast ownership regulations. Among the
FCC actions were: 1) relaxing the current "duopoly" rule to permit substantially
more frequent waivers of the rule and permitting ownership of two television
stations in a local market under certain circumstances; 2) determining that
television LMAs were equivalent to ownership for purposes of the local ownership
rules and thus permissible only where ownership was permissible; 3)
grandfathering television LMAs entered into prior to November 5, 1996, until at
least after the conclusion of a rulemaking, to be initiated no sooner than 2004,
examining whether it would be in the public interest to permit such combinations
to continue; 4) permitting the free transferability of grandfathered LMAs during
the grandfather period but limiting the transferability of television duopolies
where one entity owns both stations; and 5) modifying the FCC's radio-television
cross-ownership rules to permit the possession of "attributable" ownership
interests in a maximum of two television stations and six radio stations in
larger markets and two television and four radio stations in smaller markets.
F-52
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the new rules, management believes that: 1) the four LMAs the Company
has entered into in the Grand Rapids, New Haven, Austin and Norfolk markets are
grandfathered; and 2) these four combinations are probably eligible for waivers
of the duopoly rule and the Company will likely be able to convert those LMAs to
ownership interests through the exercise of option rights with respect to each
of those stations prior to the expiration of the grandfather period.
Litigation. On September 4, 1997, the Company announced that it had
learned of four lawsuits regarding the then proposed acquisition of LIN
Television. The Company and all of its then present directors were defendants in
all of the lawsuits. AT&T was a defendant in three of the lawsuits, and an AT&T
affiliate and Hicks Muse were defendants in one of the lawsuits. Each of the
lawsuits was filed by a purported shareholder of the Company seeking to
represent a putative class of all of the Company's public stockholders. Three of
these lawsuits have been dismissed and the Company believes the remaining
lawsuit is unlikely to have a material adverse effect on the financial position,
results of operations or cash flows of the Company.
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. In the opinion of the Company's
management, none of such litigation as of December 31, 2000 is likely to have a
material adverse effect on the financial position, results of operations or cash
flows of the Company.
NOTE 13 -- LOCAL MARKETING AGREEMENTS:
The Company has entered into option and put agreements that would enable or
require the Company to purchase its LMAs for a fixed amount under certain
conditions. Given the recent changes in FCC ownership rules, the Company, at the
option of the parties involved in the LMA contracts, could be required to
purchase certain of the LMA stations. Potential commitments for fulfilling the
put options totaled a maximum of $34.9 million, subject to adjustments for
monthly rental payments and outstanding loans, at December 31, 2000. In
connection with its LMAs, the Company is required to pay fixed periodic fees.
Future minimum fees required under the LMA's at December 31, 2000 are as
follows (in thousands):
<Table>
<Caption>
YEAR
----
2001..................................................... $ 3,212
2002..................................................... 3,114
2003..................................................... 2,576
2004..................................................... 2,307
2005..................................................... 1,536
Thereafter............................................... 2,748
-------
$15,493
=======
</Table>
F-53
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- UNAUDITED QUARTERLY DATA (IN THOUSANDS):
<Table>
<Caption>
QUARTER ENDED
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
2000 2000 2000 2000
--------- -------- ------------- ------------
Net revenues......................... $59,274 $77,798 $ 72,094 $86,540
Operating income..................... 4,291 17,724 11,204 25,383
Net income (loss).................... (1,089) (3,170) (49,559) 36,357
</Table>
<Table>
<Caption>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
--------- -------- ------------- ------------
Net revenues........................ $ 44,610 $56,629 $ 52,377 $70,830
Operating income (loss)............. (1,011) 11,738 6,333 18,930
Net loss............................ (14,846) (950) (10,890) 7,854
</Table>
NOTE 15 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (IN THOUSANDS):
<Table>
<Caption>
PREDECESSOR
PERIOD FROM PERIOD FROM
YEAR ENDED DECEMBER 31, MARCH 3 - JANUARY 1 -
----------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
---------- ---------- ------------ -----------
Cash paid for interest............. $ 63,082 $ 43,732 $ 23,059 $2,895
Cash paid for income taxes......... 1,011 599 1,075 46
NONCASH INVESTING ACTIVITIES:
Value of preferred units received
on disposal of KXTX-TV........ -- 47,000 -- --
CASH INVESTING ACTIVITIES:
On March 3, 1998, Ranger acquired
LIN Television Corporation for
approximately $1.7 billion. In
conjunction with this
acquisition, liabilities were
assumed as follows:
Fair value of assets acquired
and intangible assets....... -- -- 1,798,652 --
Cash paid..................... -- -- (1,176,359) --
--------- --------- ----------- ------
Liabilities assumed......... -- -- 622,293 --
========= ========= =========== ======
On June 30, 1999, the Company
acquired WOOD-TV and its LMA
WOTV-TV for approximately
$142.4 million. In conjunction
with this acquisition,
liabilities were assumed as
follows:
Fair value of assets acquired
and intangible assets....... -- 158,146 -- --
Cash paid..................... -- (142,385) -- --
--------- --------- ----------- ------
Liabilities assumed......... -- 15,761 -- --
========= ========= =========== ======
</Table>
F-54
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
PREDECESSOR
PERIOD FROM PERIOD FROM
YEAR ENDED DECEMBER 31, MARCH 3 - JANUARY 1 -
----------------------- DECEMBER 31, MARCH 2,
2000 1999 1998 1998
---------- ---------- ------------ -----------
On October 19, 1999, the Company
acquired Pegasus Broadcasting
of San Juan, LLC for
approximately $71.8 million.
In conjunction with this
acquisition, liabilities were
assumed as follows:
Fair value of assets acquired
and intangible assets....... -- 89,575 -- --
Cash paid..................... -- (71,800) -- --
--------- --------- ----------- ------
Liabilities assumed......... -- 17,775 -- --
========= ========= =========== ======
On April 1, 2000, the Company
exchanged two-thirds of
WAND-TV for WLFI-TV, Inc.
valued at approximately $23.7
million. In conjunction with
this acquisition, liabilities
were assumed as follows:
Fair value of assets acquired
and intangible assets....... 23,819 -- -- --
2/3 of WAND-TV..................... (23,744) -- -- --
--------- --------- ----------- ------
Liabilities assumed......... 75 -- -- --
========= ========= =========== ======
On November 10, 2000, the Company
acquired WWLP-TV for
approximately $128 million In
conjunction with this
acquisition, liabilities were
assumed as follows:
Fair value of assets acquired
and intangible assets....... 128,635 -- -- --
Cash paid..................... (128,000) -- -- --
--------- --------- ----------- ------
Liabilities assumed......... 635 -- --
========= ========= =========== ======
</Table>
NOTE 16 -- SUBSEQUENT EVENTS:
Acquisition of WNLO-TV (WNEQ-TV). On November 7, 2000, the Company agreed
to acquire from the Western New York Public Broadcasting Association certain
assets of WNEQ-TV, a noncommercial independent broadcast television station
located in Buffalo, New York. On January 29, 2001 the Company began operating
WNEQ-TV under a LMA agreement and subsequently changed the station's call
letters to WNLO-TV. The Company expects to close on the acquisition of WNLO-TV
in second quarter of 2001. The total purchase price is approximately $26.2
million, and will be funded by a combination of operating funds and additional
term loans. The Company intends to account for the business combination under
the purchase method of accounting.
Acquisition of WNAC-TV. On January 3, 2001, the Company and STC
Broadcasting, Inc., an entity in which Hicks Muse has a substantial economic
interest, and its affiliates, Smith
F-55
LIN TELEVISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Acquisition Company, Smith Acquisition License Company and STC License Company,
executed an Asset Purchase Agreement whereby the Company will acquire the FCC
license and certain related assets of WNAC-TV, the Fox affiliate serving the
Providence-New Bedford DMA, for approximately $2.5 million. After the Company
acquires WNAC-TV, the station will be operated by STC Broadcasting, Inc. under
an existing LMA agreement dated June 10, 1996. The transaction will be entirely
financed through a Loan Agreement with STC Broadcasting, Inc. and the Company.
The Company expects to close on the acquisition of WNAC-TV in second quarter of
2001. The Company intends to account for the acquisition under the purchase
method of accounting.
Form 8-K. On March 26, 2001, the Company filed a current report on Form
8-K with the Securities and Exchange Commission. In this Form 8-K, the Company
announced that revenue and broadcast cash flow for 2001 were forecast to decline
from the equivalent results in 2000, after adjustment to reflect acquisitions
and disposals. The Company also reported that it intended to engage in
discussions with its senior lenders to adjust certain covenant levels in order
to reflect the weaker business environment.
F-56
LIN HOLDINGS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<Table>
<Caption>
JUNE 30,
2001 DECEMBER 31,
(UNAUDITED) 2000
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents................................... $ 49,955 $ 7,832
Accounts receivable, less allowance for doubtful accounts
(2001 -- $1,477; 2000 -- $1,679).......................... 55,773 58,826
Program rights.............................................. 12,123 13,614
Other current assets........................................ 4,435 4,302
---------- -----------
Total current assets.............................. 122,286 84,574
Property and equipment, net................................. 160,527 164,738
Deferred financing costs.................................... 38,059 36,298
Equity investments.......................................... 85,623 91,798
Investment in Southwest Sports Group, at cost plus accrued
interest.................................................. 54,500 53,000
Program rights.............................................. 2,957 4,155
Intangible assets, net...................................... 1,583,440 1,600,882
Other assets................................................ 9,918 9,918
---------- -----------
Total Assets...................................... $2,057,310 $ 2,045,363
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 4,453 $ 7,226
Program obligations......................................... 10,997 13,491
Accrued income taxes........................................ 4,810 5,578
Current portion of long-term debt........................... -- 19,572
Accrued interest expense.................................... 11,497 10,809
Accrued sales volume discount............................... 1,473 4,728
Other accrued expenses...................................... 13,288 16,604
---------- -----------
Total current liabilities......................... 46,518 78,008
Long-term debt, excluding current portion................... 1,055,036 968,685
Deferred income taxes....................................... 510,999 521,494
Program obligations......................................... 3,216 3,984
Other liabilities........................................... 8,986 7,002
---------- -----------
Total liabilities................................. 1,624,755 1,579,173
---------- -----------
Commitments and Contingencies (Note 8)
Stockholders' equity:
Common stock, $0.01 par value: 1,000 shares authorized,
issued and outstanding.................................... -- --
Additional paid-in capital.................................. 561,808 561,669
Accumulated deficit......................................... (129,253) (95,479)
---------- -----------
Total stockholders' equity........................ 432,555 466,190
---------- -----------
Total liabilities and stockholders' equity........ $2,057,310 $ 2,045,363
========== ===========
</Table>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-57
LIN HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
2001 2000 2001 2000
-------- ------- -------- --------
Net revenues..................................... $ 73,046 $77,798 $131,074 $137,072
Operating costs and expenses:
Direct operating............................... 20,857 19,679 40,594 37,752
Selling, general and administrative............ 16,345 17,074 31,992 31,117
Corporate...................................... 2,094 2,020 4,484 4,536
Amortization of program rights................. 5,433 5,345 10,799 10,341
Depreciation and amortization of intangible
assets...................................... 17,049 15,956 33,315 31,311
-------- ------- -------- --------
Total operating costs and expenses............... 61,778 60,074 121,184 115,057
-------- ------- -------- --------
Operating income................................. 11,268 17,724 9,890 22,015
Other (income) expense:
Interest expense............................... 23,905 23,370 48,178 43,144
Investment income.............................. (979) (1,036) (1,909) (2,052)
Share of (income) loss in equity investments... (132) (584) 1,254 437
Loss on WAND-TV exchange....................... -- 2,720 -- 2,720
Other, net..................................... (12) (13) (217) 12
-------- ------- -------- --------
Total other expense, net......................... 22,782 24,457 47,306 44,261
-------- ------- -------- --------
Loss before provision for (benefit from) income
taxes and extraordinary item................... (11,514) (6,733) (37,416) (22,246)
Provision for (benefit from) income taxes........ (3,925) (127) (8,052) 6,926
-------- ------- -------- --------
Loss before extraordinary item................... (7,589) (6,606) (29,364) (29,172)
Extraordinary loss due to extinguishment of debt,
net of tax benefit of $2,400................... 4,410 -- 4,410 --
-------- ------- -------- --------
Net loss......................................... $(11,999) $(6,606) $(33,774) $(29,172)
======== ======= ======== ========
</Table>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-58
LIN HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30
---------------------
2001 2000
--------- ---------
Net cash provided by operating activities................... $ 2,460 $ 17,318
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures........................................ (7,786) (12,080)
Investment in Banks Broadcasting, Inc....................... (1,500) --
Capital distributions from equity investments............... 6,419 --
Acquisition of WWLP-TV, net of cash acquired................ -- (125,878)
Acquisition of WNAC-TV...................................... (2,500) --
Other investments........................................... (1,236) --
Local marketing agreement expenditures...................... -- (3,250)
--------- ---------
Net cash used in investing activities....................... (6,603) (141,208)
--------- ---------
FINANCING ACTIVITIES:
Net payments on exercises of phantom stock units and
issuance of employee stock purchase plan shares........... -- 12
Proceeds from long-term debt related to acquisition of
WNAC-TV................................................... 2,500 --
Proceeds from revolver debt, net............................ 13,000 --
Proceeds from long-term debt related to acquisition of
WWLP-TV................................................... -- 128,000
Proceeds from long-term debt................................ 276,055 15,000
Principal payments on long-term debt........................ (238,389) (20,154)
Financial costs incurred on issuance of long-term debt...... (6,900) --
--------- ---------
Net cash provided by financing activities................... 46,266 122,858
--------- ---------
Net increase (decrease) in cash and cash equivalents........ 42,123 (1,032)
Cash and cash equivalents at the beginning of the period.... 7,832 17,699
--------- ---------
Cash and cash equivalents at the end of the period.......... $ 49,955 $ 16,667
========= =========
</Table>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-59
LIN HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION:
LIN Holdings Corp. ("Holdings"), together with its subsidiaries, including
LIN Television Corporation ("LIN Television") (together, the "Company"), is a
television station group operator in the United States and Puerto Rico. LIN
Holdings and its subsidiaries are affiliates of Hicks, Muse, Tate & Furst
Incorporated ("Hicks Muse").
All of the Company's direct and indirect consolidated subsidiaries fully
and unconditionally guarantee the Company's Senior Subordinated Notes on a joint
and several basis.
These condensed consolidated financial statements have been prepared
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These statements should be read in conjunction with the Company's
annual report on Form 10-K for the fiscal year ended December 31, 2000.
In the opinion of management, the accompanying unaudited interim financial
statements contain all adjustments (consisting of normal recurring adjustments)
necessary to summarize fairly the financial position, results of operations and
cash flows of the Company for the periods presented. The interim results of
operations are not necessarily indicative of the results to be expected for the
full year.
The Company's preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Estimates are used when accounting for the collectability of accounts
receivable and valuing intangible assets, deferred tax assets and net assets of
businesses acquired. Actual results could differ from these estimates.
NOTE 2 -- BUSINESS COMBINATIONS:
WAND-TV Exchange: On April 1, 2000, the Company exchanged, with Block
Communications a 66.67% interest in certain assets of its television station
WAND-TV, including its FCC license and network affiliation agreement, for
substantially all of the assets and certain liabilities of WLFI-TV, Inc.
Immediately after the WAND-TV exchange the Company and Block Communications Inc.
contributed their respective interests in the WAND-TV assets to a partnership,
with the Company receiving a 33.33% interest in the partnership.
WWLP-TV: On November 10, 2000, the Company acquired the broadcast license
and operating assets of WWLP-TV, an NBC affiliate in Springfield, MA. The total
purchase price for the acquisition was approximately $128.0 million, including
direct costs of the acquisition. The acquisition was funded by borrowings under
the Company's incremental term loan facility. Although the Company did not own
or control the assets or FCC license of WWLP-TV prior to November 10, 2000,
pursuant to Emerging Issues Task Force Topic D-14, "Transactions Involving
Special Purpose Entities," WWLP Holdings, Inc., the parent of WWLP-TV, satisfied
the definition of a special purpose entity, as a result of a $75 million
guarantee of WWLP Holdings debt by the Company and other factors, and the
Company was deemed to be the sponsor of WWLP Holdings. Accordingly, the
financial results of operations of WWLP Holdings have been consolidated with
those of the Company since March 31, 2000, when WWLP Holdings, Inc. acquired
WWLP-TV from Benedek Broadcasting Corporation.
F-60
LIN HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
WNAC-TV. On June 5, 2001, the Company acquired the broadcast license and
certain related assets of WNAC-TV, the Fox affiliate serving the Providence-New
Bedford market. Simultaneously with the acquisition, the Company assumed an
existing LMA agreement with STC Broadcasting, Inc., an entity in which Hicks
Muse has a substantial economic interest, under which STC Broadcasting, Inc.
will operate WNAC-TV. As a result of this LMA, the Company does not generate
revenues or incur expenses from the operation of this station but, instead
receives an annual fee of $100,000 from STC Broadcasting, Inc. The total
purchase price was approximately $2.5 million. The acquisition was funded with a
note payable to STC Broadcasting. The Company has accounted for the business
combination under the purchase method of accounting. The acquisition is
summarized as follows (in thousands):
<Table>
Property and equipment...................................... $ 16
FCC license and network affiliation......................... 2,484
------
Total acquisition................................. $2,500
======
</Table>
NOTE 3 -- INVESTMENTS:
Joint Venture with NBC. The Company owns a 20.38% interest in a joint
venture with NBC and accounts for its interest using the equity method, as the
Company does not have a controlling interest. The following presents the
summarized financial information of the joint venture (in thousands):
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
2001 2000 2001 2000
-------- -------- ------- -------
Net revenues........................ $41,454 $45,687 $76,470 $82,937
Operating income.................... 17,932 19,657 28,325 32,213
Net income (loss)................... 1,800 3,624 (3,776) (508)
</Table>
<Table>
<Caption>
JUNE 30, 2001 JUNE 30, 2000
------------- -------------
Current assets.................................... $ 7,851 $ 15,839
Non-current assets................................ 242,310 245,540
Current liabilities............................... 725 1,087
Non-current liabilities........................... 815,500 815,500
</Table>
Investment in Banks Broadcasting, Inc. The Company owns a 50.00%
non-voting interest in Banks Broadcasting, Inc., a company formed in August
2000, and accounts for its interest using the equity method, as the Company does
not have a controlling interest. The following presents the summarized financial
information of Banks Broadcasting, Inc. (in thousands):
<Table>
<Caption>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2001 2001
-------------- --------------
Net revenues.................................... $1,054 $2,125
Operating loss.................................. (703) (872)
Net loss........................................ (452) (798)
</Table>
F-61
LIN HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
JUNE 30,
2001
--------
Current assets.............................................. $ 3,105
Non-current assets.......................................... 27,323
Current liabilities......................................... 1,510
Non-current liabilities..................................... 582
</Table>
Investment in WAND (TV) Partnership. The Company owns a 33.33% interest in
WAND (TV) Partnership, a partnership formed in April 2000, and accounts for its
interest using the equity method, as the Company does not have a controlling
interest. The following presents the summarized financial information of WAND
(TV) Partnership (in thousands):
<Table>
<Caption>
THREE MONTHS
ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------- -----------------
2001 2000 2001 2000
------ ------ ------- -------
Net revenues............................ $1,720 $2,120 $3,302 $2,120
Operating income (loss)................. 25 51 (138) 51
Net income (loss)....................... 40 51 (123) 51
</Table>
<Table>
<Caption>
JUNE 30, JUNE 30,
2001 2000
-------- --------
Current assets.......................................... $ 3,283 $ 2,178
Non-current assets...................................... 34,346 35,207
Current liabilities..................................... 641 1,518
</Table>
NOTE 4 -- INTANGIBLE ASSETS:
Intangible assets consisted of the following at (in thousands):
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
---------- ------------
FCC licenses and network affiliations............. $1,059,275 $1,055,653
Goodwill.......................................... 652,508 652,508
LMA purchase options.............................. 1,725 1,125
---------- ----------
1,713,508 1,709,286
Less accumulated amortization..................... (130,068) (108,404)
---------- ----------
$1,583,440 $1,600,882
========== ==========
</Table>
NOTE 5 -- DERIVATIVE INSTRUMENTS:
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), as amended, which requires that all derivative
instruments be reported on the balance sheet at fair value and that changes in a
derivative's fair value be recognized currently in earnings unless specific
hedge criteria are met.
The Company uses derivative instruments to manage exposure to interest rate
risks. The Company's objective for holding derivatives is to minimize these
risks using the most effective methods to eliminate or reduce the impacts of
these exposures.
F-62
LIN HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company uses interest rate collar, cap and swap arrangements, not
designated as hedging instruments under SFAS 133, in the notional amount of
$160.0 million at June 30, 2001 to mitigate the impact of the variability in
interest rates in connection with its variable rate senior credit facility. The
aggregate fair value of the arrangements at June 30, 2001 was a liability of
$2.0 million. Interest expense for the three and six-month periods ended June
30, 2001 includes a loss of $119,000 and $2.0 million, respectively, from the
marking-to-market of these derivative instruments.
NOTE 6 -- LONG-TERM DEBT:
Long-term debt consisted of the following at (in thousands):
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
---------- ------------
Senior Credit Facilities.......................... $ 200,301 $425,690
$300,000, 8 3/8% Senior Subordinated Notes due
2008 (net of a discount of $530 as of June 30,
2001)........................................... 299,470 299,442
$325,000, 10% Senior Discount Notes due 2008 (net
of a discount of $48,718 as of June 30, 2001)... 276,282 263,125
$210,000, 8% Senior Subordinated Notes due 2008
(net of discount of $7,747 as of June 30,
2001)........................................... 202,253 --
$100,000, 10% Senior Discount Notes due 2008 (net
of discount of $25,769 as of June 30, 2001)..... 74,230 --
$2,500 7% STC Broadcasting Note due 2006.......... 2,500 --
---------- --------
Total debt........................................ 1,055,036 988,257
Less current portion.............................. -- (19,572)
---------- --------
Total long-term debt.............................. $1,055,036 $968,685
========== ========
</Table>
On June 14, 2001, LIN Holdings Corp. issued $100 million aggregate
principal amount at maturity of 10% Senior Discount Notes due 2008 in a private
placement. The Senior Discount Notes were issued at a discount to yield 12.5%
and generated net proceeds of $73.9 million. Financing costs of $2.4 million
were incurred in connection with the issuance and will be amortized over the
term of the debt. The Senior Discount Notes are unsecured senior obligations of
LIN Holdings and are not guaranteed. Cash interest will not accrue or be payable
on the Senior Discount Notes prior to March 1, 2003. Thereafter, cash interest
will accrue at a rate of 10% per annum and will be payable semi-annually in
arrears commencing on September 1, 2003. The Company is subject to compliance
with certain financial covenants and other conditions set forth in offering
memorandum. The Notes are subject to early redemption provisions in the event of
a change of control.
On June 14, 2001, LIN Television issued $210 million aggregate principal
amount at maturity of 8% Senior Notes due 2008 in a private placement. The
Senior Notes were issued at a discount to yield 8 3/4% and generated net
proceeds of $202.2 million. The Senior Notes are unsecured senior obligations of
LIN Television without collateral rights, subordinated in right of payment to
all existing and any future senior indebtedness of LIN Television and are not
guaranteed. Financing costs of $4.5 million were incurred in connection with the
issuance and will be amortized over the term of the debt. Cash interest on the
Senior Notes accrues at a rate of 8% per annum and will be payable semi-annually
in arrears commencing on January 15, 2002. LIN Television is subject to
compliance with certain financial covenants and other
F-63
LIN HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
conditions set forth in offering memorandum. The Notes are subject to early
redemption provisions in the event of a change of control.
A portion of the proceeds from the Senior Discount Notes and the Senior
Notes less certain transactional costs were used to repay $233.2 million of the
Company's existing Senior Credit Facilities.
The extraordinary item in the period ending June 30, 2001 of $4.4 million,
net of a tax benefit of $2.4 million, relates to the write-off of unamortized
deferred financing costs related to the early settlement of this debt.
Simultaneously with the consummation of the offering of the new Senior
Discount Notes and the new Senior Notes, the Company obtained certain amendments
to its existing Senior Credit Facilities which (i) provided for the adjustment
of certain financial covenants and ratio tests, (ii) provided that $100 million
of the $160 million revolving portion of the Senior Credit Facilities may be
used to fund the $125 million mandatory redemption payment on the existing
Senior Discount Notes due on March 1, 2003 or, subsequent to the funding of the
mandatory redemption payment, to make interest payments on the existing Senior
Discount Notes and (iii) increased certain fees and interest rate spreads. As a
result of the repayment of the term loans under the Senior Credit Facilities,
there is expected to be no required scheduled amortization payments until
December 2005.
The following are the adjustments made to the financial covenant and ratio
tests:
<Table>
<Caption>
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02
---- ---- ---- ---- ---- ---- ---- ----
Maximum Leverage Ratio:
Amended.................... 7.40x 7.40x 7.40x 7.40x 7.40x 7.40x 7.40x 7.40x
Prior...................... 6.75x 6.75x 6.75x 6.75x 6.75x 6.75x 6.40x 6.40x
Minimum Interest Coverage
Ratio:
Amended.................... 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x
Prior...................... 1.70x 1.70x 1.70x 1.70x 1.75x 1.75x 1.85x 1.85x
</Table>
NOTE 7 -- RELATED PARTY TRANSACTIONS:
Monitoring and Oversight Agreement. The Company is party to an agreement
with Hicks, Muse & Co. Partners L.P. ("Hicks Muse Partners"), an affiliate of
the Company's ultimate parent, pursuant to which the Company agreed to pay Hicks
Muse Partners an annual fee (payable quarterly) for oversight and monitoring
services. The aggregate annual fee is adjustable, on a prospective basis, on
January 1 of each calendar year to an amount equal to 1% of the budgeted
consolidated annual EBITDA of the Company for the then current fiscal year. Upon
the acquisition by the Company of another entity or business, the fee is
adjusted prospectively in the same manner using the pro forma consolidated
annual EBITDA of the Company. In no event shall the annual fee be less than $1.0
million. Hicks Muse Partners is also entitled to reimbursement for any expenses
incurred by it in connection with rendering services allocable to the Company.
The fee for the three and six months ended June 30, 2001 was $314,000 and
$626,000, respectively. The fee for the three and six months ended June 30, 2000
was $286,000 and $524,000, respectively.
F-64
LIN HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- COMMITMENTS AND CONTINGENCIES:
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. In the opinion of the Company's
management, none of such litigation as of June 30, 2001, is likely to have a
material adverse effect on the financial position, results of operations, or
cash flows of the Company.
On March 30, 2001, the Company exercised its option to acquire the FCC
licenses of two of the Company's LMA stations, WCTX-TV and WOTV-TV. The Company
expects to close on the acquisitions of WCTX-TV and WOTV-TV upon the regulatory
approval of the FCC. The combined purchase price is approximately $7.3 million,
of which $4.0 million has been pre-paid. The balance of $3.3 million will be
funded by a combination of operating funds and additional borrowings from the
revolving credit facility.
NOTE 9 -- RECENT ACCOUNTING PRONOUNCEMENTS:
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations." SFAS 141 requires the purchase method of accounting to be applied
for business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company does not expect the application of SFAS
141 to have a material impact on its financial position or results of
operations.
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which is generally
effective for the Company from January 1, 2002. SFAS 142 requires, among other
things, the discontinuance of goodwill amortization and the introduction of
impairment testing in its place. In addition, the standard includes provisions
for the reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairments of goodwill. SFAS 142 also requires the Company to complete a
transitional goodwill impairment test six months from the date of adoption. The
Company is currently assessing, but has not yet determined, the impact of SFAS
142 on its financial position and results of operations.
NOTE 10 -- SUBSEQUENT EVENTS:
WNLO-TV: On July 25, 2001, the Company acquired the broadcast license and
operating assets of WNLO-TV (formerly called WNEQ-TV), an independent broadcast
television station located in Buffalo, New York. The Company has been operating
WNLO-TV since January 29, 2001 under a LMA agreement. The total purchase price
is approximately $26.2 million, and will be funded by available cash. The
Company intends to account for the business combination under the purchase
method of accounting.
WJPX-TV, WKPV-TV, and WJWN-TV: On August 2, 2001, the Company acquired the
broadcast license and operating assets of WJPX-TV, an independent television
station in San Juan, Puerto Rico, WKPV-TV, an independent television station in
Ponce, Puerto Rico and WJWN-TV, an independent television station in San
Sebastian, Puerto Rico. WKPV-TV and WJWN-TV currently rebroadcast the
programming carried on WJPX-TV. The total purchase price of the three stations
is approximately $11.2 million, and will be funded by available cash. The
Company intends to account for the business combination under the purchase
method of accounting.
F-65
LIN TELEVISION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<Table>
<Caption>
JUNE 30,
2001
(UNAUDITED) DECEMBER 31,
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents................................... $ 49,955 $ 7,832
Accounts receivable, less allowance for doubtful accounts
(2001 -- $1,552; 2000 -- $1,679).......................... 55,773 58,826
Program rights.............................................. 12,123 13,614
Other current assets........................................ 4,435 4,302
---------- ----------
Total current assets.............................. 122,286 84,574
Property and equipment, net................................. 160,527 164,738
Deferred financing costs.................................... 27,146 27,142
Equity investments.......................................... 85,623 91,798
Investment in Southwest Sports Group, at cost plus accrued
interest.................................................. 54,500 53,000
Program rights.............................................. 2,957 4,155
Intangible assets, net...................................... 1,583,440 1,600,882
Other assets................................................ 9,918 9,918
---------- ----------
Total Assets...................................... $2,046,397 $2,036,207
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 4,453 $ 7,226
Program obligations......................................... 10,997 13,491
Accrued income taxes........................................ 4,810 5,578
Current portion of long-term debt........................... 0 19,572
Accrued interest expense.................................... 11,497 10,809
Accrued sales volume discount............................... 1,473 4,728
Other accrued expenses...................................... 13,288 16,604
---------- ----------
Total current liabilities......................... 46,518 78,008
Long-term debt, excluding current portion................... 704,524 705,560
Deferred income taxes....................................... 532,388 536,619
LIN Holdings tax sharing obligations........................ 8,365 8,364
Program obligations......................................... 3,216 3,984
Other liabilities........................................... 8,986 7,002
---------- ----------
Total liabilities................................. 1,303,997 1,339,537
---------- ----------
Commitments and Contingencies (Note 8)
Stockholders' equity:
Common stock, $0.01 par value: 1,000 shares authorized,
issued and outstanding................................. -- --
Additional paid-in capital................................ 820,102 748,523
Accumulated deficit....................................... (77,702) (51,853)
---------- ----------
Total stockholders' equity........................ 742,400 696,670
---------- ----------
Total liabilities and stockholders' equity........ $2,046,397 $2,036,207
========== ==========
</Table>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-66
LIN TELEVISION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<Table>
<Caption>
THREE MONTHS ENDED
JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------ --------------------------
2001 2000 2001 2000
------- ------- ----------- -----------
Net revenues..................................... $73,046 $77,798 $131,074 $137,072
Operating costs and expenses:
Direct operating............................... 20,857 19,679 40,594 37,752
Selling, general and administrative............ 16,345 17,074 31,992 31,117
Corporate...................................... 2,094 2,020 4,484 4,536
Amortization of program rights................. 5,433 5,345 10,799 10,341
Depreciation and amortization of intangible
assets...................................... 17,049 15,956 33,315 31,311
------- ------- -------- --------
Total operating costs and expenses............... 61,778 60,074 121,184 115,057
------- ------- -------- --------
Operating income................................. 11,268 17,724 9,890 22,015
Other (income) expense:
Interest expense............................... 16,505 16,987 33,987 30,571
Investment income.............................. (979) (1,036) (1,909) (2,052)
Share of (income) loss in equity investments... (132) (584) 1,254 437
Loss on WAND-TV exchange....................... -- 2,720 -- 2,720
Other, net..................................... (12) (13) (217) 12
------- ------- -------- --------
Total other expense, net......................... 15,382 18,074 33,115 31,688
------- ------- -------- --------
Loss before provision for (benefit from) income
taxes and extraordinary item................... (4,114) (350) (23,225) (9,673)
Provision for (benefit from) income taxes........ (4,086) 2,820 (1,786) (5,414)
------- ------- -------- --------
Loss before extraordinary item................... (28) (3,170) (21,439) (4,259)
Extraordinary loss due to extinguishment of debt,
net of tax benefit of $2,400................... 4,410 -- 4,410 --
------- ------- -------- --------
Net loss......................................... $(4,438) $(3,170) $(25,849) $ (4,259)
======= ======= ======== ========
</Table>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-67
LIN TELEVISION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<Table>
<Caption>
SIX MONTHS ENDED JUNE 30,
--------------------------
2001 2000
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... $ 2,460 $ 17,318
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures........................................ (7,786) (12,080)
Investment in Banks Broadcasting, Inc. ..................... (1,500) --
Capital distributions from equity investments............... 6,419 --
Acquisition of WWLP-TV, net of cash acquired................ -- (125,878)
Acquisition of WNAC-TV...................................... (2,500) --
Other investments........................................... (1,236) --
Local marketing agreement expenditures...................... -- (3,250)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES....................... (6,603) (141,208)
--------- ---------
FINANCING ACTIVITIES:
Net payments on exercises of phantom stock units and
issuance of employee stock purchase plan shares........... -- 12
Capital contribution from LIN Holdings...................... 71,450 --
Proceeds from long-term debt related to acquisition of
WNAC-TV................................................... 2,500 --
Proceeds from revolver debt, net............................ 13,000 --
Proceeds from long-term debt related to acquisition of
WWLP-TV................................................... -- 128,000
Proceeds from long-term debt................................ 202,205 15,000
Principal payments on long-term debt........................ (238,389) (20,154)
Financing costs incurred on issuance of long-term debt...... (4,500) --
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 46,266 122,858
--------- ---------
Net increase (decrease) in cash and cash equivalents........ 42,123 (1,032)
Cash and cash equivalents at the beginning of the period.... 7,832 17,699
--------- ---------
Cash and cash equivalents at the end of the period.......... $ 49,955 $ 16,667
========= =========
</Table>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-68
LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION:
LIN Television Corporation ("LIN Television"), together with its
subsidiaries, (collectively, the "Company" or "LIN Television") is a television
station group operator in the United States and Puerto Rico. The Company is an
affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse") and is
directly owned by LIN Holdings Corp. ("LIN Holdings").
All of the Company's direct and indirect consolidated subsidiaries fully
and unconditionally guarantee the Senior Subordinated Notes and Senior Credit
Facilities on a joint and several basis.
These condensed consolidated financial statements have been prepared
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These statements should be read in conjunction with the Company's
annual report on Form 10-K for the fiscal year ended December 31, 2000.
In the opinion of management, the accompanying unaudited interim financial
statements contain all adjustments (consisting of normal recurring adjustments)
necessary to summarize fairly the financial position, results of operations and
cash flows of the Company for the periods presented. The interim results of
operations are not necessarily indicative of the results to be expected for the
full year.
The Company's preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Estimates are used when accounting for the collectability of accounts
receivable and valuing intangible assets, deferred tax assets and net assets of
businesses acquired. Actual results could differ from these estimates.
NOTE 2 -- BUSINESS COMBINATIONS:
WAND-TV Exchange: On April 1, 2000, the Company exchanged, with Block
Communications (formerly Blade Communications, Inc.), a 66.67% interest in
certain assets of its television station WAND-TV, including its FCC license and
network affiliation agreement, for substantially all of the assets and certain
liabilities of WLFI-TV, Inc. Immediately after the WAND-TV exchange the Company
and Block Communications Inc. contributed their respective interests in the
WAND-TV assets to a partnership, with the Company receiving a 33.33% interest in
the partnership.
WWLP-TV: On November 10, 2000, the Company acquired the broadcast license
and operating assets of WWLP-TV, an NBC affiliate in Springfield, MA. The total
purchase price for the acquisition was approximately $128.0 million, including
direct costs of the acquisition. The acquisition was funded by borrowings under
the Company's incremental term loan facility. Although the Company did not own
or control the assets or FCC license of WWLP-TV prior to November 10, 2000,
pursuant to Emerging Issues Task Force Topic D-14, "Transactions Involving
Special Purpose Entities," WWLP Holdings, Inc., the parent of WWLP-TV, satisfied
the definition of a special purpose entity, as a result of a $75 million
guarantee of WWLP Holdings debt by the Company and other factors, and the
Company was deemed to be the sponsor of WWLP Holdings. Accordingly, the
financial results of operations of WWLP Holdings have been
F-69
LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
consolidated with those of the Company since March 31, 2000, when WWLP Holdings,
Inc. acquired WWLP-TV from Benedek Broadcasting Corporation.
WNAC-TV. On June 5, 2001, the Company acquired the broadcast license and
certain related assets of WNAC-TV, the Fox affiliate serving the Providence-New
Bedford market. Simultaneously with the acquisition, the Company assumed an
existing LMA agreement with STC Broadcasting, Inc., an entity in which Hicks
Muse has a substantial economic interest, under which STC Broadcasting, Inc.
will operate WNAC-TV. As a result of this LMA, the Company does not generate
revenues or incur expenses from the operation of this station, but instead
receives an annual fee of $100,000 from STC Broadcasting, Inc. The total
purchase price was approximately $2.5 million. The acquisition was funded with a
note payable to STC Broadcasting. The Company has accounted for the business
combination under the purchase method of accounting. The acquisition is
summarized as follows (in thousands):
<Table>
Property and equipment...................................... $ 16
FCC license and network affiliation......................... 2,484
------
Total acquisition........................................... $2,500
======
</Table>
NOTE 3 -- INVESTMENTS:
Joint Venture with NBC. The Company owns a 20.38% interest in a joint
venture with NBC and accounts for its interest using the equity method, as the
Company does not have a controlling interest. The following presents the
summarized financial information of the joint venture (in thousands):
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
2001 2000 2001 2000
-------- -------- ------- -------
Net revenues........................ $41,454 $45,687 $76,470 $82,937
Operating income.................... 17,932 19,657 28,325 32,213
Net Income (loss)................... 1,800 3,624 (3,776) (508)
</Table>
<Table>
<Caption>
JUNE 30, 2001 JUNE 30, 2000
------------- -------------
Current assets.................................... $ 7,851 $ 15,839
Non-current assets................................ 242,310 245,540
Current liabilities............................... 725 1,087
Non-current liabilities........................... 815,500 815,500
</Table>
Investment in Banks Broadcasting, Inc. The Company owns a 50.00%
non-voting interest in Banks Broadcasting, Inc., a company formed in August
2000, and accounts for its interest using the equity method, as the Company does
not have a controlling interest. The following presents the summarized financial
information of Banks Broadcasting, Inc. (in thousands):
<Table>
<Caption>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
2001 2001
(UNAUDITED) (UNAUDITED)
------------ -----------
Net revenues........................................ $1,054 2,215
Operating loss...................................... (703) (872)
Net loss............................................ (452) (798)
</Table>
F-70
LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
JUNE 30,
2001
(UNAUDITED)
-----------
Current assets.............................................. $ 3,105
Non-current assets.......................................... 27,323
Current liabilities......................................... 1,510
Non-current liabilities..................................... 582
</Table>
Investment in WAND (TV) Partnership. The Company owns a 33.33% interest in
WAND (TV) Partnership, a partnership formed in April 2000, and accounts for its
interest using the equity method, as the Company does not have a controlling
interest. The following presents the summarized financial information of WAND
(TV) Partnership (in thousands):
<Table>
<Caption>
THREE MONTHS SIX MONTHS ENDED
ENDED JUNE 30, JUNE 30,
--------------- -----------------
2001 2000 2001 2000
------ ------ ------- -------
Net revenues............................ $1,720 $2,120 $3,302 $2,120
Operating income (loss)................. 25 51 (138) 51
Net income (loss)....................... 40 51 (123) 51
</Table>
<Table>
<Caption>
JUNE 30, 2001 JUNE 30, 2000
------------- -------------
Current assets.................................... $3,283 $2,178
Non-current assets................................ 34,346 35,207
Current liabilities............................... 641 1,518
</Table>
NOTE 4 -- INTANGIBLE ASSETS:
Intangible assets consisted of the following at (in thousands):
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
---------- ------------
FCC licenses and network affiliations............. $1,059,275 $1,055,653
Goodwill.......................................... 652,508 652,508
LMA purchase options.............................. 1,725 1,125
---------- ----------
1,713,508 1,709,286
Less accumulated amortization..................... (130,068) (108,404)
---------- ----------
$1,583,440 $1,600,882
========== ==========
</Table>
NOTE 5 -- DERIVATIVE INSTRUMENTS:
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), as amended, which requires that all derivative
instruments be reported on the balance sheet at fair value and that changes in a
derivative's fair value be recognized currently in earnings unless specific
hedge criteria are met.
The Company uses derivative instruments to manage exposure to interest rate
risks. The Company's objective for holding derivatives is to minimize these
risks using the most effective methods to eliminate or reduce the impacts of
these exposures.
The Company uses interest rate collar, cap and swap arrangements, not
designated as hedging instruments under SFAS 133, in the notional amount of
$160.0 million at June 30,
F-71
LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2001 to mitigate the impact of the variability in interest rates in connection
with its variable rate senior credit facility. The aggregate fair value of the
arrangements at June 30, 2001 was a liability of $2.0 million. Interest expense
for the three and six-month periods ended June 30, 2001 includes a loss of
$119,000 and $2.0 million, respectively, from the marking-to-market of these
derivative instruments.
NOTE 6 -- LONG-TERM DEBT:
Long-term debt consisted of the following at (in thousands):
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
-------- ------------
Senior Credit Facilities............................ $200,301 $425,690
$300,000, 8 3/8% Senior Subordinated Notes due 2008
(net of discount of $530 as of June 30, 2001)..... 299,470 299,442
$210,000 8% Senior Subordinated Notes due 2008
(net of discount of $7,747 as of June 30, 2001)..... 202,253 --
$2,500 7% STC Broadcasting Note due 2006............ 2,500 --
-------- --------
Total debt................................ 704,524 725,132
Less current portion................................ -- (19,572)
-------- --------
Total long-term debt...................... $704,524 $705,560
======== ========
</Table>
On June 14, 2001, LIN Television issued $210 million aggregate principal
amount at maturity of 8% Senior Notes due 2008 in a private placement. The
senior notes were issued at a discount to yield 8 3/4% and generated net
proceeds of $202.2 million. The senior notes are unsecured senior obligations of
LIN Television without collateral rights, subordinated in right of payment to
all existing and any future senior indebtedness of LIN Television and are not
guaranteed. Financing costs of $4.5 million were incurred in connection with the
issuance and will be amortized over the term of the debt. Cash interest on the
senior notes accrues at a rate of 8% per annum and will be payable semi-annually
in arrears commencing on January 15, 2002. LIN Television is subject to
compliance with certain financial covenants and other conditions set forth in
the offering memorandum. The senior notes are subject to early redemption
provisions in the event of a change of control.
A portion of the proceeds from the Senior Notes, less certain transactional
costs, and a capital contribution from LIN Holdings (see Note 9 -- Capital
Contribution) were used to repay $233.2 million of the Company's existing Senior
Credit Facilities.
The extraordinary item in the period ending June 30, 2001 of $4.4 million,
net of a tax benefit of $2.4 million, relates to the write-off of unamortized
deferred financing costs related to the early settlement of this debt.
Simultaneously with the consummation of the offering of the new Senior
Notes, the Company obtained certain amendments to its existing Senior Credit
Facilities which (i) provided for the adjustment of certain financial covenants
and ratio tests and (ii) increased certain fees and interest rate spreads. As a
result of the repayment of the term loans under the Senior Credit Facilities,
there is expected to be no required scheduled amortization payments until
December 2005.
F-72
LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following are the adjustments made to the financial covenant and ratio
tests:
<Table>
<Caption>
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02
----- ----- ----- ----- ----- ----- ----- -----
Maximum Leverage
Ratio:
Amended............. 7.40x 7.40x 7.40x 7.40x 7.40x 7.40x 7.40x 7.40x
Prior............... 6.75x 6.75x 6.75x 6.75x 6.75x 6.75x 6.40x 6.40x
Minimum Interest
Coverage Ratio:
Amended............. 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x
Prior............... 1.70x 1.70x 1.70x 1.70x 1.75x 1.75x 1.85x 1.85x
</Table>
NOTE 7 -- RELATED PARTY TRANSACTIONS:
Monitoring and Oversight Agreement. The Company is party to an agreement
with Hicks, Muse & Co. Partners, L.P. ("Hicks Muse Partners"), an affiliate of
the Company's ultimate parent, pursuant to which the Company agreed to pay Hicks
Muse Partners an annual fee (payable quarterly) for oversight and monitoring
services. The aggregate annual fee is adjustable, on a prospective basis, on
January 1 of each calendar year to an amount equal to 1% of the budgeted
consolidated annual EBITDA of the Company for the then current fiscal year. Upon
the acquisition by the Company of another entity or business, the fee is
adjusted prospectively in the same manner using the pro forma consolidated
annual EBITDA of the Company. In no event shall the annual fee be less than $1.0
million. Hicks Muse Partners is also entitled to reimbursement for any expenses
incurred by it in connection with rendering services allocable to the Company.
The fee for the three and six months ended June 30, 2001 was $314,000 and
$626,000, respectively. The fee for the three and six months ended June 30, 2000
was $286,000 and $624,000, respectively.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES:
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. In the opinion of the Company's
management, none of such litigation as of June 30, 2001, is likely to have a
material adverse effect on the financial position, results of operations, or
cash flows of the Company.
On March 30, 2001, the Company exercised its option to acquire the FCC
licenses of two of the Company's LMA stations, WCTX-TV and WOTV-TV. The Company
expects to close on the acquisitions of WCTX-TV and WOTV-TV upon the regulatory
approval of the Federal Communication Commission. The combined purchase price is
approximately $7.3 million, of which $4.0 million has been pre-paid. The balance
of $3.3 million will be funded by a combination of operating funds and
additional borrowings from the revolving credit facility.
NOTE 9 -- CAPITAL CONTRIBUTION
On June 14, 2001, and in connection with the issuance of the Senior
Discount Notes, LIN Holdings transferred $71.5 million to LIN Television in the
form of a capital contribution.
NOTE 9 -- RECENT ACCOUNTING PRONOUNCEMENTS:
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations." SFAS 141 requires the purchase method of accounting to be applied
for business combinations initiated
F-73
LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
after June 30, 2001 and eliminates the pooling-of-interests method. The Company
does not expect the application of SFAS 141 to have a material impact on its
financial position or results of operations.
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which is generally
effective for the Company from January 1, 2002. SFAS 142 requires, among other
things, the discontinuance of goodwill amortization and the introduction of
impairment testing in its place. In addition, the standard includes provisions
for the reclassification of certain existing recognized intangibles such as
goodwill, reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairments of goodwill. SFAS 142 also requires the Company to complete a
transitional goodwill impairment test six months from the date of adoption. The
Company is currently assessing, but has not yet determined, the impact of SFAS
142 on its financial position and results of operations.
NOTE 10 -- SUBSEQUENT EVENTS:
WNLO-TV: On July 25, 2001, the Company acquired the broadcast license and
operating assets of WNLO-TV (formerly called WNEQ-TV), an independent broadcast
television station located in Buffalo, New York. The Company has been operating
WNLO-TV since January 29, 2001 under a LMA agreement. The total purchase price
is approximately $26.2 million, and will be funded by available cash. The
Company intends to account for the business combination under the purchase
method of accounting.
WJPX-TV, WKPV-TV, and WJWN-TV: On August 2, 2001, the Company acquired the
broadcast license and operating assets of WJPX-TV, an independent television
station in San Juan, Puerto Rico, WKPV-TV, an independent television station in
Ponce, Puerto Rico and WJWN-TV, an independent television station in San
Sebastian, Puerto Rico. WKPV-TV and WJWN-TV currently rebroadcast the
programming carried on WJPX-TV. The total purchase price of the three stations
is approximately $11.2 million, and will be funded by available cash. The
Company intends to account for the business combination under the purchase
method of accounting.
F-74
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
LIN HOLDINGS CORP.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<Table>
<Caption>
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
ASSETS
Deferred financing costs.................................... $ 9,157 $ 10,433
Other non current assets.................................... 23,488 14,481
Investment in wholly owned subsidiaries..................... 696,670 713,661
-------- --------
Total assets...................................... $729,315 $738,575
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Long-term debt.............................................. 263,125 238,660
-------- --------
Total liabilities................................. 263,125 238,660
-------- --------
Stockholders' equity:
Additional paid-in capital................................ 561,669 561,200
Accumulated deficit....................................... (95,479) (61,285)
-------- --------
Total stockholders' equity........................ 466,190 499,915
-------- --------
Total liabilities and stockholder's equity........ $729,315 $738,575
======== ========
</Table>
F-75
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
LIN HOLDINGS CORP.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<Table>
<Caption>
PERIOD FROM
YEAR ENDED YEAR ENDED MARCH 3 -
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998
------------ ------------ ------------
Other expense:
Interest expense................................. $ 25,742 $ 23,374 $ 17,999
Share of loss in wholly owned subsidiaries....... 17,461 18,832 15,560
-------- -------- --------
Total other expense................................ 43,203 42,206 33,559
======== ======== ========
Loss before benefit from income taxes.............. (43,203) (42,206) (33,559)
Benefit from income taxes.......................... (9,009) (8,180) (6,300)
-------- -------- --------
Net loss........................................... $(34,194) $(34,026) $(27,259)
======== ======== ========
</Table>
F-76
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
LIN HOLDINGS CORP.
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<Table>
<Caption>
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN ACCUMULATE STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
------ ------ ---------- ---------- -------------
Balance at March 3, 1998........... -- $ -- $ -- $ -- $ --
Net loss......................... -- -- -- (27,259) (27,259)
Proceeds from sale of Common
Stock......................... 1 -- 558,123 -- 558,123
Proceeds from capital
contribution.................. -- -- 1,000 -- 1,000
Proceeds from exercises of
phantom stock units........... -- -- (250) -- (250)
Tax benefit from exercises of
stock options................. -- -- 795 -- 795
---- ----- -------- -------- --------
Balance at December 31, 1998....... 1 -- 559,668 (27,259) 532,409
Net loss......................... -- -- -- (34,026) (34,026)
Tax benefit from exercises of
stock options................. -- -- 1,532 -- 1,532
---- ----- -------- -------- --------
Balance at December 31, 1999....... 1 -- 561,200 (61,285) 499,915
Net loss......................... -- -- -- (34,194) (34,194)
Proceeds from exercises of
phantom stock units........... -- -- (133) -- (133)
Tax benefit from exercises of
stock options................. -- -- 602 -- 602
---- ----- -------- -------- --------
Balance at December 31, 2000....... 1 $ -- $561,669 $(95,479) $466,190
==== ===== ======== ======== ========
</Table>
F-77
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
LIN HOLDINGS CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<Table>
<Caption>
PERIOD FROM
YEAR ENDED YEAR ENDED MARCH 3 -
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998
------------ ------------ ------------
OPERATING ACTIVITIES:
Net loss........................................... $(34,194) $(34,026) $(27,259)
Share of loss in wholly owned subsidiaries......... 17,461 18,832 15,560
Amortization of financing costs and notes
discount......................................... 25,742 23,374 17,999
Deferred taxes..................................... (9,009) (8,180) (6,300)
-------- -------- --------
Net cash used in operating activities and net
change in cash and cash equivalents.............. $ -- $ -- $ --
======== ======== ========
</Table>
F-78
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
LIN HOLDINGS CORP.
(IN THOUSANDS)
<Table>
<Caption>
BALANCE AT BALANCE
BEGINNING OF CHARGED TO OTHER AT END
PERIOD OPERATIONS DEDUCTIONS DEDUCTIONS OF PERIOD
------------ ---------- ---------- ---------- ---------
Year ended December 31, 2000:
Allowance for Doubtful Accounts.... $1,918 $532 $747(1) $ 24(4) $1,679
Year ended December 31, 1999:
Allowance for Doubtful Accounts.... $1,880 $493 $403(1) $ 52(3) $1,918
Period from March 3, 1998 to December
31, 1998:
Allowance for Doubtful Accounts.... $2,296 $289 $397(1) $308(2) $1,880
Period from January 1, 1998 to March
2, 1998:
Allowance for Doubtful Accounts.... $2,197 $133 $ 34(1) $ -- $2,296
</Table>
---------------
(1) Uncollected accounts written off, net of recoveries.
(2) Contribution of KXAS-TV to NBC joint venture.
(3) Acquisition of WOOD-TV and its LMA WOTV-TV, acquisition of WAPA-TV, and the
contribution of KXTX-TV to Southwest Sports Group Holdings, LLC.
(4) Acquisition of WWLP-TV, exchange of two-thirds of WAND-TV for WLFI-TV and
the contribution of the remaining third of WAND-TV to WAND (TV) Partnership.
F-79
------------------------------------------------------
------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR BUY ANY SECURITIES IN ANY JURISDICTION WHERE IT IS UNLAWFUL.
THE INFORMATION IN THIS PROSPECTUS IS CURRENT AS OF THE DATE HEREOF.
---------------------------
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Where You Can Find More Information... i
Cautionary Statement Regarding Forward
Looking Statements.................. i
Certain Definitions and Market and
Industry Data....................... iii
Summary............................... 1
Risk Factors.......................... 20
Use of Proceeds....................... 29
Capitalization........................ 30
Selected Consolidated Financial and
Operating Data...................... 31
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 37
Business.............................. 47
Management............................ 68
Securities Ownership of Certain
Beneficial Owners and Management.... 71
Certain Relationships and Related
Transactions........................ 72
Description of Certain Indebtedness... 74
The Exchange Offers................... 78
Description of the New Senior Notes... 88
Description of the New Senior Discount
Notes............................... 118
Book Entry; Delivery and Form......... 146
Plan of Distribution.................. 148
Certain United States Federal Income
Tax Considerations.................. 149
Legal Matters......................... 155
Experts............................... 155
</Table>
---------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
(LIN ACQUISITION COMPANY LOGO)
OFFER TO EXCHANGE ALL OUTSTANDING
OLD 8% SENIOR NOTES DUE 2008
FOR
NEW 8% SENIOR NOTES DUE 2008
OF
LIN TELEVISION CORPORATION
OFFER TO EXCHANGE ALL OUTSTANDING
OLD SENIOR DISCOUNT NOTES DUE 2008
FOR
NEW SENIOR DISCOUNT NOTES DUE 2008
OF
LIN HOLDINGS CORP.
---------------------------
PROSPECTUS
---------------------------
OCTOBER 26, 2001
------------------------------------------------------
------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Delaware law authorizes corporations to limit or to eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. the certificate of
incorporation of each corporate co-registrant, as amended, limits the liability
of each corporate co-registrant's directors to each corporate co-registrant or
its stockholders to the fullest extent permitted by the Delaware statute as in
effect from time to time. Specifically, directors of each corporate
co-registrant will not be personally liable for monetary damages for breach of a
director's fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to each corporate
co-registrant or its stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law;
- for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in the Delaware law; or
- for any transaction from which the director derived an improper personal
benefit.
The certificate of incorporation, as amended, of each corporate
co-registrant provides that each corporate co-registrant shall indemnify its
officers and directors and former officers and directors to the fullest extent
permitted by the General Corporation Law of the State of Delaware. Pursuant to
the provisions of Section 145 of the General Corporation Law of the State of
Delaware, each corporate co-registrant has the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, other than an action by or in the right
of each issuer, by reason of the fact that he is or was a director, officer,
employee or agent of each corporate co-registrant, against any and all expenses,
judgments, fines and amounts paid in actually and reasonably incurred in
connection with such action, suit or proceeding. The power to indemnify applies
only if such person acted in good faith and in a manner he reasonably believed
to be in the best interest or not opposed to the best interest, of each
corporate co-registrant and with respect to any criminal action or proceeding,
had no reasonably cause to believe his conduct was unlawful.
The power to indemnify applies to actions brought by or in the right of
each corporate co-registrant as well, but only to the extent of defense and
settlement expenses and not to any satisfaction of a judgment or settlement of
the claim itself, and with the further limitation that in such actions no
indemnification shall be made in the event of any adjudication of negligence or
misconduct unless the court, in its discretion, believes that in light of all
the circumstances indemnification should apply.
The statute further specifically provides that the indemnification
authorized thereby shall not be deemed exclusive of any other rights to which
any such officer or director may be entitled under any bylaws, agreement, vote
of stockholders or disinterested directors, or otherwise.
Each limited liability company co-registrant is empowered by the Delaware
Limited Liability Company act, through its limited liability company agreement,
to indemnify and hold harmless any member or manager or other person from and
against any and all claims and demands whatsoever.
II-1
Article 8 of each limited liability company co-registrant's Limited
Liability Company Agreement provides as follows:
Liability of Members; Indemnification.
(a) Neither a Member, including the Managing Member, not any officer,
employee or agent of the company, including a person having more than one
such capacity, shall be personally liable for any expenses, liabilities,
debts or obligations of the company solely by reason of acting in such
capacity except as provided in the Act.
(b) To the fullest extent permitted by law, the company shall
indemnify and hold harmless the Managing Member, each Member and any
officer, employee or agent of the company from and against any and all
losses, claims, damages, liabilities or expenses of whatever nature (each a
"Claim"), as incurred, arising out of or relating to the management or
business of the company; provided that such indemnification shall not apply
to any such person if a court of competent jurisdiction has made a final
determination that such Claim resulted directly from the gross negligence,
bad faith or willful misconduct of such person.
The limited partnership co-registrant is empowered by the Delaware Revised
Uniform Limited Partnership Act, through its partnership agreement, to indemnify
and hold harmless any partner or other person from and against any and all
claims and demands whatsoever.
The limited partnership co-registrant's partnership agreement provides that
"[i]f any Partner or any director, officer or partner of any Partner serving on
behalf of the Partnership, or any officer of the Partnership (an "Indemnitee")
was or is a party or is threatened to be made a party in any threatened, pending
or completed action, suit, proceeding or investigation involving a cause of
action or alleged cause of action for damages or other relief arising from or
related to the business or affairs of the Partnership, the Partnership (but
without recourse to the separate assets of any Partner) shall indemnify such
Indemnitee against all losses, costs and expenses, including attorney's fees,
judgments and amounts paid in settlement actually and reasonably incurred by the
Indemnitee in connection with such action, suit, proceeding or investigation, so
long as such Indemnitee["s] ... conduct for and on behalf of the Partnership was
taken in good faith, in a manner reasonably believed to be in or not opposed to
the best interests of the partnership, or with the care that an ordinarily
prudent person in a like position would use under similar circumstances."
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, members, partners and controlling
persons of each co-registrant pursuant to the foregoing provisions, or
otherwise, each co-registrant has been advised that in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable. In the event that a claim for indemnification
against such liabilities, other than the payment by each co-registrant of
expenses incurred or paid by a director, officer, member, partner or controlling
person thereof in the successful defense of any action, suit or proceeding, is
asserted by a director, officer, member, partner or controlling person in
connection with the securities being registered, each co-registrant will, unless
in the opinion of its counsel the matter has been settled by controlled
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<Table>
2.1 -- Agreement and Plan of Merger among Ranger Holdings Corp.,
Ranger Acquisition Company, and LIN Television
Corporation dated as of August 12, 1997, as amended as of
October 21, 1997.(1)
3.1.1 -- Certificate of Incorporation of LIN Holdings Corp.
(formerly known as Ranger Holdings Corp.).(1)
3.1.2 -- Certificate of Amendment of Certificate of Incorporation
of LIN Holdings Corp. (formerly known as Ranger Holding
Corp.).(1)
3.2 -- Bylaws of LIN Holdings Corp.(1)
3.3 -- Restated Certificate of Incorporation of LIN Television
Corporation.(1)
3.4 -- Restated Bylaws of LIN Television Corporation.(1)
3.5 -- Certificate of Incorporation of Airwaves, Inc.(1)
3.6 -- Bylaws of Airwaves, Inc.(1)
3.7 -- Certificate of Formation of Indiana Broadcasting, LLC.(1)
3.8 -- Limited Liability Company Agreement of Indiana
Broadcasting, LLC, dated as of February 3, 1998.(1)
3.9.1 -- Certificate of Incorporation of KXAN, Inc. (formerly
known as C.&W.A., Inc.).(1)
3.9.2 -- Certificate of Amendment of Certificate of Incorporation
of KXAN, Inc. (formerly known as C.&W.A., Inc.)(1)
3.9.3 -- Certificate of Amendment of Certificate of Incorporation
of KXAN, Inc. (formerly known as WFIL, Inc.).(1)
3.10 -- Bylaws of KXAN, Inc.(1)
3.11 -- Certificate of Incorporation of KXTX Holdings, Inc.
(formerly known as KXAS Holdings, Inc.).(1)
3.12 -- Bylaws of KXTX Holdings, Inc.(1)
3.13 -- Certificate of Incorporation of Linbenco, Inc.(1)
3.14 -- Bylaws of Linbenco, Inc.(1)
3.15 -- Certificate of Formation of LIN Airtime, LLC*
3.16 -- Limited Liability Company Agreement of LIN Airtime, dated
as of August 1, 2000.*
3.17 -- Certificate of Incorporation of LIN Sports, Inc.(1)
3.18 -- Bylaws of LIN Sports, Inc.(1)
3.19 -- Certificate of Incorporation of San Juan, Inc.*
3.20 -- Bylaws of San Juan, Inc.*
3.21 -- Certificate of Incorporation of LIN Television of Texas
Inc.(1)
3.22 -- By-laws of LIN Television of Texas, Inc.(1)
3.23 -- Amended and Restated Certificate of Limited Partnership
of LIN Television of Texas, L.P.(1)
3.24 -- Amended and Restated Agreement of Limited Partnership of
LIN Television of Texas, L.P.(1)
3.25 -- Certificate of Incorporation of North Texas Broadcasting
Corporation.(1)
3.26 -- By-laws of North Texas Broadcasting Corporation.(1)
3.27 -- Certificate of Incorporation of Primeland Television,
Inc. (formerly known as WAND Television, Inc.).(1)
3.28 -- By-laws of Primeland Television, Inc. (formerly known as
WAND Television, Inc.).(1)
3.29 -- Certificate of Formation of Providence Broadcasting,
LLC.*
3.30 -- Limited Liability Company Agreement of Providence
Broadcasting, dated as of January 25, 2001.*
</Table>
II-3
<Table>
3.31 -- Certificate of Formation of Televicentro of Puerto Rico,
LLC.*
3.32 -- Limited Liability Company Agreement of Televicentro of
Puerto Rico, LLC, dated as of August 26, 1999.*
3.33 -- Certificate of Formation of WAVY Broadcasting, LLC.(1)
3.34 -- Limited Liability Company Agreement of WAVY Broadcasting
LLC, dated as of February 3, 1998 (formerly known as WAND
Television, Inc.).(1)
3.35 -- Certificate of Formation of WIVB Broadcasting, LLC.(1)
3.36 -- Limited Liability Company Agreement of WIVB Broadcasting
LLC, dated as of February 3, 1998.(1)
3.37 -- Certificate of Formation of WOOD License Co., LLC.(1)
3.38 -- Limited Liability Company Agreement of WOOD License Co.,
LLC, dated as of February 3, 1998.(1)
3.39 -- Certificate of Incorporation of WOOD Television, Inc.(1)
3.40 -- By-laws of WOOD Television, Inc.(1)
3.41 -- Certificate of Incorporation of WTNH Broadcasting,
Inc.(1)
3.42 -- By-laws of WTNH Broadcasting, Inc.(1)
3.43 -- Certificate of Incorporation of WNJX-TV, Inc.*
3.44 -- By-laws of WNJX-TV, Inc.*
3.45 -- Certificate of Formation of WWLP Broadcasting, LLC.*
3.46 -- Limited Liability Company Agreement of WWLP Broadcasting,
LLC, dated as of September 26, 2000.*
4.1 -- Indenture, dated as of March 3, 1998, among LIN
Acquisition Company, the Guarantors named therein, and
The Bank of New York, successor to United States Trust
Company of New York, as Trustee, relating to the Senior
Subordinated Notes.(1)
4.2 -- Indenture, dated as of March 3, 1998, among LIN Holdings
Corp. and The Bank of New York, successor to United
States Trust Company of New York, as Trustee, relating to
the Senior Discount Notes.(1)
4.3 -- Indenture, dated as of June 14, 2001, among LIN
Television Corporation, the Guarantors named therein, and
The Bank of New York, successor to United States Trust
Company of New York, as Trustee, relating to the Senior
Notes.(8)
4.4 -- Form of Old Senior Note (included in Exhibit 4.3 hereto
as Exhibit A).
4.5 -- Form of New Senior Note (included in Exhibit 4.3 hereto
as Exhibit B).
4.6 -- Indenture, dated as of June 14, 2001, among LIN Holdings
Corp. and The Bank of New York, successor to United
States Trust Company of New York, as Trustee, relating to
the Senior Discount Notes.(8)
4.7 -- Form of Old Senior Discount Note (included in Exhibit 4.6
hereto as Exhibit A).
4.8 -- Form of Old Senior Discount Note (included in Exhibit 4.6
hereto as Exhibit B).
4.9 -- Exchange and Registration Rights Agreement, dated as of
June 14, 2001, among LIN Television Corporation, the
Guarantors named therein, J.P. Morgan Securities Inc. and
Deutsche Bank Alex. Brown Inc., relating to the Senior
Notes.*
4.10 -- Exchange and Registration Rights Agreement, dated as of
June 14, 2001, among LIN Holdings Corp., J.P. Morgan
Securities Inc. and Deutsche Bank Alex. Brown Inc.,
relating to the Senior Discount Notes.*
5.1 -- Opinions of Weil, Gotshal & Manges LLP as to the
securities issued hereby.+
10.1 -- Credit Agreement, dated as of March 3, 1998, among LIN
Holdings Corp., LIN Television Corporation, the lenders
party thereto, The Chase Manhattan Bank, as
Administrative Agent, Issuing Lender and Swingline
Lender, the Bank of New York, as Syndication Agent, and
National Westminster Bank PLC, as Documentation Agent.(1)
</Table>
II-4
<Table>
10.2 -- Guarantee and Collateral Agreement, dated as of March 3,
1998, made by LIN Holdings Corp., LIN Acquisition
Company, LIN Television Corporation and the Guarantors
named herein, in favor of The Chase Manhattan Bank, as
Administrative Agent.(1)
10.3 -- Monitoring and Oversight Agreement, dated as of March 3,
1998, among LIN Television Corporation, LIN Holdings
Corp., Ranger Equity Holdings Corporation, Ranger Equity
Holdings A Corp., Ranger Equity Holdings B Corp. and
Hicks, Muse & Co. Partners, L.P.(1)
10.4 -- Financial Advisory Agreement, dated as of March 3, 1998,
among LIN Television Corporation, LIN Holdings Corp.,
Ranger Equity Holdings Corporation, Ranger Equity
Holdings A Corp., Ranger Equity Holdings B Corp. and
Hicks, Muse & Co. Partners, L.P.(1)
10.5 -- Amended and Restated Transaction Agreement, dated as of
January 22, 1998, between National Broadcasting Company
Inc., Outlet Broadcasting, Inc., LIN Television of Texas
L.P., LIN Television Corporation, Station Venture
Holdings, LLC, Station Venture Operations, LP, and Ranger
Holdings Corp.(1)
10.6 -- Asset Purchase Option Agreement, dated as of March 3,
1998, among LIN Holdings Corp. and Birmingham
Broadcasting (WVTM TV), Inc. and joined in by National
Broadcasting Company, Inc. for the sole purpose of
Article 12.(1)
10.7 -- Asset Purchase Agreement, dated as of August 12, 1997,
among LIN Holdings Corp., LIN Television Corporation, LIN
Broadcasting Corporation, LIN Michigan Broadcasting
Corporation and LCH Communications, Inc.(1)
10.8 -- Television Affiliation Agreement for WAND-TV with
American Broadcasting Companies, Inc., dated February 8,
1990, as amended.(2)
10.9 -- Television Affiliation Agreement for WANE-TV with CBS,
Inc., dated November 1, 1992.(2)
10.10 -- Television Affiliation Agreement for WISH-TV with CBS,
Inc., dated November 1, 1992, as amended.(2)
10.11 -- Television Affiliation Agreement for WTNH-TV with
American Broadcasting Companies, Inc., dated February 1,
1993, as amended.(2)
10.12 -- Television Affiliation Agreement for WIVB-TV with CBS,
Inc., dated December 4, 1992.(1)
10.13.1 -- Television Affiliation Agreement for KXAN-TV with
National Broadcasting Company, Inc., dated April 12,
1995.(3)
10.13.2 -- Amendment to Television Affiliation Agreement for KXAN-TV
with National Broadcasting Company, Inc., dated March 2,
1998.(1)
10.14.1 -- Television Affiliation Agreement for WOOD-TV with
National Broadcasting Company, Inc., dated April 12,
1995.(3)
10.14.2 -- Amendment to Television Affiliation Agreement for WOOD-TV
with National Broadcasting Company, Inc., dated March 2,
1998.(1)
10.15.1 -- Television Affiliation Agreement for WAVY-TV with
National Broadcasting Company, Inc., dated April 12,
1995.(3)
10.15.2 -- Amendment to Television Affiliation Agreement for WAVY-TV
with National Broadcasting Company, Inc., dated March 2,
1998.(1)
10.16 -- Severance Compensation Agreement dated as of September 5,
1996, between LIN Television Corporation and Gary R.
Chapman.(3)
10.17 -- Employment Agreement dated as of September 5, 1996,
between LIN Television Corporation and Gary R.
Chapman.(4)
10.18 -- Severance Compensation Agreement dated as of September 5,
1996, between LIN Television Corporation and Paul
Karpowicz.(4)
10.19 -- Severance Compensation Agreement dated as of September 5,
1996, between LIN Television Corporation and C. Robert
Ogren, Jr.(4)
10.20 -- Severance Compensation Agreement dated as of September 5,
1996, between LIN Television Corporation and Gregory M.
Schmidt.(4)
</Table>
II-5
<Table>
10.21 -- Severance Compensation Agreement dated as of September 5,
1996, between LIN Television Corporation and Peter E.
Maloney.(1)
10.22 -- LIN Television Corporation Amended and Restated 1994
Stock Incentive Plan.(2)
10.23 -- Supplemental Benefit Retirement Plan of LIN Television
Corporation and Subsidiary Companies, as amended and
restated.(2)
10.24 -- LIN Television Corporation Retirement Plan, as amended
and restated.(2)
10.25 -- LIN Television Corporation 401(k) Plan and Trust.(2)
10.26 -- Ranger Equity Holdings Corporation 1998 Stock Option
Plan.(6)
10.27 -- Agreement and Plan of Merger dated as of July 7, 1998,
between Chancellor Media Corporation and Ranger Equity
Holdings Corporation.(5)
10.28 -- Amended and Restated Guarantee and Collateral Agreement
dated as of March 31, 2000, between LIN Holdings Corp.,
LIN Television Corporation and certain of its
Subsidiaries, in favor of the Chase Manhattan Bank.(7)
10.29 -- Amended and Restated Credit Agreement, dated June 29,
2001, among the issuers, Chase Manhattan Bank, as
administrative agent, and lenders named therein.(8)
10.30 -- Option Agreement dated as of March 1, 2000, between LIN
Television Corporation and Gary R. Chapman.(7)
10.31 -- Ranger Equity Holdings 1998 Phantom Stock Plan.(8)
12.1 -- Statement regarding Computation of Ratio of Earnings to
Fixed Charges.*
21.1 -- Subsidiaries of the Registrants.*
23.1 -- Consent of Weil, Gotshal & Manges LLP (included in the
opinions filed as Exhibit 5.1 to this Registration
Statement).+
23.2 -- Consent of PricewaterhouseCoopers LLP, independent
accountants.+
24.1 -- Power of Attorney for LIN Holdings Corp. (included on its
signature page to this Registration Statement).*
24.2 -- Power of Attorney for LIN Television Corporation
(included on its signature page to this Registration
Statement).*
24.3 -- Power of Attorney for Airwaves, Inc. (included on its
signature page to this Registration Statement).*
24.4 -- Power of Attorney for Indiana Broadcasting LLC (included
on its signature page to this Registration Statement).*
24.5 -- Power of Attorney for KXAN, Inc. (included on its
signature page to this Registration Statement.)*
24.6 -- Power of Attorney for KXTX Holdings, Inc. (included on
its signature page to this Registration Statement).*
24.7 -- Power of Attorney for Linbenco, Inc. (included on its
signature page to this Registration Statement).*
24.8 -- Power of Attorney for LIN Airtime, LLC (included on its
signature page to this Registration Statement).*
24.9 -- Power of Attorney for LIN Sports, Inc. (included on its
signature page to this Registration Statement).*
24.10 -- Power of Attorney for LIN Television of San Juan, Inc.
(included on its signature page to Registration
Statement).*
24.11 -- Power of Attorney for LIN Television of Texas, Inc.
(included on its signature page to this Registration
Statement).*
24.12 -- Power of Attorney for LIN Television of Texas, LP
(included on its signature page to this Registration
Statement).*
24.13 -- Power of Attorney for North Texas Broadcasting
Corporation (included on its signature page to this
Registration Statement).*
24.14 -- Power of Attorney for Primeland Television, Inc.
(included on its signature page to this Registration
Statement).*
</Table>
II-6
<Table>
24.15 -- Power of Attorney for Providence Broadcasting, LLC
(included on its signature page to this Registration
Statement)*
24.16 -- Power of Attorney for Televicentro of Puerto Rico, LLC
(included on its signature page to this Registration
Statement).*
24.17 -- Power of Attorney for WAVY Broadcasting, LLC (included on
its signature page to this Registration Statement).*
24.18 -- Power of Attorney for WIVB Broadcasting, LLC (included on
its signature page to this Registration Statement).*
24.19 -- Power of Attorney for WOOD License Co., LLC (included on
its signature page to this Registration Statement).*
24.20 -- Power of Attorney for WOOD Television, Inc. (included on
its signature page to this Registration Statement).*
24.21 -- Power of Attorney for WTNH Broadcasting, Inc. (included
on its signature page to this Registration Statement).*
24.22 -- Power of Attorney for WNJX-TV, Inc. (included on its
signature page to this Registration Statement).*
24.23 -- Power of Attorney for WWLP Broadcasting, LLC (included on
its signature page to this Registration Statement).*
25.1 -- Form T-1 of The Bank of New York, successor to United
States Trust Company of New York, as Trustee for 8%
Senior Notes due 2008 of LIN Television Corporation.+
25.2 -- Form T-1 of The Bank of New York, successor to United
States Trust Company of New York, as Trustee for 10%
Senior Discount Notes due 2008 of LIN Holdings Corp.+
99.1 -- Form of Letter of Transmittal for 8% Senior Notes due
2008 of LIN Television Corporation.+
99.2 -- Form of Notice of Guaranteed Delivery for 8% Senior Notes
due 2008 of LIN Television Corporation.+
99.3 -- Form of Letter of Transmittal for 10% Senior Discount
Notes due 2008 for LIN Holdings Corp.+
99.4 -- Form of Notice of Guaranteed Delivery for 10% Senior
Discount Notes due 2008 for LIN Holdings Corp.+
</Table>
---------------
+ Filed herewith.
* Previously filed.
(1) Incorporated by reference to the Registration Statement on Form S-1 of LIN
Holdings Corp. and LIN Television Corporation, dated May 29, 1998, File No.
333-54003.
(2) Incorporated by reference to the Registration Statement on Form S-1 of LIN
Broadcasting Corporation, dated October 4, 1994, File No. 33-84718.
(3) Incorporated by reference to the Quarterly Report on Form 10-Q of LIN
Television Corporation for the fiscal quarter ended March 31, 1995, File No.
0-2481.
(4) Incorporated by reference to the Quarterly Report on Form 10-Q of LIN
Television Corporation for the fiscal quarter ended September 30, 1996, File
No. 0-25206.
(5) Incorporated by reference to the Registration Statement on Form S-1/A of LIN
Holdings Corp. and LIN Television Corporation, dated August 7, 1998, File
No. 333-54003.
(6) Incorporated by reference to the annual report on Form 10-K of LIN Holdings
Corp. and LIN Television Corporation, dated March 31, 2000, File No.
333-54003.
(7) Incorporated by reference to the Quarterly Report on Form 10-Q of LIN
Holdings Corp. and LIN Television Corporation for the fiscal quarter, ended
March 31, 2000.
(8) Incorporated by reference to the Quarterly Report on Form 10-Q of LIN
Holdings Corp. and LIN Television Corporation for the fiscal quarter, ended
June 30, 2001.
II-7
(b) Financial Statement Schedules
The following Financial Statement Schedules may be found on pages F-75
through F-80 of this Registration Statement:
Schedule I -- Condensed Financial Information of LIN Holdings Corp.
Schedule II -- Valuation and Qualifying Accounts of LIN Holdings Corp.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(2) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(3) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
Co-Registrant certifies that it has reasonable grounds to believe that it meets
all requirements for filing on Form S-4 and has duly caused this Amendment No. 1
to Registration Statement on Form S-4 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Providence, Sate of Rhode
Island, on October 25, 2001.
LIN HOLDINGS CORP.
LIN TELEVISION CORPORATION
By: /s/ PETER E. MALONEY
----------------------------------
Peter E. Maloney
Vice President of Finance
POWER OF ATTORNEY
Each individual whose signature appears below constitutes and appoints
Peter E. Maloney and Gary R. Chapman, such person's true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for such person and in such person's name, place, and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and requests to accelerate the effectiveness of
this registration statement, and to file the same with all exhibits thereto, and
all such documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement on Form S-4 has been signed by
the following persons in the capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman, Director, October 25, 2001
----------------------------------------------------- President, and Chief
Gary R. Chapman Executive Offer (Principal
Executive Officer)
* Vice President of October 25, 2001
----------------------------------------------------- Television, and Director
Paul Karpowicz
/s/ PETER E. MALONEY Vice President of Finance October 25, 2001
----------------------------------------------------- (Principal Financial and
Peter E. Maloney Accounting Officer)
* Director October 25, 2001
-----------------------------------------------------
Randell S. Fojtasek
* Director October 25, 2001
-----------------------------------------------------
Royal W. Carson, III
*/s/ PETER E. MALONEY October 25, 2001
---------------------------------------------------
Peter E. Maloney
Attorney-in-Fact
</Table>
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
Co-Registrant certifies that it has reasonable grounds to believe that it meets
all requirements for filing on Form S-4 and has duly caused this Amendment No. 1
to Registration Statement on Form S-4 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Providence, State of
Rhode Island, on October 25, 2001.
AIRWAVES, INC.
KXAN, INC.
KXTX HOLDINGS, INC.
LINBENCO, INC.
LIN SPORTS, INC.
LIN TELEVISION OF SAN JUAN, INC.
LIN TELEVISION OF TEXAS, INC.
NORTH TEXAS BROADCASTING CORPORATION
PRIMELAND TELEVISION, INC.
WTNH BROADCASTING, INC.
WOOD TELEVISION, INC.
WNJX-TV, INC.
By: /s/ PETER E. MALONEY
-----------------------------------
Peter E. Maloney
Vice President of Finance
POWER OF ATTORNEY
Each individual whose signature appears below constitutes and appoints Peter
E. Maloney and Gary R. Chapman, each of the, such person's true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for such person and in such person's name, place, and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and requests to accelerate the effectiveness of
this registration statement, and to file the same with all exhibits thereto, and
all such documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement on Form S-4 has been signed by the
following persons in the capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President, Chief Executive October 25, 2001
----------------------------------------------------- Officer (Principal
Gary R. Chapman Executive Officer) and
Director of each of the
co-registrants
/s/ PETER E. MALONEY Vice President of Finance October 25, 2001
----------------------------------------------------- (Principal Financial and
Peter E. Maloney Accounting Officer) and
Director of each of the
co-registrants
* Vice President of Television October 25, 2001
----------------------------------------------------- and Director of each of
Paul Karpowicz the co-registrants
*/s/ PETER E. MALONEY October 25, 2001
---------------------------------------------------
Peter E. Maloney
Attorney-in-Fact
</Table>
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
Co-Registrant certifies that it has reasonable grounds to believe that it meets
all requirements for filing on Form S-4 and has duly caused this Amendment No. 1
to Registration Statement on Form S-4 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Providence, State of
Rhode Island, on October 25, 2001.
INDIANA BROADCASTING, LLC
LIN AIRTIME, LLC
PROVIDENCE BROADCASTING, LLC
TELEVICENTRO OF PUERTO RICO, LLC
WAVY BROADCASTING, LLC
WIVB BROADCASTING, LLC
WOOD LICENSE CO., LLC
WWLP BROADCASTING, LLC
By: /s/ PETER E. MALONEY
-----------------------------------
Peter E. Maloney
Vice President of Finance
POWER OF ATTORNEY
Each individual whose signature appears below constitutes and appoints Peter
E. Maloney and Gary R. Chapman, each of the, such person's true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for such person and in such person's name, place, and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and requests to accelerate the effectiveness of
this registration statement, and to file the same with all exhibits thereto, and
all such documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement on Form S-4 has been signed by the
following persons in the capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman, Director, President and October 25, 2001
----------------------------------------------------- Chief Executive Officer of LIN
Gary R. Chapman Television Corporation
(Principal Executive Officer)
* Vice President of Television and October 25, 2001
----------------------------------------------------- Director of LIN Television
Paul Karpowicz Corporation
/s/ PETER E. MALONEY Vice President of Finance of LIN October 25, 2001
----------------------------------------------------- Television Corporation
Peter E. Maloney (Principal Financial and
Accounting Officer)
* Director of LIN Television October 25, 2001
----------------------------------------------------- Corporation
Randell S. Fojtasek
* Director of LIN Television October 25, 2001
----------------------------------------------------- Corporation
Royal W. Carson, III
/s/ PETER E. MALONEY October 25, 2001
-----------------------------------------------------
Peter E. Maloney
Attorney-in-Fact
</Table>
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
Co-Registrant certifies that it has reasonable grounds to believe that it meets
all requirements for filing on Form S-4 and has duly caused this Amendment No. 1
to Registration Statement on Form S-4 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Providence, State of
Rhode Island, on October 25, 2001.
LIN TELEVISION OF TEXAS, L.P.
By: LIN TELEVISION OF TEXAS, INC.
its General Partner
By: /s/ PETER E. MALONEY
----------------------------------
Peter E. Maloney
Vice President of Finance
POWER OF ATTORNEY
Each individual whose signature appears below constitutes and appoints
Peter E. Maloney and Gary R. Chapman, each of the, such person's true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for such person and in such person's name, place, and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and requests to accelerate the effectiveness of
this registration statement, and to file the same with all exhibits thereto, and
all such documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Amendment No. 1 to Registration Statement on Form S-4 has been signed by the
following persons in the capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President, Chief Executive October 25, 2001
----------------------------------------------------- Officer and Director of
Gary R. Chapman LIN Television of Texas,
Inc. (Principal Executive
Officer)
/s/ PETER E. MALONEY Vice President of Finance October 25, 2001
----------------------------------------------------- (Principal Financial and
Peter E. Maloney Accounting Officer) and
Director of LIN Television
of Texas, Inc.
* Vice President of Television October 25, 2001
----------------------------------------------------- and Director of LIN
Paul Karpowicz Television of Texas, Inc.
*/s/ PETER E. MALONEY October 25, 2001
----------------------------------------------------
Peter E. Maloney
Attorney-in-Fact
</Table>
II-12
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 -- Agreement and Plan of Merger among Ranger Holdings Corp.,
Ranger Acquisition Company, and LIN Television
Corporation dated as of August 12, 1997, as amended as of
October 21, 1997.(1)
3.1.1 -- Certificate of Incorporation of LIN Holdings Corp.
(formerly known as Ranger Holdings Corp.).(1)
3.1.2 -- Certificate of Amendment of Certificate of Incorporation
of LIN Holdings Corp. (formerly known as Ranger Holding
Corp.).(1)
3.2 -- Bylaws of LIN Holdings Corp.(1)
3.3 -- Restated Certificate of Incorporation of LIN Television
Corporation.(1)
3.4 -- Restated Bylaws of LIN Television Corporation.(1)
3.5 -- Certificate of Incorporation of Airwaves, Inc.(1)
3.6 -- Bylaws of Airwaves, Inc.(1)
3.7 -- Certificate of Formation of Indiana Broadcasting, LLC.(1)
3.8 -- Limited Liability Company Agreement of Indiana
Broadcasting, LLC, dated as of February 3, 1998.(1)
3.9.1 -- Certificate of Incorporation of KXAN, Inc. (formerly
known as C.&W.A., Inc.).(1)
3.9.2 -- Certificate of Amendment of Certificate of Incorporation
of KXAN, Inc. (formerly known as C.&W.A., Inc.)(1)
3.9.3 -- Certificate of Amendment of Certificate of Incorporation
of KXAN, Inc. (formerly known as WFIL, Inc.).(1)
3.10 -- Bylaws of KXAN, Inc.(1)
3.11 -- Certificate of Incorporation of KXTX Holdings, Inc.
(formerly known as KXAS Holdings, Inc.).(1)
3.12 -- Bylaws of KXTX Holdings, Inc.(1)
3.13 -- Certificate of Incorporation of Linbenco, Inc.(1)
3.14 -- Bylaws of Linbenco, Inc.(1)
3.15 -- Certificate of Formation of LIN Airtime, LLC*
3.16 -- Limited Liability Company Agreement of LIN Airtime, dated
as of August 1, 2000.*
3.17 -- Certificate of Incorporation of LIN Sports, Inc.(1)
3.18 -- Bylaws of LIN Sports, Inc.(1)
3.19 -- Certificate of Incorporation of San Juan, Inc.*
3.20 -- Bylaws of San Juan, Inc.*
3.21 -- Certificate of Incorporation of LIN Television of Texas
Inc.(1)
3.22 -- By-laws of LIN Television of Texas, Inc.(1)
3.23 -- Amended and Restated Certificate of Limited Partnership
of LIN Television of Texas, L.P.(1)
3.24 -- Amended and Restated Agreement of Limited Partnership of
LIN Television of Texas, L.P.(1)
3.25 -- Certificate of Incorporation of North Texas Broadcasting
Corporation.(1)
3.26 -- By-laws of North Texas Broadcasting Corporation.(1)
3.27 -- Certificate of Incorporation of Primeland Television,
Inc. (formerly known as WAND Television, Inc.).(1)
3.28 -- By-laws of Primeland Television, Inc. (formerly known as
WAND Television, Inc.).(1)
3.29 -- Certificate of Formation of Providence Broadcasting,
LLC.*
3.30 -- Limited Liability Company Agreement of Providence
Broadcasting, dated as of January 25, 2001.*
</Table>
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.31 -- Certificate of Formation of Televicentro of Puerto Rico,
LLC.*
3.32 -- Limited Liability Company Agreement of Televicentro of
Puerto Rico, LLC, dated as of August 26, 1999.*
3.33 -- Certificate of Formation of WAVY Broadcasting, LLC.(1)
3.34 -- Limited Liability Company Agreement of WAVY Broadcasting
LLC, dated as of February 3, 1998 (formerly known as WAND
Television, Inc.).(1)
3.35 -- Certificate of Formation of WIVB Broadcasting, LLC.(1)
3.36 -- Limited Liability Company Agreement of WIVB Broadcasting
LLC, dated as of February 3, 1998.(1)
3.37 -- Certificate of Formation of WOOD License Co., LLC.(1)
3.38 -- Limited Liability Company Agreement of WOOD License Co.,
LLC, dated as of February 3, 1998.(1)
3.39 -- Certificate of Incorporation of WOOD Television, Inc.(1)
3.40 -- By-laws of WOOD Television, Inc.(1)
3.41 -- Certificate of Incorporation of WTNH Broadcasting,
Inc.(1)
3.42 -- By-laws of WTNH Broadcasting, Inc.(1)
3.43 -- Certificate of Incorporation of WNJX-TV, Inc.*
3.44 -- By-laws of WNJX-TV, Inc.*
3.45 -- Certificate of Formation of WWLP Broadcasting, LLC.*
3.46 -- Limited Liability Company Agreement of WWLP Broadcasting,
LLC, dated as of September 26, 2000.*
4.1 -- Indenture, dated as of March 3, 1998, among LIN
Acquisition Company, the Guarantors named therein, and
The Bank of New York, successor to United States Trust
Company of New York, as Trustee, relating to the Senior
Subordinated Notes.(1)
4.2 -- Indenture, dated as of March 3, 1998, among LIN Holdings
Corp. and The Bank of New York, successor to United
States Trust Company of New York, as Trustee, relating to
the Senior Discount Notes.(1)
4.3 -- Indenture, dated as of June 14, 2001, among LIN
Television Corporation, the Guarantors named therein, and
The Bank of New York, successor to United States Trust
Company of New York, as Trustee, relating to the Senior
Notes.(8)
4.4 -- Form of Old Senior Note (included in Exhibit 4.3 hereto
as Exhibit A).
4.5 -- Form of New Senior Note (included in Exhibit 4.3 hereto
as Exhibit B).
4.6 -- Indenture, dated as of June 14, 2001, among LIN Holdings
Corp. and The Bank of New York, successor to United
States Trust Company of New York, as Trustee, relating to
the Senior Discount Notes.(8)
4.7 -- Form of Old Senior Discount Note (included in Exhibit 4.6
hereto as Exhibit A).
4.8 -- Form of Old Senior Discount Note (included in Exhibit 4.6
hereto as Exhibit B).
4.9 -- Exchange and Registration Rights Agreement, dated as of
June 14, 2001, among LIN Television Corporation, the
Guarantors named therein, J.P. Morgan Securities Inc. and
Deutsche Bank Alex. Brown Inc., relating to the Senior
Notes.*
4.10 -- Exchange and Registration Rights Agreement, dated as of
June 14, 2001, among LIN Holdings Corp., J.P. Morgan
Securities Inc. and Deutsche Bank Alex. Brown Inc.,
relating to the Senior Discount Notes.*
5.1 -- Opinions of Weil, Gotshal & Manges LLP as to the
securities issued hereby.+
</Table>
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.1 -- Credit Agreement, dated as of March 3, 1998, among LIN
Holdings Corp., LIN Television Corporation, the lenders
party thereto, The Chase Manhattan Bank, as
Administrative Agent, Issuing Lender and Swingline
Lender, the Bank of New York, as Syndication Agent, and
National Westminster Bank PLC, as Documentation Agent.(1)
10.2 -- Guarantee and Collateral Agreement, dated as of March 3,
1998, made by LIN Holdings Corp., LIN Acquisition
Company, LIN Television Corporation and the Guarantors
named herein, in favor of The Chase Manhattan Bank, as
Administrative Agent.(1)
10.3 -- Monitoring and Oversight Agreement, dated as of March 3,
1998, among LIN Television Corporation, LIN Holdings
Corp., Ranger Equity Holdings Corporation, Ranger Equity
Holdings A Corp., Ranger Equity Holdings B Corp. and
Hicks, Muse & Co. Partners, L.P.(1)
10.4 -- Financial Advisory Agreement, dated as of March 3, 1998,
among LIN Television Corporation, LIN Holdings Corp.,
Ranger Equity Holdings Corporation, Ranger Equity
Holdings A Corp., Ranger Equity Holdings B Corp. and
Hicks, Muse & Co. Partners, L.P.(1)
10.5 -- Amended and Restated Transaction Agreement, dated as of
January 22, 1998, between National Broadcasting Company
Inc., Outlet Broadcasting, Inc., LIN Television of Texas
L.P., LIN Television Corporation, Station Venture
Holdings, LLC, Station Venture Operations, LP, and Ranger
Holdings Corp.(1)
10.6 -- Asset Purchase Option Agreement, dated as of March 3,
1998, among LIN Holdings Corp. and Birmingham
Broadcasting (WVTM TV), Inc. and joined in by National
Broadcasting Company, Inc. for the sole purpose of
Article 12.(1)
10.7 -- Asset Purchase Agreement, dated as of August 12, 1997,
among LIN Holdings Corp., LIN Television Corporation, LIN
Broadcasting Corporation, LIN Michigan Broadcasting
Corporation and LCH Communications, Inc.(1)
10.8 -- Television Affiliation Agreement for WAND-TV with
American Broadcasting Companies, Inc., dated February 8,
1990, as amended.(2)
10.9 -- Television Affiliation Agreement for WANE-TV with CBS,
Inc., dated November 1, 1992.(2)
10.10 -- Television Affiliation Agreement for WISH-TV with CBS,
Inc., dated November 1, 1992, as amended.(2)
10.11 -- Television Affiliation Agreement for WTNH-TV with
American Broadcasting Companies, Inc., dated February 1,
1993, as amended.(2)
10.12 -- Television Affiliation Agreement for WIVB-TV with CBS,
Inc., dated December 4, 1992.(1)
10.13.1 -- Television Affiliation Agreement for KXAN-TV with
National Broadcasting Company, Inc., dated April 12,
1995.(3)
10.13.2 -- Amendment to Television Affiliation Agreement for KXAN-TV
with National Broadcasting Company, Inc., dated March 2,
1998.(1)
10.14.1 -- Television Affiliation Agreement for WOOD-TV with
National Broadcasting Company, Inc., dated April 12,
1995.(3)
10.14.2 -- Amendment to Television Affiliation Agreement for WOOD-TV
with National Broadcasting Company, Inc., dated March 2,
1998.(1)
10.15.1 -- Television Affiliation Agreement for WAVY-TV with
National Broadcasting Company, Inc., dated April 12,
1995.(3)
10.15.2 -- Amendment to Television Affiliation Agreement for WAVY-TV
with National Broadcasting Company, Inc., dated March 2,
1998.(1)
10.16 -- Severance Compensation Agreement dated as of September 5,
1996, between LIN Television Corporation and Gary R.
Chapman.(3)
</Table>
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.17 -- Employment Agreement dated as of September 5, 1996,
between LIN Television Corporation and Gary R.
Chapman.(4)
10.18 -- Severance Compensation Agreement dated as of September 5,
1996, between LIN Television Corporation and Paul
Karpowicz.(4)
10.19 -- Severance Compensation Agreement dated as of September 5,
1996, between LIN Television Corporation and C. Robert
Ogren, Jr.(4)
10.20 -- Severance Compensation Agreement dated as of September 5,
1996, between LIN Television Corporation and Gregory M.
Schmidt.(4)
10.21 -- Severance Compensation Agreement dated as of September 5,
1996, between LIN Television Corporation and Peter E.
Maloney.(1)
10.22 -- LIN Television Corporation Amended and Restated 1994
Stock Incentive Plan.(2)
10.23 -- Supplemental Benefit Retirement Plan of LIN Television
Corporation and Subsidiary Companies, as amended and
restated.(2)
10.24 -- LIN Television Corporation Retirement Plan, as amended
and restated.(2)
10.25 -- LIN Television Corporation 401(k) Plan and Trust.(2)
10.26 -- Ranger Equity Holdings Corporation 1998 Stock Option
Plan.(6)
10.27 -- Agreement and Plan of Merger dated as of July 7, 1998,
between Chancellor Media Corporation and Ranger Equity
Holdings Corporation.(5)
10.28 -- Amended and Restated Guarantee and Collateral Agreement
dated as of March 31, 2000, between LIN Holdings Corp.,
LIN Television Corporation and certain of its
Subsidiaries, in favor of the Chase Manhattan Bank.(7)
10.29 -- Amended and Restated Credit Agreement, dated June 29,
2001, among the issuers, Chase Manhattan Bank, as
administrative agent, and lenders named therein.(8)
10.30 -- Option Agreement dated as of March 1, 2000, between LIN
Television Corporation and Gary R. Chapman.(7)
10.31 -- Ranger Equity Holdings 1998 Phantom Stock Plan.(8)
12.1 -- Statement regarding Computation of Ratio of Earnings to
Fixed Charges.*
21.1 -- Subsidiaries of the Registrants.*
23.1 -- Consent of Weil, Gotshal & Manges LLP (included in the
opinions filed as Exhibit 5.1 to this Registration
Statement).+
23.2 -- Consent of PricewaterhouseCoopers LLP, independent
accountants.+
24.1 -- Power of Attorney for LIN Holdings Corp. (included on its
signature page to this Registration Statement).*
24.2 -- Power of Attorney for LIN Television Corporation
(included on its signature page to this Registration
Statement).*
24.3 -- Power of Attorney for Airwaves, Inc. (included on its
signature page to this Registration Statement).*
24.4 -- Power of Attorney for Indiana Broadcasting LLC (included
on its signature page to this Registration Statement).*
24.5 -- Power of Attorney for KXAN, Inc. (included on its
signature page to this Registration Statement.)*
24.6 -- Power of Attorney for KXTX Holdings, Inc. (included on
its signature page to this Registration Statement).*
24.7 -- Power of Attorney for Linbenco, Inc. (included on its
signature page to this Registration Statement).*
24.8 -- Power of Attorney for LIN Airtime, LLC (included on its
signature page to this Registration Statement).*
24.9 -- Power of Attorney for LIN Sports, Inc. (included on its
signature page to this Registration Statement).*
</Table>
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
24.10 -- Power of Attorney for LIN Television of San Juan, Inc.
(included on its signature page to Registration
Statement).*
24.11 -- Power of Attorney for LIN Television of Texas, Inc.
(included on its signature page to this Registration
Statement).*
24.12 -- Power of Attorney for LIN Television of Texas, LP
(included on its signature page to this Registration
Statement).*
24.13 -- Power of Attorney for North Texas Broadcasting
Corporation (included on its signature page to this
Registration Statement).*
24.14 -- Power of Attorney for Primeland Television, Inc.
(included on its signature page to this Registration
Statement).*
24.15 -- Power of Attorney for Providence Broadcasting, LLC
(included on its signature page to this Registration
Statement)*
24.16 -- Power of Attorney for Televicentro of Puerto Rico, LLC
(included on its signature page to this Registration
Statement).*
24.17 -- Power of Attorney for WAVY Broadcasting, LLC (included on
its signature page to this Registration Statement).*
24.18 -- Power of Attorney for WIVB Broadcasting, LLC (included on
its signature page to this Registration Statement).*
24.19 -- Power of Attorney for WOOD License Co., LLC (included on
its signature page to this Registration Statement).*
24.20 -- Power of Attorney for WOOD Television, Inc. (included on
its signature page to this Registration Statement).*
24.21 -- Power of Attorney for WTNH Broadcasting, Inc. (included
on its signature page to this Registration Statement).*
24.22 -- Power of Attorney for WNJX-TV, Inc. (included on its
signature page to this Registration Statement).*
24.23 -- Power of Attorney for WWLP Broadcasting, LLC (included on
its signature page to this Registration Statement).*
25.1 -- Form T-1 of The Bank of New York, successor to United
States Trust Company of New York, as Trustee for 8%
Senior Notes due 2008 of LIN Television Corporation.+
25.2 -- Form T-1 of The Bank of New York, successor to United
States Trust Company of New York, as Trustee for 10%
Senior Discount Notes due 2008 of LIN Holdings Corp.+
99.1 -- Form of Letter of Transmittal for 8% Senior Notes due
2008 of LIN Television Corporation.+
99.2 -- Form of Notice of Guaranteed Delivery for 8% Senior Notes
due 2008 of LIN Television Corporation.+
99.3 -- Form of Letter of Transmittal for 10% Senior Discount
Notes due 2008 for LIN Holdings Corp.+
99.4 -- Form of Notice of Guaranteed Delivery for 10% Senior
Discount Notes due 2008 for LIN Holdings Corp.+
</Table>
---------------
+ Filed herewith.
* Previously filed.
(1) Incorporated by reference to the Registration Statement on Form S-1 of LIN
Holdings Corp. and LIN Television Corporation, dated May 29, 1998, File No.
333-54003.
(2) Incorporated by reference to the Registration Statement on Form S-1 of LIN
Broadcasting Corporation, dated October 4, 1994, File No. 33-84718.
(3) Incorporated by reference to the Quarterly Report on Form 10-Q of LIN
Television Corporation for the fiscal quarter ended March 31, 1995, File No.
0-2481.
(4) Incorporated by reference to the Quarterly Report on Form 10-Q of LIN
Television Corporation for the fiscal quarter ended September 30, 1996, File
No. 0-25206.
(5) Incorporated by reference to the Registration Statement on Form S-1/A of LIN
Holdings Corp. and LIN Television Corporation, dated August 7, 1998, File
No. 333-54003.
(6) Incorporated by reference to the annual report on Form 10-K of LIN Holdings
Corp. and LIN Television Corporation, dated March 31, 2000, File No.
333-54003.
(7) Incorporated by reference to the Quarterly Report on Form 10-Q of LIN
Holdings Corp. and LIN Television Corporation for the fiscal quarter, ended
March 31, 2000.
(8) Incorporated by reference to the Quarterly Report on Form 10-Q of LIN
Holdings Corp. and LIN Television Corporation for the fiscal quarter, ended
June 30, 2001.