Granite Broadcasting Corp · S-4/A · On 6/3/96

Filed On 6/3/96   ·   SEC File 333-03376   ·   Accession Number 1005477-96-151

Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction   ·   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4/A       Amendment No. 1                                      189  1,070K 
 2: EX-4.43     Instruments Defining Rights of Security Holders        6±    33K 
 3: EX-5.1      Opinion Re: Legality                                   3     15K 
 4: EX-7.1      Opinion Re: Liquidation Preference                     3     15K 
 5: EX-8.1      Opinion Re: Tax Matters                                2     10K 
 6: EX-11       Statement Re: Computation of Per Share Earnings        3±    13K 
 7: EX-12       Statement Re: Computation of Ratios                    5     19K 
 8: EX-23.1     Consent of Independent Auditors                        1      8K 
 9: EX-23.2     Consent of Independent Auditors                        1      6K 
10: EX-99.1     Letter of Transmittal                                 12     57K 
11: EX-99.2     Notice of Guaranteed Delivery                          2     14K 

S-4/A   ·   Amendment No. 1
Document Table of Contents

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 As filed with the Securities and Exchange Commission on June 3, 1996.
                                                       Registration No. 333-3376

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------

 AMENDMENT NO. 1
TO

FORM S-4
REGISTRATION STATEMENT
 UNDER
THE SECURITIES ACT OF 1933

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

GRANITE BROADCASTING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

     Delaware                          4833                   13-3458782
(State or other jurisdiction of  (Primary Standard Industrial   (I.R.S. Employer
incorporation or organization)   Classification Code Number)     Identification 
                                                                 Number)

767 Third Avenue, 34th Floor
New York, New York 10017
(212) 826-2530
 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
 INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

 W. DON CORNWELL
 Chief Executive Officer
GRANITE BROADCASTING CORPORATION
767 Third Avenue, 34th Floor
New York, New York 10017
(212) 826-2530
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

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

Copies to:
 Russell W. Parks, Jr., P.C.
 William A. Bianco, Esq.
 AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
 1333 New Hampshire Avenue, N.W.
 Suite 400
Washington, D.C. 20036
 ---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
 As soon as practicable after this Registration Statement becomes effective.
 ---------------------

 If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with 
 General Instruction G, check the following box. [ ]

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

  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION       
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF  
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT     
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,  
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.                            

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

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GRANITE BROADCASTING CORPORATION

CROSS-REFERENCE SHEET SHOWING LOCATION IN THE PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS ON FORM S-4

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    FORM S-4 ITEM NUMBER AND CAPTION                            PROSPECTUS CAPTION                                  
    --------------------------------                            ------------------                                  
                                                                                                                    
1.  Forepart of the Registration Statement and Outside                                                              
    Front Cover Page of Prospectus............................. Outside Front Cover Page; Cross Reference Sheet     

2.  Inside Front and Outside Back Cover Pages of                                                                    
    Prospectus................................................. Inside Front Cover Page; Available Information      

3.  Risk Factors, Ratio of Earnings to Fixed Charges                                                                
    and Other Information...................................... Prospectus Summary; Risk Factors                    

4.  Terms of the Transaction................................... Outside Front Cover Page; Prospectus Summary; The   
                                                                Exchange Offer; Certain U.S. Tax Considerations;    
                                                                Description of New Notes                            

5.  Pro Forma Financial Information............................ Prospectus Summary; Pro Forma Condensed Consolidated
                                                                Statement of Operations                             

6.  Material Contracts With the Company Being Acquired......... *                                                   

7.  Additional Information Required for Reoffering by                                                               
    Persons and Parties Deemed to be Underwriters.............. Plan of Distribution                                

8.  Interests of Named Experts and Counsel..................... Legal Matters; Experts                              

9.  Disclosure of Commission Position on                                                                            
    Indemnification of Securities Act Liabilities.............. *                                                   

10. Information with Respect to S-3 Registrants................ *                                                   

11. Incorporation of Certain Information by Reference.......... *                                                   

12. Information with respect to S-2 or S-3 Registrants......... *                                                   

13. Incorporation of Certain information by Reference.......... *                                                   

14. Information with Respect to Registrants Other than                                                              
    S-3 or S-2 Registrants..................................... Inside Front Cover Page; Prospectus Summary; Risk   
                                                                Factors; Capitalization; Selected Consolidated      
                                                                Financial Data; Management's Discussion and Analysis
                                                                of Financial Condition and Results of Operations;   
                                                                Business; Financial Statements                      

15. Information With Respect to S-3 Companies.................. *                                                   

16. Information With Respect to S-2 or S-3 Companies........... *                                                   

17. Information With Respect to Companies Other than                                                                
    S-2 or S-3 Companies....................................... *                                                   

18. Information if Proxies, Consents or Authorizations                                                              
    are to be Solicited........................................ *                                                   

19. Information if Proxies, Consents, or Authorizations                                                             
    are not to be Solicited, or in an Exchange Offer........... Inside Front Cover Page; The Exchange Offer;        
                                                                Management; Certain Transactions; Ownership of      
                                                                Capital Stock                                       

-------------------------                                                       
*     Not applicable.                                                           

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 OFFER TO EXCHANGE
 ALL OUTSTANDING
 9 3/8% SERIES A SENIOR SUBORDINATED NOTES
DUE DECEMBER 1, 2005
 ($110,000,000 PRINCIPAL AMOUNT OUTSTANDING)
 FOR
9 3/8% SENIOR SUBORDINATED NOTES
DUE DECEMBER 1, 2005
OF

GRANITE BROADCASTING
 CORPORATION

 -----------

THE EXCHANGE OFFER
 WILL EXPIRE AT 5:00 p.m., NEW YORK CITY TIME,
ON JULY 3, 1996, unless extended

    Granite Broadcasting Corporation, a Delaware corporation ("Granite" or the
"Company"), hereby offers, upon the terms and subject to the conditions set     
forth in this Prospectus and the accompanying letter of transmittal (the "Letter
of Transmittal," and together with this Prospectus, the "Exchange Offer"), to   
exchange $1,000 principal amount of its 9 3/8% Senior Subordinated Notes due    
December 1, 2005 (the "New Notes"), which have been registered under the        
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a        
Registration Statement (as defined herein) of which this Prospectus is a part,  
for each $1,000 principal amount of the outstanding 9 3/8% Series A Senior      
Subordinated Notes due December 1, 2005 (the "Old Notes") of the Company of     
which $110,000,000 principal amount is outstanding. The New Notes and the Old   
Notes are together referred to herein as the "Notes."                           

 Granite will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m. New York City time, on the date the Exchange  
Offer expires, which will be July 3, 1996, unless the Exchange Offer is extended
(the "Expiration Date"). The exchange of New Notes for Old Notes will be made   
(i) with respect to all Old Notes validly tendered and not withdrawn on or prior
to 5:00 p.m. New York City time, on June 17, 1996 (the "Early Exchange Date"),  
within two business days following the Early Exchange Date, and (ii) with       
respect to all Old Notes validly tendered and not withdrawn after the Early     
Exchange Date and on or prior to the Expiration Date, within two business days  
following the Expiration Date. Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date, unless          
previously accepted for exchange. The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being tendered for exchange. However, the 
Exchange Offer is subject to certain conditions which may be waived by the      
Company. See "The Exchange Offer." Old Notes may be tendered only in            
denominations of $250,000 and integral multiples of $1,000 in excess thereof.   
The Company has agreed to pay the expenses of the Exchange Offer.               

                                                        (CONTINUED ON NEXT PAGE)

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND    
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES   
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE      
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A 
CRIMINAL OFFENSE.                                                               

 The date of this Prospectus is June 3, 1996

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 The New Notes will be obligations of the Company issued pursuant to the
Indenture under which the Old Notes were issued (the "Indenture"). The form and 
terms of the New Notes are identical in all material respects to the form and   
terms of the Old Notes except (i) that the New Notes have been registered under 
the Securities Act, (ii) that the New Notes are not entitled to certain         
registration rights which are applicable to the Old Notes under a registration  
rights agreement (the "Registration Rights Agreement") between the Company and  
Goldman, Sachs & Co., BT Securities Corporation and Lazard Freres & Co. LLC, the
initial purchasers of the Old Notes (the "Initial Purchasers") and (iii) for    
certain contingent interest rate provisions. See "The Exchange Offer."          

The New Notes will bear interest from June 1, 1996, the most recent   
interest payment date on the Old Notes. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have waived the right to receive any    
payment in respect of interest on the Old Notes accrued from June 1, 1996 to the
date of the issuance of the New Notes. Interest on the New Notes is payable     
semi-annually on June 1 and December 1 of each year, commencing December 1,     
1996, accruing from June 1, 1996 at a rate of 9 3/8% per annum.                 

  The New Notes will be redeemable in the event that on or before February
22, 1999 the Company receives net proceeds from the sale of its Capital Stock   
other than Disqualified Stock (each as defined herein) in one or more offerings,
in which case the Company may, at its option, use all or a portion of any such  
net proceeds within 75 days of receipt thereof to redeem Notes in a principal   
amount of at least $5,000,000 and up to an aggregate amount equal to 33% of the 
original principal amount of the Notes at a redemption price of 109.375% of the 
principal amount thereof plus accrued interest to the date of redemption;       
PROVIDED, HOWEVER, that Notes in the amount equal to at least 67% of the        
original principal amount of the Notes remains outstanding. In addition, the New
Notes will be redeemable at the option of the Company, in whole or in part, at  
any time on or after December 1, 2000, at the redemption prices set forth herein
plus accrued interest to the date of redemption. In the event of a Change of    
Control, the Company will be required to offer to purchase all outstanding New  
Notes at 101% of the principal amount thereof plus accrued interest to the date 
of repurchase. The New Notes will be issued only in registered form in minimum  
denominations of $1,000 and integral multiples thereof.                         

     The New Notes will be general unsecured obligations of the Company and will
be subordinated in right of payment to all existing and future Senior Debt (as  
defined herein) and will rank PARI PASSU with all senior subordinated debt and  
senior to all subordinated debt of the Company. The Company's Credit Agreement  
(as defined herein) permits revolving credit borrowings of up to $60,000,000,   
all of which constitutes senior debt. At May 31, 1996, there were $5,000,000 of 
outstanding revolving credit borrowings under the Credit Agreement and the      
aggregate principal amount of outstanding senior subordinated debt of the       
Company was approximately $344,455,000 (including the Old Notes). The incurrence
of additional Senior Debt is limited by the "Limitation on Debt" covenant       
contained in the Indenture and by the Credit Agreement (as defined herein).     

Old Notes initially purchased by qualified institutional buyers were  
initially represented by a single, global Note in registered form, registered in
the name of a nominee of The Depository Trust Company ("DTC"), as depository.   
The New Notes exchanged for Old Notes represented by the global Note will be    
represented by one or more global New Notes in registered form, registered in   
the name of the nominee of DTC. New Notes in global form will trade in DTC's    
Same-Day Funds Settlement System, and secondary market trading activity in such 
New Notes will therefore settle in immediately available funds. See "Description
of New Notes -- Form, Denomination and Book -- Entry Procedures." New Notes     
issued to non-qualified institutional buyers in exchange for Old Notes held by  
such investors will be issued only in certificated, fully registered, definitive
form.                                                                           

Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third    
parties, the Company believes that New Notes issued pursuant to the Exchange    
Offer in exchange for Old Notes may be offered for resale, resold and otherwise 
transferred by a holder thereof (other than a "Restricted Holder," being (i) a  
broker-dealer who purchases such Old Notes directly from the Company to resell  
pursuant to Rule 144A or any other available exemption under the Securities Act 
or (ii) a person that is an affiliate of the Company within the meaning of Rule 
405 under the Securities Act), without compliance with the registration and     
prospectus delivery provisions of the Securities Act, PROVIDED that the holder  
is acquiring the New Notes in the ordinary course of its business and is not    
participating, does not intend to                                               

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participate and has no arrangement or understanding with any person to          
participate, in a distribution of the New Notes. Eligible holders wishing to    
accept the Exchange Offer must represent to the Company that such conditions    
have been met. 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. The Letter of       
Transmittal states that by so acknowledging and by delivering a prospectus, a   
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or         
supplemented from time to time, may be used by a broker-dealer in connection    
with resales of New Notes received in exchange for Old Notes where such Old     
Notes were acquired by such broker-dealer as a result of market-making          
activities or other trading activities. The Company has agreed that it will make
this Prospectus available to any broker-dealer for use in connection with any   
such resale for a period from the date of this Prospectus until 180 days after  
the consummation of the Exchange Offer, or such shorter period as will terminate
when all Old Notes acquired by broker-dealers for their own accounts as a result
of market-making activities or other trading activities have been exchanged for 
New Notes and resold by such broker-dealers. See "The Exchange Offer" and "Plan 
of Distribution."                                                               

The Company will not receive any proceeds from this offering, and no  
underwriter is being utilized in connection with the Exchange Offer. See "Use of
Proceeds."                                                                      

THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT  
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH 
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.                               

Prior to the Exchange Offer, there has previously been only a limited 
secondary market and no public market for the Old Notes or the New Notes. If a  
market for the New Notes should develop, the New Notes could trade at a discount
from their principal amount. The Company does not intend to list the New Notes  
on a national securities exchange or to apply for quotation of the New Notes    
through the National Association of Securities Dealers Automated Quotation      
System. There can be no assurance that an active public market for the New Notes
will develop.                                                                   

    FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE NEW
NOTES, SEE "RISK FACTORS," BEGINNING ON PAGE 17 OF THIS PROSPECTUS.             

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 AVAILABLE INFORMATION

    The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance        
therewith files reports and other information with the Commission. The reports  
and other information filed by the Company with the Commission can be inspected 
and copied at the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,   
N.W., Washington, D.C. 20549, and at the following regional offices of the      
Commission: 7 World Trade Center, Suite 1300, New York, New York 10048; and     
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-  
2511. Copies of such information can be obtained from the Public Reference      
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at   
prescribed rates. The Company's Common Stock (Nonvoting), par value $.01 per    
share, and Cumulative Convertible Exchangeable Preferred Stock, par value $.01  
per share, are quoted on the Nasdaq National Market and such reports and other  
information can be inspected and copied at the National Association of          
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. In       
addition, the Company intends to furnish registered holders of the Notes with   
annual reports containing consolidated financial statements audited by          
independent certified public accountants and with quarterly reports containing  
unaudited financial information for each of the first three fiscal quarters of  
the Company's fiscal year.                                                      

   The Company has filed with the Commission a Registration Statement (which
term shall include any amendment, exhibit, schedule and supplement thereto) on  
Form S-4 under the Securities Act for the registration of the New Notes offered 
hereby. This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain items of which are omitted as permitted by the rules and regulations of 
the Commission. For further information with respect to the Company and such    
securities, reference is hereby made to the Registration Statement, including   
the exhibits and schedules thereto. Statements made in this Prospectus          
concerning the contents of any contract, agreement or other document referred to
herein are not necessarily complete. With respect to each such contract,        
agreement or other document filed with the Commission as an exhibit to the      
Registration Statement, reference is hereby made to the exhibit for a more      
complete description of the matter involved, and each such statement shall be   
deemed qualified in its entirety by such reference. The Registration Statement  
and the exhibits and schedules thereto filed by the Company with the Commission 
may be inspected at the Commission at Room 1024, Judiciary Plaza, 450 Fifth     
Street, N.W., Washington, D.C. 20549.                                           

The Company has agreed that, if it is not subject to the informational
requirements of Sections 13 or 15(d) of the Exchange Act at any time while the  
Notes constitute "restricted securities" within the meaning of the Securities   
Act, it will furnish to holders and beneficial owners of the Notes and to       
prospective purchasers designated by such holders the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act to permit        
compliance with Rule 144A in connection with resales of the Notes.              

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TABLE OF CONTENTS 
                                                                            PAGE
Available Information...................................................       4
Prospectus Summary......................................................       6
Risk Factors............................................................      17
Use of Proceeds.........................................................      21
The Exchange Offer......................................................      22
Capitalization..........................................................      29
Selected Consolidated Financial Data....................................      30
Pro Forma Condensed Consolidated Statement of Operations................      33
Management's Discussion and Analysis of Financial                               
  Condition and Results of Operations...... ............................      37

Business................................................................      44
Management..............................................................      65
Ownership of Capital Stock..............................................      74
Certain Transactions....................................................      77
Description of New Notes................................................      78
Description of Certain Debt Instruments.................................      98
Description of Preferred Stock..........................................     103
Certain U.S. Tax Considerations.........................................     106
Plan of Distribution....................................................     109
Experts.................................................................     109
Legal Matters...........................................................     110

Index to Financial Statements...........................................     F-1

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PROSPECTUS SUMMARY

   THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONNECTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND  
NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. SEE "RISK FACTORS" FOR A  
DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED IN CONNECTION WITH AN INVESTMENT 
IN THE NEW NOTES. UNLESS THE CONTEXT REQUIRES OTHERWISE, REFERENCES TO THE      
"COMPANY" OR "GRANITE" INCLUDE GRANITE BROADCASTING CORPORATION AND ITS         
SUBSIDIARIES.                                                                   

 THE COMPANY

Granite is a group broadcasting company which owns and operates nine  
network-affiliated television stations. The Company's stations are diverse in   
geographic location and network affiliation and serve communities representing  
approximately 5.7% of the total television households in the United States. For 
the twelve months ended March 31, 1996, after giving pro forma effect to its    
recently consummated acquisitions and new network affiliation agreements, the   
Company would have had net revenue, broadcast cash flow and operating cash flow 
of $125,353,000, $58,128,000 and $54,818,000, respectively.                     

  The Company's goal is to identify and acquire properties that management
believes have the potential for substantial long-term appreciation and to       
aggressively manage such properties to improve their operating results. Since   
its inception, the Company has grown significantly, primarily as a result of a  
series of carefully selected acquisitions involving network affiliated          
television stations in increasingly larger markets and also as a result of the  
implementation of the Company's operating strategies. During the year ended     
December 31, 1995, Granite's net revenue, broadcast cash flow and operating cash
flow increased by 59%, 77% and 80%, respectively, from the previous year. During
the three month period ended March 31, 1996, Granite's net revenue, broadcast   
cash flow and operating cash flow increased by 74%, 82% and 91%, respectively,  
from the same period in 1995. See "Management's Discussion and Analysis of      
Financial Condition and Results of Operations."                                 

The following table sets forth general information for each of the    
Company's stations:                                                             

                                                        · Enlarge/Download Table

                                                                                        PRO FORMA YEAR ENDED   
                                                                                        DECEMBER 31, 1995(a)   
                                                                                        --------------------   
                                          YEAR    NETWORK      MARKET   STATION     NET REVENUE      PERCENTAGE
                               STATION  ACQUIRED  AFFILIATION  RANK(b)  RANK(b)    (IN THOUSANDS)     OF TOTAL 
                               -------  --------  -----------  -------  -------    --------------    ----------
                                                                                                               
Duluth, Minnesota -                                                                                            
 Superior, Wisconsin..........   KBJR    1988       NBC          134       2          $  3,969           3.2%  
Peoria - Bloomington,                                                                                          
 Illinois.....................   WEEK    1988       NBC          109       1            10,345           8.3   
Fort Wayne, Indiana...........   WPTA    1989       ABC          103       1            10,109           8.1   
San Jose - Monterey -                                                                                          
 Salinas, California..........   KNTV    1990       ABC          122       3            16,898          13.6   
Syracuse, New York............   WTVH    1993       CBS           69       3            11,373           9.1   
Fresno - Visalia,                                                                                              
 California...................   KSEE    1993       NBC           56       2            12,026           9.6   
Austin, Texas.................   KEYE    1995       CBS(c)        64       2(tie)       12,861          10.3   
Grand Rapids - Kalamazoo -                                                                                     
 Battle Creek, Michigan.......   WWMT    1995       CBS           38       1(tie)       19,830          15.9   
Buffalo, New York.............   WKBW    1995       ABC           39       1(tie)       27,338          21.9   
                                                                                      --------         -----   
                                                                                      $124,749         100.0%  
                                                                                      ========         ======  

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

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(a)  Pro forma net revenue information reflects actual 1995 net revenues of the 
   stations adjusted to reflect negotiated increases in network compensation
revenue and decreases in sales commissions paid to a national         
representative at certain stations.                                   

(b)  "Market rank" refers to the size of the television market or Designated    
 Market Area ("DMA") as defined by the A.C. Nielsen Company ("Nielsen").
"Station rank" represents the rank of a station in its DMA, based on  
     sign-on to sign-off station audience share of such station. All market rank
 and station rank data is from the Nielsen Station Index, dated February
1996, unless otherwise noted.                                         

(c)  KEYE-TV ("KEYE"), formerly KBVO, a Fox Broadcasting Company ("Fox")        
affiliate, became a CBS, Inc. ("CBS") affiliate on July 2, 1995.      

     A key element of the Company's strategy to improve the operating results of
its stations is expanding each station's local news franchise. Seven of         
Granite's nine stations are ranked either first or second in their respective   
markets in share of viewing audience during the total day and a majority of the 
stations are ranked either first or second in the key news dayparts and produce 
as many or more local news programs than their principal competitors. The       
Company also develops innovative sales and marketing techniques using exclusive 
in-depth audience research, mass-market community events, special local         
programming and targeted promotional campaigns. Granite's strategy also involves
aggressively managing station operating expenses, including staffing levels and 
programming expenditures, in order to achieve significant broadcast cash flow   
margins. For example, at stations WTVH-TV and KSEE-TV, acquired by the Company  
in December 1993, broadcast cash flow margins increased from 13% in 1993 to     
greater than 38% in 1994. For the five years ended December 31, 1995, Granite's 
broadcast cash flow margin averaged more than 40%.                              

    Granite's long-term objective is to acquire additional television stations
and to pursue acquisitions of other media and communications-related properties.

  On February 8, 1996, the Telecommunications Act of 1996 was enacted. The
legislation amends major portions of the regulatory framework applicable to the 
television industry. See "Business -- FCC Licenses" and "-- Proposed Legislation
and Regulations."                                                               

    The Company's Principal Executive Offices are located at 767 Third Avenue,
34th Floor, New York, New York 10017, telephone number (212) 826-2530.          

RISK FACTORS

The New Notes offered hereby involve a high degree of risk. See "Risk 
Factors."                                                                       

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SUMMARY OF TERMS OF THE EXCHANGE OFFER

The Exchange Offer relates to the exchange of up to $110,000,000 aggregate      
principal amount of Old Notes for up to an equal aggregate principal amount of  
New Notes. The New Notes will be obligations of the Company issued pursuant to  
the Indenture. The form and terms of the New Notes are identical in all material
respects to the form and terms of the Old Notes except (i) that the New Notes   
have been registered under the Securities Act, (ii) that the New Notes are not  
entitled to certain registration rights which are applicable to the Old Notes   
under the Registration Rights Agreement and (iii) for certain contingent        
interest rate provisions. The Old Notes and the New Notes are together referred 
to herein as the "Notes." See "Description of New Notes."                       

THE EXCHANGE OFFER.............         $1,000 principal amount of New Notes    
                                   will be issued in exchange for each
                                    $1,000 principal amount of Old Notes
                                validly tendered pursuant to the
                                      Exchange Offer. As of the date hereof,
                                   $110,000,000 in aggregate principal
                                        amount of Old Notes are outstanding. The
                                        exchange of New Notes for Old Notes will
                                   be made (i) with respect to all Old
                                        Notes validly tendered and not withdrawn
                                       on or prior to the Early Exchange Date,
                                      within two business days following the
                                  Early Exchange Date, and (ii) with
                                respect to all Old Notes validly
                                      tendered and not withdrawn on or prior
                                  to the Expiration Date, within two
                                      business days following the Expiration
                                   Date. The Old Notes were originally
                                   issued in a private placement. As a
                                    condition to the purchase of the Old
                                      Notes, the Initial Purchasers required
                                        that the Company make a registered offer
                                   to exchange the Old Notes for other
                                       securities substantially similar to the
                                      Old Notes. The Exchange Offer is being
                                made to satisfy this contractual
                          obligation of the Company.

RESALE..........................        Based on an interpretation by the staff 
                                        of the Commission set forth in no-action
                                    letters issued to third parties, the
                                      Company believes that New Notes issued
                                 pursuant to the Exchange Offer in
                                     exchange for Old Notes may be offered
                                  for resale and resold or otherwise
                                     transferred by holders thereof (other
                                   than any Restricted Holder) without
                                    compliance with the registration and
                                     prospectus delivery provisions of the
                                      Securities Act, PROVIDED that such New
                                  Notes are acquired in the ordinary
                                    course of such holders' business and
                                      such holders are not participating, do
                                     not intend to participate and have no
                                     arrangement or understanding with any
                             person to participate, in the
                                   distribution of such New Notes. See
                               "Mary Kay Cosmetics, Inc.," SEC
                                   No-Action Letter (available June 5,
                             1991); "Morgan Stanley & Co.,
                                   Incorporated," SEC No-Action Letter
                                    (available June 5, 1991); and "Exxon
                                  Capital Holdings Corporation," SEC
                                   No-Action Letter (available May 13,
                                       1988). Each broker-dealer that receives
                                New Notes for its own account in
                                      exchange for Old Notes, where such Old
                           Notes were acquired by such
                            broker-dealer as a result of
                                 market-making activities or other
                                    trading activities, must acknowledge
                                    that it will deliver a prospectus in
                                      connection with any resale of such New
                                  Notes. See "Plan of Distribution."

                                        If any person were to participate in the
                                 Exchange Offer for the purpose of
                                       distributing securities in a manner not
                                     permitted by the preceding paragraph,
                                     such person (i) could not rely on the
                        position of the staff of

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                                   the Commission enunciated in "Exxon
                                      Capital Holdings Corporation" and (ii)
                                     must comply with the registration and
                                       prospectus delivery requirements of the
                                   Securities Act in connection with a
                                        secondary resale transaction. Therefore,
                                        each holder of Old Notes who accepts the
                                    Exchange Offer must represent in the
                                       Letter of Transmittal that it meets the
                                    conditions described above. See "The
                                       Exchange Offer -- Terms of the Exchange
       Offer."

EARLY EXCHANGE DATE.............        All Old Notes validly tendered and not  
                                      withdrawn on or prior to 5:00 p.m. New
                                     York City time, on June 17, 1996 (the
                                        "Early Exchange Date") will be exchanged
                                      for New Notes within two business days
                                  following the Early Exchange Date.

EXPIRATION DATE.................        5:00 p.m., New York City time, on July  
                                    3, 1996 unless the Exchange Offer is
                                extended, in which case the term
                                       "Expiration Date" means the latest date
                                       and time to which the Exchange Offer is
                                    extended. See "The Exchange Offer --
                            Expiration Date; Extensions;
            Amendments."

ACCRUED INTEREST ON THE NEW NOTES                                               
AND THE OLD NOTES.............        The New Notes will bear interest from 
                                      June 1, 1996, the most recent interest
                                      payment date on the Old Notes. Holders
                                of Old Notes whose Old Notes are
                                       accepted for exchange will be deemed to
                                    have waived the right to receive any
                                      payment in respect of interest on such
                                      Old Notes accrued from June 1, 1996 to
                                   the date of the issuance of the New
                              Notes. See "The Exchange Offer
                             --Interest on the New Notes."

CONDITIONS TO THE EXCHANGE                                                      
OFFER.........................        The Company will not be obligated to  
                                        consummate the Exchange Offer if the New
                                Notes to be received will not be
                                      tradeable by the holder, other than in
                                       the case of Restricted Holders, without
                                        restriction under the Securities Act and
                                     the Exchange Act and without material
                                  restrictions under the blue sky or
                                       securities laws of substantially all of
                                     the states of the United States. This
                                       condition may be waived by the Company.
                                       See "The Exchange Offer -- Conditions."

                              No federal or state regulatory
                                     requirements must be complied with or
                                     approvals obtained in connection with
                                  the Exchange Offer, other than the
                              registration provisions of the
                                 Securities Act and any applicable
                                        registration or qualification provisions
                         of state securities laws.

PROCEDURE FOR TENDERING OLD                                                     
NOTES.........................        Each holder of Old Notes wishing to   
                                        accept the Exchange Offer must complete,
                                        sign and date the Letter of Transmittal,
                                     or a facsimile thereof, in accordance
                                      with the instructions contained herein
                                  and therein, and mail or otherwise
                                      deliver such Letter of Transmittal, or
                                     such facsimile, together with the Old
                                  Notes (unless such tender is being
                                       effected pursuant to the procedures for
                                       book-entry transfer described below) to
                                   be exchanged and any other required
                    documentation to the

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                                     Exchange Agent (as defined herein) at
                                the address set forth herein and
                                   therein. See "The Exchange Offer --
                         Procedure for Tendering."

SPECIAL PROCEDURES FOR                                                          
BENEFICIAL HOLDERS............        Any beneficial holder whose Old Notes 
                                 are registered in the name of his
                                      broker, dealer, commercial bank, trust
                                       company or other nominee and who wishes
                                      to tender in the Exchange Offer should
                                       contact such registered holder promptly
                                      and instruct such registered holder to
                                        tender on his behalf. If such beneficial
                                  holder wishes to tender on his own
                                    behalf, such beneficial holder must,
                                     prior to completing and executing the
                                        Letter of Transmittal and delivering his
                                  Old Notes, either make appropriate
                                     arrangements to register ownership of
                                      the Old Notes in such holder's name or
                                      obtain a properly completed bond power
                                        from the registered holder. The transfer
                            of record ownership may take
                                    considerable time. See "The Exchange
                                  Offer -- Procedure for Tendering."

GUARANTEED DELIVERY                                                             
 PROCEDURES....................        Holders of Old Notes who wish to tender
                                       their Old Notes and whose Old Notes are
                                       not immediately available or who cannot
                                      deliver their Old Notes (or who cannot
                                      complete the procedures for book-entry
                                 transfer on a timely basis) and a
                                        properly completed Letter of Transmittal
                                      or any other documents required by the
                                     Letter of Transmittal to the Exchange
                                    Agent prior to the Early Termination
                                        Date or the Expiration Date, as the case
                                  may be, may tender their Old Notes
                                    according to the guaranteed delivery
                                     procedures set forth in "The Exchange
                            Offer -- Guaranteed Delivery
            Procedures."

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,
                                        unless previously accepted for exchange.
                                        See "The Exchange Offer -- Withdrawal of
         Tenders."

ACCEPTANCE OF OLD NOTES AND                                                     
DELIVERY OF NEW NOTES.........        Subject to certain conditions (as     
                                      summarized above in "Conditions to the
                                        Exchange Offer" and described more fully
                                       in "The Exchange Offer -- Conditions"),
                                        the Company will accept for exchange any
                                   and all Old Notes which are validly
                                       tendered in the Exchange Offer prior to
                                      5:00 p.m., New York City time, on each
                                  of the Early Exchange Date and the
                                     Expiration Date. The New Notes issued
                                      pursuant to the Exchange Offer will be
                                        delivered promptly following each of the
                                      Early Exchange Date and the Expiration
                                      Date. See "The Exchange Offer -- Terms
                       of the Exchange Offer."

CERTAIN TAX                                                                     
CONSIDERATIONS................        The exchange pursuant to the Exchange 
                                     Offer will generally not be a taxable
                                      event for federal income tax purposes.
                                      See "Certain U.S. Tax Considerations."

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EXCHANGE AGENT..................        The Bank of New York, the Trustee under 
                                     the Indenture, is serving as exchange
                               agent (the "Exchange Agent") in
                                       connection with the Exchange Offer. The
                                     address of the Exchange Agent is: The
                                      Bank of New York, 101 Barclay Street -
                                        7E, New York, New York 10286, Attention:
                                      Enrique Lopez, Reorganization Section.
                                   For information with respect to the
                                    Exchange Offer, call (212) 815-6333.

USE OF PROCEEDS.................        The Company will not receive any        
                                     proceeds from the exchange of the New
                                       Notes for the Old Notes pursuant to the
                                     Exchange Offer. The net proceeds from
                                      the sale of Old Notes of approximately
                             $106,300,000 (after deducting
                                      underwriting discounts and expenses of
                                    the offering) were used to repay all
                                   outstanding term loan and revolving
                                  credit borrowings under the Credit
                                      Agreement and for additions to working
                               capital. See "Use of Proceeds."

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SUMMARY DESCRIPTION OF THE NEW NOTES

SECURITIES OFFERED..............        $110,000,000 principal amount of 9 3/8% 
                                      Senior Subordinated Notes due December
                          1, 2005 (the "New Notes").

MATURITY DATE...................        December 1, 2005.                       

INTEREST PAYMENT DATES..........        June 1 and December 1, commencing       
                 December 1, 1996.

OPTIONAL REDEMPTION.............        The New Notes will be redeemable in the 
                                    event that on or before February 22,
                                      1999 the Company receives net proceeds
                                        from the sale of its Capital Stock other
                                      than Disqualified Stock in one or more
                                    offerings, in which case the Company
                                        may, at its option, use all or a portion
                                       of any such net proceeds within 75 days
                                       of receipt thereof to redeem Notes in a
                                       principal amount of at least $5,000,000
                                      and up to an aggregate amount equal to
                                       33% of the original principal amount of
                                  the Notes at a redemption price of
                                       109.375% of the principal amount of the
                                       Notes plus accrued interest to the date
                                      of redemption; PROVIDED, HOWEVER, that
                                        Notes in an amount equal to at least 67%
                                       of the original principal amount of the
                                      Notes remain outstanding. In addition,
                                       the New Notes will be redeemable at any
                                     time on or after December 1, 2000, in
                                      whole or in part, at the option of the
                                     Company, at the redemption prices set
                                     forth herein plus accrued interest to
                    the Redemption Date.

CHANGE OF CONTROL...............        The Company will be required to offer to
                                   purchase all outstanding Notes at a
                                      price equal to 101% of their principal
                                        amount plus accrued interest to the date
                                      of repurchase in the event of a Change
                             of Control (as defined in the
                                    Indenture). The Company will also be
                                        required to offer to purchase all of the
                                   10 3/8% Notes and 12.75% Debentures
                                (each as defined) at 101% of the
                                     principal amount thereof, of which an
                                       aggregate $235,000,000 principal amount
                                  is currently outstanding, upon the
                                    occurrence of a Change of Control. A
                                     Change of Control is also an event of
                                        default under the Credit Agreement. If a
                                      Change of Control were to occur, there
                                    can be no assurance that the Company
                                        would have sufficient funds to repay all
                                     borrowings under the Credit Agreement
                                      and pay the Change of Control purchase
                                   price for all 10 3/8% Notes, 12.75%
                                        Debentures and the Notes tendered by the
                holders thereof.

MANDATORY SINKING FUND..........        None.                                   

RANKING.........................        The New Notes will be general unsecured 
                                      obligations of the Company and will be
                                       subordinated in right of payment to all
                                   existing and future Senior Debt (as
                                       defined in the Indenture) and will rank
                                       PARI PASSU with all senior subordinated
                                   debt and senior to all subordinated
                                   debt. See "Description of New Notes
                                      --Subordination." At May 31, 1996, the
                                     Company had $5,000,000 of Senior Debt
                   outstanding and the

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                             aggregate principal amount of
                                       outstanding senior subordinated debt of
                             the Company was approximately
                                       $344,455,000 (including the Old Notes).

FORM AND DENOMINATION...........        Fully registered as to principal and    
                                    interest in minimum denominations of
                                      $1,000 and integral multiples thereof.
                                    The Old Notes initially purchased by
                                      qualified institutional investors were
                                  initially represented by a single,
                               global Note in registered form,
                                  deposited with a custodian for and
                                      registered in the name of a nominee of
                                 DTC, as depository. The New Notes
                               exchanged for Old Notes will be
                                     represented by one or more global New
                                      Notes in registered form and deposited
                                      with a custodian for and registered in
                                   the name of the nominee of DTC. New
                                    Notes issued to accredited investors
                                    that are not qualified institutional
                             buyers will be issued only in
                               certificated, fully registered,
                                        definitive form. See "Description of New
                               Notes -- Form, Denomination and
                       Book-Entry Procedures."

CERTAIN COVENANTS...............        The Indenture will contain certain      
                                   covenants that, among other things,
                                        limit the ability of the Company and its
                                        subsidiaries to incur debt, make certain
                                       restricted payments, enter into certain
                                        transactions with affiliates, dispose of
                                    certain assets, incur liens securing
                                        subordinated debt of the Company, engage
                                 in mergers and consolidations and
                                        restrict the ability of the subsidiaries
                                        of the Company to make distributions and
                             transfers to the Company. See
                           "Description of New Notes."

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 SUMMARY CONSOLIDATED FINANCIAL DATA
 (IN THOUSANDS, EXCEPT PER SHARE DATA)

  The summary consolidated financial information presented below should be
read in conjunction with the consolidated financial statements and notes thereto
included elsewhere herein and "Selected Consolidated Financial Data" and        
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" herein. The acquisitions by the Company of its operating properties 
during the periods for which the summary data are presented below materially    
affect the comparability of such data from one period to another. The summary   
consolidated data for the three months ended March 31, 1995 and 1996 are derived
from unaudited financial statements but, in the opinion of the Company, reflect 
all adjustments, of a normal recurring nature, necessary for a fair presentation
of such data. The results of operations for interim periods are not necessarily 
indicative of the results to be expected for the full year. The consolidated    
summary pro forma data below should be read in conjunction with the unaudited   
Pro Forma Condensed Consolidated Statement of Operations and notes thereto      
contained elsewhere in this Prospectus.                                         

                                                        · Enlarge/Download Table


                                                     YEARS ENDED DECEMBER 31,                          THREE MONTHS ENDED   
                                  --------------------------------------------------------------            MARCH 31,       
                                                                                         1995              (UNAUDITED)      
                                                                                     PRO FORMA(a)          -----------      
                                     1992         1993         1994        1995      (UNAUDITED)        1995         1996   
                                  ---------    ---------    ---------    ---------   -----------     ---------    --------- 
                                                                                                                            

STATEMENT OF OPERATIONS DATA:                                                                                               

Net revenue ....................  $  35,957    $  37,499    $  62,856    $  99,895    $ 124,749      $  16,456    $  28,630 

Station operating                                                                                                           
  expenses .....................     21,638       22,790       37,764       55,399       66,648         10,338       17,518 

Depreciation and                                                                                                            
  amortization .................      6,262        6,263        8,135       13,844       17,087          2,252        4,424 

Corporate expense ..............      1,192        1,374        2,162        3,132        3,132            812          990 
Non-cash compensation ..........       --            123          282          363          363             81          115 
                                  ---------    ---------    ---------    ---------    ---------      ---------    --------- 

Operating income ...............      6,865        6,949       14,513       27,157       37,519          2,973        5,583 
Equity in net income of investee       --           --           --           (439)        --             --           --   
Interest expense, net ..........     11,675       10,977       10,707       27,026       36,119          3,710        8,850 
Income (loss) before                                                                                                        
  extraordinary item ...........     (4,826)      (4,035)       3,047         (783)        (730)(f)       (831)      (3,454)
Extraordinary loss on                                                                                                       
  extinguishment of debt .......     (5,709)      (1,007)        --           --                          --         (3,510)
                                  ---------    ---------    ---------    ---------                   ---------    --------- 

Net income (loss) ..............  $ (10,535)   $  (5,042)   $   3,047    $    (783)                  $    (831)   $  (6,964)
                                  =========    =========    =========    =========                   =========    ========= 

Net loss attributable                                                                                                       
  to common shareholders .......  $ (10,628)   $  (5,278)   $    (688)   $  (4,333)   $  (4,280)     $  (1,770)   $  (7,845)
                                  =========    =========    =========    =========    =========      =========    ========= 

Loss before extraordinary                                                                                                   
  item per common share ........  $   (1.22)   $   (0.98)   $   (0.15)   $   (0.73)   $   (0.72)     $   (0.39)   $   (0.51)
                                  =========    =========    =========    =========    =========      =========    ========= 

Net loss per common                                                                                                         
  share(b) .....................  $   (2.63)   $   (1.21)   $   (0.15)   $   (0.73)                  $   (0.39)   $   (0.93)
                                  =========    =========    =========    =========                   =========    ========= 

Weighted average common shares                                                                                              
  outstanding ..................      4,041        4,365        4,498        5,920        5,920          4,578        8,464 


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                                                        · Enlarge/Download Table


                                               DECEMBER 31,                     MARCH 31, 
                            -------------------------------------------------     1996    
                               1992         1993         1994         1995     (UNAUDITED)
                            ----------   ----------   ----------   ----------  ---------- 
                                                                                          
Balance Sheet Data:                                                                       

Total assets .............  $  140,948   $  191,517   $  189,881   $  452,221  $  449,771 
Total debt ...............     101,611       99,000       99,250      341,000     344,455 
Redeemable preferred stock       1,574       49,139       49,171       45,488      45,488 
Stockholders' equity .....      17,211       12,075       11,729        8,868       1,137 


                                                        · Enlarge/Download Table


                                                    YEARS ENDED DECEMBER 31,                      TWELVE    
                                  ----------------------------------------------------------   MONTHS ENDED 
                                                                                    1995      MARCH 31, 1996
                                                                                 PRO FORMA(a)   PRO FORMA(a)
                                    1992         1993        1994        1995    (UNAUDITED)    (UNAUDITED) 
                                  --------     --------    --------    --------    --------      --------   
                                                                                                            
OTHER DATA:                                                                                                 

Broadcast cash flow(c) .........  $ 14,319     $ 14,709    $ 25,092    $ 44,495    $ 58,101      $ 58,128   
Broadcast cash flow margin .....      39.8%        39.2%       39.9%       44.5%       46.6%         46.4%  
Operating cash flow(d) .........  $ 13,127     $ 13,335    $ 22,930    $ 41,364    $ 54,969      $ 54,818   
Operating cash flow margin .....      36.5%        35.6%       36.5%       41.4%       44.1%         43.7%  
Cash flows provided by (used in)                                                                            
  operating activities .........  $ (1,001)    $  3,611    $  5,808    $  8,806    $ 16,449      $ 19,142   
Ratio of:                                                                                                   
  Operating cash flow to total                                                                              
    interest expense ...........     1.12x        1.21x       2.14x       1.53x       1.52x         1.53x   
  Earnings to fixed charges(e) .      --           --         1.30x        --         1.02x         1.00x   
  Long-term debt to operating                                                                               
    cash flow ..................     7.57x        7.33x       4.14x       8.24x       6.28x         6.28x   
Capital expenditures ...........  $  1,036     $  1,089    $  2,628    $  7,682    $  8,221      $  7,207   


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

(a)   Gives effect to the acquisitions of KEYE, WWMT and WKBW and the           
      application of the net proceeds used to finance such acquisitions, the new
      network affiliation agreements, decreased sales commissions, certain other
      adjustments and the application of the net proceeds of the Old Notes as if
    such events had occurred January 1, 1995. See "Use of Proceeds" and "Pro
   Forma Condensed Consolidated Statement of Operations." During the three
months ended March 31, 1996, the Company wrote-off approximately    
$3,500,000 of deferred financing costs associated with the Credit   
    Agreement in connection with the repayment of the term loan. Such amount
is excluded from the Pro Forma Statement of Operations Data.        

(b)   Assuming that the then outstanding Series A Preferred Stock, Series B     
Preferred Stock, Series C Preferred Stock and Cumulative Convertible
 Exchangeable Preferred Stock were converted into the Company's Common
     Stock (Nonvoting), net income (loss) per common share for the years ended
    December 31, 1992, 1993, 1994 and 1995 would have been $(1.50), $(0.29),
    $0.17 and $(0.05), respectively. Net loss per common share for the three
     months ended March 31, 1995 and 1996 would have been $(0.05) and $(0.40),
respectively.                                                       

(c)   "Broadcast cash flow" means operating income plus depreciation and        
      amortization, corporate expense and non-cash compensation. The Company has
      included broadcast cash flow data because such data are commonly used as a
measure of performance for broadcast companies and are also used by 
    investors to measure a company's ability to service debt. Broadcast cash
  flow is not, and should not be used as, an indicator or alternative to
      operating income, net income or cash flow as reflected in the Consolidated
 Financial Statements, is not a measure of financial performance under
    generally accepted accounting principles and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.           

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(d)   "Operating cash flow" means operating income plus depreciation and        
    amortization and non-cash compensation expense. The Company has included
operating cash flow data because such data are used by investors to 
     measure a company's ability to service debt. Operating cash flow does not
      purport to represent cash provided by operating activities as reflected in
the Consolidated Financial Statements, is not a measure of financial
     performance under generally accepted accounting principles and should not
     be considered in isolation or as a substitute for measures of performance
 prepared in accordance with generally accepted accounting principles.

(e)   For purposes of computing the ratio of earnings to fixed charges, "fixed  
     charges" consists of interest expense, amortization of deferred financing
charges and the interest component of rent expense, and "earnings"  
   consists of income before income taxes and fixed charges. Earnings were
insufficient to cover fixed charges for each of the two years in the
period ended December 31, 1993 by $5,297 and $4,507, respectively.  
Earnings were insufficient to cover fixed charges for the year ended
   December 31, 1995 and the three months ended March 31, 1996 by $228 and
$3,393, respectively.                                               

(f)   Excludes a write-off of approximately $3,500,000 of deferred financing    
      costs associated with the Credit Agreement upon repayment of all term loan
borrowings thereunder with the proceeds of the Old Notes.           

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RISK FACTORS

LIMITATIONS ON FINANCIAL FLEXIBILITY; EFFECT OF NON-COMPLIANCE WITH RESTRICTIVE 
COVENANTS                                                                       

  The Company has incurred significant indebtedness in connection with the
acquisition of its nine television stations and anticipates incurring additional
indebtedness in connection with future acquisitions. At May 31, 1996, the       
Company's long-term indebtedness was approximately $349,455,000. The Indenture  
(the "10 3/8% Note Indenture") governing the Company's 10 3/8% Senior           
Subordinated Notes due May 15, 2005 (the "10 3/8% Notes"), the Indenture (the   
"12.75% Debenture Indenture") governing the Company's 12.75% Senior Subordinated
Debentures, due September 1, 2002 (the "12.75% Debentures") and the Credit      
Agreement contain various financial and operating covenants that, among other   
things, require the maintenance of certain financial ratios and restrict the    
Company's ability to borrow funds and to utilize funds for various purposes,    
including investments in certain subsidiaries. See "Description of New Notes"   
and "Description of Certain Debt Instruments." These restrictions, in           
combination with the leveraged nature of the Company, could limit the ability of
the Company to respond to market conditions or meet extraordinary capital needs,
or could adversely affect the Company's ability to finance its future operations
or capital needs, or engage in other business activities which could be in the  
interest of the Company.                                                        

     The Company's ability to service its debt, including the Notes, the 10 3/8%
Notes, the 12.75% Debentures, borrowings under the Credit Agreement and the     
Exchange Debentures (as defined herein), if issued, will depend upon the        
Company's future operating performance, which is subject to financial,          
political, business, regulatory and other factors, many of which are beyond the 
Company's control. Since borrowings under the Credit Agreement bear interest at 
rates that will fluctuate with certain prevailing interest rates, increases in  
such prevailing interest rates likely will increase the Company's interest      
payment obligations with respect to borrowings thereunder and could have an     
adverse effect on the Company.                                                  

 Additionally, if the Company were to sustain a decline in its operating
results, it could experience difficulty in complying with the covenants that are
contained in the Credit Agreement and any other agreements governing future     
indebtedness of the Company. The failure to comply with such covenants could    
result in an event of default under these agreements, thereby permitting        
acceleration of indebtedness incurred pursuant thereto, as well as indebtedness 
under other instruments that contain cross-acceleration or cross-default        
provisions, including the Indenture, the 10 3/8% Note Indenture and the 12.75%  
Debenture Indenture.                                                            

SUBORDINATION OF NOTES; PLEDGE OF ASSETS TO SECURE SENIOR INDEBTEDNESS          

   The Notes are subordinated in right of payment to all existing and future
Senior Debt, including the principal of (and premium, if any) and interest on   
and all other amounts due on or payable in connection with Senior Debt. At May  
31, 1996, there was $5,000,000 of Senior Debt outstanding. The Credit Agreement 
permits $60,000,000 of revolving borrowings thereunder and the Indenture does   
not limit the amount of Senior Debt that the Company may incur provided that the
incurrence of Debt is then permitted under the Indenture. By reason of the      
subordination of the Notes, in the event of the insolvency, liquidation,        
reorganization, dissolution or other winding-up of the Company or upon a default
in payment with respect to, or the acceleration of, or if a judicial proceeding 
is pending with respect to any default under, any Senior Debt, the lenders under
the Credit Agreement and any other creditors who are holders of Senior Debt must
be paid in full before the holders of the Notes may be paid. The Indenture also 
does not limit the amount of debt ranking PARI PASSU with the Notes that the    
Company may incur provided that the incurrence of debt is then permitted under  
the Indenture. The 10 3/8% Notes and 12.75% Debentures are PARI PASSU in right  
of payment with the Notes. If the Company incurs any additional PARI PASSU debt,
the holders of such debt, along with the holders of the 10 3/8% Notes and 12.75%
Debentures, would be entitled to share ratably with the holders of the Notes in 
any proceeds distributed in connection with any insolvency, liquidation,        
reorganization, dissolution or other winding-up of the Company. This may have   
the effect of reducing the amount of proceeds paid to the holders of the Notes. 
In addition, no payments may be made with respect to the principal of (premium, 
if any) or interest on the Notes if a payment default exists with respect to    
Senior Debt                                                                     

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and, under certain circumstances, no payments may be made with respect to the   
principal of (premium, if any) or interest on the Notes for a period of up to   
179 days if a non-payment default exists with respect to Senior Debt. In        
addition, the Indenture permits subsidiaries of the Company to incur debt       
provided certain conditions are met. Any debt incurred by a subsidiary of the   
Company will be structurally senior to the Notes. See "Description of New       
Notes."                                                                         

     The Company has granted to the lenders under the Credit Agreement, security
interests in substantially all of the present and future assets of the Company, 
as well as a pledge of all of the issued and outstanding shares of capital stock
of the Company's current and future subsidiaries. In the event of a default on  
secured indebtedness (whether as a result of the failure to comply with a       
payment or other covenant, a cross-default, or otherwise), the parties granted  
such security interests will have a prior secured claim on the assets of the    
Company and its subsidiaries. If such parties should attempt to foreclose on    
their collateral, the Company's financial condition and the value of the Notes  
will be materially adversely affected. In the event of certain Asset            
Dispositions (as defined in the Indenture), the Indenture provides that net     
proceeds thereof not reinvested as provided in the Indenture must be applied    
first to the repayment of Senior Debt and then to offer to repurchase the 12.75%
Debentures and the 10 3/8% Notes prior to offering to repurchase the Notes. As a
result thereof, in the event of one or more such Asset Dispositions, there may  
be insufficient proceeds to repurchase the Notes.                               

DEPENDENCE ON SUBSIDIARIES                                                      

   Eight of the Company's nine television stations are owned by wholly-owned
subsidiaries of the Company, and future acquisitions will likely be made through
present or future subsidiaries. The Company's cash flow and consequent ability  
to service its debt, including the Notes, will be dependent upon the earnings of
its subsidiaries and the distribution of those earnings to the Company, or upon 
loans or other payments of funds by those subsidiaries to the Company. The      
Company's subsidiaries have no obligation, contingent or otherwise, to make any 
funds available to the Company. The Credit Agreement, the 10 3/8% Note          
Indenture, the 12.75% Debenture Indenture and the Indenture impose certain      
limitations on the ability of subsidiaries of the Company to enter into         
agreements restricting their ability to declare dividends or make distributions 
or advances to the Company. The claims of holders of the Notes, upon any        
distribution of assets of any subsidiary of the Company in the event of the     
liquidation or reorganization of such subsidiary, will be subordinate to the    
prior claims of present and future creditors of that subsidiary, including      
holders of indebtedness and trade creditors thereof.                            

ABSENCE OF NET INCOME; POSSIBLE CHANGES IN FUTURE UTILIZATION OF NET OPERATING  
LOSSES FOR TAX PURPOSES                                                         

  The Company reported a net loss of $6,964,000 for the three months ended
March 31, 1996 and net losses of $783,000, $5,042,000, $10,535,000 and          
$8,295,000 for the years ended December 31, 1995, 1993, 1992 and 1991,          
respectively. The losses were primarily caused by the substantial interest      
expense on debt incurred by the Company to finance the acquisitions of its      
television broadcasting stations (and extraordinary losses of $3,510,000,       
$1,007,000 and $5,709,000 incurred in 1996, 1993 and 1992, respectively, on     
extinguishment of debt) and depreciation and amortization charges. The 1996     
extraordinary loss resulted from the write-off of deferred financing costs      
associated with the Credit Agreement in connection with the repayment of the    
term loan. There can be no assurances that the Company will not report net      
losses in the future. The future utilization of a portion of the Company's net  
operating losses for federal income tax purposes is subject to an annual        
limitation. In addition, the Company's June 29, 1995 acquisition of WKBW (the   
"WKBW Acquisition") could potentially eliminate substantially all of the        
Company's net operating losses for federal income tax purposes available for    
future utilization, and could result in the Company being in a tax paying       
position in present and future years. For financial reporting purposes, in      
accordance with Statement of Financial Accounting Standards No. 109, any taxes  
paid arising from the consummation of the WKBW Acquisition is considered        
additional purchase price and allocated to goodwill.                            

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DEPENDENCE ON KEY PERSONNEL                                                     

   W. Don Cornwell, the Chief Executive Officer and Chairman of the Board of
Directors of the Company, and Stuart J. Beck, the President and Secretary of the
Company, have each entered into employment agreements with the Company. Each    
agreement provides for a two-year employment term and will be automatically     
renewed for a subsequent two year term except upon advance notice of nonrenewal 
by either party. The current terms under the agreements expire on September 19, 
1997. The agreements provide that Mr. Cornwell and Mr. Beck will not engage in  
any business activities during the term of such agreements outside the scope of 
their employment with the Company unless approved by a majority of the Company's
independent directors. The loss of the services of certain key personnel        
currently employed by the Company could have an adverse impact on the Company.  
There can be no assurance that the services of such personnel will continue to  
be made available to the Company. The Company does not maintain key man life    
insurance on any of its employees.                                              

DEPENDENCE ON CONTINUED NETWORK AFFILIATION                                     

 Three of the Company's nine television stations are affiliated with the
National Broadcasting Company, Inc. ("NBC"), three of the Company's television  
stations are affiliated with the American Broadcasting Corporation, Inc.        
("ABC"), and three of the Company's stations are affiliated with CBS (NBC, ABC, 
CBS and Fox are referred to herein individually as a "Network" and collectively 
as the "Networks"). Under each of the Company's affiliation agreements, the     
terms of which range from seven to ten years, the Networks may, under certain   
circumstances, terminate the agreement upon advance written notice. The         
non-renewal or termination of one or more of the Network affiliation agreements 
could have a material adverse effect on the Company's results of operations. No 
assurance can be given that the Company's Network affiliation agreements will be
renewed or that such agreements will not be terminated. See "Business --Network 
Affiliation Agreements."                                                        

RISK OF CHANGE IN GOVERNMENT REGULATION; NECESSITY OF FCC LICENSES              

The Company's operations are subject to significant regulation by the 
Federal Communications Commission ("FCC") under the Communications Act of 1934, 
as amended (the "Communications Act"). The Communications Act prohibits the     
operation of television broadcasting stations except pursuant to a license      
issued by the FCC and empowers the FCC, among other things, to issue, renew,    
revoke and modify broadcasting licenses, adopt regulations to carry out the     
provisions of the Communications Act and impose penalties for violation of such 
regulations. The Telecommunications Act of 1996, which amends major provisions  
of the Communications Act, was enacted on February 8, 1996. The FCC has         
commenced, but not yet completed, implementation of the provisions of the       
Telecommunications Act of 1996. The FCC has under consideration and the U.S.    
Congress and the FCC may in the future adopt new laws, regulations and policies 
regarding a wide variety of matters which could, directly or indirectly,        
materially affect the operation and ownership of the Company's broadcast        
properties. See "Business -- FCC Licenses," "-- Proposed Legislation and        
Regulations" "-- The Cable Television Consumer Protection and Competition Act of
1992," and "-- Special Tax Status."                                             

COMPETITION, CHANGES IN THE BROADCAST INDUSTRY AND GENERAL ECONOMIC CONDITIONS  

  Technological innovation, and the resulting proliferation of programming
alternatives, have fractionalized television viewing audiences and subjected    
traditional television broadcast stations to new types of competition. These    
changes have had and will continue to have an effect on the broadcasting        
industry in general. In addition, the television industry is affected by        
prevailing economic conditions. Since the Company relies on sales of advertising
time at its stations for substantially all of its revenues, the Company's       
operating results are and will be sensitive to general economic conditions and  
regional conditions in each of the local markets in which the stations operate. 
The Company cannot predict the future direction of such conditions. See         
"Business -- Industry Background" and "-- Competition."                         

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RISK OF INABILITY TO FINANCE CHANGE OF CONTROL OFFER                            

   W. Don Cornwell and Stuart J. Beck, through their ownership of all of the
outstanding shares of the Company's Class A Common Stock, par value $.01 per    
share (the "Voting Common Stock"), possess 55% and 45%, respectively, of the    
voting power in the Company. As long as Messrs. Cornwell and Beck hold all of   
the outstanding shares of Voting Common Stock, they will be able to elect all of
the Company's directors and, under most circumstances, amend the Company's      
Certificate of Incorporation and effect a merger, sale of assets or other       
fundamental corporate transaction without the approval of the other stockholders
of the Company and will be able to defeat any unsolicited attempt to acquire    
control of the Company. See "Ownership of Capital Stock."                       

    In the event of a Change of Control, the Company will be required to offer
to purchase all outstanding Notes at a purchase price equal to 101% of the      
principal amount thereof, plus accrued interest to the date of purchase. The    
Company will also be required to offer to purchase all of the 10 3/8% Notes and 
the 12.75% Debentures at 101% of the principal amount thereof, of which         
$235,000,000 principal amount, in the aggregate, is currently outstanding, upon 
the occurrence of the Change of Control. A Change of Control is an event of     
default under the Credit Agreement. If a Change of Control were to occur, there 
can be no assurance that the Company would have sufficient funds to repay all   
borrowings under the Credit Agreement and pay the Change of Control purchase    
price for all 10 3/8% Notes, 12.75% Debentures and the Notes tendered by the    
holders thereof.                                                                

NO PUBLIC MARKET FOR THE NOTES                                                  

 There has previously been only a limited secondary market and no public
market for the Old Notes, and there can be no assurance as to the liquidity of  
any market that may develop for the New Notes, the ability of the holders of the
New Notes to sell their New Notes or the prices at which the holders of the New 
Notes would be able to sell their New Notes. The New Notes could trade at prices
higher or lower than their principal amount, depending on a number of factors,  
including the market for similar securities, the Company's financial condition  
and prevailing interest rates. The Company does not intend to list the New Notes
on a national securities exchange or to apply for quotation of the New Notes    
through the National Associate of Securities Dealers Automated Quotation System.

CONSEQUENCES OF THE EXCHANGE OFFER ON NON-TENDERING HOLDERS OF THE OLD NOTES    

The Company intends for the Exchange Offer to satisfy its registration
obligations under the Registration Rights Agreement. If the Exchange Offer is   
consummated, the Company does not intend to file further registration statements
for the sale or other disposition of Old Notes. Consequently, following         
completion of the Exchange Offer, holders of Old Notes seeking liquidity in     
their investment would have to rely on an exemption to the registration         
requirements under applicable securities laws, including the Securities Act,    
with respect to any sale or other disposition of the Old Notes.                 

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 USE OF PROCEEDS

     The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes offered hereby,
the Company will receive, in exchange, Old Notes in like principal amount.      

The net proceeds of the Old Notes, $106,300,000 (after deducting the  
underwriting discounts and estimated expenses of the offering), were used to    
repay all outstanding term and revolving credit borrowings under the Credit     
Agreement (aggregating $103,900,000) and for additions to working capital.      

   In connection with the financing of the acquisitions of WWMT and WKBW, on
May 19, 1995, the Company completed its offering of the 10 3/8% Notes and       
entered into the Credit Agreement. At February 22, 1996, outstanding borrowings 
under the Credit Agreement bore interest at a blended rate of 7.95%. See        
"Description of Certain Debt Instruments -- Credit Agreement."                  

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THE EXCHANGE OFFER

TERMS OF THE EXCHANGE OFFER                                                     

GENERAL                                                                   

  The Old Notes were sold by the Company on February 22, 1996 in a private
placement in reliance on Section 4(2) of the Securities Act and/or Regulation D 
of the Securities Act. The Old Notes were sold to the Initial Purchasers who    
resold the Old Notes to "qualified institutional buyers" within the meaning of  
Rule 144A under the Securities Act and accredited non-qualified institutional   
buyers. The Initial Purchasers required as a condition to the purchase of the   
Old Notes that the Company grant the purchasers of the Old Notes certain        
registration rights pursuant to the Registration Rights Agreement. The          
Registration Rights Agreement required the Company to file with the Commission  
following the closing of the offering of the Old Notes on February 22, 1996 (the
"Closing"), a registration statement relating to an exchange offer pursuant to  
which notes which are substantially identical to the Old Notes would be offered 
in exchange for the then outstanding Old Notes tendered at the option of the    
holders thereof. The form and terms of the New Notes are identical in all       
material respects to the form and terms of the Old Notes except (i) that the New
Notes have been registered under the Securities Act, (ii) that the New Notes are
not entitled to certain registration rights which are applicable to the Old     
Notes under the Registration Rights Agreement, and (iii) certain contingent     
interest rate provisions applicable to the Old Notes are generally not          
applicable to the New Notes. In the event that the applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange    
Offer, the Company agreed to use its reasonable best efforts to cause to become 
effective a shelf registration statement with respect to the resale of the Old  
Notes and to keep such resale registration statement effective for a period of  
up to three years. The Exchange Offer is being made to satisfy the contractual  
obligations of the Company under the Registration Rights Agreement.             

The Company has agreed that if (i) the Company failed to file the     
registration statement relating to the Exchange Offer within 75 days following  
the Closing, (ii) such registration statement (or, if applicable, the resale    
registration statement) had not become effective within 150 days following the  
Closing, (iii) the Exchange Offer has not been consummated within 30 business   
days after the effective date of the Exchange Offer registration statement or   
(iv) certain other specified events occur, then the per annum interest rate on  
the Old Notes will increase by 0.5% for the period from the occurrence of such  
default until such time as no default is in effect (at which time the interest  
rate will be reduced to its initial rate). If the Company has not consummated   
the Exchange Offer (or, if applicable, the resale registration statement has not
become effective) within 270 days following the Closing, then the per annum     
interest rate on the Old Notes will increase by an additional 0.5% for so long  
as the Company has not consummated the Exchange Offer (or until such resale     
registration statement becomes effective).                                      

     The holders of any Old Notes not tendered in the Exchange Offer will not be
entitled to require the Company to file a shelf registration statement. Any Old 
Notes remaining outstanding following consummation of the Exchange Offer will be
treated together with the New Notes as one series for purposes of the Indenture.
See "Description of New Notes -- Registration Covenant; Exchange Offer."        

     An exchange offer shall be deemed to have been consummated upon the earlier
to occur of (i) the Company having exchanged New Notes for all outstanding Old  
Notes (other than Old Notes held by a Restricted Holder) pursuant to such       
exchange offer and (ii) the Company having exchanged, pursuant to such exchange 
offer, New Notes for all Old Notes that have been validly tendered and not      
withdrawn on the Expiration Date. In such event, holders of Old Notes seeking   
liquidity in their investment would have to rely on exemptions to registration  
requirements under applicable securities laws, including the Securities Act.    

   Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old  
Notes validly tendered prior to 5:00 p.m., New York City time, on the Expiration
Date. The exchange of New Notes for Old Notes will be made (i) with respect to  
all Old Notes                                                                   

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validly tendered and not withdrawn on or prior to the Early Exchange Date,      
within two business days following the Early Exchange Date, and (ii) with       
respect to all Old Notes validly tendered and not withdrawn after the Early     
Exchange Date but on or prior to the Expiration Date, within two business days  
following the Expiration Date. The New Notes issued pursuant to the Exchange    
Offer will be delivered promptly following each of the Early Exchange Date and  
the Expiration Date. The Company will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of outstanding Old Notes accepted  
in the Exchange Offer. Holders may tender some or all of their Old Notes        
pursuant to the Exchange Offer in denominations of $250,000 and integral        
multiples of $1,000 in excess thereof.                                          

Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that New Notes  
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered  
for resale, resold and otherwise transferred by the holders thereof (other than 
a Restricted Holder) without compliance with the registration and prospectus    
delivery provisions of the Securities Act, PROVIDED that such New Notes are     
acquired in the ordinary course of such holders' business and such holders are  
not participating, do not intend to participate and have no arrangement or      
understanding with any person to participate in the distribution of such New    
Notes. See "Mary Kay Cosmetics, Inc.," SEC No-Action Letter (available June 5,  
1991); "Morgan Stanley & Co., Incorporated," SEC No-Action Letter (available    
June 5, 1991); and "Exxon Capital Holdings Corporation," SEC No-Action Letter   
(available May 13, 1988). Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such   
broker-dealer as a result of market-making activities or other trading          
activities, must acknowledge that it will deliver a prospectus in connection    
with any resale of such New Notes. See "Plan of Distribution."                  

    If any person were to participate in the Exchange Offer for the purpose of
distributing securities in a manner not permitted by the Commission's           
interpretation, such person (i) could not rely on the position of the staff of  
the Commission enunciated in "Exxon Capital Holdings Corporation" or similar    
interpretive letters and (ii) must comply with the registration and prospectus  
delivery requirements of the Securities Act in connection with a secondary      
resale transaction. Accordingly, each eligible holder wishing to accept the     
Exchange Offer must represent to the Company in the Letter of Transmittal that  
the conditions described above have been met.                                   

    In connection with the issuance of the Old Notes, the Company arranged for
the inclusion of the Old Notes initially purchased by qualified institutional   
buyers on the Private Offerings, Resales and Trading through Automated Linkages 
(PORTAL) market. The Company also arranged for the Old Notes initially purchased
by qualified institutional buyers to be issued and transferable in book-entry   
form through the facilities of DTC, acting as depository, and in DTC's Same-Day 
Funds Settlement System. The New Notes will also be issuable and transferable in
book-entry form through the DTC in the Same-Day Funds Settlement System.        

    As of the date of this Prospectus, $110,000,000 aggregate principal amount
of the Old Notes is outstanding.                                                

    This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of June 3, 1996 (the "Record Date").     

 The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the     
Exchange Agent. The Exchange Agent will act as agent for the tendering holders  
of Old Notes for the purpose of receiving New Notes from the Company and        
delivering New Notes to such holders.                                           

If any tendered Old Notes are not accepted for exchange because of an 
invalid tender or the occurrence of certain other events set forth herein,      
certificates for any such unaccepted Old Notes will be returned, without        
expense, to the tendering holder thereof as promptly as practicable after the   
Expiration Date.                                                                

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  The registration expenses to be incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent and Trustee and        
accounting and legal fees, will be paid by the Company. The Company has agreed  
to pay, subject to the instructions in the Letter of Transmittal, all transfer  
taxes, if any, relating to the sale or disposition of such holder's Old Notes   
pursuant to the Exchange Offer. See "-- Fees and Expenses."                     

EXPIRATION DATE; EXTENSIONS; AMENDMENTS                                   

    The term "Expiration Date" shall mean July 3, 1996, unless the Company, in
its sole discretion, extends the Exchange Offer, in which case the term         
"Expiration Date" shall mean the latest date to which the Exchange Offer is     
extended.                                                                       

In order to extend the Expiration Date, the Company will notify the   
Exchange Agent of any extension by oral or written notice and will mail to the  
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,   
New York City time, on the next business day after the previously scheduled     
Expiration Date. Such announcement may state that the Company is extending the  
Exchange Offer for a specified period of time.                                  

     The Company reserves the right (i) to delay acceptance of any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and to refuse to   
accept Old Notes not previously accepted, if any of the conditions set forth    
herein under "-- Conditions" shall have occurred and shall not have been waived 
by the Company, by giving oral or written notice of such delay, extension or    
termination to the Exchange Agent, and (ii) to amend the terms of the Exchange  
Offer in any manner deemed by it to be advantageous to the holders of the Old   
Notes. Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof. If the   
Exchange Offer is amended in a manner determined by the Company to constitute a 
material change, the Company will promptly disclose such amendment in a manner  
reasonably calculated to inform the holders of the Old Notes of such amendment. 

    Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advertise, 
or otherwise communicate any such public announcement, other than by making a   
timely release to a financial news service.                                     

INTEREST ON THE NEW NOTES                                                       

The New Notes will bear interest from June 1, 1996, the most recent   
interest payment date on the Old Notes, payable semi-annually on June 1 and     
December 1 of each year commencing on December 1, 1996, at the rate of 9 3/8%   
per annum. Holders of Old Notes whose Old Notes are accepted for exchange will  
be deemed to have waived the right to receive any payment in respect of interest
on the Old Notes accrued from June 1, 1996 until the date of the issuance of the
New Notes.                                                                      

PROCEDURE FOR TENDERING                                                         

    To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Old Notes (unless    
such tender is being effected pursuant to the procedure for book-entry transfer 
described below) and any other required documents, to the Exchange Agent prior  
to 5:00 p.m., New York City time, on the Expiration Date. Signatures on a Letter
of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed
by a member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. or a commercial bank or trust company   
having an office or correspondent in the United States (an "Eligible            
Institution") unless the Old Notes tendered pursuant thereto are tendered (i) by
a registered holder who has not completed the box entitled "Special Issuance    
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution.                                

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Any financial institution that is a participant in DTC's Book-Entry   
Transfer Facility system may make book-entry delivery of the Old Notes by       
causing DTC to transfer such Old Notes into the Exchange Agent's account in     
accordance with DTC's procedure for such transfer. Although delivery of Old     
Notes may be effected through book-entry transfer into the Exchange Agent's     
account at DTC, the Letter of Transmittal (or facsimile thereof), with any      
required signature guarantees and any other required documents, must, in any    
case, be transmitted to and received or confirmed by the Exchange Agent at its  
addresses set forth herein prior to 5:00 p.m., New York City time, on the       
Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES 
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.                             

  The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the     
conditions set forth herein and in the Letter of Transmittal.                   

     Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,       
dealers, commercial banks, trust companies or nominees effect such tender for   
such holders.                                                                   

   THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF   
THE HOLDERS. 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 TIMELY DELIVERY. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD 
BE SENT TO THE COMPANY.                                                         

     Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose  
name Old Notes are registered on the books of the Company or any other person   
who has obtained a properly completed bond power from the registered holder or  
any person whose Old Notes are held of record by DTC who desires to deliver such
Old Notes at DTC.                                                               

 Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes  
to tender his Old Notes should contact the registered holder promptly and       
instruct such registered holder to tender on his behalf. If such beneficial     
holder wishes to tender on his own behalf, such beneficial holder must, prior to
completing and executing the Letter of Transmittal and delivering his Old Notes,
either make appropriate arrangements to register ownership of the Old Notes in  
such holder's name or obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take considerable time.            

If the Letter of Transmittal is signed by a person other than the     
registered holder of any Old Notes listed therein, such Old Notes must be       
endorsed or accompanied by appropriate bond powers which authorize such person  
to tender the Old Notes on behalf of the registered holder, in either case      
signed as the name of the registered holder or holders appears on the Old Notes.

    If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of a
corporation or others acting in a fiduciary or representative capacity, such    
persons should so indicate when signing, and unless waived by the Company,      
evidence satisfactory to the Company of their authority to so act must be       
submitted with the Letter of Transmittal.                                       

All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and    
binding. The Company reserves the absolute right to reject any and all Old Notes
not validly tendered or any Old Notes the Company's acceptance of which would,  
in the opinion of counsel for the Company, be unlawful. The Company also        
reserves the absolute right to waive any irregularities or conditions of tender 
as to particular Old Notes. The Company's interpretation of the terms and       
conditions of the Exchange Offer (including the instructions in the 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 Company shall determine. Neither                        

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the Company, the Exchange Agent nor any other person shall be under any duty to 
give notification of defects or irregularities with respect to tenders of Old   
Notes nor shall any of them incur any liability for failure to give such        
notification. Tenders of Old Notes will not be deemed to have been made until   
such irregularities have been cured or waived. Any Old Notes received by the    
Exchange Agent that are not validly tendered and as to which the defects or     
irregularities have not been cured or waived will be returned by the Exchange   
Agent without cost to the tendering holder of such Old Notes unless otherwise   
provided in the Letter of Transmittal, as soon as practicable following the     
Expiration Date.                                                                

   By tendering, each holder will represent to the Company that, among other
things (i) the New Notes acquired pursuant to the Exchange Offer are being      
obtained in the ordinary course of such holder's business, (ii) such holder is  
not participating, does not intend to participate and has no arrangement or     
understanding with any person to participate, in a distribution of such New     
Notes, (iii) such holder is not an "affiliate," as defined under Rule 405 of the
Securities Act, of the Company and (iv) such holder is not a broker-dealer who  
acquired Old Notes directly from the Company to resell pursuant to Rule 144A or 
any other available exemption under the Securities Act.                         

GUARANTEED DELIVERY PROCEDURES                                                  

    Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of 
Transmittal or any other required documents to the Exchange Agent prior to the  
Early Exchange Date or the Expiration Date, may effect a tender if:             

(a) The tender is made through an Eligible Institution;               

   (b) Prior to the Early Exchange Date or the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly     
executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand 
delivery) setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of Old 
Notes tendered, stating that the tender is being made thereby, and guaranteeing 
that, within three business days after the date of execution of the Notice of   
Guaranteed Delivery, the Letter of Transmittal (or facsimile thereof), together 
with the certificate(s) representing the Old Notes to be tendered in proper form
for transfer and any other documents required by the Letter of Transmittal, will
be deposited by the Eligible Institution with the Exchange Agent; and           

(c) Such properly completed and executed Letter of Transmittal (or    
facsimile thereof), together with the certificate(s) representing all tendered  
Old Notes in proper form for transfer (or confirmation of a book-entry transfer 
into the Exchange Agent's account at DTC of Old Notes delivered electronically) 
and all other documents required by the Letter of Transmittal are received by   
the Exchange Agent within three business days after the date of execution of the
Notice of Guaranteed Delivery.                                                  

WITHDRAWAL OF TENDERS                                                           

    Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date,     
unless previously accepted for exchange.                                        

To withdraw a tender of Old Notes in the Exchange Offer, a written or 
facsimile transmission notice of withdrawal must be received by the Exchange    
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date and prior to acceptance for exchange thereof by the Company.
Any such notice of withdrawal must (i) specify the name of the person having    
deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Old Notes), (iii) be signed by the Depositor in the same manner  
as the original signature on the Letter of Transmittal by which such Old Notes  
were tendered (including required signature guarantees) or be accompanied by    
documents of transfer sufficient to permit the Trustee with respect to the Old  
Notes to register the                                                           

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transfer of such Old Notes into the name of the Depositor withdrawing the tender
and (iv) specify the name in which any such Old Notes are to be registered, if  
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices will be      
determined by the Company, 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 purposes of the Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly retendered. Any   
Old Notes which have been tendered but which are not accepted for exchange will 
be returned by the Exchange Agent to the holder thereof without cost to such    
holder as soon as practicable after withdrawal, rejection of tender or          
termination of the Exchange Offer. Properly withdrawn Old Notes may be          
retendered by following one of the procedures described above under "--         
Procedure for Tendering" at any time prior to the Expiration Date.              

CONDITIONS                                                                      

    Notwithstanding any other term of the Exchange Offer, the Company will not
be obligated to consummate the Exchange Offer if the New Notes to be received   
will not be tradeable by the holder, other than in the case of Restricted       
Holders, without restriction under the Securities Act and the Exchange Act and  
without material restrictions under the blue sky or securities laws of          
substantially all of the states of the United States. Such condition will be    
deemed to be satisfied unless a holder provides the Company with an opinion of  
counsel reasonably satisfactory to the Company to the effect that the New Notes 
received by such holder will not be tradeable without restriction under the     
Securities Act and the Exchange Act and without material restrictions under the 
blue sky laws of substantially all of the states of the United States. The      
Company may waive this condition.                                               

  If the condition described above exists, the Company will be entitled to
refuse to accept any Old Notes and, in the case of such refusal, will return all
tendered Old Notes to exchanging holders of the Old Notes. See "Description of  
New Notes -- Registration Covenant; Exchange Offer."                            

EXCHANGE AGENT                                                                  

   The Bank of New York, the Trustee under the Indenture, has been appointed
as Exchange Agent for the Exchange Offer. Questions and requests for assistance 
and requests for additional copies of this Prospectus or of the Letter of       
Transmittal should be directed to the Exchange Agent addressed as follows:      

By Hand Delivery:       The Bank of New York                                    
101 Barclay Street              
Corporate Trust Services Window 
New York, New York 10286        
Attn:       Enrique Lopez,      
              Reorganization Section

By Registered or                                                                
Certified Mail:       The Bank of New York                                  
101 Barclay Street - 7E         
New York, New York 10286        
Attn:       Enrique Lopez,      
              Reorganization Section

By Overnight Courier:   The Bank of New York                                    
101 Barclay Street              
Corporate Trust Services Window 
New York, New York 10286        
Attn:       Enrique Lopez,      
              Reorganization Section

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Facsimile Transmission:                                                         
(Eligible Institutions and                                                      
Withdrawal Notices Only)           (212) 571-3080                             
                Confirm:  (212) 815-2742
                             For Information Call:  (212) 815-6333

FEES AND EXPENSES                                                               

   The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the    
Exchange Offer is being made by mail. Additional solicitations may be made by   
officers and regular employees of the Company and its affiliates in person, by  
telegraph or telephone.                                                         

     The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection      
therewith.                                                                      

  The registration expenses to be incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent and Trustee and        
accounting and legal fees, will be paid by the Company.                         

     The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates          
representing New Notes or Old Notes for principal amounts not tendered or       
accepted for exchange are to be delivered to, or are to be registered or issued 
in the name of, any person other than the registered holder of the Old Notes    
tendered, or if tendered Old Notes are registered in the name of any person     
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the     
Exchange Offer, then the amount of any such transfer taxes (whether imposed on  
the registered holder or any other persons) will be payable by the tendering    
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer    
taxes will be billed directly to such tendering holder.                         

ACCOUNTING TREATMENT                                                            

   No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer. The expenses of the Exchange Offer 
will be amortized by the Company over the term of the New Notes under generally 
accepted accounting principles.                                                 

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CAPITALIZATION
(IN THOUSANDS)

The following table sets forth the capitalization of the Company as of
March 31, 1996:                                                                 

                                                                · Download Table

                                                                  MARCH 31, 1996
                                                                  --------------
                                                                                
Long-term debt:                                                                 
  12.75% Senior Subordinated                                                    
    Debentures due September 1, 2002 .............................       60,000 
  10 3/8% Senior Subordinated                                                   
    Notes due May 15, 2005 .......................................      175,000 
  9 3/8% Senior Subordinated                                                    
    Notes net of unamortized discount                                           
    of $545 due December 1, 2005 .................................      109,455 
                                                                        ------- 
  Total long-term debt ...........................................      344,455 
 Redeemable preferred stock, $.01 par value:                                    
  Cumulative Convertible Exchangeable Preferred Stock ............       45,488 

Stockholders' equity:                                                           
  Common stock: $.01 par value, 41,000,000 shares authorized                    
    consisting of 1,000,000 shares of Voting Common Stock and                   
    40,000,000 shares of Common Stock (Nonvoting); 178,500                      
    shares of Voting Common Stock and 8,298,966 shares of                       
    Common Stock (Nonvoting) issued and outstanding ..............           85 
 Additional paid-in capital ......................................       45,982 
 Accumulated deficit .............................................      (43,554)
 Less: unearned compensation .....................................       (1,376)
                                                                      --------- 
    Total stockholders' equity ...................................        1,137 
                                                                      --------- 
    Total capitalization .........................................    $ 391,080 
                                                                      ========= 


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SELECTED CONSOLIDATED FINANCIAL DATA
 (IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected consolidated financial data below should be read in      
conjunction with the consolidated financial statements and notes thereto        
included elsewhere in this Prospectus. The acquisitions by the Company of its   
operating properties during the periods from which selected data are presented  
below materially affect the comparability of such data from one period to       
another. The selected consolidated financial data for the years ended December  
31, 1991, 1992, 1993, 1994 and 1995 are derived from the Company's audited      
consolidated financial statements. The selected consolidated data for the three 
months ended March 31, 1995 and 1996 are derived from unaudited financial       
statements but, in the opinion of the Company, reflect all adjustments of a     
normal recurring nature necessary for a fair presentation of such data. The     
results of operations for interim periods are not necessarily indicative of the 
results to be expected for the full year. The selected pro forma data below     
should be read in conjunction with the unaudited Pro Forma Condensed            
Consolidated Statement of Operations and notes thereto contained elsewhere in   
this Prospectus.                                                                

                                                        · Enlarge/Download Table


                                                            YEARS ENDED DECEMBER 31,                          THREE MONTHS ENDED   
                                  ----------------------------------------------------------------------           MARCH 31,       
                                                                                              PRO FORMA           (UNAUDITED)      
                                                                                               1995(a)       --------------------- 
                                     1991        1992        1993        1994        1995    (UNAUDITED)        1995        1996   
                                  ---------   ---------   ---------   ---------   ---------   ---------      ---------   --------- 
                                                                                                                                   

STATEMENT OF OPERATIONS DATA:                                                                                                      
Net revenue ..................... $  33,426   $  35,957   $  37,499   $  62,856   $  99,895   $ 124,749      $  16,456   $  28,630 
Station operating                                                                                                                  
  expenses ......................    19,953      21,638      22,790      37,764      55,399      66,648         10,338      17,518 
Depreciation ....................     2,446       2,279       2,398       3,420       4,514       5,237            805       1,473 
Amortization ....................     4,697       3,983       3,865       4,715       9,330      11,850          1,448       2,951 
Corporate expense ...............       658       1,192       1,374       2,162       3,132       3,132            812         990 
Non-cash compensation ...........      --          --           123         282         363         363             81         115 
                                  ---------   ---------   ---------   ---------   ---------   ---------      ---------   --------- 
Operating income ................     5,672       6,865       6,949      14,513      27,157      37,519          2,973       5,583 
Other expense ...................       730         487         479         309         798         738             94         126 
Equity in net income                                                                                                               
  of investee ...................      --          --          --          --          (439)       --             --          --   
Interest expense, net ...........    13,709      11,675      10,977      10,707      27,026      36,119          3,710       8,850 
                                  ---------   ---------   ---------   ---------   ---------   ---------      ---------   --------- 
Income (loss) before                                                                                                               
  income taxes and                                                                                                                 
  extraordinary item ............    (8,767)     (5,297)     (4,507)      3,497        (228)        662           (831)     (3,393)
(Provision) benefit for                                                                                                            
  income taxes ..................       472         471         472        (450)       (555)     (1,392)          --           (61)
                                  ---------   ---------   ---------   ---------   ---------   ---------      ---------   --------- 
Income (loss) before                                                                                                               
  extraordinary item ............    (8,295)     (4,826)     (4,035)      3,047        (783)       (730)(f)       (831)     (3,454)
Extraordinary loss                                                                                                                 
 extinguishment of debt .........      --        (5,709)     (1,007)       --          --                         --        (3,510)
                                  ---------   ---------   ---------   ---------   ---------                  ---------   --------- 
Net income (loss) ............... $  (8,295)  $ (10,535)  $  (5,042)  $   3,047   $    (783)                 $    (831)  $  (6,964)
                                  =========   =========   =========   =========   =========                  =========   ========= 
Net loss attributable                                                                                                              
  to common shareholders ........ $  (8,335)  $ (10,628)  $  (5,278)  $    (688)  $  (4,333)  $  (4,280)     $  (1,770)  $  (7,845)
                                  =========   =========   =========   =========   =========   =========      =========   ========= 
Loss before extraordinary                                                                                                          
  item per common share ......... $  (20.24)  $   (1.22)  $   (0.98)  $   (0.15)  $   (0.73)  $   (0.72)     $   (0.39)  $   (0.51)
                                  =========   =========   =========   =========   =========   =========      =========   ========= 
Net loss per common                                                                                                                
  share(b) ...................... $  (20.24)  $   (2.63)  $   (1.21)  $   (0.15)  $   (0.73)                 $   (0.39)  $   (0.93)
                                  =========   =========   =========   =========   =========                  =========   ========= 
Weighted average common                                                                                                            
  shares outstanding ............       412       4,041       4,365       4,498       5,920       5,920          4,758       8,464 


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                                                   DECEMBER 31,                         
                            -----------------------------------------------   MARCH 31, 
                                                                                1996    
                               1991     1992      1993      1994      1995   (UNAUDITED)
                            --------  --------  --------  --------  --------  --------  
                                                                                        

BALANCE SHEET DATA:                                                                     

Total assets .............  $141,918  $140,948  $191,517  $189,881  $452,221  $449,771  
Total debt ...............   111,892   101,611    99,000    99,250   341,000   344,455  
Redeemable preferred stock     1,487     1,574    49,139    49,171    45,488    45,488  
Stockholders' equity .....     6,299    17,211    12,075    11,729     8,868     1,137  

                                                        · Enlarge/Download Table


                                                                       YEARS ENDED DECEMBER 31,                     TWELVE MONTHS 
                                           ------------------------------------------------------------------------     ENDED     
                                                                                                          1995      MARCH 31, 1996
                                                                                                       PRO FORMA(a) PRO FORMA(a)  
                                                                                                       ------------ ------------  
                                             1991        1992        1993        1994        1995      (UNAUDITED)   (UNAUDITED)  
                                           --------    --------    --------    --------    --------    ------------ ------------- 
                                                                                                                                  
OTHER DATA:                                                                                                                       

Broadcast cash flow(c) ................... $ 13,473    $ 14,319    $ 14,709    $ 25,092    $ 44,495      $ 58,101     $ 58,128    
Broadcast cash flow margin ...............     40.3%       39.8%       39.2%       39.9%       44.5%         46.6%        46.4%   
Operating cash flow(d) ................... $ 12,815    $ 13,127    $ 13,335    $ 22,930    $ 41,364      $ 54,969     $ 54,818    
Operating cash flow margin ...............     38.3%       36.5%       35.6%       36.5%       41.4%         44.1%        43.7%   
Cash flows provided by (used in)                                                                                                  
  operating activities ................... $    356    $ (1,001)   $  3,611    $  5,808    $  8,806      $ 16,449     $ 19,142    
Ratio of:                                                                                                                         
  Operating cash flow to total                                                                                                    
    interest expense .....................    0.93x       1.12x       1.21x       2.14x       1.53x         1.52x        1.53x    
  Earnings to fixed charges(e) ...........     --          --          --         1.30x        --           1.02x        1.00x    
  Long-term debt to operating                                                                                                     
    cash flow ............................    7.44x       7.57x       7.33x       4.14x       8.24x         6.28x        6.28x    
Capital expenditures ..................... $    469    $  1,036    $  1,089    $  2,628    $  7,682      $  8,221     $  7,207    

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

(a)   Gives effect to the acquisition of KEYE, WWMT and WKBW and the application
  of the net proceeds used to finance such acquisitions, the new network
affiliation agreements, decreased sales commissions, certain other  
      adjustments and the application of the net proceeds of the Old Notes as if
  such events had occurred on January 1, 1995. See "Use of Proceeds" and
  "Pro Forma Condensed Consolidated Statement of Operations." During the
  three months ended March 31, 1996, the Company wrote-off approximately
$3,500,000 of deferred financing costs associated with the Credit   
    Agreement in connection with the repayment of the term loan. Such amount
is excluded from the Pro Forma Statement of Operations Data.        

(b)   Assuming that the then outstanding Series A Preferred Stock, Series B     
Preferred Stock, Series C Preferred Stock and Cumulative Convertible
 Exchangeable Preferred Stock were converted into the Company's Common
     Stock (Nonvoting), net income (loss) per common share for the years ended
 December 31, 1991, 1992, 1993, 1994 and 1995 would have been $(2.71),
  $(1.50), $(0.29), $0.17 and $(0.05), respectively. Net loss per common
    share for the three months ended March 31, 1995 and 1996 would have been
$(0.05) and $(0.40), respectively.                                  

(c)   "Broadcast cash flow" means operating income plus depreciation and        
      amortization, corporate expense and non-cash compensation. The Company has
      included broadcast cash flow data because such data are commonly used as a
measure of performance for broadcast companies and are also used by 
    investors to measure a company's ability to service debt. Broadcast cash
  flow is not, and should not be used as, an indicator or alternative to
      operating income, net income or cash flow as reflected in the Consolidated
 Financial Statements, is not a measure of financial performance under
generally accepted accounting                                       

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   principles and should not be considered in isolation or as a substitute
      for measures of performance prepared in accordance with generally accepted
accounting principles.                                              

(d)   "Operating cash flow" means operating income plus depreciation and        
    amortization and non cash compensation expense. The Company has included
operating cash flow data because such data are used by investors to 
     measure a company's ability to service debt. Operating cash flow does not
      purport to represent cash provided by operating activities as reflected in
the Consolidated Financial Statements, is not a measure of financial
     performance under generally accepted accounting principles and should not
     be considered in isolation or as a substitute for measures of performance
 prepared in accordance with generally accepted accounting principles.

(e)   For purposes of computing the ratio of earnings to fixed charges, "fixed  
     charges" consists of interest expense, amortization of deferred financing
charges, and the interest component of rent expense, and "earnings" 
   consists of income before income taxes and fixed charges. Earnings were
  insufficient to cover fixed charges for each of the three years in the
      period ended December 31, 1993 by $8,767, $5,297 and $4,507. Earnings were
    insufficient to cover fixed charges for the year ended December 31, 1995
and the three months ended March 31, 1996 by $228 and $3,393,       
respectively.                                                       

(f)   Excludes a write-off of approximately $3,500,000 of deferred financing    
      costs associated with the Credit Agreement upon repayment of all term loan
borrowings thereunder with the proceeds of the Old Notes.           

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PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

The pro forma condensed consolidated statement of operations presented
below is based on the historical financial statements of: (i) the Company; (ii) 
Austin Television, the former owner of KEYE (formerly KBVO-TV); (iii) WWMT, a   
division of Busse Broadcasting Corporation; and (iv) Queen City Broadcasting,   
Inc., the owner of 100% of the issued and outstanding stock of the company that 
owns and operates WKBW ("Queen City"). The pro forma condensed consolidated     
statement of operations for the year ended December 31, 1995 gives effect to:   
(i) the acquisitions of KEYE, WWMT and WKBW and the application of the net      
proceeds of the sale of the 10 3/8% Notes, additional borrowings under the      
Credit Agreement and certain other adjustments; and (ii) the application of the 
net proceeds from the sale of the Old Notes as if such transactions occurred on 
January 1, 1995.                                                                

   The pro forma condensed consolidated statement of operations gives effect
to the acquisitions described above under the purchase method of accounting and 
are based upon the assumptions and adjustments described in the accompanying    
notes. These pro forma condensed consolidated statement of operations should be 
read in conjunction with the Company's Consolidated Financial Statements and the
Financial Statements of Austin Television, WWMT and Queen City appearing        
elsewhere in this Prospectus. The pro forma information is not necessarily      
indicative of the results that would have been reported had such events actually
occurred on the dates specified, nor is it indicative of the Company's future   
results.                                                                        

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PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended December 31, 1995
 (Unaudited)
 (in thousands, except per share data)

                                                        · Enlarge/Download Table

                                   Granite             Austin                        Queen City                    
                                 Broadcasting        Television      WWMT Five     For the Period                  
                               Corporation Year       One Month     Months ended      January 1,      Pro Forma    
                              ended December 31,  ended January 31,    May 31,          1995 to       Adjustments  
                                     1995               1995            1995        June 28, 1995  for acquisitions
                              ------------------  -----------------  ------------   -------------  ----------------
                                                                                                                   

Net revenue..................    $99,895               $  875           $7,934          $12,889          3,156 (a) 
Station operating expenses...     55,399                  380            4,182            7,577           (805)(b) 
                                                                                                           (85)(c) 
Depreciation expense.........      4,514                   32              360              331                    
Amortization expense.........      9,330                   10              253              675          1,681 (d) 
Corporate expense............      3,132                                                    395           (395)(f) 
Non-cash compensation........        363                                                                           
                                 -------              -------          --------         -------                    
Operating income.............     27,157                  453            3,139            3,911                    
Equity in net income                                                                                               
  of investee................       (439)                                                                  439 (k) 
Interest expense, net .......     27,026                   49                             2,933          5,704 (g) 
Other expense (income).......        798                   21              (43)             (18)           (20)(l) 
                                 -------               ------          --------         --------                   
Income (loss) before                                                                                               
  income taxes and                                                                                                 
  extraordinary item.........       (228)                 383            3,182              996                    
Provision for income taxes...       (555)                                                   (24)          (813)(i) 
                                 --------             -------          --------         --------                   
Loss before extraordinary                                                                                          
  item(m)....................    $  (783)              $  383           $3,182         $    972                    
                                 ========              ======           ======         ========                    
Loss before extraordinary item                                                                                     
  attributable to                                                                                                  
  common shareholders........   $ (4,333)                                                                          
                                =========                                                                          
Loss before extraordinary item                                                                                     
  per common share...........   $  (0.73)                                                                          
                                =========                                                                          
Weighted average common                                                                                            
  shares outstanding(j)......      5,920                                                                           
                                   =====                                                                           

                                                                · Download Table

                                    Pro Forma                 
                                   Adjustments                
                                 for refinancing    Pro forma 
                                 ---------------    --------- 

                                                              
Net revenue..................                        $124,749 
Station operating expenses...                          66,648 

Depreciation expense.........                           5,237 
Amortization expense.........         (99)(e)          11,850 
Corporate expense............                           3,132 
Non-cash compensation........                             363 
                                                    --------- 
Operating income.............                          37,519 
Equity in net income                                          
  of investee................                                 
Interest expense, net .......         407 (h)          36,119 
Other expense (income).......                             738 
                                                    --------- 
Income (loss) before                                          
  income taxes and                                            
  extraordinary item.........                             662 
Provision for income taxes...                          (1,392)
                                                     ---------
Loss before extraordinary                                     
  item(m)....................                       $    (730)
                                                    ==========
Loss before extraordinary item                                
  attributable to                                             
  common shareholders........                       $  (4,280)
                                                    ==========
Loss before extraordinary item                                
  per common share...........                       $   (0.72)
                                                    ==========
Weighted average common                                       
  shares outstanding(j)......                           5,920 
                                                        ===== 

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 NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
 (Unaudited)

 Adjustments reflected in the pro forma condensed consolidated financial
statement are explained as follows:                                             

    (a)  Net Revenue. To adjust net revenue to reflect negotiated increases in
        network compensation revenue and decreases in sales commissions paid
to national representative companies.                       

   (b)  Amortization of Film Contract Rights. To adjust amortization of film
         contract rights to reflect the net assets to be acquired based on the
allocation of the purchase price.                           

(c)  Selling, General and Administrative Expenses. To adjust station  
         operating expenses for reductions of certain employee benefit related
expenses.                                                   

 (d)  Amortization of Intangible Assets and Deferred Financing Costs. To
reflect increased amortization expense as follows:          

                                                                · Download Table

                                                         Year ended   
                                                     December 31, 1995
                                                     -----------------
                                                                      
(i)  Amortization of excess costs of the purchase                     
     price over net assets acquired................     $2,135,000    

(ii) Amortization of deferred financing costs                         
     associated with the issuance of the 10 3/8%                      
     Notes and with additional borrowings under                       
     the Credit                                                       
     Agreement....................................         474,000    

(iii) Elimination of historical amortization                          
     expense in the financial statements of the                       
     stations acquired............................        (928,000)   
                                                        ----------    
                                                        $1,681,000    
                                                        ==========    

  (e)  Amortization of Deferred Financing Cost. To reflect amortization of
          deferred financing costs associated with the issuance of the Old Notes
         and to partially eliminate amortization expense of deferred financing
costs related to the Credit Agreement.                      

     (f)  Corporate Expense. To eliminate the historical allocation of corporate
expense charged to the stations acquired.                   

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(g)  Interest Expense.                                                

          To adjust interest expense to reflect the application of proceeds used
to finance the acquisitions:                                

                                                                · Download Table

                                                        Year ended    
                                                     December 31, 1995
                                                     -----------------
                                                                      

(i)  Interest expense on the 10 3/8% Notes at an                      
     interest rate of 10.375%.....................      $7,565,000    

(ii) Interest expense on the additional borrowings                    
     under the Credit Agreement...................       3,769,000    

(iii) Elimination of historical interest expense                      
     on debt not assumed..........................      (5,630,000)   
                                                        -----------   
                                                        $5,704,000    
                                                        ==========    

   (h)  Interest Expense. To adjust interest expense for the sale of the Old
         Notes at an interest rate of 9.375% and to eliminate interest expense
on borrowings under the Credit Agreement.                   

(i)  Income Taxes. To adjust the provision for income taxes to reflect
         changes in income before income taxes resulting from the acquisitions
and the refinancing.                                        

     (j)  Weighted Average Common Shares Outstanding. Pro forma weighted average
         common shares outstanding for 1995 does not include the conversion of
       any convertible preferred stock and the exercise of any outstanding
     stock options. The inclusion of such items would be antidilutive.

     (k)  Equity in Net Income of Investee. To eliminate equity of net income of
Queen City.                                                 

(l)  Other. To eliminate legal expense incurred by Austin Television  
relating to the sale of the station to the Company.         

    (m)  Loss before Extraordinary Item. Excludes a write-off of approximately
     $3,500,000 of deferred financing costs associated with the Credit
        Agreement upon repayment of all term loan borrowings thereunder with
the proceeds of the Old Notes.                              

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 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  The consolidated financial statements of the Company reflect significant
increases between the years ended December 31, 1995 and 1994 and between the    
three months ended March 31, 1996 and 1995 in substantially all line items. The 
principal reasons for such increases are the acquisition of KEYE on February 1, 
1995, the acquisition of WWMT-TV, the CBS affiliate licensed to serve Grand     
Rapids - Kalamazoo - Battle Creek, Michigan ("WWMT") on June 1, 1995 and the    
acquisition of WKBW on June 29, 1995. Significant increases between the years   
ended December 31, 1994 and 1993 were due to the acquisition of WTVH-TV, the CBS
affiliate licensed to serve Syracuse, New York ("WTVH") and KSEE-TV, the NBC    
affiliate licensed to serve Fresno - Visalia, California ("KSEE") on December   
23, 1993. It is anticipated that the Company's consolidated financial statements
for the year ended December 31, 1996 will reflect significant increases in      
substantially all line items compared to the prior year due to the acquisitions 
of KEYE, WWMT and WKBW. In addition, the Company may recognize significant      
taxable income as a result of the acquisition of WKBW. Such taxable income could
potentially eliminate substantially all of the Company's net operating losses   
for federal income tax purposes available for future utilization, and could     
result in the Company being in a tax paying position in present and future      
years. For financial reporting purposes, any taxes paid arising from the        
consummation of the acquisition of WKBW is considered additional purchase price 
and allocated to goodwill.                                                      

The Company's revenues are derived principally from local and national
advertising and, to a lesser extent, from network compensation for the broadcast
of programming and revenues from studio rental and commercial production        
activities. In 1995, the Company negotiated long-term affiliation agreements for
its stations which the Company expects will provide aggregate additional annual 
revenues of approximately $3,300,000 in cash to the Company's stations, only a  
portion of which is reflected in the Company's results of operations for the    
year ended December 31, 1995. The primary operating expenses involved in owning 
and operating television stations are personnel costs, depreciation and         
amortization, programming and promotion expenses and news costs. Numbers        
referred to in the following discussion have been rounded to the nearest        
thousand.                                                                       

   The following table sets forth certain operating data for the three years
ended December 31, 1993, 1994 and 1995 and the three months ended March 31, 1995
and 1996:                                                                       

                                                        · Enlarge/Download Table


                                                    Year ended December 31,             Three Months Ended    
                                           ----------------------------------------          March 31,        
                                                                                     -------------------------
                                              1993           1994           1995        1995          1996    
                                           ----------     ----------     ----------  ----------    -----------

                                                                                                              
Operating income........................ $  6,949,000    $14,513,000    $27,157,000  $2,973,000    $ 5,583,000
Add:                                                                                                          
  Depreciation and amortization.........    6,263,000      8,135,000     13,843,000   2,252,000      4,424,000
  Corporate expense.....................    1,374,000      2,162,000      3,132,000     812,000        990,000
  Non-cash compensation.................      123,000        282,000        363,000      81,000        115,000
                                          -----------    -----------    -----------  ----------    -----------

Broadcast cash flow.....................  $14,709,000    $25,092,000    $44,495,000  $6,118,000    $11,112,000
                                          ===========    ===========    ===========  ==========    ===========


"Broadcast cash flow" means operating income plus depreciation,       
amortization, corporate expense and non-cash compensation. The Company has      
included broadcast cash flow data because such data are commonly used as a      
measure of performance for broadcast companies and are also used by investors to
measure a company's ability to service debt. Broadcast cash flow is not, and    
should not be used as, an indicator or alternative to operating income, net     
income or cash flow as reflected in the Consolidated Financial Statements, is   
not a measure of financial performance under generally accepted accounting      
principles and should not be considered in isolation or as a substitute for     
measures of performance prepared in accordance with generally accepted          
accounting principles.                                                          

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The Company believes that the adoption of Statements of Financial     
Accounting Standards No. 115 (Accounting for Certain Investments in Debt and    
Equity Securities), No. 119 (Disclosure about Derivative Financial Instruments  
and Fair Value of Financial Instruments), No. 121 (Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of) and No. 123   
(Accounting for Stock Based Compensation) have not, to the extent in effect, and
will not have a material effect on its financial position and results of        
operations.                                                                     

Three Months ended March 31, 1996 and 1995                                      

     Net revenues for the three months ended March 31, 1996 totaled $28,630,000,
an increase of $12,174,000 or 74% compared to $16,456,000 for the three months  
ended March 31, 1995. Of this increase, $11,084,000 was due to the inclusion of 
one additional month of operations of KEYE and three months of operations of    
WWMT and WKBW. The remaining increase of $1,090,000 resulted primarily from     
increased network compensation and increased political spending in an election  
year. Net revenue at the Company's nine stations (including revenue derived by  
KEYE, WWMT and WKBW prior to their acquisition by the Company) increased        
$1,621,000, or 6.0% during the three months ended March 31, 1996 as compared to 
the same period in 1995.                                                        

   Station operating expenses totaled $17,518,000, an increase of $7,180,000
or 69% compared to $10,338,000 for the three months ended March 31, 1995. Of    
this increase, $6,088,000 was due to the inclusion of one additional month of   
operations of KEYE and three months of operations of WWMT and WKBW. The         
remaining increase of $1,092,000 resulted from increased news expenses,         
primarily associated with the launch of a news operation at KEYE, and increased 
promotion expenses. Station operating expenses at the Company's nine stations   
(including station operating expenses of KEYE, WWMT and WKBW prior to their     
acquisition by the Company) increased $947,000, or 5.7% during the three months 
ended March 31, 1996 as compared to the same period in 1995.                    

     Depreciation and amortization increased $2,172,000, or 96% during the three
months ended March 31, 1996 compared to the same period a year earlier primarily
due to the inclusion of one additional month of operations of KEYE and three    
months of operations of WWMT and WKBW.                                          

   Corporate expense increased $178,000 or 22% during the three months ended
March 31, 1996 compared to the same period a year earlier, primarily due to     
higher administrative expenses resulting from the acquisitions of KEYE, WWMT and
WKBW during 1995. Non-cash compensation expense increased $34,000 during the    
three months ended March 31, 1996 compared to the same period a year earlier due
to the granting of additional shares of Common Stock (Nonvoting) to certain     
executive employees under the Company's Management Stock Plan.                  

    As a result of the above, operating income totaled $5,582,000, an increase
of $2,609,000 or 88% compared to $2,973,000 for the three months ended March 31,
1995.                                                                           

    Net interest expense was $8,850,000 compared to $3,710,000 a year earlier,
an increase of $5,140,000 or 139%, due primarily to higher levels of outstanding
indebtedness as a result of the acquisitions of KEYE, WWMT and WKBW in 1995.    

  Loss before extraordinary item for the three months ended March 31, 1996
totaled $3,454,000 compared to $831,000 for the same period a year earlier, an  
increase of $2,623,000.                                                         

   The Company completed an offering of $110,000,000 principal amount of the
Old Notes due December 2005. Proceeds from the sale of the Old Notes were used  
to repay all outstanding term loan and revolving credit borrowings under the    
Credit Agreement and for general working capital purposes. As a result of       
repaying the term loan, which is not subject to being reborrowed, the Company   
incurred an extraordinary loss of $3,510,000 due to the write-off of related    
deferred financing fees.                                                        

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  Net loss totaled $6,964,000 during the three months ended March 31, 1996
compared to a net loss of $831,000 during the same period a year earlier, an    
increase of $6,133,000. This change is due to the changes in the line items     
described above.                                                                

  Broadcast cash flow totaled $11,112,000 for the three month period ended
March 31, 1996, an increase of $4,994,000 or 82% compared to $6,118,000 during  
the same period a year earlier. Of this increase, $5,026,000 was due to the     
inclusion of one additional month of operations of KEYE and three months of     
operations of WWMT and WKBW. Broadcast cash flow at the Company's nine stations 
(including broadcast cash flow derived by KEYE, WWMT and WKBW prior to their    
acquisition by the Company) increased $674,000, or 6.5% during the three months 
ended March 31, 1996 as compared to the same period in 1995.                    

Years ended December 31, 1995 and 1994                                          

  Net revenue for the year ended December 31, 1995 totaled $99,895,000, an
increase of $37,039,000, or 58.9% compared to net revenue of $62,856,000 for the
year ended December 31, 1994. Of this increase, $36,324,000 was due to the      
inclusion of eleven months of operations of KEYE, seven months of operations of 
WWMT and six months of operations of WKBW. The remaining increase of $715,000   
resulted from a strong advertising environment in the first six months of the   
year and increased network compensation, offset, in part, by lower political    
advertising in a non-election year. Net revenue at the Company's nine stations  
(including revenue derived by KEYE, WWMT and WKBW prior to their acquisition by 
the Company) increased $2,316,000, or 2.0% during the year ended December 31,   
1995 as compared to the same period in 1994.                                    

 Station operating expenses for the year ended December 31, 1995 totaled
$55,399,000, an increase of $17,635,000, or 46.7% compared to station operating 
expenses of $37,764,000 for the same period a year earlier. Of this increase,   
$16,589,000 was due to the inclusion of eleven months of operations of KEYE,    
seven months of operations of WWMT and six months of operations of WKBW. The    
remaining increase of $1,046,000 was primarily due to increased news and sales  
development costs. Station operating expenses at the Company's nine stations    
(including station operating expenses of KEYE, WWMT and WKBW prior to their     
acquisition by the Company) decreased $1,779,000, or 2.7% during the year ended 
December 31, 1995 as compared to the same period in 1994.                       

    Depreciation and amortization increased by $5,708,000, or 70.2% during the
year ended December 31, 1995 compared to the same period a year earlier         
primarily due to the inclusion of eleven months of operations of KEYE, seven    
months of operations of WWMT and six months of operations of WKBW. Corporate    
expense increased $970,000, or 44.9% during the year ended December 31, 1995    
compared to the same period a year earlier, primarily due to higher             
administrative costs associated with the expansion of the Company's corporate   
office to manage its expanded station group. Non-cash compensation expense      
increased $81,000 during the year ended December 31, 1995 compared to the same  
period a year earlier due to the granting of additional awards payable in Common
Stock (Nonvoting) to certain executive employees under the Company's Management 
Stock Plan.                                                                     

As a result of the factors discussed above, operating income increased
$12,644,000 or 87.1% during the year ended December 31, 1995 compared to the    
same period a year earlier.                                                     

The equity in net income of investee of $439,000 for the year ended   
December 31, 1995 resulted from the Company recognizing its pro rata share of   
the earnings of Queen City III Limited Partnership ("QCIII"), the ultimate      
parent of WKBW, under the equity method of accounting. The Company acquired all 
of the limited partnership interests of QCIII in December 1993 and, on June 29, 
1995, acquired all remaining interests in QCIII.                                

     Net interest expense totaled $27,026,000 during the year ended December 31,
1995, an increase of $16,319,000, or 152.4% compared to net interest expense of 
$10,707,000 during the same period a year earlier,                              

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primarily due to higher levels of outstanding indebtedness as a result of the   
acquisitions of KEYE, WWMT and WKBW.                                            

 Other expenses increased by $490,000 during the year ended December 31,
1995 compared to the same period a year earlier primarily due to the incurrence 
of a charge to terminate and change certain service contracts.                  

    Net loss totaled $783,000 during the year ended December 31, 1995 compared
to net income of $3,047,000 during the same period a year earlier, a decrease of
$3,830,000. This change is primarily due to the changes in the line items       
discussed above.                                                                

    Broadcast cash flow totaled $44,495,000 during the year ended December 31,
1995 compared to $25,092,000 during the same period a year earlier, an increase 
of $19,403,000, or 77.3%. Of this increase, $19,735,000 was due to the inclusion
of eleven months of operations of KEYE, seven months of operations of WWMT and  
six months of operations of WKBW, which was offset, in part, by a decrease in   
broadcast cash flow from the Company's initial six stations (the "Initial Six   
Stations"). Broadcast cash flow at the Company's nine stations (including       
broadcast cash flow of KEYE, WWMT and WKBW prior to their acquisition by the    
Company) increased $537,000, or 1.0% during the year ended December 31, 1995 as 
compared to the same period in 1994.                                            

Pro Forma and actual year ended December 31, 1995                               

Pro forma net revenue for the year ended December 31, 1995 totaled    
$124,749,000 compared to actual net revenue for the year ended December 31, 1995
of $99,895,000, a difference of $24,854,000 or 24.9%. Of this difference,       
$21,698,000 was due to the acquisitions of KEYE, WWMT and WKBW. The remaining   
difference of $3,156,000 resulted from higher network compensation and lower    
fees paid to certain national sales representative companies.                   

   Pro forma station operating expenses for the year ended December 31, 1995
totaled $66,648,000 compared to actual station operating expenses for the year  
ended December 31, 1995 of $55,399,000, a difference of $11,249,000 or 20.3%.   
The difference was primarily due to the acquisitions of KEYE, WWMT and WKBW.    

 Pro forma depreciation and amortization for the year ended December 31,
1995 was higher by $3,243,000 or 23.4% compared to actual depreciation and      
amortization for the year ended December 31, 1995 primarily due to the          
acquisitions of KEYE, WWMT and WKBW.                                            

  As a result of the changes in net revenue and station operating expenses
outlined above, broadcast cash flow on a pro forma basis for the year ended     
December 31, 1995 totaled $58,101,000 compared to actual broadcast cash flow for
the year ended December 31, 1995 of $44,495,000, a difference of $13,606,000 or 
30.6%.                                                                          

Years ended December 31, 1994 and 1993                                          

  Net revenue for the year ended December 31, 1994 totaled $62,856,000, an
increase of $25,357,000, or 67.6%, compared to net revenue of $37,499,000 for   
the year ended December 31, 1993. Of this increase, $21,266,000 was due to the  
inclusion of a full year of operations of WTVH and KSEE. The remaining increase 
of $4,091,000 was due to increased spending by local and national advertisers,  
higher advertising rates and increased political advertising, in an election    
year. Net revenue at the Company's Initial Six Stations (including revenue      
derived by WTVH and KSEE in 1993 prior to their acquisition by the Company)     
increased $7,757,000, or 14.1% during the year ended December 31, 1994 as       
compared to the same full year period in 1993.                                  

 Station operating expenses for the year ended December 31, 1994 totaled
$37,764,000, an increase of $14,974,000, or 65.7%, compared to operating        
expenses of $22,790,000 for the same period a year earlier. Of this increase,   
$13,229,000 was due to the inclusion of a full year of operations of WTVH and   
KSEE. The remaining increase of $1,745,000 was due primarily to increased       
expenses for local news and sales development.                                  

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Station operating expenses at the Company's Initial Six Stations (including     
station operating expenses of WTVH and KSEE in 1993 prior to their acquisition  
by the Company) decreased $482,000, or 1.3% during the year ended December 31,  
1994 as compared to the same period in 1993. The decrease resulted primarily    
from lower programming expense and the elimination of certain general and       
administrative costs at WTVH and KSEE offset, in part, by increased expenses for
local news and sales development.                                               

     Depreciation and amortization increased by $1,872,000, or 29.9%, during the
year ended December 31, 1994 compared to the same period a year earlier         
primarily due to the inclusion of a full year of operations of WTVH and KSEE.   

Corporate expense increased $788,000, or 57.4%, during the year ended 
December 31, 1994 compared to the same period a year earlier, primarily due to  
the hiring of additional staff and the incurrence of higher administrative costs
associated with the expansion of the Company's corporate office to manage its   
expanded station group. Non-cash compensation expense increased $159,000, or    
129.3% during the year ended December 31, 1994 due to the granting of additional
awards payable in Common Stock (Nonvoting) to certain executive employees of the
Company under the Company's Management Stock Plan adopted in 1993.              

As a result of the factors discussed above, operating income increased
$7,564,000 or 108.9% during the year ended December 31, 1994 compared to the    
same period a year earlier.                                                     

     Net interest expense totaled $10,707,000 during the year ended December 31,
1994, a decrease of $270,000, or 2.5% compared to net interest expense of       
$10,977,000 during the same period a year earlier. The decrease was primarily   
due to the absence of non-cash interest expense related to the termination of   
certain interest rate protection agreements, offset by higher interest rates on 
bank debt.                                                                      

Net income totaled $3,047,000 during 1994 compared with a net loss of 
$5,043,000 for the previous year, an increase of $8,090,000. This increase was  
primarily due to the changes in the line items discussed above and the absence  
of an extraordinary loss on extinguishment of debt, offset, in part, by the fact
that the Company had a provision for income taxes in 1994 compared to an income 
tax benefit in 1993.                                                            

    Broadcast cash flow totaled $25,092,000 during the year ended December 31,
1994 compared to $14,709,000 during the same period a year earlier, an increase 
of $10,383,000, or 70.6%. Of this increase, $8,235,000 was due to the inclusion 
of a full year of operations of WTVH and KSEE. Broadcast cash flow at the       
Company's Initial Six stations (including broadcast cash flow of WTVH and KSEE  
in 1993 prior to their acquisition by the Company) increased $8,239,000, or     
48.9% during the year ended December 31, 1994 as compared to the same period in 
1993.                                                                           

Liquidity and Capital Resources                                                 

    On February 1, 1995, the Company's then existing bank credit agreement was
amended and restated (as amended and restated, the "Prior Credit Agreement") to 
permit term borrowings of up to $100,000,000 plus a revolving working capital   
facility permitting borrowings of up to $15,000,000. The additional borrowings  
under the Prior Credit Agreement were used: (i) to fund the acquisition of KEYE;
(ii) to repurchase all of the Company's Adjustable Rate Preferred Stock that was
issued in connection with the acquisitions of WTVH and KSEE; (iii) to pay all of
the Company's then existing revolving bank indebtedness; (iv) to pay fees and   
expenses in connection with such transactions; and (v) for general working      
capital purposes.                                                               

  On June 1, 1995, the Company acquired substantially all of the assets of
WWMT (the "WWMT Acquisition") from Busse Broadcasting Corporation ("Busse") for 
$98,942,000 in cash (including $3,942,000 in working capital and other          
adjustments) and the assumption of certain liabilities of WWMT. On June 29,     
1995, the Company acquired WKBW through its acquisition of all of the General   
Partnership Interests of Queen City III Limited Partnership ("QCIII"), the      
ultimate parent of WKBW. Prior to the acquisition, Granite owned all of the     

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Limited Partnership Interests and the debt securities of QCIII. Granite paid    
$16,000,000 (including certain related expenses) for the General Partnership    
Interests, assumed approximately $59,000,000 of debt and received working       
capital totaling $6,760,000, of which $3,491,000 was cash or cash equivalents.  

On May 19, 1995, the Company completed the offering of $175,000,000   
principal amount of the 10 3/8% Notes. Concurrently with the closing of the     
offering of the 10 3/8% Notes, the Company amended and restated the Prior Credit
Agreement (as amended and restated the "Credit Agreement") to permit term loan  
borrowings of up to $102,000,000 plus revolving credit borrowings of up to      
$60,000,000. The proceeds of the sale of the 10 3/8% Notes, together with       
incremental borrowings under the Credit Agreement, were used to fund the        
acquisitions of WWMT and WKBW and to pay fees and expenses incurred in          
connection with the offering and the Credit Agreement.                          

 On February 22, 1996, the Company completed an offering of $110,000,000
principal amount of the Old Notes. Proceeds from the sale of the Old Notes were 
used to repay all outstanding term loan and revolving credit borrowings under   
the Credit Agreement and for general working capital purposes. As of May 31,    
1996, the Company had $55,000,000 of revolving credit borrowings available under
the Credit Agreement.                                                           

Cash flows provided by operating activities were $6,365,000 during the
three months ended March 31, 1996 compared to cash flows used in operating      
activities of $772,000 during the three months ended March 31, 1995, an increase
of $7,137,000. The increase was primarily due to an increase in broadcast cash  
flow and a decrease in net operating assets offset, in part, by higher cash     
interest expense.                                                               

  Cash flows used in investing activities were $1,444,000 during the three
months ended March 31, 1996, compared to $56,107,000 during the three months    
ended March 31, 1995. Cash flows used in investing activities during the first  
quarter of 1995 related primarily to the acquisition of KEYE while cash flows   
used in investing activities during the first quarter of 1996 were entirely     
related to capital expenditures.                                                

Cash flows used in financing activities were $661,000 during the three
months ended March 31, 1996 compared to cash flows provided by financing        
activities of $57,414,000 during the three months ended March 31, 1995. The     
decrease in 1996 resulted primarily from a net decrease in bank borrowings and  
an increase in payments for deferred financing fees partially offset by proceeds
from the sale of the Old Notes in 1996 and redemption of the Company's          
Adjustable Rate Preferred Stock in 1995.                                        

Net cash provided by operating activities totaled $8,806,000 in 1995  
compared to $5,808,000 in 1994 and $3,611,000 in 1993. The increase from 1994 to
1995 was primarily due to higher broadcast cash flow offset, in part by higher  
cash interest expense. The increase from 1993 to 1994 was due to higher         
broadcast cash flow, partially offset by an increase in net operating assets.   

    Cash flows used in investing activities were $236,343,000 in 1995 compared
to $2,628,000 in 1994 and $31,089,000 in 1993. The increase in 1995 resulted    
from the payment of the purchase price for KEYE, WWMT and WKBW and increased    
capital expenditures in connection with the expansion of KEYE's studio site. The
1994 cash flows used in investing activities were used entirely for capital     
expenditures. Included in 1993 cash flows used in investing activities was a    
cash payment of $30,000,000 for the acquisition of WTVH and KSEE.               

    Cash flows provided by financing activities during the year ended December
31, 1995 amounted to $225,685,000, compared to cash flows used in financing     
activities of $2,780,000 in 1994 and cash flows provided by financing activities
of $27,822,000 in 1993. The increase in cash provided by financing activities   
from 1994 to 1995 resulted primarily from a net increase in bank borrowings and 
the proceeds from the sale of 10 3/8% Notes, partially offset by higher deferred
financing fees and the redemption of the Company's Adjustable Rate Preferred    
Stock in 1995. The decrease in cash provided by financing activities from 1993  
to 1994 resulted from the sale of the Company's Cumulative Convertible          
Exchangeable Preferred Stock in 1993 and the payment of cash dividends          

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therein in 1994, offset, in part, by a net decrease in bank borrowings in 1993  
and a decrease in payments of deferred financing fees in 1994.                  

   The Company believes that internally generated funds from operations, and
borrowings under its revolving working capital facility, if necessary, will be  
sufficient to satisfy the Company's cash requirements for its existing          
operations for the next twelve months and for the foreseeable future thereafter.

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BUSINESS

Granite is a group broadcasting company founded in 1988 which owns and
operates nine Network-affiliated television stations. The Company's stations are
diverse in geographic location and network affiliation and reach communities    
representing approximately 5.7% of the total television households in the United
States. For the twelve months ended March 31, 1995, after giving pro forma      
effect to its recently consummated acquisitions and new network affiliation     
agreements, the Company would have had net revenue, broadcast cash flow, and    
operating cash flow of $125,353,000, $58,128,000 and $54,818,000, respectively. 

  The Company's goal is to identify and acquire properties that management
believes have the potential for substantial long-term appreciation and to       
aggressively manage such properties to improve their operating results. Since   
its inception, the Company has grown significantly, primarily as a result of a  
series of carefully selected acquisitions involving Network-affiliated          
television stations in increasingly larger markets and also as a result of the  
implementation of the Company's operating strategies. During the year ended     
December 31, 1995, Granite's net revenue, broadcast cash flow and operating cash
flow increased by 59%, 77% and 80%, respectively, from the previous year. During
the three month period ended March 31, 1996, Granite's net revenue, broadcast   
cash flow and operating cash flow increased by 74%, 82% and 91%, respectively,  
from the same period in 1995. See "Management's Discussion and Analysis of      
Financial Condition and Results of Operations."                                 

The following table sets forth general information for each of the    
Company's stations:                                                             

                                                        · Enlarge/Download Table


                                                                                    Pro Forma Year Ended     
                                                                                    December 31, 1995(a)     
                                                                                    --------------------     
                                         Year      Network    Market   Station    Net Revenue      Percentage
                              Station  Acquired  Affiliation  Rank(b)  Rank(b)   (in thousands)    of Total  
                              -------  --------  -----------  -------  -------   --------------    --------  
                                                                                                             

Duluth, Minnesota -                                                                                          
 Superior, Wisconsin.........  KBJR       1988      NBC        134       2          $  3,969         3.2%    
Peoria - Bloomington,                                                                                        
 Illinois....................  WEEK       1988      NBC        109       1            10,345         8.3     
Fort Wayne, Indiana..........  WPTA       1989      ABC        103       1            10,109         8.1     
San Jose - Monterey -                                                                                        
 Salinas, California.........  KNTV       1990      ABC        122       3            16,898        13.6     
Syracuse, New York...........  WTVH       1993      CBS         69       3            11,373         9.1     
Fresno - Visalia,                                                                                            
 California..................  KSEE       1993      NBC         56       2            12,026         9.6     
Austin, Texas................  KEYE       1995      CBS         64       2(tie)       12,861        10.3     
Grand Rapids - Kalamazoo -                                                                                   
 Battle Creek, Michigan......  WWMT       1995      CBS         38       1(tie)       19,850        15.9     
Buffalo, New York............  WKBW       1995      ABC         39       1(tie)       27,338        21.9     
                                                                                    --------       -----     
                                                                                    $124,749       100.0%    
                                                                                    ========       =====     

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

(a)  Pro forma net revenue information reflects actual 1995 net revenues of the 
   stations adjusted to reflect negotiated increases in network compensation
revenue and decreases in sales commissions paid to a national         
representative at certain stations.                                   

(b)  "Market rank" refers to the size of the television market or DMA as defined
 by Nielsen. "Station rank" represents the rank of a station in its DMA,
  based on sign-on to sign-off station audience share of such station. All
    market rank and station rank data is from the Nielsen Station Index, dated
February 1996, unless otherwise noted.                                

     A key element of the Company's strategy to improve the operating results of
its stations is expanding each station's local news franchise. Seven of         
Granite's nine stations are ranked either first or second in their respective   

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market in share of viewing audience during the total day and a majority of the  
stations are ranked either first or second in the key news dayparts and produce 
as many or more local news programs than their principal competitors. The       
Company also develops innovative sales and marketing techniques using exclusive 
in-depth audience research, mass-market community events, special local         
programming, and targeted promotional campaigns. Granite's strategy also        
involves aggressively managing station operating expenses, including staffing   
levels and programming expenditures, in order to achieve significant broadcast  
cash flow margins. For example, at stations WTVH and KSEE, acquired by the      
Company in December 1993, broadcast cash flow margins increased from 13% in 1993
to greater than 38% in 1994. For the five years ended December 31, 1995,        
Granite's broadcast cash flow margin averaged more than 40%.                    

   The Company was ranked number 9 on Black Enterprise Magazine's 1996 Black
Enterprise Industrial/Service 100 List, which ranks U.S. black-owned industrial 
and service enterprises by gross revenues. In addition, the Company was selected
by Black Enterprise Magazine as its Company of the Year for 1995. Granite's     
long-term objective is to acquire the full complement of television stations    
permitted under FCC regulations and to pursue acquisitions of other media and   
communications-related properties.                                              

Industry Background                                                             

    Commercial television broadcasting began in the United States on a regular
basis in the 1940s. Currently there are a limited number of channels available  
for broadcasting in any one geographic area and the license to operate a        
broadcast station is granted by the FCC. Television stations can be             
distinguished by the frequency on which they broadcast. Television stations that
broadcast over the very high frequency ("VHF") band of the spectrum generally   
have some competitive advantage over television stations that broadcast over the
ultra-high frequency ("UHF") band of the spectrum because the former usually    
have better signal coverage and operate at a lower transmission cost. In        
elevision markets in which all local stations are UHF stations, such as Fort    
Wayne, Indiana, Peoria-Bloomington, Illinois and Fresno-Visalia, California, no 
competitive disadvantage exists.                                                

    Television station revenues are primarily derived from local, regional and
national advertising and, to a lesser extent, from network compensation and     
revenues from studio rental and commercial production activities. Advertising   
rates are based upon a program's popularity among the viewers an advertiser     
wishes to attract, the number of advertisers competing for the available time,  
the size and demographic make-up of the market served by the station and the    
availability of alternative advertising media in the market area. Since         
broadcast television stations rely on advertising revenues, declines in         
advertising budgets, particularly in recessionary periods, adversely affect the 
broadcast industry, and as a result may contribute to a decrease in the         
valuation of broadcast properties.                                              

    Whether a station is affiliated with one of the Networks, NBC, ABC, CBS or
Fox, has a significant impact on the composition of the station's revenues,     
expenses and operations. A typical Network-affiliate receives a significant     
portion of its programming each day from the Network. This programming, along   
with cash payments, is provided to the affiliate by the Network in exchange for 
a substantial majority of the advertising inventory during Network programs. The
Network then sells this advertising time and retains the revenues so generated. 

   In contrast, a fully independent station purchases or produces all of the
programming that it broadcasts, resulting in generally higher programming costs,
although the independent station is, in theory, able to retain its entire       
inventory of advertising and all of the revenue obtained therefrom. However,    
barter and cash-plus-barter arrangements are becoming increasingly popular.     
Under such arrangements, a national program distributor typically retains up to 
50% of the available advertising time for programming it supplies in exchange   
for reduced fees for such programming.                                          

     In May 1994, New World Communications Group, Inc. announced plans to switch
affiliation of the twelve stations it owned or planned to acquire to Fox and to 
terminate existing ABC, CBS or NBC affiliation agreements. The announcement     
triggered a number of transfers, renegotiations and cancellations of affiliation
agreements in the                                                               

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broadcasting industry. Due in part to these events certain Network-affiliated   
stations have been able to negotiate affiliation agreements with longer         
durations and/or more favorable terms for the affiliate. In this environment, in
1995 the Company negotiated long-term affiliation agreements for its stations   
which the Company expects will provide aggregate additional annual revenues of  
approximately $3,300,000 in cash to the Company's stations.                     

Through the 1970s, television broadcasting in general enjoyed virtual 
dominance in viewership and television advertising revenue because              
Network-affiliated stations competed only with each other in local markets. FCC 
regulation of the broadcast industry evolved to address this environment of only
three commercial broadcast networks, with the focus on encouraging increased    
competition and diversity of viewpoints and programming in the television       
broadcasting industry. Such rules prohibit the common ownership of a television 
station and either an AM or an FM radio station in the same geographic market.  
The Telecommunications Act of 1996 directs the FCC to relax, eliminate or       
consider modifying certain rules regarding the multiple and cross-ownership of  
broadcast stations and other media on a national and local level. Pursuant to   
this directive, the FCC has revised its rules to eliminate the limit on the     
number of television stations that an individual or entity may own or control   
nationally, provided that the audience reach of all television stations owned   
does not exceed 35% of all U.S. households. The FCC also has revised or will    
consider revising in pending or future rulemaking proceedings its other multiple
and cross-ownership rules. See "--FCC Licenses."                                

     Cable television systems were first installed in significant numbers in the
early 1970s and were initially used to retransmit broadcast television          
programming to paid subscribers in areas with poor broadcast signal reception.  
In contrast to broadcast television stations, the primary source of revenues for
cable systems is subscriber fees. As the technology of satellite program        
delivery to cable systems advanced in the late 1970s, development of programming
for cable accelerated dramatically. The emergence of multiple, national-scale   
program alternatives, in turn, fueled the rapid expansion of cable television   
and produced high subscriber growth rates. According to information provided by 
The National Cable Television Association, cable television was available to 97%
of U.S. households as of August 1995, with 65% of all households subscribing.   
Aggregate cable-originated programming has emerged as a significant competitor  
for viewers of broadcast television programming, although no single cable       
programming network regularly attains audience levels amounting to more than a  
small fraction of any single major broadcast Network. According to Nielsen Media
Research, as of November 1995, 62% of all cable household prime time viewing    
(from 8:00 p.m.-11:00 p.m. Monday through Saturday and 7:00 p.m.-11:00 p.m.     
Sunday, Eastern Time) was spent watching broadcast television programming.      

    Other developments have also affected television programming and delivery.
Independent stations, whose number has increased significantly over the past ten
years, have emerged as viable competitors for television viewership share and   
have stimulated the development of new television networks, two of which, United
Paramount Network and WB Network, were launched in early 1995. In addition,     
there has been substantial growth in the number of home satellite dish          
receivers, direct broadcast satellite receivers, VCRs and other video delivery  
systems, which has further expanded the number of programming alternatives for  
household audiences.                                                            

Further advances in technology may increase competition for household 
audiences and advertisers. Video compression techniques, now in development, are
expected to reduce the bandwidth required for television signal transmission.   
These compression techniques, as well as other technological developments, are  
applicable to all video delivery systems and have the potential to provide      
vastly expanded programming to highly targeted audiences. 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 defined audiences is expected to alter  
the competitive dynamics for advertising expenditures. See "-- Competition."    

Acquisition and Operating Strategy                                              

   The Company has grown through a series of carefully selected acquisitions
of Network-affiliated television stations in increasingly larger markets. The   
Company's objective is to acquire and operate the full complement of            

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television stations which it is permitted to own under FCC regulations. The     
Company will pursue the acquisition of other media and communications related   
properties consistent with its effort to be the leading provider of local news, 
weather and sports in each of its markets.                                      

The Company believes that television stations with leading local news 
franchises have the potential for long-term growth and value appreciation as    
electronic media becomes an increasingly more important source of news and      
information relative to newspapers. Furthermore, the Company believes that      
Network-affiliated stations, given their mix of local news and general interest 
programming, have the ability to deliver large audiences to local and national  
advertisers, which represents a competitive advantage relative to other         
advertising media, particularly cable programming services. The ability to      
attract large audiences and considerable advertising support enable well managed
Network-affiliated stations to perpetuate production and acquisition of quality 
programming. The Company believes that the small size of cable's fractionalized 
audiences may render it difficult to generate quality programming for them,     
either through subscriber fees or advertiser support.                           

The Company has focused on acquiring broadcast properties in carefully
selected markets with attractive demographic, socio-economic and other          
characteristics. In addition, the Company focuses on markets in which it        
believes there is an opportunity to improve market share, due to factors such as
competitive environment, Network affiliation, signal frequency and local        
management expertise. The Company believes that in such markets an opportunity  
exists for local broadcasters to attract large audience shares and thus compete 
successfully for advertising revenues with alternatives such as newspapers,     
radio and cable television operators in these markets.                          

 Key elements of the Company's acquisition and operating strategies are:

Local News Leadership                                                       

The Company seeks to acquire television stations that are, or have the
potential to become, local news leaders. Based on its operating experience, the 
Company believes that local news audiences are highly desirable to local and    
national advertisers. The Company believes that the revenue associated with     
local news leadership is particularly significant in light of the declining     
circulation of local newspapers. Local newspapers compete with television       
stations for, and currently obtain by far the largest share of, local and       
regional advertisement revenue. As reported by Zenith Media, a division of      
Cordiant PLC, the year ended December 31, 1994 was the first year in history in 
which the total television advertising revenues in the United States surpassed  
that of newspapers.                                                             

The Company's strength in local or market-specific information is the 
foundation of the Company's strategy to build significant audience share. In    
each of its markets, the Company develops additional information-oriented       
programming designed to expand the Company's hours of commercially valuable     
local news and other programming with relatively small incremental increases in 
operating expenses. Local news programming is commercially valuable because of  
its high viewership level, the attractiveness of the typical news audience to   
advertisers (allowing stations to charge higher rates for advertising time) and 
the effects of viewership habits both after each news telecast and through out  
the broadcast day.                                                              

Local Market Advertising                                                    

 At all of its stations the Company emphasizes its position as a leading
news franchise to attract advertisers interested in broad market coverage. The  
Company believes that its approach allows it to compete for local advertising,  
in particular that segment currently served by local newspapers which obtain by 
far the largest share of local and regional advertising revenue. According to   
1994 McCann-Erickson data, local newspapers in the United States generated in   
1994 almost $30.5 billion in local and regional advertising revenue despite a   
long-term trend of declining paid circulation, as compared to approximately $9.2
billion in local and regional expenditures on television stations.              

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Innovative Sales and Marketing                                                  

     Granite's sales and marketing efforts involve the continuous development of
promotional campaigns designed to drive traffic into advertisers' stores and    
provide sponsorship opportunities for traditional and non-traditional           
advertisers. Sponsored events have included children's festivals, parades and   
athletic events that enable advertisers, who are given the opportunity to       
participate in such events, an opportunity to direct a marketing program at a   
targeted audience. These additional products have proven successful in          
generating high margin advertising revenues.                                    

Long-Term Diversification                                                   

  The Company's stations are located throughout the United States in areas
with wide-ranging socio-economic compositions. The Company has three stations   
affiliated with each of ABC, CBS and NBC. In addition, for the year ended       
December 31, 1995, after giving pro forma effect to the acquisitions of KEYE,   
WKBW and WWMT, the new network affiliation agreements and decreases in sales    
commissions, no individual station would have accounted for greater than 22% of 
the Company's net revenue, broadcast cash flow or operating cash flow. The      
Company believes that such diversification assists it in achieving its objective
of consistently strong operating results. In addition, although the Company's   
primary focus is presently on the acquisition of broadcast television stations, 
in the long term the Company also intends to pursue the acquisition of other    
media and communications-related properties consistent with the Company's focus 
on local news and programming and the development of complementary media        
outlets.                                                                        

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Station Summary                                                                 

The following table sets forth general information for each of the    
Company's stations:                                                   

                                                        · Enlarge/Download Table

                                                                           Other                                       
                                                                         Commercial  Station                           
                             Date of    Channel/     Network    Market    Stations   Audience  Station  Expiration Date
   Station    Market Area  Acquisition  Frequency  Affiliation  Rank(a)    in DMA    Share(a)  Rank(a)  of FCC License 
   -------    -----------  -----------  ---------  -----------  -------    ------    --------  -------  -------------- 
                                                                                                                       
KBJR-TV     Duluth, MN-                                                                                                
            Superior, WI     10/31/88     6/VHF        NBC        134         2         20        2        12/01/97    

WEEK-TV     Peoria-                                                                                                    
            Bloomington,                                                                                               
            IL               10/31/88   25/UHF(b)      NBC        109         3         22        1        12/01/97    

WPTA-TV     Fort Wayne, IN   12/11/89   21/UHF(b)      ABC        103         3         23        1        08/01/97    

KNTV(TV)    San Jose-                                                                                                  
            Monterey-                                                                                                  
            Salinas, CA(c)   02/05/90    11/VHF        ABC        122         5(d)       9        3        12/01/98    

WTVH-TV     Syracuse, NY     12/23/93     5/VHF        CBS         69         4         17        3        06/01/99    

KSEE-TV     Fresno-                                                                                                    
            Visalia, CA      12/23/93   24/UHF(b)      NBC         56         8(e)      17        2        12/01/98    

KEYE-TV     Austin, TX       02/01/95    42/UHF        CBS         64         5         15     2(tie)      08/01/98    

WWMT-TV     Grand Rapids-                                                                                              
            Kalamazoo-                                                                                                 
            Battle Creek, MI 06/01/95     3/VHF        CBS         38         6         19     1(tie)      10/01/97    

WKBW-TV     Buffalo, NY      06/29/95     7/VHF        ABC         39         3         20     1(tie)      06/01/99    

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

(a)  "Market rank" refers to the size of the television market or DMA as defined
   by Nielsen. "Station audience share" represents the average percentage of
    households watching a particular station in any given 15 or 30 minute time
period from sign-on to sign-off of all households in that DMA watching
     television at that time. "Station rank" represents the rank of a station in
its DMA, based on sign-on to sign-off station audience share of such  
station. All market rank, station audience share and station rank data
  related to a DMA is from the Nielsen Station Index, dated February 1996,
unless otherwise noted.                                               

(b)  All television stations in the Fort Wayne, Indiana, Peoria-Bloomington,    
Illinois and Fresno-Visalia, California television markets are UHF    
stations.                                                             

(c)  All market rank, station audience share and station rank data is for the   
    Salinas-Monterey television market and does not reflect KNTV's audience in
the adjacent market of San Jose.                                      

(d)  Includes KSMS, Salinas-Monterey and KCU, Salinas, both of which broadcast  
entirely in Spanish.                                                  

(e)  Includes KFTV Hanford-Fresno and KMSG, Sanger-Fresno, both of which        
broadcast entirely in Spanish.                                        

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Set forth below are the principal types of television gross revenues  
(before agency and representative commissions) received by the Company's        
television stations for the periods indicated and the percentage contribution of
each to the gross television revenues of the television stations owned by the   
Company.                                                                        

GROSS REVENUES, BY CATEGORY,
FOR THE COMPANY'S STATIONS
(dollars in thousands)

                                                        · Enlarge/Download Table


                                                             Year ended December 31,                                  
                           -------------------------------------------------------------------------------------------
                                 1991               1992              1993              1994                1995      
                           ---------------    ---------------   ----------------   ----------------   ----------------
                           Amount      %      Amount      %      Amount      %      Amount      %      Amount      %  
                          --------  -----    --------  -----    --------  -----    --------  -----    --------  ----- 
                                                                                                                      

Local/Regional(a) ....... $ 21,818   54.6%   $ 23,088   53.5%   $ 25,416   56.3%   $ 38,802   50.9%   $ 60,969   51.0%
National(b) .............   14,638   36.6      15,367   35.6      16,290   36.1      28,548   37.5      48,995   41.0 
Network Compensation(c) .    1,654    4.1       1,427    3.3       1,286    2.8       2,244    2.9       4,154    3.5 
Political(d) ............       73    0.2       1,246    2.9         133    0.3       4,060    5.3       1,498    1.3 
Other Revenue(e) ........    1,803    4.5       2,023    4.7       2,041    4.5       2,559    3.4       3,849    3.2 
                          --------  -----    --------  -----    --------  -----    --------  -----    --------  ----- 
    Total ............... $ 39,986  100.0%   $ 43,151  100.0%   $ 45,166  100.0%   $ 76,213  100.0%   $119,465  100.0%
                          ========  =====    ========  =====    ========  =====    ========  =====    ========  ===== 


                                                                · Download Table


                                             Three Months Ended March 31,      
                                            1995                      1996     
                                       -----------------     ------------------
                                       Amount       %          Amount      %   
                                       -------    -----       -------    ----- 
                                                                               
Local/Regional(a) ..................   $10,498     53.3%      $16,155     47.0%
National(b) ........................     7,967     40.4        14,243     41.5 
Network Compensation(c) ............       559      2.8         1,859      5.4 
Political(d) .......................         2     --             889      2.6 
Other Revenue(e) ...................       688      3.5         1,205      3.5 
                                       -------    -----       -------    ----- 
    Total ..........................   $19,714    100.0%      $34,351    100.0%
                                       =======     ====       =======     ==== 


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

(a)  Represents sale of advertising time to local and regional advertisers or   
agencies representing such advertisers and other local sources.       

(b)  Represents sale of advertising time to agencies representing national      
advertisers.                                                          

(c)  Represents payment by networks for broadcasting network programming.       

(d)  Represents sale of advertising time to political advertisers.              

(e)  Represents miscellaneous revenue, including payment for production of      
commercials.                                                          

   Automobile advertising constitutes the Company's single largest source of
gross revenues, accounting for approximately 23% of the Company's total gross   
revenues in 1995. Gross revenues from restaurants and entertainment-related     
businesses each accounted for approximately 8% of the Company's total gross     
revenues in 1995. Each other category of advertising revenue represented less   
than 5% of the Company's total gross revenues.                                  

Stations Overview                                                               

KNTV: San Jose, California                                                  

KNTV-TV ("KNTV") is distinguished by its status as the only           
Network-affiliated station and only VHF station licensed to serve San Jose,     
California, the largest city in Northern California and the eleventh largest    
city                                                                            

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in the United States. Its VHF signal is broadcast on Channel 11 and covers all  
of Santa Clara County, which includes an area that has come to be known as      
"Silicon Valley." Although the Nielsen rating service designates KNTV as the ABC
affiliate for the Monterey-Salinas market (which is southwest of and adjacent to
San Jose), according to the February 1996 Nielsen Monterey/Salinas Viewers In   
Profile Report, 62% of the station's audience resides in the San                
Francisco-Oakland-San Jose television market (the fifth largest DMA in the      
country). The Company believes that substantially all of such audience resides  
in Santa Clara County. As a result, KNTV provides a unique opportunity for local
and national advertisers to target a media campaign to this highly affluent     
county. If Santa Clara County were a separate DMA with its 522,980 television   
households, it would rank as the 52nd largest DMA in the United States.         

 KNTV has formally operated as The San Jose News Channel since mid-1987.
KNTV's local newscasts compete very effectively against stations licensed to    
serve San Francisco for Santa Clara County local news audiences. According to   
February 1996 ratings data, more adults in Santa Clara County aged 18-49, one of
the most popular demographic targets for advertisers, viewed KNTV's popular 5:00
p.m. weekday newscast than any other Network-affiliate serving the San          
Francisco-Oakland-San Jose market. In April 1995, all of the station's local    
newscasts were redesigned and the 11:00 p.m. newscast was reformatted as "Eleven
at 11" to deliver complete news and weather in the first 11 minutes of the      
program without a commercial break. Since 1985, the station has won 43 awards   
from The Associated Press, the Radio Television News Directors Association and  
the California Teachers Association for its news broadcasts, 28 of which were   
won under the Company's management. The Associated Press named KNTV's 6:00 p.m. 
newscast the "Best Major Market 30 Minute Newscast" in California and Nevada for
1993. KNTV's inventory of syndicated programming includes, among others, "Home  
Improvement," "Star Trek: The Next Generation," "Extra," "Inside Edition," and  
"Cheers."                                                                       

     Santa Clara County has a diverse and affluent economy. The median income by
household was $54,778 according to the 1995 Demographics USA Report. The area is
home to over 2,800 technological companies as well as numerous institutions and 
companies of national reputation. Prominent corporations located in Santa Clara 
County include Hewlett-Packard, Lockheed/Martin, IBM, Apple, Intel, Sun         
Microsystems, Amdahl, Tandem Computers, National Semiconductor, Syntex, Conner  
Peripherals, Varian Associates and Chips & Technologies. Santa Clara County is  
also the home of several universities including Stanford University, San Jose   
State University and Santa Clara University with enrollments aggregating        
approximately 51,000 students.                                                  

WTVH: Syracuse, New York                                                    

WTVH, acquired from Meredith Corporation on December 23, 1993, began  
operations in 1948 and is affiliated with CBS. WTVH estimates it receives       
approximately 28% of the total television advertising revenue available to      
stations in the Syracuse market, as determined by an independent accounting     
firm, based upon the most recent available data (1995) submitted to it by local 
stations. WTVH has won over 40 awards, including 15 from The Associated Press,  
for its news coverage since 1988. WTVH's inventory of syndicated programming    
includes, among others, "Inside Edition," "Extra," "Cheers," "American Journal" 
and "Montel Williams."                                                          

The Syracuse economy is centered on manufacturing, education and      
government. The average income by household in the DMA was $43,036 as of January
1, 1995, according to estimates provided in the BIA Investing in Television 1996
Market Report (the "BIA Report"). Prominent corporations located in the area    
include Carrier Corporation, New Venture Gear, Bristol-Myers Squibb,            
Crouse-Hinds, Nestle Foods and Lockheed/Martin. The Syracuse DMA is also the    
home of several universities, including Syracuse University, Cornell University 
and Colgate University, with enrollments aggregating over 50,000 students.      

KSEE: Fresno-Visalia, California                                            

KSEE, acquired from Meredith Corporation on December 23, 1993, began  
operations in 1953 and is affiliated with NBC. KSEE estimates it receives       
approximately 24% of the total television advertising revenue                   

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available to stations in the Fresno-Visalia market as determined by an          
independent accounting firm based upon the most recent available data (1995)    
submitted to it by local stations. According to February 1996 ratings           
information, KSEE had a 17% sign-on to sign-off audience share and a 24% share  
of those households viewing local stations. KSEE has won over 35 awards,        
including 16 from The Associated Press, for its news coverage since 1988. On May
8, 1995, KSEE was presented with the 1994 Peabody Award, one of the most        
prestigious awards in broadcast journalism, for an investigative report. KSEE's 
inventory of syndicated programming includes, among others, "Inside Edition,"   
"Extra," "Regis and Kathie Lee," "American Journal," "Jenny Jones," "Ricki Lake"
and "Seinfeld."                                                                 

Fresno and the San Joaquin Valley are one of the most productive      
agricultural areas in the world with over 6,000 square miles planted with more  
than 250 different crops. Although farming continues to be the single most      
important part of the Fresno area economy, the area now attracts a variety of   
service-based industries and manufacturing and industrial operations. No single 
employer or industry dominates the local economy. The average income by         
household in the DMA was $38,732 as of January 1, 1995, according to estimates  
provided in the BIA Report. The Fresno-Visalia DMA is also the home of several  
universities, including Fresno State University, with enrollment estimated at   
40,000.                                                                         

WPTA: Fort Wayne, Indiana                                                   

WPTA-TV ("WPTA") began operations in 1957 and is affiliated with ABC. 
Through the February 1996 ratings period, WPTA was ranked number one in the Fort
Wayne television market in sign-on to sign-off audience share for the past six  
years and in news audience share for the past seven years. Based upon February  
1996 ratings information, WPTA ranked first in its DMA with a 23% overall       
sign-on to sign-off audience share and a 34% share of those households viewing  
local stations. WPTA has won over 55 awards, including 19 awards from The       
Associated Press, for its news coverage since 1984, 15 of which were won under  
the Company's management. WPTA's inventory of syndicated programming includes,  
among others, "The Oprah Winfrey Show," "Home Improvement," "Entertainment      
Tonight," "Cheers" and "Coach."                                                 

     The Fort Wayne economy is centered on manufacturing, government, insurance,
financial services and education. The average income by household in the DMA was
$42,368 as of January 1, 1995, according to estimates provided in the BIA       
Report. Prominent corporations located in the area include Magnavox, Lincoln    
National Life Insurance, General Electric, General Motors, North American Van   
Lines, GTE, Dana, Phelps Dodge, ITT and Tokheim. The Fort Wayne DMA is also the 
home of several universities including the joint campus of Indiana University   
and Purdue University at Fort Wayne, with enrollments aggregating over 11,000   
students.                                                                       

WEEK: Peoria-Bloomington, Illinois                                          

   WEEK-TV ("WEEK") began operations in 1953 and is affiliated with NBC. The
station has been the number one station in sign-on to sign-off audience share in
the Peoria-Bloomington market for the past 15 years. WEEK estimates it receives 
38% of the total television advertising revenue available to stations in the    
Peoria-Bloomington market, as determined by an independent accounting firm,     
based upon the most recent available data (1995) submitted to it by local       
stations.                                                                       

     According to February 1996 ratings information, WEEK commands a 22% sign-on
to sign-off audience share and a 38% share of those households viewing local    
stations. WEEK has been the number one news station in the Peoria-Bloomington   
market for the past 15 years (based upon the 10:00-10:30 p.m. news broadcast    
period) and since 1985 has won over 18 awards from The Associated Press, United 
Press International and the Illinois Valley Press Club for its news broadcasts, 
eight of which were won under the Company's management. In addition, in 1994,   
WEEK received the Illinois Broadcasters Association "Station of the Year" Award 
for the third consecutive year. The award is presented annually to the          
television station accumulating the greatest number of recipients of and        
finalists for the Illinois statewide "Silver Dome" Awards for Excellence. These 
awards cover various                                                            

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categories, including news, weather programming and special events. Recipients  
are selected from among all stations in Illinois outside Chicago. WEEK's        
inventory of syndicated programming includes, among others, "The Oprah Winfrey  
Show," "Sally Jessy Raphael" and "Seinfeld."                                    

The Peoria economy is centered on agriculture and heavy equipment     
manufacturing but has achieved diversification with the growth of service-based 
industries such as conventions, health care and higher technology manufacturing.
Prominent corporations located in Peoria include Caterpillar, Bemis, Central    
Illinois Light Company, Commonwealth Edison Company, Komatsu-Dresser Industries,
IBM, Trans-Technology Electronics and Keystone Steel & Wire. In addition, the   
United States Department of Agriculture's second largest research facility is   
located in Peoria, and the area has become a major regional health care center. 
The economy of Bloomington, on the other hand, is focused on insurance,         
education, agriculture and manufacturing. Prominent corporations located in     
Bloomington include State Farm Insurance Company, Country Companies Insurance   
Company and Diamond-Star Motors Corporation (a subsidiary of Mitsubishi). The   
average income by household in the DMA was $44,705 as of January 1, 1995,       
according to estimates provided in the BIA Report. The Peoria-Bloomington area  
is also the home of numerous institutions of higher education including Bradley 
University, Illinois Central College, Illinois Wesleyan University, Illinois    
State University, Eureka College and the University of Illinois College of      
Medicine, with enrollments aggregating over 38,000 students.                    

KBJR: Duluth, Minnesota and Superior, Wisconsin                             

KBJR-TV ("KBJR") began operations in 1954 and is affiliated with NBC. 
According to February 1996 ratings information, KBJR delivered a 20% sign-on to 
sign-off audience share and a 35% share of those households viewing local       
stations. KBJR was awarded "Best Newscast" by The Associated Press in 1994, 1995
and 1996 and was named "Station of Excellence" by the Radio and Television News 
Directors Association in a six-state regional competition in 1994. KBJR         
estimates that it receives 35% of the total television advertising revenue      
available to stations in the Duluth-Superior market, based upon the most recent 
available data (1994) from the National Association of Broadcasters. KBJR's     
inventory of syndicated programming includes, among others, "The Oprah Winfrey  
Show," "Jeopardy," "Wheel of Fortune," "Roseanne," "Coach," "M*A*S*H" and the   
complete "Star Trek" franchise.                                                 

The area's primary industries include mining, fishing, food products, 
paper, medical, shipping, tourism and timber. The average income by household in
the DMA was $34,860 as of January 1, 1995, according to estimates provided in   
the BIA Report. Duluth is one of the major ports in the United States out of    
which iron ore, coal, limestone, cement, grain, paper and chemicals are shipped.
Northwest Airlines has begun construction of airplane maintenance facilities in 
the Duluth area that are expected to add approximately 1,000 jobs to the Duluth 
area's economy by the end of 1996. Prominent corporations located in the area   
include Minnesota Power, U.S. West, Mesabi & Iron Range Railway Co., Walmart,   
Jeno Paulucci International, Lake Superior Industries, Potlatch Corporation,    
Boise Cascade, Burlington Northern Railway, Target (Dayton-Hudson Corporation), 
ConAgra, International Multifoods, Peavey, Cargill, U.S. Steel, Cleveland-Cliffs
Corporation, NorWest Bank, Shopko, Cub Foods and Advanstar. The Duluth-Superior 
DMA is also the home of numerous educational institutions such as the University
of Minnesota-Duluth, the University of Wisconsin-Superior and the College of St.
Scholastica, with enrollments aggregating over 12,000 students.                 

KEYE: Austin, Texas                                                         

     KEYE, acquired from Austin Television on February 1, 1995, began operations
in 1983. The station, formerly a Fox affiliate, became a CBS affiliate on July  
2, 1995.                                                                        

   Based on February 1996 ratings information, KEYE ranked second in its DMA
with a 15% sign-on to sign-off share. During 1995, the station began a news     
operation with the launch of news at 5:30 a.m., 12:00                           

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p.m., 5:00 p.m., 6:00 p.m. and 10:00 p.m. KEYE's inventory of syndicated        
programming includes "Ricki Lake," "Jenny Jones" and "Home Improvement."        

     The Austin economy benefits from having large private sector employers such
as IBM, Motorola, HEB Stores, Advanced Micro Devices, Abbott Laboratories, Texas
Instruments, Dell Computers, 3M Corporation, Applied Materials and SEMATECH.    
Approximately 825 high tech firms employ nearly 85,000 people in the area. This 
fact, plus the terrain of the region's Hill Country, have resulted in the Austin
area being nicknamed "Silicon Hills." Since Austin, the nation's 23rd largest   
city, is the state capital, as well as home to the University of Texas, a       
substantial amount of public sector employment opportunities are also provided. 
The average income per household in the DMA was $43,351 as of January 1, 1995,  
according to estimates provided in the BIA Report. Since 1990, employment has   
grown approximately 27%, resulting in Chamber of Commerce unemployment          
projections of 3.7% for 1996. This vitality helped retail sales increase at a   
rate of more than 9% per year during the past five years, with 13.5% growth in  
1994 alone. In addition to the University of Texas, Southwestern University,    
Saint Edwards University and Southwest Texas University are located in the DMA. 
Total university enrollment in the DMA is approximately 100,000 students.       

WWMT: Grand Rapids - Kalamazoo - Battle Creek, Michigan                     

   WWMT began operations in 1950 and is affiliated with CBS. The station has
been the number one station in sign-on to sign-off audience share in the Grand  
Rapids - Kalamazoo - Battle Creek DMA for the past two years. WWMT estimates it 
receives approximately 28% of the total television advertising revenue available
to stations in the Grand Rapids - Kalamazoo - Battle Creek market, based on the 
most recent available data from the local business area reports.                

    Based upon February 1996 ratings information, WWMT ranked first in its DMA
with a 19% sign-on to sign-off share. WWMT has won numerous awards for its local
newscasts and in 1994 was voted "Best Newscast" by the Michigan Broadcasters    
Association for the third consecutive year. Also in 1994, The Associated Press  
recognized the station for "Best Newscast" and "Overall Excellence" in state    
competition.                                                                    

WWMT is distinguished by the fact that it operates four news bureaus  
located in the major population centers of the market. During 1994, the station 
expanded its news operation with the launch of News 3 at 5:30 p.m. and WWMT is  
the only station in the market providing local newscasts on weekend mornings and
middays. WWMT's inventory of syndicated programming includes "The Oprah Winfrey 
Show", "Wheel of Fortune", "Jeopardy", "American Journal", and "Sally Jessy     
Raphael."                                                                       

The Grand Rapids - Kalamazoo - Battle Creek economy is centered around
manufacturing, health services, education and financial services. The average   
household income in the DMA was $44,818 as of January 1, 1995, according to     
estimates provided in the BIA Report. Leading employers in the area include The 
UpJohn Company, Bronson Medical Center, Borgess Medical Center, Butterworth     
Hospital, St. Mary's Health Services, Steel Case, Inc., Amway Corporation,      
Meijer, Inc., James River Corporation, General Motors Corporation and The       
Kellogg Company.                                                                

WKBW: Buffalo, New York                                                     

  WKBW began operations in 1958 and is affiliated with ABC. The station is
distinguished by its status as one of the top ten ranked ABC affiliates in the  
country. The Company believes that WKBW has been the number one station in      
sign-on to sign-off audience share in the Buffalo DMA for over twenty years.    
Based on data shared among stations in the DMA, WKBW estimates it receives      
approximately 34% of the total television advertising revenues available to     
stations in the Buffalo market, based on the most recent available data (1995). 

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    Based upon February 1996 ratings information, WKBW ranked first in its DMA
with a 20% sign-on to sign-off share. WKBW has won numerous awards for its      
newscasts on both a national and state-wide basis. WKBW's inventory of          
syndicated programming includes "Ricki Lake," "Wheel of Fortune," "Jeopardy,"   
"Montel Williams" and "Coach."                                                  

  The Buffalo economy is centered around manufacturing, government, health
services and financial services. The average household income in the DMA was    
$39,726 as of January 1, 1995, according to estimates provided in the BIA       
Report. Leading employers in the area include General Motors, Ford Motor        
Company, American Axle and Manufacturing, M&T Bank, Fleet Bank, Roswell Park    
Cancer Institute, Buffalo General Hospital, NYNEX, Tops Markets and DuPont.     

Network Affiliation                                                             

    Each of the Company's stations is affiliated with a Network pursuant to an
affiliation agreement. KSEE, WEEK and KBJR are affiliated with NBC, KNTV, WPTA  
and WKBW are affiliated with ABC, and KEYE, WTVH and WWMT are affiliated with   
CBS. Pursuant to a recently executed affiliation agreement between the Company  
and CBS, KEYE became a CBS affiliate on July 2, 1995. Granite has also entered  
into new affiliation agreements with CBS for WWMT and WTVH, that became         
effective on January 1, 1996, and has entered into new affiliation agreements   
with NBC for each of its NBC-affiliated stations, that became effective in April
1, 1995. In addition, the Company entered into a new affiliation agreement with 
ABC for WKBW that, as amended, became effective June 30, 1995 and new agreements
with ABC for KNTV and WPTA that became effective January 1, 1996. The new       
affiliation agreements provide for contract terms of ten years (other than the  
NBC agreements for which the terms are seven years) and are expected to result  
in increased annual network compensation of approximately $3,300,000 in cash, in
the aggregate, to the stations.                                                 

Under each of the Company's affiliation agreements the Networks may   
increase or decrease network compensation and, under certain circumstances,     
terminate the agreement upon advance written notice. Under the Company's        
ownership, none of its stations has received a termination notice from its      
respective Network.                                                             

 In substance, each affiliation agreement provides the stations with the
right to broadcast all programs transmitted by the Network with which it is     
affiliated. In exchange, the Network has the right to sell a substantial        
majority of the advertising time during such broadcast. In addition, for every  
hour that the station elects to broadcast Network programming, the Network pays 
the station a fee, specified in each affiliation agreement, which varies with   
the time of day. Typically, "prime-time" programming (Monday through Saturday   
from 8-11 p.m. and Sunday from 7-11 p.m. Eastern Time) generates the highest    
hourly rates. Rates are subject to increase or decrease by the Network during   
the term of each affiliation agreement, with provisions for advance notice to   
and right of termination by the station in the event of a reduction in rates.   

Competition                                                                     

    The financial success of the Company's television stations is dependent on
audience ratings and revenues from advertisers within each station's geographic 
market. The Company's stations compete for revenues with other television       
stations in their respective markets, as well as with other advertising media,  
such as newspapers, radio, magazines, outdoor advertising, transit advertising, 
yellow page directories, direct mail and local cable systems. Some competitors  
are part of larger companies with substantially greater financial resources than
the Company.                                                                    

 Competition in the broadcasting industry occurs primarily in individual
markets. Generally, a television broadcasting station in one market does not    
compete with stations in other market areas. The Company's stations are located 
in highly competitive markets.                                                  

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  Factors that are material to a television station's competitive position
include management experience, signal coverage, local program acceptance,       
Network affiliation, audience characteristics, assigned frequency and strength  
of local competition. In addition to the competition the Company faces from     
television stations in its market and other advertising supported media, leisure
time activities, such as sporting events, concerts and live theater, also       
compete for a television viewer's leisure time.                                 

    Conventional commercial television broadcasters also face competition from
other programming, entertainment and video distribution systems, the most common
of which is cable television. These other programming, entertainment and video  
distribution systems can increase competition for a broadcasting station by     
bringing into its market distant broadcasting signals not otherwise available to
the station's audience and also serving as distribution systems for             
non-broadcast programming. Programming is now being distributed to cable        
television systems by both terrestrial microwave systems and by satellite. Other
sources of competition include home entertainment systems (including video      
cassette recorder and playback systems, video discs and television game         
devices), multi-point distribution systems and multichannel multi-point         
distribution systems and other video delivery systems. The Company's television 
stations also face competition from direct broadcast satellite services which   
transmit programming directly to homes equipped with special receiving antennas 
and competition from video signals delivered over telephone lines.              

   The broadcasting industry is continuously faced with technological change
and innovation, which could possibly have a material adverse effect on the      
Company's operations and results. Commercial television broadcasting may face   
future competition from interactive video and data services that may provide    
two-way interaction with commercial video programming, along with information   
and data services that may be delivered by commercial television stations, cable
television, direct broadcast satellites, multi-point distribution systems,      
multichannel multi-point distribution systems or other video delivery systems.  
In addition, recent actions by the FCC, Congress and the courts all presage     
significant future involvement in the provision of video services by telephone  
companies. The Telecommunications Act of 1996 lifts the prohibition on the      
provision of cable television services by telephone companies in their telephone
areas subject to regulatory safeguards and permits telephone companies to own   
cable systems under certain circumstances. Various federal courts have held that
the prior statutory ban on the provision of video programming directly to       
subscribers by a telephone company in its telephone service area is             
unconstitutionally broad. After agreeing to review these decisions, the Supreme 
Court remanded the cases to the lower appellate courts to determine whether the 
challenge to the constitutionality of the restriction on video programming      
delivery by telephone companies has been rendered moot by the Telecommunications
Act of 1996. It is not possible to predict the impact of any future relaxation  
or elimination of the statutory ban on the Company's television stations. The   
elimination or further relaxation of the restriction, however, could increase   
the competition the Company's television stations face from other distributors  
of video programming.                                                           

Rating Services Data                                                            

     All television audience share and aggregate television audience information
contained in this Prospectus are based upon data compiled from surveys conducted
by Nielsen, a national audience measuring service. All television stations in   
the United States are grouped by Nielsen into approximately 211 generally       
recognized non-overlapping television markets, called designated market areas,  
that are ranked in size according to various formulae based upon actual or      
potential audience. A DMA generally consists of counties in which commercial    
television stations located in the same general vicinity achieve the largest    
audience share. Nielsen periodically publishes data on estimated audiences for  
the television stations in the various television markets throughout the United 
States. The estimates are expressed in terms of the percentage of the total     
potential audience in the market viewing a station and of the percentage of the 
audience actually watching television. Nielsen provides such data on the basis  
of total television households and selected demographic groupings in the market.
Nielsen uses two methods of determining a station's ability to attract viewers. 
In larger geographic markets, ratings are determined by meters connected        
directly to selected television sets, while in smaller markets weekly diaries of
television viewing are completed by selected households. Advertising rates      
charged by a television station are based in large part on                      

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the number of households tuned to a particular station during a particular time 
period, the demographic characteristics of those households, and whether the    
station is a leading station in its geographic market area.                     

Except as otherwise indicated herein, all current television ratings  
information contained in the Prospectus is based upon data compiled from the    
February 1996 Nielsen survey. Historical ratings information is based upon      
ratings data contained in the February, May and November Nielsen surveys in     
prior years, but excludes July Nielsen data. July ratings are considered to be  
of minor significance due to low viewership during the early summer months and  
the large percentage of reruns aired during that time. In addition, ratings     
information for periods that the Olympic Games are broadcast by a Network,      
including February 1994, are not considered by broadcasters or advertisers to be
indicative of future viewing trends and are therefore excluded. Certain ratings 
for July and Olympic periods may be more or less favorable to the Company's     
stations than ratings for other periods.                                        

FCC Licenses                                                                    

     Television broadcasting is subject to the jurisdiction of the FCC under the
Communications Act. The Communications Act prohibits the operation of television
broadcasting stations except under a license issued by the FCC and empowers the 
FCC, among other things, to issue, revoke and modify broadcasting licenses,     
determine the locations of stations, regulate the equipment used by stations,   
adopt regulations to carry out the provisions of the Communications Act and     
impose penalties for violation of such regulations. The Telecommunications Act  
of 1996, which amends major provisions of the Communications Act, was enacted on
February 8, 1996. The FCC has commenced, but not yet completed, implementation  
of the provisions of the Telecommunications Act of 1996.                        

The Communications Act prohibits the assignment of a license or the   
transfer of control of a licensee without prior approval of the FCC. In         
addition, foreign governments, representatives of foreign governments,          
non-citizens, representatives of non-citizens and corporations or partnerships  
organized under the laws of a foreign nation are barred from holding broadcast  
licenses. Non-citizens, however, may own up to 20% of the capital stock of a    
licensee and up to 25% of the capital stock of a United States corporation that,
in turn, owns a controlling interest in a licensee. A broadcast license may not 
be granted to or held by any corporation that is controlled, directly or        
indirectly, by any other corporation of which more than one-fourth of the       
capital stock is owned or voted by non-citizens or their representatives, by    
foreign governments or their representatives, or by non-U.S. corporations, if   
the FCC finds that the public interest will be served by the refusal or         
revocation of such license. Under the Telecommunications Act of 1996,           
non-citizens may serve as officers and directors of a broadcast licensee and any
corporation controlling, directly or indirectly, such licensee. The Company,    
which is the licensee of one of the existing stations, is restricted by the     
Communications Act from having more than one-fifth of its capital stock owned by
non-citizens, foreign governments or foreign corporations, but not from having  
an officer or director who is a non-citizen.                                    

  Television broadcasting licenses are generally granted and renewed for a
period of five years, but may be renewed for a shorter period upon a finding by 
the FCC that the "public interest, convenience and necessity" would be served   
thereby. The Telecommunications Act of 1996 extends the license period for      
television stations to eight years. Pursuant to the statute, the FCC has        
proposed to grant and renew as a matter of course licenses for television       
stations for a term of 8 years. At the time an application is filed for renewal 
of a television license, parties in interest as well as members of the public   
may apprise the FCC of the service the station has provided during the preceding
license term and urge the grant or denial of the application. Under the         
Telecommunications Act of 1996, as implemented in the FCC's rules, a competing  
application for authority to operate a station and replace the incumbent        
licensee may not be filed against a renewal application and considered by the   
FCC in deciding whether to grant a renewal application. The statute modified the
license renewal process to provide for the grant of a renewal application upon a
finding by the FCC that the licensee (i) has served the public interest,        
convenience and necessity; (ii) has committed no serious violations of the      
Communications Act or the FCC's rules; and (iii) has committed no other         
violations of the Communications Act or the FCC's rules which would constitute a
pattern of abuse. If the FCC cannot make such a finding, it may deny a renewal  
application, and only then may the FCC accept other applications to operate the 
station of the former licensee. In the vast majority of cases, broadcast        
licenses are renewed by the FCC even when petitions to deny are filed against   
broadcast license renewal                                                       

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applications. All of the Company's licenses that have come up for renewal have  
been renewed for full terms and are in effect. Such licenses are subject to     
renewal at various times during 1997, 1998 and 1999. Although there can be no   
assurance that the Company's licenses will be renewed, the Company is not aware 
of any facts or circumstances that would prevent the Company from having its    
licenses renewed.                                                               

 FCC regulations govern the multiple ownership of broadcast stations and
other media on a national and local level. The Telecommunications Act of 1996   
directs the FCC to eliminate or modify certain rules regarding                  
the multiple ownership of broadcast stations and other media on a national and  
local level. Pursuant to this directive, the FCC has revised its rules to       
eliminate the limit on the number of television stations that an individual or  
entity may own or control nationally, provided that the audience reach of all   
television stations owned does not exceed 35% of all U.S. households. The FCC   
also will conduct a rulemaking proceeding, in accordance with the               
Telecommunications Act of 1996, to determine whether to retain, eliminate or    
modify its limitations on the number of television stations (currently one in   
most instances) that an individual or entity may own within the same geographic 
market.                                                                         

    Pursuant to the Telecommunications Act of 1996, the FCC has eliminated the
limit on the number of radio broadcast stations that an individual or entity may
own or control nationally. The FCC also has relaxed its local radio multiple    
ownership rules governing the common ownership of radio broadcast stations in   
the same geographic market. In accordance with the Telecommunications Act of    
1996, the FCC's rules permit the common ownership of up to 8 commercial radio   
stations, not more than 5 of which are in the same service (i.e., AM or FM), in 
markets with 45 or more commercial radio stations. In markets with 30 to 44     
commercial radio stations, an individual or entity may own up to 7 commercial   
radio stations, not more than 4 of which are in the same service. In markets    
with 15 to 29 commercial radio stations, an individual or entity may own up to 6
commercial radio stations, not more than 4 of which are in the same service. In 
markets with 14 or fewer commercial radio stations, an individual or entity may 
own up to 5 commercial radio stations, not more than 3 of which are in the same 
service, provided that the commonly owned stations represent no more than 50% of
the stations in the market.                                                     

The Telecommunications Act of 1996 does not eliminate the FCC's rules 
restricting the common ownership of a radio station and a television station in 
the same geographic market ("one-to-a-market rule") and the common ownership of 
a daily newspaper and a broadcast station located in the same geographic market.
The statute, however, does relax the FCC's one-to-a-market rule by authorizing  
the FCC to extend its waiver policy to stations located in the 50 largest       
television markets. As directed by the Telecommunications Act of 1996, the FCC  
has eliminated its prior restriction on the common ownership of a cable system  
and a television network. Although the statute lifts the prior statutory        
restriction on the common ownership of a cable television system and a          
television station located in the same geographic market, the FCC is not        
statutorily required to eliminate its regulatory restriction on such common     
ownership. The FCC is expected to initiate a proceeding this year to solicit    
comments on retaining, modifying or eliminating this regulatory restriction.    
Pursuant to the Telecommunications Act of 1996, the FCC has revised its rules to
permit the common ownership of multiple television networks under certain       
circumstances. Furthermore, the statute directs the FCC to review all of its    
ownership rules to determine whether they continue to serve the public interest.

Ownership of television licensees generally is attributed to officers,
directors and shareholders who own 5% or more of the outstanding voting stock of
a licensee, except that certain institutional investors who exert no control or 
influence over a licensee may own up to 10% of such outstanding voting stock    
before attribution results. Under FCC regulations, debt instruments, non-voting 
stock and certain limited partnership interests (provided the licensee certifies
that the limited partners are not "materially involved" in the media-related    
activities of the partnership) and voting stock held by minority shareholders   
where there is a single majority shareholder generally will not result in       
attribution. Under the FCC's multiple and cross-ownership rules, which have been
or will be revised in accordance with the Telecommunications Act of 1996, an    
officer or director of the Company or a holder of the Company's Voting Common   
Stock who has an attributable interest in other broadcast stations, a cable     
television system or a daily newspaper, may violate the FCC regulations         
depending on the number and location of the other broadcasting stations, cable  
television systems or daily newspapers attributable to such person. In addition,

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the FCC's cross-interest policy, which precludes an individual or entity from   
having an attributable interest in one media property and a "meaningful" (but   
not attributable) interest in another media property in the same area, may be   
invoked in certain circumstances to reach interests not expressly covered by the
multiple ownership rules. None of the Company's officers, directors or holders  
of Voting Common Stock have attributable or non-attributable interests in       
broadcasting stations, cable television systems or daily newspapers that violate
the FCC's multiple and cross-ownership rules.                                   

   The FCC has repealed its prime time access rule ("PTAR") effective August
30, 1996, retaining the rule in its present form until that date. PTAR generally
prohibits television stations affiliated with the ABC, CBS or NBC Network in the
50 largest television markets from broadcasting more than three hours of network
programming or off-network programming during the four hours of prime time. The 
Company cannot predict how the repeal of PTAR will affect the Company's         
business.                                                                       

   The Telecommunications Act of 1996 authorizes the FCC to issue additional
licenses for advanced television ("ATV") services only to individuals or        
entities that hold an authorization to operate or construct a television station
("Existing Broadcasters"). ATV is a technology that will improve the technical  
quality to television service. The Telecommunications Act of 1996 directs the   
FCC to adopt rules to permit Existing Broadcasters to use their ATV channels for
various purposes, including foreign language, niche, or other specialized       
programming. The statute also authorizes the FCC to collect fees from Existing  
Broadcasters who use their ATV channels to provide services for which payment is
received. Prior to the enactment of the Telecommunications Act of 1996, members 
of Congress sought assurance from the FCC that it would not implement any plan  
to award spectrum for ATV service until additional legislation is enacted to    
resolve spectrum issues such as whether broadcasters should be required to pay  
for ATV licenses. In response to this request, the FCC stated that it would not 
award licenses or construction permits for ATV service until such additional    
legislation is enacted to address ATV spectrum issues.                          

The Cable Television Consumer Protection and Competition Act of 1992            

   The Cable Television Consumer Protection and Competition Act of 1992 (the
"Cable Act") and the FCC's implementing regulations give television stations the
right to control the use of their signals on cable television systems. Under the
Cable Act, at three year intervals beginning in June 1993, each television      
station is required to elect whether it wants to avail itself of must-carry     
rights or, alternatively, to grant retransmission consent. If a television      
station elects to exercise its authority to grant retransmission consent, cable 
systems are required to obtain the consent of that television station for the   
use of its signal and could be required to pay the television station for such  
use. The Cable Act further requires mandatory cable carriage of all qualified   
local television stations electing their must-carry rights or not exercising    
their retransmission rights. All initial arrangements relating to retransmission
consent were required to be entered into by October 6, 1993. Each of the        
Company's stations has either elected its must-carry rights or entered into     
retransmission consent agreements with substantially all cable systems in its   
DMA. KNTV has elected to exercise its must-carry rights in both the             
Salinas-Monterey DMA and Santa Clara County. The Company's other stations have  
elected to require retransmission consent in substantially all cases, with the  
remainder exercising must-carry rights. Approximately 60% of the households in  
the geographic areas with respect to which the Company's stations have elected  
to exercise their retransmission rights subscribe to cable television.          

    The Company's stations have elected to exercise their must-carry rights or
entered into long-term retransmission agreements requiring continued carriage of
the Company's stations on cable systems covering the majority of the cable      
households in its stations' DMAs. The long-term retransmission agreements range 
in duration from one to five years, and in most cases are automatically renewed 
for an additional term unless notice of nonrenewal is given by either party.    
With respect to the remaining cable households, the Company has entered into    
short-term retransmission agreements, which are expected to be replaced by      
longer term agreements in 1996. The Company cannot predict the outcome of       
retransmission negotiations for replacement of existing short-term agreements   
and, although the Company also expects to renew its current retransmission      
agreements upon expiration, there can be no assurance that such replacements or 
renewals will be entered into. Under the FCC's rules,                           

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television stations must make their next election between must-carry and        
retransmission consent status by October 1, 1996, which will take effect on     
January 1, 1997. Television stations that fail to make an election by the       
specified deadline will be deemed to have elected must-carry status for the     
relevant three year period.                                                     

  On April 8, 1993, a special three-judge panel of the U.S. District Court
for the District of Columbia upheld the constitutionality of the must-carry     
provisions of the Cable Act. However, on June 27, 1994, the U.S. Supreme Court  
vacated the lower court's judgment and remanded the case to the District Court  
for further proceedings. Although the Supreme Court found the must-carry rules  
to be content-neutral, it also found that genuine issues of material fact still 
remained that must be resolved on a more detailed evidentiary record. On remand,
on December 13, 1995, the District Court upheld the constitutionality of the    
must-carry rules. An appeal of the District Court's decision is pending before  
the Supreme Court. In the meantime, however, the FCC's must-carry regulations   
implementing the Cable Act remain in effect. The Company cannot predict the     
outcome of such challenges or the effect on the Company's business if the       
must-carry or retransmission consent provisions of the Cable Act are found to be
unconstitutional or otherwise unlawful.                                         

Proposed Legislation and Regulations                                            

     The FCC has under consideration and the Congress and the FCC, in the future
may consider and adopt new or modify existing laws, regulations and policies    
regarding a wide variety of matters that could affect, directly or indirectly,  
the operation, ownership and profitability of the Company's stations, result in 
the loss of audience share and advertising revenues for the Company's stations  
and affect the ability of the Company to acquire additional stations or finance 
such acquisitions. Such matters include: (i) spectrum use or other fees on FCC  
licensees; (ii) the FCC's equal employment opportunity rules and other matters  
relating to minority and female involvement in the broadcasting industry; (iii) 
rules relating to political broadcasting; (iv) technical and frequency          
allocation matters; (v) changes in the FCC's cross-interest, multiple ownership 
and cross-ownership rules and policies; (vi) changes to broadcast technical     
requirements; (vii) limiting the tax deductibility of advertising expenses by   
advertisers; and (viii) changes to the standards governing the evaluation and   
regulation of television programming directed towards children, and violent and 
indecent programming.                                                           

    Specifically, and as an example of the above proposed changes, the FCC has
initiated rulemaking proceedings to solicit comments on its multiple ownership, 
attribution and minority ownership rules as well as other rules with respect to 
television broadcasting generally. More particularly, on January 17, 1995 the   
FCC released a Further Notice of Proposed Rulemaking which proposed, among other
things, the following changes regarding television broadcasting: (i) narrowing  
the geographic area where common ownership restrictions would be triggered by   
limiting it to overlapping "Grade A" contours rather than "Grade B" contours and
by permitting (or granting waivers in particular cases or markets) certain      
UHF/UHF or UHF/VHF overlaps; (ii) relaxing the rules prohibiting cross-ownership
of radio and television stations in the same market to allow certain            
combinations where there remain alternative outlets and suppliers to ensure     
diversity; and (iii) treating television Local Marketing Agreements ("LMAs") the
same as radio LMAs, which would currently preclude certain television LMAs where
the programmer owns or has an attributable interest in another television       
station in the same market. The Company cannot predict the outcome of the FCC's 
rulemaking proceedings or how FCC changes in its multiple and cross-ownership   
rules, made in accordance with the Telecommunications Act of 1996, will affect  
the Company's business.                                                         

  On January 12, 1995, the FCC released two additional Notices of Proposed
Rulemaking. The first seeks comment on whether the FCC should relax attribution 
and other rules to facilitate greater minority and female ownership. The second 
seeks comment on whether the FCC should modify its attribution rules by, among  
other things, (i) restricting the availability of the single majority           
shareholder exemption and (ii) attributing certain non-equity interests such as 
non-voting stock, debt and certain holdings by limited liability corporations.  
In the context of this latter rulemaking, the Commission is further examining   
its cross interest policy and seeks comment on the appropriate treatment of     
nonequity financial interests and multiple business interrelationships between  
licensees. The Company cannot predict the outcome of those proceedings or how   
they will affect the Company's business.                                        

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   The FCC also has initiated a notice of inquiry proceeding seeking comment
on whether the public interest would be served by establishing limits on the    
amount of commercial matter broadcast by television stations. No prediction can 
be made at this time as to whether the FCC will impose any limits on commercials
at the conclusion of its deliberation. The imposition of limits on the          
commercial matter broadcast by television stations may have an adverse effect on
the Company's revenues.                                                         

     The FCC is currently examining or has recently completed review of a number
of rules that govern the relationship between broadcast television networks and 
their affiliates and that are applicable to all broadcast television networks.  
In particular, the FCC has eliminated the network station ownership rule        
prohibiting network ownership of television stations in markets where the       
existing television stations are so few or of such unequal desirability that    
competition would be substantially restrained. Although the FCC continues to    
restrict network representation of affiliates for the sale of spot advertising  
time, the FCC has issued a notice of proposed rulemaking to re-examine its rule 
prohibiting affiliate stations from being represented by their networks for the 
sale of non-network broadcast time. In the same rulemaking proceeding, the FCC  
also is re-examining its rule prohibiting agreements by which a network can     
influence or control the rates its affiliates set for the sale of their         
non-network broadcast time. Additionally, the FCC has issued a separate notice  
of proposed rulemaking to consider the following: (i) eliminating financial     
considerations as a sole justification for an affiliate's exercise of its right 
to reject network programming; (ii) modifying the time option rule to permit    
networks to option time on affiliate stations as long as the affiliates are     
given sufficient advance notice; (iii) eliminating, at least in large markets,  
the exclusive affiliation rule prohibiting arrangements that bar an affiliate   
from broadcasting the programming of another network; (iv) eliminating the      
territorial exclusivity rule's prohibition against agreements that prevent      
another station in the same market from broadcasting network programming that   
has been rejected by the network's affiliate; and (v) reexamining the dual      
network rule preventing a single entity from owning more than one network. The  
Company cannot predict whether the FCC's proposed rule changes will be adopted  
or how these proposed changes would affect the Company's business.              

   The FCC also has released a Notice of Proposed Rulemaking seeking comment
on whether to consider effective market access as a factor in permitting        
non-citizen ownership of a licensee's parent company in excess of 25%. Under    
this proposal, a citizen of a foreign country would be permitted to own more    
than 25% of a broadcast licensee's parent company if a U.S. citizen were        
permitted the same level of investment in a broadcast licensee's parent company 
in the foreign investor's country. In addition, the FCC is seeking comments on  
other proposals for permitting non-citizen ownership of a licensee's parent     
company in excess of 25%. The Company cannot predict whether the FCC proposal   
will be adopted or how these proposed changes would affect the Company's        
business.                                                                       

     The FCC has begun adopting rules and proposing others to implement advanced
television service ("ATV") which includes high definition television systems.   
ATV is a technology that will improve television audio and video quality. The   
FCC has "set aside" channels within the existing television system for ATV and  
has limited initial ATV eligibility to existing television stations and certain 
applicants for new television stations ("Existing Broadcasters"). The FCC has   
preliminarily established a three-year period, commencing on a date to be       
determined, during which Existing Broadcasters have the exclusive right to apply
for ATV channels. The FCC proposed to allow Existing Broadcasters six months in 
which to decide whether to apply for an ATV channel and an additional 2 1/2     
years to supply the FCC with the information necessary for the FCC to issue an  
authorization for the ATV channel. The FCC has preliminarily decided to allow   
Existing Broadcasters who file timely applications for ATV channels to have     
three years from the expiration of the three-year application filing period to  
construct their ATV facilities. The FCC has determined that ATV will be a       
digital system incompatible with current television transmitters and receivers. 
The rules for phasing in ATV service permit each television station to provide  
conventional television service on its regular channel until ATV service has    
become the prevalent medium. The FCC is seeking comments on a timetable for     
requiring broadcasters to convert to ATV. Broadcasters will have to convert to  
ATV by the conversion deadline and surrender one channel back to the FCC. The   
FCC also proposed phased in simulcasting requirements during the transition     
period under which a broadcaster must simulcast on its ATV channel the          
programming that is broadcast on its existing conventional channel. The FCC also
adopted a timetable for periodic review of the simulcasting and conversion      
deadlines. The FCC also proposed licensing the                                  

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ATV and conventional broadcast channels under a single license. In addition, the
FCC is seeking comments on whether broadcasters should provide a minimum amount 
of free over-the-air television broadcasting on the ATV channel and to what     
extent to allow the use of ATV spectrum for services other than free            
over-the-air broadcasting. The FCC also is seeking comments on whether to allow 
an extension of the six year application and construction period under certain  
circumstances, including circumstances involving financial hardship and stations
serving small or economically disadvantaged areas. The FCC has further proposed 
several broad objectives to govern the ATV channel allotment process and has    
proposed a number of procedures and specific technical criteria to be used in   
allotting ATV channels. The FCC also issued for public comment a working draft  
of a proposed ATV Table of Allotments intended to provide an ATV channel for    
each existing television station in a manner that will maximize the coverage for
ATV stations while taking into account interference to existing television      
stations and between ATV stations. The FCC has proposed to adopt the Advanced   
Television Systems Committee Standard as the standard for digital television    
broadcasting in the United States. This standard was developed jointly by the   
three groups that previously had developed four different, competing digital    
television standards for consideration by the FCC. If the FCC adopts a standard 
for ATV service that is inferior to the signal quality alternative video        
technologies provide, such action could have a negative impact on the audience  
and revenues for television stations. Implementation of ATV service will impose 
substantial additional costs on television stations to provide the new service, 
due to increased equipment costs. It is also possible that advances in          
technology may permit Existing Broadcasters to enhance the picture quality of   
existing systems without the need to implement ATV service. Prior to the        
enactment of the Telecommunications Act of 1996, members of Congress sought     
assurance from the FCC that it would not implement any plan to award spectrum   
for ATV service until additional legislation is enacted to resolve spectrum     
issues such as whether broadcasters should be required to pay for ATV licenses. 
In response to this request, the FCC stated that it would not award licenses or 
construction permits for ATV service until legislation is enacted to address ATV
spectrum issues. Such legislation, if adopted, may require Existing Broadcasters
to pay for ATV licenses. Although the Company believes the FCC will authorize   
ATV service, the Company cannot predict when such authorization might be given  
or the effect such authorization might have on the Company's business or capital
expenditure requirements. Consistent with the Telecommunications Act of 1996,   
the FCC has begun a rulemaking asking for public comment on proposals to allow  
licensees to provide ancillary digital services within the video portion of     
their broadcast signals. The Company cannot predict whether these proposals will
be enacted and if enacted the effect these proposals would have on the Company. 

Seasonality                                                                     

    The Company's operating revenues are generally lower in the first calendar
quarter and generally higher in the fourth calendar quarter than in the other   
two quarters, due in part to increases in retail advertising in the fall months 
in preparation for the holiday season, and in election years due to increased   
political advertising.                                                          

Employees                                                                       

The Company and its subsidiaries currently employ approximately 955   
persons, of whom approximately 284 are represented by two unions (including 11  
bargaining units) pursuant to contracts expiring in 1996 and 1997. The Company  
believes its relations with its employees are good.                             

Special Tax Status                                                              

     Historically, the FCC issued tax certificates pursuant to Code Section 1071
to encourage ownership of broadcast facilities by minority-controlled companies,
such as Granite. Subject to certain conditions, a tax certificate allowed       
sellers of broadcast facilities to minority-controlled companies to elect to (i)
defer payment of capital gains tax on the sale of such facilities provided that 
the seller reinvested the proceeds within two years in a "qualified replacement 
property" such as another broadcast property or the stock of a broadcast entity,
and, if desired, to the extent not applied in (i) above or (ii) use the gain to 
reduce the basis of specific depreciable property which the seller retained. In 
1995, the President signed into law legislation that eliminates                 
minority-controlled companies'                                                  

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ability to make use of a tax certificate. The Company does not anticipate that  
this elimination will have any material adverse effect on the Company.          

Properties                                                                      

The Company's principal executive offices are located in New York, New
York. The lease agreement, for approximately 6,800 square feet of office space, 
expires January 31, 2011.                                                       

    The types of properties required to support each of the Company's stations
include offices, studios, transmitter sites and antenna sites. A station's      
studios are generally housed with its offices in downtown or business districts.
The transmitter sites and antenna sites are generally located so as to provide  
maximum market coverage.                                                        

 The following table contains certain information describing the general
character of the Company's properties:                                          

                                                        · Enlarge/Download Table

                                                   Owned or                    Expiration of
Station     Metropolitan Area and Use               Leased   Approximate Size    Lease      
-------     -------------------------               ------   ----------------    -----      

                                                                                            
  KNTV   San Jose, California                                                               
           Office and Studio                       Owned      26,469 sq. feet      --       
           Tower Site                              Leased      2,080 sq. feet   9/30/97     
           Low Power Transmission Site             Leased        100 sq. feet  1/1/2001(a)  

  WTVH   Syracuse, New York                                                                 
           Office and Studio                       Owned      41,500 sq. feet      --       
         Onondaga, New York                                                                 
           Tower Site                              Owned       2,300 sq. feet      --       

  KSEE   Fresno, California                                                                 
           Office and Studio                       Owned      32,000 sq. feet      --       
         Bear Mountain, Fresno County, California                                           
           Tower Site                              Leased      9,300 sq. feet   3/22/2034   

  WPTA   Fort Wayne, Indiana                                                                
           Office, Studio and Tower Site           Owned      18,240 sq. feet      --       

  WEEK   Peoria, Illinois                                                                   
           Office, Studio and Tower Site           Owned      20,000 sq. feet      --       
         Bloomington, Illinois                                                              
           Studio and Sales Office                 Leased        617 sq. feet   12/31/96    

  KBJR   Duluth, Minnesota, Superior, Wisconsin                                             
           Office and Studio                       Owned      15,749 sq. feet      --       
           Tower Site                              Owned       3,125 sq. feet      --       

  KEYE   Austin, Texas                                                                      
           Office and Studio                       Owned      14,000 sq. feet      --       
           Tower Site                              Leased      1,600 sq. feet  5/1/2013(a)  

  WWMT   Kalamazoo, Michigan                                                                
           Office and Studio                       Owned      45,000 sq. feet      --       
         Gun Lake, Michigan                                                                 
           Tower Site                              Owned       3,580 sq. feet      --       

  WKBW   Buffalo, New York                                                                  
           Office and Studio                       Owned      32,000 sq. feet      --       
         Colden, New York                                                                   
           Tower Site                              Owned       3,406 sq. feet      --       


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

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(a)  Assuming exercise of all of the Company's renewal options under such lease.

Legal Proceedings                                                               

Not applicable                                                

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MANAGEMENT

The following table sets forth information concerning the executive   
officers and directors of the Company as of March 1, 1996:                      

                                                        · Enlarge/Download Table

         Name                      Age                    Position                        
         ----                      ---                    --------                        
                                                                                          
W. Don Cornwell(1)................ 48   Chairman of the Board, Chief Executive Officer    
                                          and Director                                    
Stuart J. Beck(1)................. 49   President, Treasurer, Secretary and Director      
Lawrence I. Wills................. 35   Vice President-Finance and Controller             
Ellen McClain..................... 31   Vice President-Corporate Development and Treasurer
James L. Greenwald(2)............. 68   Director                                          
Vickee Jordan Adams............... 36   Director                                          
Martin F. Beck(2)................. 78   Director                                          
Edward Dugger, III(2)............. 46   Director                                          
Thomas R. Settle(1)(3)............ 54   Director                                          
Charles J. Hamilton, Jr.(3)....... 48   Director                                          
Mikael Salovaara.................. 42   Director                                          

----------                                                                      
(1)   Member of the Stock Option Committee.                                     

(2)   Member of the Audit Committee.                                            

(3)   Member of the Compensation Committee and Management Stock Plan Committee. 

     Mr. Cornwell is a founder of the Company and has been Chairman of the Board
of Directors and Chief Executive Officer of the Company since February 1988. Mr.
Cornwell served as President of the Company, which office then included the     
duties of chief executive officer, until September 1991 when he was elected to  
the newly- created office of Chief Executive Officer. Prior to founding the     
Company, Mr. Cornwell served as a Vice President in the Investment Banking      
Division of Goldman, Sachs & Co. ("Goldman Sachs") from May 1976 to July 1988.  
In addition, Mr. Cornwell was the Chief Operating Officer of the Corporate      
Finance Department of Goldman Sachs from January 1980 to August 1987. Mr.       
Cornwell is a director of Melville Corporation, Hershey Trust Company, the      
Milton S. Hershey School and Utendahl Capital Partners. Mr. Cornwell received a 
Bachelor of Arts degree from Occidental College in 1969 and a Masters degree in 
Business Administration from Harvard Business School in 1971.                   

  Mr. Stuart Beck is a founder of the Company and has been a member of the
Board of Directors and Secretary of the Company since February 1988 and         
President of the Company since September 1991. Prior to founding the Company,   
Mr. Beck was an attorney in private practice of law in New York, New York and   
Washington, DC. Mr. Beck received a Bachelor of Arts degree from Harvard College
in 1968 and a Juris Doctor degree from Yale Law School in 1971. Mr. Beck is the 
son of Martin F. Beck.                                                          

 Mr. Wills has been Vice President-Finance and Controller of the Company
since June 25, 1990. Prior to joining the Company, Mr. Wills was employed by    
Ernst & Young LLP from July 1982 to May 1990 in various capacities, the most    
recent of which was as audit manager responsible for managing and supervising   
audit engagements. Mr. Wills is a director of the Broadcast Cable Financial     
Management Association. Mr. Wills received a bachelors degree in Business       
Administration from Iona College in 1982.                                       

   Ms. McClain has been Vice President - Corporate Development and Treasurer
of the Company since January 1994. Prior to joining Granite, Ms. McClain        
attended Harvard Business School, where she received a                          

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Masters degree in Business Administration in June 1993. From 1990 to 1991, Ms.  
McClain was an Assistant Vice President with Canadian Imperial Bank of Commerce,
where she served as a lender in the Bank's Media Group and from 1986 to 1990 was
employed by Bank of New England, N.A. in various capacities including a lender  
in the Communications Group. Ms. McClain received a Bachelor of Arts Degree in  
Economics from Brown University in 1986.                                        

  Mr. Greenwald has been a member of the Board of Directors of the Company
since December 1988. Mr. Greenwald was the Chairman and Chief Executive Officer 
of Katz Communications, Inc. from May 1975 to August 1994 and has been Chairman 
Emeritus since August 1994. Mr. Greenwald has served as President of the Station
Representatives Association and the International Radio and Television Society  
and Vice President of the Broadcast Pioneers. Mr. Greenwald received a Bachelor 
of Arts degree from Columbia University in 1949 and an Honorary Doctorate Degree
in Commercial Science from St. Johns University in 1980.                        

    Ms. Adams has been a member of the Board of Directors of the Company since
August 1988. Ms. Adams has been Vice President, Director of Communications      
Training with Ketchum P.R., a New York City-based public relations firm, since  
October 1992. From February 1990 to September 1992, Ms. Adams was Vice          
President, Manager Communications Training with Burson-Marsteller, a New York   
City-based public relations firm. From December 1983 to February 1990, Ms. Adams
served in various capacities in Burson-Marsteller's Communications Training     
section. Ms. Adams is an Advisory Council Member of the New York Zoological     
Society and a member of the PENN Club Board of Governors. She has also served on
the Board of the NOW Legal Defense and Education Fund since 1988. Ms. Adams     
received a Bachelor of Arts degree from the University of Pennsylvania in 1981. 

    Mr. Martin Beck has been a member of the Board of Directors of the Company
since December 1988. Mr. Beck has served as Chairman of Beck-Ross               
Communications, Inc., a New York-based group owner of FM radio stations, from   
June 1966 until April 1995, at which time he retired. Mr. Beck has served as    
President of the New York State Broadcasters Association, the Long Island       
Broadcasters Association and the National Association of Broadcasters Radio     
Board. Mr. Beck is a director of Tribune Swab Fox Companies, Inc. Mr. Beck      
received a Bachelor of Arts degree from Cornell University in 1938. Mr. Beck is 
the father of Stuart J. Beck.                                                   

     Mr. Dugger has been a member of the Board of Directors of the Company since
December 1988. Mr. Dugger has been President and Chief Executive Officer of UNC 
Ventures, Inc., a Boston-based venture capital firm, since January 1978. Mr.    
Dugger is a director of the Federal Reserve Bank of Boston, Envirotest Systems  
Corporation and U.S. Radio, Inc. Mr. Dugger received a Bachelor of Arts degree  
from Harvard College in 1971 and a Masters degree in Public Administration and  
Urban Planning from Princeton University in 1973. In 1988, prior to the         
investment in the Company by UNC Ventures, Inc. and UNC Ventures II, L.P. (the  
"UNC Entities"), an agreement was entered into between Mr. Cornwell, Mr. Stuart 
Beck and the UNC Entities pursuant to which Mr. Dugger was to become a member of
the Company's Board of Directors and be assured of remaining on the Board until 
the earlier to occur of certain events, including the effectiveness of a        
registration statement covering any securities of the Company. This event       
occurred on January 13, 1992 when the Company's registration statement for the  
initial public offering of the Common Stock (Nonvoting) was declared effective  
by the Commission.                                                              

 Mr. Hamilton has been a member of the Board of Directors of the Company
since July 1992. Mr. Hamilton has been a partner in the New York law firm of    
Battle Fowler since 1983. Mr. Hamilton received a Bachelor of Arts degree from  
Harvard College in 1969 and a Juris Doctor degree from Harvard Law School in    
1975. Mr. Hamilton is a trustee of the National Urban League, Inc. and the      
Environmental Defense Fund. Mr. Hamilton is a member of the Board of Directors  
of the Phoenix House Foundation, Inc. He is a member of the Committee on Policy 
for Racial Justice of the Joint Center for Political and Economic Studies, Inc. 
in Washington, DC and is Chairman of the Board of Directors of the Higher       
Education Extension Service.                                                    

     Mr. Settle has been a member of the Board of Directors of the Company since
July 1992. Mr. Settle founded and has been the President of The Winchester      
Group, Inc., an investment advisory firm, since 1990. Mr. Settle was the chief  
investment officer at Bernhard Management Corporation from 1985 to 1989. He was 
a                                                                               

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Managing Director of Furman Selz Capital Management from 1979 until 1985. Mr.   
Settle received a Bachelor of Arts Degree from Muskingum College in 1963 and a  
Masters degree in Business Administration from Wharton Graduate School in 1965. 

     Mr. Salovaara has been a member of the Board of Directors since March 1994.
Mr. Salovaara has been a General Partner of Greycliff Partners, an investment   
advisory firm, since 1991 and a Limited Partner of the Blackstone Group since   
1994. From 1988 to 1991, Mr. Salovaara was a General Partner of Goldman, Sachs &
Co. Prior to becoming a General Partner, Mr. Salovaara worked at Goldman, Sachs 
& Co. in various capacities from 1980 to 1988. Mr. Salovaara is a trustee of    
Playwrights Horizons in New York City and a director of Hadco Corporation and a 
director of Circuit City Stores, Inc. Mr. Salovaara received a Bachelor of Arts 
degree from Dartmouth College in 1974, a Juris Doctor degree and Masters degree 
in Business Administration from the University of Virginia in 1980 and a Masters
of Arts degree from Cambridge University in 1986.                               

 All members of the Board of Directors hold office until the next annual
meeting of shareholders of the Company or until their successors are duly       
elected and qualified. All officers are elected annually and serve at the       
discretion of the Board of Directors.                                           

   Members of the Board of Directors are entitled to receive a fee of $1,500
for each Board of Directors meeting attended in person. Pursuant to and in      
accordance with the terms and conditions of the Company's Director Stock Option 
Plan (the "Director Option Plan"), however, once every three years, each        
director was permitted to elect (a "Triennial Election") to receive options to  
purchase shares of the Company's Common Stock (Nonvoting) ("Options"), in lieu  
of cash compensation, for attendance at regularly scheduled quarterly meetings  
of the Board ("Regular Quarterly Meetings") during the three years subsequent to
the Triennial Election or until their earlier termination (the "Triennial Option
Period"). At the end of the current Triennial Option Period, February 28, 1997, 
and each third year anniversary thereafter, however, all directors will         
automatically receive an option to purchase 18,000 shares of Common Stock       
(Nonvoting) ("Automatic Director Service Awards") as compensation for attendance
at Regular Quarterly Meetings during the Triennial Option Period subsequent to  
the grant, in lieu of cash compensation. Directors elected or appointed during  
the Triennial Option Period receive Options, in lieu of cash compensation, for  
the remaining portion of the Triennial Option Period.                           

  During the Triennial Option Period, Options to purchase shares of Common
Stock (Nonvoting) become exercisable one year (or immediately in the case of    
Automatic Director Service Awards) from the date of attendance by director at a 
Regular Quarterly Meeting in the following amounts: (i) 1,500 shares for        
attendance in person; or (ii) 500 shares for attendance by telephonic means. The
exercise price of all Options is the fair market value of the Common Stock      
(Nonvoting) on the date of grant. The following directors have elected to       
receive Options, in lieu of cash compensation, for the current Triennial Option 
Period: James L. Greenwald, Vickee Jordan Adams, Martin F. Beck, Thomas R.      
Settle, Charles J. Hamilton, Jr. and Mikael Salovaara. See "Executive           
Compensation -- Director Stock Option Plan."                                    

In addition, under the Director Option Plan, directors receive Options
("Automatic Committee Awards") to purchase shares of Common Stock (Nonvoting)   
for service on certain of the committees of the Board of Directors (each a      
"Committee"). Automatic Committee Awards to purchase 1,500 shares of Common     
Stock (Nonvoting) become exercisable one year (or immediately for Automatic     
Committee Awards to be granted after February 27, 1997) from the date of        
attendance, in person, at each regularly scheduled Committee meeting.           

 Directors are not separately reimbursed by the Company for their travel
expenses incurred in attending Board or committee meetings.                     

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Executive Compensation                                                          

     The following table sets forth the cash compensation paid by the Company to
its Chief Executive Officer and each of its most highly compensated executive   
officers whose total cash compensation exceeded $100,000 during the fiscal year 
ended December 31, 1995, for each of the three years in the period ended        
December 31, 1995:                                                              

Summary Compensation Table

                                                        · Enlarge/Download Table

                                                               Long-Term Compensation                
                                 Annual Compensation                    Awards                       
                          -----------------------------------  -----------------------               
                                                                Restricted                All Other  
   Name and                                                       Stock       Options/   Compensation
  Principal Position         Year     Salary ($)    Bonus ($)     Awards      SARs (#)       ($)(1)  
--------------------      --------  ------------ ------------  ------------ -----------  ------------

                                                                                                     
W. Don Cornwell              1995     $460,000   $    -        $       -      165,000     $  4,620   
Chief Executive              1994      270,000        -                -            -        3,000   
  Officer                    1993      332,000        -          280,500(2)   192,500        1,800   

Stuart J. Beck               1995      460,000        -                -      135,000        4,620   
President                    1994      267,000        -                -            -        2,000   
                             1993      260,000        -          229,500(3)   157,500        4,364   

Lawrence I. Wills            1995      115,000       28,000            -            -        2,875   
Vice President -             1994      105,000       25,000       70,000(4)         -        2,100   
  Finance and                1993      100,000       20,000            -            -        2,000   
  Controller                                                                                         

Ellen McClain                1995       85,000       45,000       41,438(5)         -        2,125   
Vice President - Corporate   1994       68,000       17,000       30,000(6)         -            -   
  Development and Treasurer  1993            -        -                -            -            -   


----------                                                                      

(1)  Represents matching Company contributions under the Company's Employees'   
Profit Sharing and Savings (401(k)) Plan.                             

(2)  Represents the market value on the date of award of 93,500 Bonus Shares (as
 defined) awarded under the Company's Management Stock Plan on April 27,
1993. On each of December 31, 1993, 1994 and 1995, 18,700 Bonus Shares
     vested. An additional 18,700 Bonus Shares will vest on each of December 31,
   1996 and December 31, 1997. Shares of Common Stock (Nonvoting) subject to
   an award of Bonus Shares are not deemed issued and outstanding until such
Bonus Shares vest, and no shareholder rights, including the right to  
     receive dividends, if any, will arise with respect thereto until such Bonus
Shares vest.                                                          

(3)  Represents the market value on the date of award of 76,500 Bonus Shares    
 awarded under the Company's Management Stock Plan on April 27, 1993. On
  each of December 31, 1993, 1994 and 1995, 15,300 Bonus Shares vested. An
   additional 15,300 Bonus Shares will vest on each of December 31, 1996 and
   December 31, 1997. Shares of Common Stock (Nonvoting) subject to an award
of Bonus Shares are not deemed issued and outstanding until such Bonus
Shares vest, and no shareholder rights, including the right to receive
    dividends, if any, will arise with respect thereto until such Bonus Shares
vest.                                                                 

(4)  Represents the market value on the date of award of 17,500 Bonus Shares    
 awarded under the Company's Management Stock Plan on March 15, 1994. On
each of December 31, 1994 and 1995, 3,500 Bonus Shares vested. An     
additional 3,500 Bonus Shares will vest on December 31, 1996 and each 
anniversary thereof through December 31, 1998. Shares of Common Stock 
(Nonvoting) subject to an Award of Bonus                              

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    Shares are not deemed issued and outstanding until such Bonus Shares vest,
 and no shareholder rights, including the right to receive dividends, if
any, will arise with respect thereto until such Bonus Shares vest.    

(5)  Represents the market value on the date of award of 6,500 Bonus Shares     
  awarded under the Management Stock Plan on July 1, 1995. On December 31,
     1995, 1,000 Bonus Shares vested. An additional 1,000 Bonus Shares will vest
     on December 31, 1996 and each anniversary thereof through December 31, 1998
 and 2,500 Bonus Shares will vest on December 31, 1999. Shares of Common
     Stock (Nonvoting) subject to an Award of Bonus Shares are not deemed issued
  and outstanding until such Bonus Shares vest, and no shareholder rights,
   including the right to receive dividends, if any, will arise with respect
thereto until such Bonus Shares vest.                                 

(6)  Represents the market value on the date of award of 7,500 Bonus Shares     
awarded under the Management Stock Plan on March 15, 1994. On each of 
    December 31, 1994 and 1995, 1,500 Bonus Shares vested. An additional 1,500
  Bonus Shares will vest on December 31, 1996 and each anniversary thereof
     through December 31, 1998. Shares of Common Stock (Nonvoting) subject to an
Award of Bonus Shares are not deemed issued and outstanding until such
Bonus Shares vest, and no shareholder rights, including the right to  
     receive dividends, if any, will arise with respect thereto until such Bonus
Shares vest.                                                          

Employment Agreements and Compensation Arrangements                             

     Mr. Cornwell and Mr. Stuart Beck each have an employment agreement with the
Company. The agreements provide for a two year employment term which is         
automatically renewed for subsequent two year terms unless advance notice of    
nonrenewal is given (the current term under such agreements, which were renewed 
in 1995, expires September 19, 1997). The base salary determined by the         
Compensation Committee of the Board of Directors was $267,000 for 1994 and      
$460,000 for 1995. The agreements stipulate that Mr. Cornwell and Mr. Beck will 
devote their full time and efforts to the Company and will not engage in any    
business activities outside the scope of their employment with the Company      
unless approved by a majority of the Company's independent directors. Under the 
agreements, Mr. Cornwell and Mr. Beck are permitted to exchange any or all of   
their shares of Voting Common Stock for shares of Common Stock (Nonvoting),     
provided that such exchange does not jeopardize the Company's status as a       
minority-controlled entity under FCC regulations and that, after such exchange  
is effected, there will continue to be shares of voting stock of the Company    
outstanding. In addition to the compensation set forth in the employment        
agreements, Mr. Cornwell and Mr. Beck are eligible to receive incentive bonus   
payments under the Company's incentive bonus plan and stock options under       
certain of the Company's stock option plans. See "--Incentive Bonus Plan,"      
"--Stock Option Plan," "--Management Stock Plan" and "--Target Cash Flow Stock  
Option Plan."                                                                   

In November 1990, the Compensation Committee of the Board of Directors
established each of Mr. Cornwell's and Mr. Stuart Beck's base compensation for  
fiscal 1991 at $210,000. In order for the Company to remain in compliance with  
one of its covenants under the loan agreement relating to its then existing bank
debt, in 1991 Mr. Cornwell adjusted his base salary down to $20,730. In 1992,   
the Board of Directors of the Company adopted a resolution providing that Mr.   
Cornwell's salary adjustment in 1991 did not vitiate Mr. Cornwell's right to the
remainder of his base compensation in subsequent years. In connection therewith,
Mr. Cornwell received supplemental payments in 1992, 1993 and 1994 totaling     
$33,000, $72,000 and $3,000, respectively.                                      

    Under an employment arrangement with the Company, Mr. Wills is eligible to
receive an annual cash bonus based upon the Company's financial performance     
during that year, such bonus to be determined by Messrs. Cornwell and Beck. Mr. 
Wills's 1995 base salary was fixed at $115,000.                                 

   Under an employment arrangement with the Company, Ms. McClain is eligible
to receive an annual cash bonus based upon the Company's financial performance  
during that year, such bonus to be determined by Messrs. Cornwell and Beck. Ms. 
McClain's 1995 base salary was fixed at $85,000.                                

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401(k) Profit Sharing and Savings Plan                                          

Effective January 1990, the Company adopted the Granite Broadcasting  
Corporation Employees' Profit Sharing and Savings (401(k)) Plan for the purpose 
of providing retirement benefits for substantially all of its employees.        
Contributions to the Plan are made by both the employee and the Company. The    
Company matches 50% of that part of an employee's deferred compensation which   
does not exceed 5% of such employee's salary (4% in 1994). Company-matched      
contributions vest at a rate of 20% for each year of an employee's service to   
the Company.                                                                    

 A contribution to the Plan of $499,000 was charged to expense for 1995.

Employee Stock Purchase Plan                                                    

On February 28, 1995, the Company adopted the Granite Broadcasting    
Corporation Employee Stock Purchase Plan (the "Stock Purchase Plan") for the    
purpose of enabling its employees to acquire ownership of Common Stock          
(Nonvoting) at a discount, thereby providing an additional incentive to promote 
the growth and profitability of the Company. The Stock Purchase Plan enables    
employees of the Company to purchase up to an aggregate of 1,000,000 shares of  
Common Stock (Nonvoting) at 85% of the then current market price through        
application of regularly made payroll deductions. The Stock Purchase Plan is    
administered by a Committee consisting of not less than two directors who are   
ineligible to participate in the Stock Purchase Plan. The members of the        
Committee are currently Mr. Cornwell and Mr. Stuart J. Beck. At the discretion  
of the Committee, purchases under the Stock Purchase Plan may be effected       
through issuance of authorized but previously unissued shares, treasury shares  
or through open market purchases. The Committee has engaged a brokerage company 
to administer the day-to-day functions of the Stock Purchase Plan. Purchases    
under the Stock Purchase Plan commenced on June 1, 1995.                        

Stock Option Plan                                                               

   In April 1990, the Company adopted a Stock Option Plan (the "Stock Option
Plan") providing for the grant, from time to time, of Options to key employees, 
officers and directors of the Company or its affiliates (collectively, the      
"Participating Persons") to purchase shares of Common Stock (Nonvoting). On     
April 27, 1993, 192,500 Options were granted to Mr. Cornwell and 157,500 Options
were granted to Mr. Stuart Beck. On April 25, 1995, 165,000 Options were granted
to Mr. Cornwell and 135,000 Options were granted to Mr. Stuart Beck. On July 25,
1995, the Plan was amended to increase the shares of Common Stock (Nonvoting)   
subject to Options available for grant under the Plan to 2,000,000 from 800,000.
As of December 31, 1995, Options granted under the Plan were outstanding for the
purchase of 947,250 shares of Common Stock (Nonvoting). On April 23, 1996,      
166,000 Options were granted to Mr. Cornwell and 135,000 Options were granted to
Mr. Stuart Beck. On April 25, 1996, an additional 318,000 Options were granted  
to Mr. Cornwell and 260,000 Options were granted to Mr. Stuart Beck.            

 The Stock Option Plan provides for the grant of (i) Options intended to
qualify as Incentive Stock Options ("ISOs") as defined in Section 422 of the    
Code, to certain key employees of the Company or its affiliates (including      
employees who are officers or directors, but excluding directors who are not    
employees) who have substantial responsibility in the direction and management  
of the Company or an affiliate ("Key Employees") and (ii) Options which do not  
qualify as ISOs ("NQSOs") to Key Employees and other officers and directors of  
the Company or its affiliates who have substantial responsibility in the        
direction and management of the Company or an affiliate. No Participating Person
may be granted ISOs which, when first exercisable in any calendar year (combined
with all incentive stock option plans of the Company and its affiliates) will   
permit such person to purchase stock of the Company having an aggregate fair    
market value (determined as of the time the ISO was granted) of more than       
$100,000.                                                                       

     The Stock Option Plan is administered by a committee consisting of not less
than three members of the Board of Directors appointed by the Board. Subject to 
the provisions of the Stock Option Plan, the committee is                       

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empowered to, among other things, grant Options under the Stock Option Plan;    
determine which employees may be granted Options under the Stock Option Plan,   
the type of Option granted (ISO or NQSO), the number of shares subject to each  
Option, the time or times at which Options may be granted and exercised and the 
exercise price thereof; construe and interpret the Stock Option Plan; determine 
the terms of any option agreement pursuant to which Options are granted (an     
"Option Agreement"), and amend any Option Agreement with the consent of the     
recipient of Options (the "Optionee"). Notwithstanding the foregoing, grants    
under the Stock Option Plan to officers of the Company and holders of 10% or    
more of the Voting Common Stock are made by the disinterested members of the    
Board of Directors of the Company. The Board of Directors may amend or terminate
the Stock Option Plan at any time, except that approval of the holders of a     
majority of the outstanding Voting Common Stock of the Company is required for  
amendments which decrease the minimum option price for ISOs, extend the term of 
the Stock Option Plan beyond 10 years or the maximum term of the Options granted
beyond 10 years, withdraw the administration of the Stock Option Plan from the  
committee, change the class of eligible employees, officers or directors or     
increase the aggregate number of shares which may be issued pursuant to the     
provisions of the Stock Option Plan. Notwithstanding the foregoing, the Board of
Directors may, without the need for shareholder approval, amend the Stock Option
Plan in any respect to qualify ISOs as Incentive Stock Options under Section 422
of the Code.                                                                    

 With the exception of Options granted to Mr. Cornwell and Mr. Stuart J.
Beck, pursuant to the terms of each currently effective Option Agreement, 40%   
(and in two cases 20%) of the Options covered by the Option Agreement are       
exercisable by the Optionee immediately upon the date of grant (or with respect 
to certain Option Agreements, upon the next preceding January 1 after the date  
of grant) and an additional 20% of such options become exercisable on each      
January 1 thereafter, on a cumulative basis. Options granted to each of Mr.     
Cornwell and Mr. Stuart J. Beck vest as follows: (i) 60% of the Options granted 
on April 27, 1993 became exercisable on December 1, 1995 and 20% of such Options
become exercisable on each of December 1, 1996 and 1997; (ii) 40% of the Options
granted on April 25, 1995 became exercisable on April 25, 1996, 30% of such     
Options become exercisable on April 25, 1997, and 10% of such Options become    
exercisable on each of April 25, 1998, 1999 and 2000; (iii) with respect to     
44,000 of the Options granted on April 23, 1996 to each of Mr. Cornwell and Mr. 
Stuart Beck, 20% of such Options become exercisable on each of December 1, 1996,
1997, 1998, 1999 and 2000, and with respect to the remaining Options granted on 
April 23, 1996 to Mr. Cornwell and Mr. Stuart Beck, 40% of such Options become  
exercisable on April 23, 1997, 30% on April 23, 1998 and 10% on each of April   
23, 1999, 2000 and 2001; (iv) 50% of the Options granted on April 25, 1996      
become exercisable on each of October 23, 1997 and April 23, 1998; and (v)      
approximately 34% of all remaining Options vested immediately upon date of      
grant, and approximately 16% vest on each successive January 1.                 

    The exercise price per share for all ISOs may not be less than 100% of the
fair market value of a share of Common Stock (Nonvoting) on the date on which   
the Option is granted (or 110% of the fair market value on the date of grant of 
an ISO if the Optionee owns more than 10% of the total combined voting power of 
all classes of voting stock of the Company or any of its affiliates (a "10%     
Holder")). The exercise price per share for NQSOs may be less than, equal to or 
greater than the fair market value of a share of Common Stock (Nonvoting) on the
date such NQSO is granted. Options are not assignable or transferable other than
by will or the laws of descent and distribution.                                

   Unless sooner terminated by the Board of Directors, the Stock Option Plan
will terminate on April 1, 2000, 10 years after its effective date. Unless      
otherwise specifically provided in an Optionee's Option Agreement, each Option  
granted under the Stock Option Plan expires no later than 10 years after the    
date such Option is granted (5 years for ISOs granted to 10% Holders). Options  
may be exercised only during the period that the original Optionee has a        
relationship with the Company which confers eligibility to be granted Options   
and (i) for a period of 30 days after termination of such relationship, (ii) for
a period of 3 months after retirement by the Optionee with the consent of the   
Company, or (iii) for a period of 12 months after the death or disability of the
Optionee.                                                                       

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Management Stock Plan                                                           

     In April 1993, the Company adopted a Management Stock Plan (the "Management
Stock Plan") providing for the grant from time to time of awards denominated in 
shares of Common Stock (Nonvoting) (the "Bonus Shares") to all salaried         
executive employees of the Company. The purpose of the Management Stock Plan is 
to keep senior executives in the employ of the Company and to compensate such   
executives for their contributions to the growth and profits of the Company and 
its subsidiaries. The Company has set aside a reserve of 470,000 shares of      
Common Stock (Nonvoting) for grant under the Management Stock Plan (which       
reserve may be adjusted from time to time). All salaried executive employees    
(including officers and directors, except for persons serving as directors only)
are eligible to receive a grant under the Management Stock Plan. The Management 
Stock Plan is administered by a committee appointed by the Board of Directors   
which consists of not less than two members of the Board of Directors (the      
"Management Stock Plan Committee"). Pursuant to Board resolution, the members of
the Compensation Committee constitute the members of the Management Stock Plan  
Committee. The Management Stock Plan Committee, from time to time, selects      
eligible employees to receive a discretionary bonus of Bonus Shares based upon  
such employee's position, responsibilities, contributions and value to the      
Company and such other factors as the Management Stock Plan Committee deems     
appropriate. The Management Stock Plan Committee has discretion to determine the
date on which the Bonus Shares allocated to an employee will be issued to such  
employee. The Management Stock Plan Committee may, in its sole discretion,      
determine what part of an award of Bonus Shares is paid in cash and what part of
an award is paid in the form of Common Stock (Nonvoting). Any cash payment will 
be made to such employee as of the date the corresponding Bonus Shares would    
otherwise be issued to such employee and shall be in an amount equal to the fair
market value of such Bonus Shares on that date.                                 

     As of December 31, 1995, the Company has allocated a total of 466,000 Bonus
Shares pursuant to the Management Stock Plan, 210,200 of which had vested       
through December 31, 1995. Each allocation provides for the vesting of a        
percentage of the award on each December 31 after the date of the allocation.   

Target Cash Flow Option Plan                                                    

 On October 31, 1988, the Company entered into a Target Cash Flow Option
Plan and Agreement (the "Target Cash Flow Option Plan") with W. Don Cornwell and
Stuart J. Beck (collectively, the "Recipients"). The Target Cash Flow Option    
Plan granted to the Recipients non-qualified options ("Options") to purchase an 
aggregate of not more than 150,000 shares of Common Stock (Nonvoting) at an     
exercise price of $.01 per share. The Options vested and became exercisable upon
certain cash flow targets being met by the Company during each fiscal year      
through 1992. Options have vested for the purchase of 150,000 shares of Common  
Stock (Nonvoting), and on April 19, 1995, were exercised as follows: Mr.        
Cornwell: 82,500; Mr. Beck: 67,500.                                             

Director Stock Option Plan                                                      

 On March 1, 1994, the Company adopted a Director Stock Option Plan (the
"Director Option Plan") providing for the grant, from time to time, of Options  
to non-employee directors of the Company ("Director Participants") to purchase  
Common Stock (Nonvoting). The number of shares of Common Stock (Nonvoting)      
allocated for grant under the Director Option Plan is 300,000. As of December   
31, 1995, Options granted under the Director Option Plan were outstanding for   
the purchase of 101,700 shares of Common Stock (Nonvoting).                     

The Director Option Plan provides for the grant of NQSO's to Director 
Participants. Under the Plan, once every three years, each director was         
permitted to make an irrevocable Triennial Election to receive Options, in lieu 
of cash compensation, for attendance in person at each Regular Quarterly Meeting
during the Triennial Option Period covered by such election. At the end of the  
current Triennial Option Period and each third year anniversary thereafter,     
however, all directors will automatically receive an option to purchase 18,000  
shares of Common Stock (Nonvoting) as compensation for attendance at Regular    
Quarterly Meetings during the Triennial Option Period subsequent to the grant in
lieu of cash compensation. Directors elected or appointed during the course of a
Triennial Option Period receive Options, in lieu of a cash compensation, for the
remaining portion of such Triennial Option                                      

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Period. In addition, under the Director Option Plan, directors receive Automatic
Committee Awards for each Committee of the Board of Directors on which they     
serve.                                                                          

  During the Triennial Option Period, Options to purchase shares of Common
Stock (Nonvoting) become exercisable one year (or immediately in the case of    
Automatic Director Service Awards) from the date of attendance by director at a 
Regular Quarterly Meeting in the following amounts: (i) 1,500 shares for        
attendance in person; or (ii) 500 shares for attendance by telephonic means.    
Automatic Awards to purchase 1,500 shares of Common Stock (Nonvoting) become    
exercisable one year (or immediately for Automatic Awards to be granted after   
February 27, 1997) from the date of attendance in person at each regularly      
scheduled Committee meeting. The exercise price per share of all Options is the 
fair market value on the date of grant.                                         

    The following table sets forth information with respect to Options granted
to the executive officers of the Company during 1995.                           

 Option/SAR Grants in Last Fiscal Year

                                                        · Enlarge/Download Table


                                                                         Potential Realizable Value 
                                                                         at assumed Annual Rates of 
                                                                         Stock Price Appreciation   
                             Individual Grants                                for Option Term       
                 ------------------------------------------------------  -------------------------- 
                                % of Total                                                          
                                Options/SARs                                                        
                                 Granted to    Exercise or                                          
                   Options/SARs Employees in   Base Price     Expiration                            
     Name          Granted (#)   Fiscal Year  ($ Per Share)    Date          5% ($)        10% ($)  
--------------   ------------------------------------------------------   ------------    ----------
                                                                                                    
W. Don Cornwell       165,000        55.0%     $7.00         4/25/2005     $  726,373     $1,840,773

Stuart J. Beck        135,000        45.0%      7.00         4/25/2005        594,305      1,506,087

The following table sets forth, as of December 31, 1995, the number of
options and the value of unexercised options held by the Company's executive    
officers who held options as of that date, and the options exercised and the    
consideration received therefor by such persons during fiscal 1995.             

 Aggregated Option/SAR Exercises
 In Last Fiscal Year And
FY-End Option/SAR Values

                                                        · Enlarge/Download Table

                                                      Number of             Value of Unexercised  
                                                 Unexercised Options        in-the-Money Options  
                                                 at December 31, 1995       at December 31, 1995  
                                              -------------------------  -------------------------
                   Shares Acquired   Value                                                        
      Name          on Exercise     Realized  Exercisable/Unexercisable  Exercisable/Unexercisable
      ----          -----------     --------  -------------------------  -------------------------
                                                                                                  
W. Don Cornwell       82,500        $556,050       222,600/262,400       $1,456,350/$1,294,900    

Stuart J. Beck        67,500         454,950       182,700/214,800        1,119,638/1,060,050     

Lawrence I. Wills      -                -              3,750/-                20,156/-            

Compensation Committee Interlocks and Insider Participation                     

During 1995, Thomas R. Settle and Charles J. Hamilton, Jr. served as  
members of the Compensation Committee of the Board of Directors of the Company. 

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OWNERSHIP OF CAPITAL STOCK

The following table sets forth certain information, as of February 15,
1996, regarding beneficial ownership of the Company's Voting Common Stock by    
each shareholder who is known by the Company to own beneficially more than 5% of
the outstanding Voting Common Stock, each director, each executive officer and  
all directors and officers as a group, and beneficial ownership of: (i) the     
Company's Common Stock (Nonvoting) (assuming conversion of all preferred stock  
and exercise of all options for the purchase of Common Stock (Nonvoting), which 
conversion or exercise is at the option of the holder within sixty (60) days);  
and (ii) the Company's Cumulative Convertible Exchangeable Preferred Stock, by  
each director, each executive officer and all directors and officers as a group.
Except as set forth in the footnotes to the table, each shareholder listed below
has informed the Company that such shareholder has (i) sole voting and          
investment power with respect to such shareholder's shares of stock, except to  
the extent that authority is shared by spouses under applicable law and (ii)    
record and beneficial ownership with respect to such shareholder's shares of    
stock.                                                                          

                                                        · Enlarge/Download Table

                                                                                                       Cumulative Convertible
                                                                                                            Exchangeable     
                              Voting Common Stock             Common Stock (Nonvoting)                     Preferred Stock   
                              -------------------  -------------------------------------------------    ---------------------
                                    Shares                                Percent of Shares                    Shares        
                              Beneficially Owned                          Beneficially Owned              Beneficially Owned 
                              ------------------   Number of Shares       ------------------            ---------------------
                              Number      Percent  Beneficially Owned  Actual(1)    Fully Diluted(2)    Number        Percent
                              ------      -------  ------------------  ---------    -----------------   ------        -------
                                                                                                                             
W. Don Cornwell..............  98,250       55.0%     457,950 (3)           5.3%                 2.6%     9,750             *

Stuart J. Beck...............  80,250       45.0%     386,362 (4)           4.4%                 2.2%    10,000             *

Lawrence I. Wills............                           8,021 (5)              *                    *        --             *

Ellen McClain................                           2,702                  *                    *        --             *

Martin F. Beck...............                          78,914 (6)              *                    *     3,950             *

James L. Greenwald...........                          84,527 (7)           1.0%                    *     1,000             *

Vickee Jordan Adams..........                           4,137 (8)              *                    *        --             *

Edward Dugger III............                          45,257 (9)              *                    *        --             *

Thomas R. Settle.............                          57,412(10)              *                    *     3,000             *

Charles J.                                                                                                                   
  Hamilton, Jr...............                           4,550(11)              *                    *        --             *

Mikael Salovaara.............                          48,250(12)              *                    *     4,950             *
                              -------     ------    ------------           ----                  ---     ------          --- 
All directors and                                                                                                            
 officers as a                                                                                                               
 group(11)................... 178,500     100.0%    1,178,082              13.2%                 6.6%    32,650          1.8%

----------                                                                      

*    Less than 1%.                                                              

(1)  Actual percentage figures assume the conversion of such shareholder's      
   preferred stock into Common Stock (Nonvoting) and the exercise of options
for the purchase of Common Stock (Nonvoting) held by such shareholder,
  which conversion or exercise is at the option of the holder within sixty
(60) days.                                                            

(2)  Fully diluted percentage figures assume conversion of all outstanding      
  shares of preferred stock into Common Stock (Nonvoting), and exercise of
all options for the purchase of Common Stock (Nonvoting), which are   
  convertible or exercisable at the option of the holder within sixty (60)
days.                                                                 

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(3)  Includes 243,000 shares issuable upon exercise of options granted to Mr.   
     Cornwell under the Stock Option Plan which are exercisable at the option of
the holder within sixty (60) days, 48,750 shares issuable upon the    
     conversion of 9,750 shares of Cumulative Convertible Exchangeable Preferred
   Stock which are convertible at the option of the holder within sixty (60)
    days, and a total of 3,900 shares held by Mr. Cornwell's immediate family.
Mr. Cornwell disclaims beneficial ownership with respect to such 3,900
shares. The business address of Mr. Cornwell is Granite Broadcasting  
Corporation, 767 Third Avenue, 34th Floor, New York, New York, 10017. 

(4)  Includes 199,500 shares issuable upon exercise of options granted to Stuart
    J. Beck under the Stock Option Plan which are exercisable at the option of
the holder within sixty (60) days, and 50,000 shares issuable upon the
conversion of 10,000 shares of Cumulative Convertible Exchangeable    
  Preferred Stock which are convertible at the option of the holder within
sixty (60) days. The business address of Mr. Stuart Beck is Granite   
     Broadcasting Corporation, 767 Third Avenue, 34th Floor, New York, New York,
10017.                                                                

(5)  Includes 3,750 shares issuable upon the exercise of options granted to Mr. 
  Wills under the Stock Option Plan which are exercisable at the option of
the holder within sixty (60) days.                                    

(6)  Includes 19,750 shares issuable upon the conversion of 3,950 shares        
    (including 450 shares of such stock held by Mr. Beck's wife) of Cumulative
Convertible Exchangeable Preferred Stock which are convertible at the 
option of the holder within sixty (60) days, 6,000 shares held by Mr. 
 Beck's wife, and 1,300 shares issuable upon exercise of options granted
    under the Directors' Stock Option Plan which are exercisable at the option
of the holder within sixty (60) days. Mr. Beck disclaims beneficial   
     ownership with respect to shares held by his spouse. Mr. Beck is the father
of Stuart J. Beck.                                                    

(7)  Includes 5,000 shares issuable upon the conversion of 1,000 shares of      
   Cumulative Convertible Exchangeable Preferred Stock which are convertible
at the option of the holder within sixty (60) days and 4,000 shares   
     issuable upon exercise of options granted under the Directors' Stock Option
  Plan which are exercisable at the option of the holder within sixty (60)
days.                                                                 

(8)  Includes 1,800 shares issuable upon the exercise of Options granted under  
     the Directors' Stock Option Plan which are exercisable at the option of the
holder within sixty (60) days.                                        

(9)  Represents shares held by UNC Ventures, Inc. Mr. Dugger is the President   
     and Chief Executive Officer of UNC Ventures, Inc. and holds, subject to the
    approval of the board of directors of UNC Ventures, Inc., investment power
with respect to such shares.                                          

(10) Includes 15,000 shares issuable upon the conversion of 3,000 shares of     
   Cumulative Convertible Exchangeable Preferred Stock which are convertible
  at the option of the holder within sixty (60) days, 4,500 shares held by
    Mr. Settle's wife as custodian for his children, and 3,900 shares issuable
 upon exercise of options granted under the Directors' Stock Option Plan
   which are exercisable at the option of the holder within sixty (60) days.
   Mr. Settle disclaims beneficial ownership with respect to the shares held
by his spouse as custodian for his children.                          

(11) Includes 4,300 shares issuable upon exercise of options granted under the  
  Directors' Stock Option Plan, which are exercisable at the option of the
holder within sixty (60) days.                                        

(12) Includes: (i) 3,500 shares, and 5,000 shares issuable upon the conversion  
 of 1,000 shares of Cumulative Convertible Exchangeable Preferred Stock,
   which are convertible at the option of the holder within sixty (60) days,
    held in Trust for the benefit of one of Mr. Salovaara's children for which
    Mr. Salovaara is the Trustee; (ii) 3,500 shares, and 5,000 shares issuable
    upon the conversion of 1,000 shares of Cumulative Convertible Exchangeable
   Preferred Stock, which are convertible at the option of the holder within
  sixty (60) days, held in Trust for the benefit of one of Mr. Salovaara's
    children for which Mr. Salovaara's wife is the Trustee; (iii) 9,750 shares
issuable upon the conversion of 1,950 shares of Cumulative Convertible

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  Exchangeable Preferred Stock, which are convertible at the option of the
    holder within sixty (60) days; (iv) 4,500 shares issuable upon exercise of
options granted under the Directors' Stock Option Plan which are      
 exercisable at the option of the holder within sixty (60) days; and (v)
5,000 shares issuable upon conversion of 1,000 shares of Cumulative   
Convertible Exchangeable Preferred Stock, which are convertible at the
    option of the holder within sixty (60) days, held in Trust for the benefit
of nonaffiliates of Mr. Salovaara, for which Mr. Salovaara and Mr.    
Salovaara's wife are among the Trustees and as to which Mr. Salovaara 
disclaims beneficial ownership.                                       

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CERTAIN TRANSACTIONS

  On June 1, 1995, the Company acquired substantially all of the assets of
WWMT from Busse for $98,942,000 in cash (including $3,942,000 in working capital
and other adjustments) and the assumption of certain liabilities of WWMT.       
Certain investment limited partnerships, as to which Mr. Salovaara, a director  
of the Company (i) owns a 50% interest in a general partner (which general      
partner has a 1% partnership interest in the limited partnerships), (ii) is a   
general partner of the general partnership that serves as the investment advisor
for such investment limited partnerships, and (iii) together with his immediate 
family members, owns limited partnership interests of approximately 1.25%, owned
approximately $193,400,000 (including accrued interest) of the non-bank         
indebtedness of Busse, which indebtedness was in default. Busse entered into an 
agreement in principle with, among others, such investment partnerships         
outlining a financial restructuring of Busse, the terms of which are            
incorporated into a prepackaged bankruptcy joint plan of reorganization (the    
"Plan") filed with the Bankruptcy Court for the District of Delaware. Pursuant  
to the Plan which was confirmed, and substantially consummated on May 3, 1995,  
such investment limited partnerships acquired 98% of the common stock of Busse  
and Messrs. Cornwell and Stuart Beck constitute two of the three members of     
Busse's board of directors.                                                     

    Katz Communications serves as the exclusive representative and sales agent
for all of KBJR's, WEEK's and WPTA's national broadcast advertising. James L.   
Greenwald, a member of the Board of Directors of the Company, was the Chairman  
and Chief Executive Officer of Katz Communications until August 1994, and during
part of 1994 beneficially owned or controlled the voting or disposition of      
135,000 shares (or 8.7%) of its outstanding voting stock (Mr. Greenwald no      
longer owns or controls the voting or disposition of such shares). During 1994, 
the Company paid $518,257 to Katz Communications for services rendered to KBJR, 
WEEK and WPTA. The Board of Directors of the Company believes that these        
arrangements were made, and continue to be, on commercially reasonable terms,   
which are at least as favorable to the Company as terms which could have been   
negotiated with an unaffiliated third party. Mr. Greenwald's interest in these  
payments is limited to any benefits which may accrue to him as a shareholder of 
Katz Communications.                                                            

   The Company is a party to a financial advisory agreement, dated September
12, 1994, with The Blackstone Group, an investment advisory firm in which Mr.   
Salovaara, a director of the Company, is a limited partner. Pursuant to this    
agreement, The Blackstone Group provides financial advisory services to the     
Company in connection with the analysis, structuring, negotiation and           
effectuation of acquisitions of certain television broadcast properties by the  
Company, and is paid a fee for successful acquisitions based upon a formula set 
forth in the agreement. The Blackstone Group is also reimbursed by the Company  
for reasonable out-of-pocket expenses it incurs under the agreement. The        
Blackstone Group received $421,000 for financial advisory services it rendered  
to the Company in connection with the WKBW Acquisition.                         

   In 1995, the Company made a loan to Mr. Cornwell, Chief Executive Officer
and Chairman of the Board of Directors, in the amount of $348,660 and a loan to 
Mr. Stuart Beck, President and a member of the Board of Directors, in the amount
of $221,200 to pay for certain personal taxes. Both loans are term loans        
providing for an annual interest rate of 9%, payable semi-annually on December  
29 and June 29 of each year, with all principal and remaining interest due on   
December 29, 2004. As of May 31, 1996, the amount outstanding on such loans to  
Messrs. Cornwell and Beck was $361,822 and $229,550, respectively, which amounts
represented the largest amount outstanding thereunder up to that date.          

     On April 23, 1996, the Company made a loan to Mr. Cornwell in the amount of
$886,875 to pay the exercise price incurred in connection with exercising       
Options. The loan is a term loan which provides for an annual interest rate of  
8%, payable annually on April 23 of each year, with all principal and remaining 
interest due on April 23, 2001. As of May 31, 1996, the amount outstanding under
the loan was $894,167, which amount represented the largest amount outstanding  
thereunder up to that date.                                                     

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DESCRIPTION OF NEW NOTES

General                                                                         

The Old Notes were issued, and the New Notes will be issued, under an 
Indenture dated as of February 22, 1996 (the "Indenture"), between the Company  
and The Bank of New York, as Trustee (the "Trustee"). The Indenture authorizes a
maximum principal amount of $110,000,000 of the Old Notes and $110,000,000 of   
the New Notes. The New Notes will be issued solely in exchange for an equal     
principal amount of the outstanding Old Notes pursuant to the Exchange Offer.   
The terms of the New Notes will be identical in all material respects to the    
form and terms of the Old Notes except that: (i) the New Notes will have been   
registered under the Securities Act (and will generally be freely transferable  
by holders thereof who are not a Restricted Holder); and (ii) the registration  
rights and contingent interest rate provisions applicable to the Old Notes are  
generally not applicable to the New Notes. References in this Section to the    
"Notes" will be references to the Old Notes and/or the New Notes, depending upon
which are outstanding. The definition of certain terms used in the following    
summary are set forth below under "-- Certain Definitions."                     

The Indenture is by its terms subject to and governed by the Trust    
Indenture Act of 1939, as amended. The statements under this caption relating to
the Notes and the Indenture are summaries and do not purport to be complete, and
where reference is made to particular provisions of the Indenture, such         
provisions, including the definition of certain terms, are incorporated by      
reference as a part of such summaries or terms, which are qualified in their    
entirety by such reference. All material provisions of the Notes and the        
Indenture, however, are set forth herein. Unless otherwise indicated, references
under this caption to sections, "ss." or articles are references to sections and
articles of the Indenture. A copy of the Indenture is available as set forth    
under "Available Information."                                                  

The Notes are general unsecured senior subordinated obligations of the
Company and mature on December 1, 2005.                                         

   The Notes bear interest at the rate of 9 3/8% per annum from February 22,
1996 or from the most recent interest payment date to which interest has been   
paid or provided for, payable semi-annually on June 1 and December 1 of each    
year, commencing June 1, 1996, to the person in whose name the Note (or any     
Predecessor Note) is registered at the close of business on the May 15 or       
November 15 next preceding such interest payment date. (ss.ss. 301 and 307)     
Interest on the Notes is computed on the basis of a 360-day year of twelve      
30-day months. (ss. 310) At the option of the Company, principal of and premium,
if any, and interest on the Notes may be paid at the corporate trust office of  
the Trustee or by check mailed to the registered address of such holders.       
(ss.ss. 301, 305 and 1002)                                                      

The New Notes will be issued only in fully registered form, without   
coupons, in denominations of $1,000 and integral multiples thereof. (ss. 302) No
service charge will be made for any registration of transfer or exchange of     
Notes, but the Company may require payment of a sum sufficient to cover any tax 
or other governmental charge payable in connection therewith. (ss. 305)         

  Initially, the Trustee will act as Paying Agent and Registrar. The Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar. (ss. 305)                                                            

Settlement for the Notes will be made in immediately available funds. 
Payments by the Company in respect of the Notes (including principal, premium,  
if any, and interest) will be made in immediately available funds. Secondary    
trading in long-term notes and debentures of corporate issuers is generally     
settled in clearing-house or next-day funds. In contrast, the Notes will trade  
in the PORTAL System and in DTC's Same-Day Funds Settlement System, and any     
permitted secondary market trading activity in the Notes will therefore be      
required by DTC to be settled in immediately available funds. No assurance can  
be given as to the effect, if any, of such settlement arrangements on trading   
activity in the Notes.                                                          

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Form, Denomination and Book-Entry Procedures                                    

The Old Notes initially sold to qualified institutional buyers were   
represented by one or more fully-registered global notes (collectively, the     
"Book-Entry Old Note"). The Book-Entry Old Note was deposited upon issuance with
DTC and registered in the name of DTC or a nominee of DTC (the "Book-Entry Old  
Note Registered Owner"). The Book-Entry Old Note, to the extent directed by     
holders thereof in their Letters of Transmittal, will be exchanged through      
book-entry electronic transfer for one or more global New Notes in definitive,  
fully registered form without coupons (collectively, the "Book-Entry New Note") 
registered in the name of a nominee of DTC (the "Book-Entry New Note Registered 
Owner"). No service charge will be made for any registration of transfer or     
exchange of Notes, but the Company may require payment of a sum sufficient to   
cover any tax or other governmental charge payable in connection therewith.     

  Old Notes sold to accredited investors within the meaning of Rule 501 of
Regulation D under the Securities Act who were not qualified institutional      
buyers were issued in registered, certificated form without interest coupons.   
New Notes issued to non-qualified institutional buyers in exchange for Old Notes
held by such investors will be issued only in certificated, fully registered,   
definitive form. The Book-Entry New Note will, upon request, be exchangeable for
other New Notes in definitive, fully registered form without coupons in         
denominations of $1,000 and integral multiples thereof, but only in accordance  
with DTC's customary procedures. The Book-Entry New Notes will also be          
exchangeable in certain other limited circumstances. The Company, the Trustee   
and any other agent thereof will be entitled to treat DTC's nominee as the sole 
owner and holder of the unexchanged portion of the Book-Entry New Notes for all 
purposes.                                                                       

 DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,   
the "Participants") and to facilitate the clearance and settlement of           
transactions in those securities between Participants through electronic        
book-entry changes in accounts of its Participants. The Participants include    
securities brokers and dealers (including the Purchasers), banks, trust         
companies, clearing corporations and certain other organizations. Access to     
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect       
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect       
Participants. The ownership interest and transfer of ownership interest of each 
actual purchaser of each security held by or on behalf of DTC are recorded on   
the records of the Participants and Indirect Participants.                      

   Payments in respect of the principal of and premium, if any, and interest
on any New Notes registered in the name of the Book-Entry New Note Registered   
Owner will be payable by the Trustee to the Book-Entry New Note Registered Owner
in its capacity as the registered Holder under the Indenture. Under the terms of
the Indenture, the Company and the Trustee will treat the persons in whose names
the New Notes, including the Book-Entry New Note, are registered as the owners  
thereof for the purpose of receiving such payments and for any and all other    
purposes whatsoever. Consequently, neither the Company, the Trustee nor any     
agent of the Company or the Trustee has or will have any responsibility or      
liability for (i) any aspect of DTC's records or any Participant's records      
relating to or payments made on account of beneficial ownership interests in the
Book-Entry New Note, or for maintaining, supervising or reviewing any of DTC's  
records or any Participant's records relating to the beneficial ownership       
interests in the Book-Entry New Note or (ii) any other matter relating to the   
actions and practices of DTC or any of its Participants. DTC has advised the    
Company that its current practice, upon receipt of any payment in respect of    
securities such as the New Notes (including principal and interest), is to      
credit the accounts of the relevant Participants with the payment on the payment
date, in amounts proportionate to their respective holdings in principal amount 
of beneficial interests in the relevant security as shown on the records of DTC 
unless DTC has reason to believe it will not receive payment on such payment    
date. Payments by the Participants and the Indirect Participants to the         
beneficial owners of New Notes will be governed by standing instructions and    
customary practices and will be the responsibility of the Participants or the   
Indirect Participants and will not be the responsibility of DTC, the Trustee or 
the Company. Neither the Company nor the Trustee will be liable for any delay by
DTC or any of its Participants in identifying the beneficial owners of the New  
Notes, and                                                                      

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the Company and the Trustee may conclusively rely on and will be protected in   
relying on instructions from the Book-Entry New Note Registered Owner for all   
purposes.                                                                       

    The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.                       

Redemption                                                                      

  The Notes will be redeemable in the event that on or before February 22,
1999 the Company receives net proceeds from the sale of its Capital Stock (other
than Disqualified Stock) in one or more offerings, in which case the Company    
may, at its option and from time to time, use all or a portion of any such net  
proceeds to redeem Notes in a principal amount of at least $5,000,000 and up to 
an aggregate amount equal to 33% of the original principal amount of the Notes, 
provided, however, that Notes in an amount equal to at least 67% of the original
principal amount of the Notes remain outstanding after each such redemption. Any
such redemption must occur on a Redemption Date within 75 days of any such sale 
and upon not less than 30 nor more than 60 days' notice mailed to each Holder of
Notes to be redeemed at such Holder's address appearing in the Note Register, in
amounts of $1,000 or an integral multiple of $1,000, at a redemption price of   
109.375% of the principal amount of the Notes plus accrued interest to but      
excluding the Redemption Date (subject to the right of Holders of record on the 
relevant Regular Record Date to receive interest due on an Interest Payment Date
that is on or prior to the Redemption Date).                                    

   The Notes will be subject to redemption, at the option of the Company, in
whole or in part, at any time on or after December 1, 2000 and prior to         
maturity, upon not less than 30 nor more than 60 days' notice mailed to each    
Holder of Notes to be redeemed at the address appearing in the Note Register, in
amounts of $1,000 or an integral multiple of $1,000, at the following Redemption
Prices (expressed as percentages of principal amount) plus accrued interest to  
but excluding the Redemption Date (subject to the right of Holders of record on 
the relevant Regular Record Date to receive interest due on an Interest Payment 
Date that is on or prior to the Redemption Date), if redeemed during the        
12-month period beginning December 1 of each of the years indicated below:      

                                                                · Download Table

                                                                  Redemption 
Year                                                                 Price   
----                                                                 -----   
                                                                             
2000........................................................         104.687%
2001........................................................         102.344%
2002 and thereafter.........................................         100.000%

  In the case of any redemption by the Company, the Notes will be redeemed
pro rata if less than all the Notes are to be redeemed. (ss.ss. 203, 1101, 1104,
1105 and 1107)                                                                  

The Notes will not have the benefit of any sinking fund obligations.  

Subordination                                                                   

     The Notes will, to the extent set forth in the Indenture, be subordinate in
right of payment to the prior payment of all Senior Debt. Upon any payment or   
distribution of assets of the Company to creditors upon any liquidation,        
dissolution, winding up, reorganization, assignment for the benefit of          
creditors, marshalling of assets or any bankruptcy, insolvency or similar       
proceedings of the Company, the holders of Senior Debt will first be entitled to
receive payment in full in cash or cash equivalents of principal of (premium, if
any) and interest on, such Senior Debt before the Holders of Notes are entitled 
to receive any payment of principal of (premium, if any) or interest on, or any 
obligation to purchase, the Notes. In the event that notwithstanding the        
foregoing, the Trustee or the Holder of any Note receives any payment or        
distribution of assets of the Company of any kind or character (including any   
such payment or distribution which may be payable or deliverable by the reason  
of the payment of any other indebtedness of the Company being subordinated to   
the payment of the Notes), before all the Senior Debt is so paid in full, then  
such payment or distribution will be required to be paid over or delivered      
forthwith to the                                                                

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trustee in bankruptcy or other Person making payment or distribution of assets  
of the Company for application to the payment of all Senior Debt remaining      
unpaid, to the extent necessary to pay the Senior Debt in full in cash or cash  
equivalents. However, notwithstanding the foregoing, Holders of the Notes may   
receive shares of stock of the Company or securities of the Company which are   
subordinate in right of payment to all Senior Debt to substantially the same    
extent as the Notes are so subordinated ("subordinated consideration"). (ss.    
1202)                                                                           

     The Company may not make any payments on account of the Notes or on account
of the purchase or redemption or other acquisition of Notes (except for         
subordinated consideration) if there shall have occurred and be continuing a    
default in the payment of principal of (premium, if any) or interest on the     
Senior Debt (a "Senior Payment Default"). If there shall have occurred and be   
continuing any default (other than a Senior Payment Default) with respect to any
Senior Debt permitting the holders thereof (or a trustee on behalf thereof) then
to accelerate the maturity thereof (a "Senior Nonmonetary Default"), and the    
Company and the Trustee have received written notice thereof from the Agent Bank
under the Senior Loan Agreement (or any successor credit facility) or any other 
holder of Senior Debt designated by the Company, then the Company may not make  
any payments on account of the Notes or on account of the purchase or redemption
or other acquisition of Notes (except for subordinated consideration) for a     
period (a "blockage period") commencing on the date the Company and the Trustee 
receive such written notice and ending on the earlier of (x) 179 days after such
date and (y) the date, if any, on which the Senior Debt to which such default   
relates is discharged or such default is waived or otherwise cured. In any      
event, not more than one blockage period may be commenced during any period of  
360 consecutive days and there shall be a period of at least 181 consecutive    
days in each 360-day period when no blockage period is in effect. No Senior     
Nonmonetary Default with respect to Senior Debt that existed or was continuing  
on the date of the commencement of any blockage period with respect to the      
Senior Debt initiating such blockage period will be, or can be, made the basis  
for the commencement of a second blockage period, unless such default has been  
cured or waived for a period of not less than 90 consecutive days. In the event 
that, notwithstanding the foregoing, the Company makes any payment to the       
Trustee or the Holder of any Notes prohibited by the subordination provisions,  
then such payment will be required to be paid over and delivered forthwith to   
the holders of the Senior Debt remaining unpaid, to the extent necessary to pay 
in full all the Senior Debt. (Article Twelve)                                   

   By reason of such subordination, in the event of insolvency, creditors of
the Company who are not holders of Senior Debt or of the Notes may recover less,
ratably, than holders of Senior Debt and may recover more, ratably, than the    
Holders of the Notes.                                                           

 "Senior Debt" means (a) the principal of (premium, if any) and interest
(including interest accruing on or after the filing of any petition in          
bankruptcy or for reorganization relating to the Company whether or not such    
claim for post-petition interest is allowed in such proceeding) on, and         
penalties and any obligation of the Company for reimbursement, indemnities and  
fees relating to, Debt outstanding pursuant to the Senior Loan Agreement, (b)   
payment obligations of the Company under interest rate swap or similar          
agreements or foreign currency hedge, exchange or similar agreements entered    
into to hedge Debt Incurred under the Senior Loan Agreement or any renewal,     
refunding, refinancing or extension thereof, (c) all other Debt for money       
borrowed of the Company referred to in the definition of Debt other than Clause 
(vi), and (d) all renewals, extensions, modifications, refinancings, refundings 
and amendments of any Debt referred to in Clause (a), (b) or (c) above, unless  
but only to the extent, in the case of any particular Debt referred to in Clause
(a), (b) or (c) above, (A) such Debt is owed to a Subsidiary, (B) the instrument
creating or evidencing the same or pursuant to which the same is outstanding    
expressly provides that such Debt is not superior in right of payment to the    
Notes, (C) such Debt is Incurred in violation of the Indenture, or (D) such Debt
is subordinate in right of payment in respect to any other Debt of the Company. 
(ss. 101)                                                                       

     The subordination provisions described above will cease to be applicable to
the Notes upon any defeasance or covenant defeasance of the Notes as described  
under "Defeasance." (Article Thirteen)                                          

 As of May 31, 1996, there was no term loan borrowings and $5,000,000 of
revolving credit facility borrowings outstanding under the Credit Agreement. See
"Capitalization."                                                               

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Registration Covenant; Exchange Offer                                           

    In connection with the issuance of the Old Notes, the Company entered into
an Exchange and Registration Rights Agreement (the "Registration Rights         
Agreement") pursuant to which the Company agreed, for the benefit of the Holders
of the Notes, (i) to file with the Commission, within 75 days following the     
Closing, a registration statement (the "Exchange Offer Registration Statement") 
under the Securities Act relating to an exchange offer (the "Exchange Offer")   
pursuant to which notes substantially identical to the Old Notes (except that   
such notes will not contain terms with respect to transfer restrictions) (the   
"New Notes") would be offered in exchange for the then outstanding Old Notes    
tendered at the option of the holders thereof and (ii) to use its reasonable    
best efforts to cause the Exchange Offer Registration Statement to become       
effective as soon as practicable thereafter. The Company further agreed to      
commence the Exchange Offer promptly after the Exchange Offer Registration      
Statement became effective, hold the offer open for at least 30 days, and       
exchange New Notes for all Old Notes validly tendered and not withdrawn before  
the expiration of the offer.                                                    

  Under existing Commission interpretations set forth in no-action letters
issued to third parties, the Company believes that the New Notes will in general
be freely transferable after the Exchange Offer without further registration    
under the Securities Act, except that broker-dealers ("Participating            
Broker-Dealers") receiving New Notes in the Exchange Offer will be subject to a 
prospectus delivery requirement with respect to resales of those New Notes. The 
Commission has taken the position that Participating Broker-Dealers may fulfill 
their prospectus delivery requirements with respect to the New Notes (other than
a resale of an unsold allotment from the original sale of the Old Notes) by     
delivery of the prospectus contained in the Exchange Offer Registration         
Statement. Under the Registration Rights Agreement, the Company is required to  
allow Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use the prospectus contained in the Exchange
Offer Registration Statement in connection with the resale of such New Notes.   
The Exchange Offer Registration Statement will be kept effective for a period of
up to 180 days after the Exchange Offer has been consummated in order to permit 
resales of Old Notes acquired by broker-dealers in after-market transactions.   
Each Holder of Old Notes (other than certain specified Holders) who wishes to   
exchange such Old Notes for New Notes in the Exchange Offer will be required to 
represent that any New Notes to be received by it will be acquired in the       
ordinary course of its business, that at the time of the commencement of the    
Exchange Offer it is not participating, does not intend to participate and has  
no arrangement or understanding with any person to participate in, the          
distribution (within the meaning of the Securities Act) of the Exchange Notes   
and that it is not an Affiliate of the Company.                                 

  However, if on or before the date of consummation of the Exchange Offer,
the existing Commission interpretations are changed such that the Notes would   
not in general be freely transferable in such manner on such date, the Company  
will, in lieu of effecting registration of New Notes, use its reasonable best   
efforts to cause a registration statement under the Securities Act relating to a
shelf registration of the Old Notes for resale by Holders (the "Resale          
Registration") to become effective and to remain effective for a period of up to
three years after the effective date of such registration statement. The Company
will, in the event of the Resale Registration, provide to the Holders of the Old
Notes copies of the prospectus that is a part of the registration statement     
filed in connection with the Resale Registration, notify such Holders when the  
Resale Registration for the Old Notes has become effective and take certain     
other actions as are required to permit unrestricted resales of the Old Notes. A
Holder of Old Notes that sells such Old Notes pursuant to the Resale            
Registration generally would be required to be named as a selling securityholder
in the related prospectus and to deliver a prospectus to purchasers, will be    
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the           
Registration Rights Agreement that are applicable to such a Holder (including   
certain indemnification obligations).                                           

   In the event that (i) the Company did not file the registration statement
relating to the Exchange Offer within 75 days following the Closing, or (ii)    
such registration statement (or, if applicable, the Resale Registration) had not
become effective within 150 days following the Closing, or (iii) the Exchange   
Offer has not been consummated within 30 business days after the effective date 
of the Exchange Offer Registration Statement, or (iv) any registration statement
required by the Registration Rights Agreement is filed and declared effective   
but shall thereafter cease to be effective (except as specifically permitted    
therein) without being succeeded immediately by                                 

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an additional registration statement filed and declared effective (any such     
event referred to in Clauses (i) through (iv), the "Registration Default"), then
the per annum interest rate on the Old Notes will increase by 0.5% for the      
period from the occurrence of the Registration Default until such time as no    
Registration Default is in effect (at which time the interest rate will be      
reduced to its initial rate). If the Company has not consummated the Exchange   
Offer (or, if applicable, the Resale Registration has not become effective),    
within 270 days following the Closing, then the per annum interest rate on the  
Old Notes will increase by an additional 0.5% for so long as the Company has not
consummated the Exchange Offer (or until such Resale Registration becomes       
effective).                                                                     

The summary herein of certain provisions of the Registration Rights   
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights     
Agreement, a copy of which is available as set forth in "Available Information."

Covenants                                                                       

The Indenture contains, among others, the following covenants:        

Limitation on Debt                                                          

   The Company may not, and may not permit any Subsidiary to, Incur any Debt
unless the ratio of (a) the aggregate principal amount of Debt of the Company   
and its Subsidiaries outstanding as of the most recent available balance sheet, 
after giving pro forma effect to the Incurrence of such Debt and any other Debt 
Incurred since such balance sheet date and the receipt and application of the   
proceeds thereof, to (b) Pro Forma Consolidated Cash Flow for the preceding four
full fiscal quarters, determined on a pro forma basis as if such Debt and any   
other Debt Incurred since such balance sheet date had been Incurred and the     
proceeds therefrom had been applied at the beginning of such four fiscal        
quarters, would be less than 6.5 to 1.                                          

    Notwithstanding the foregoing, the Company or any Subsidiary may Incur the
following without regard to the foregoing limitation: (i) Debt under the Senior 
Loan Agreement not to exceed $100,000,000 aggregate principal amount at any one 
time outstanding, and any renewal, extension, refinancing or refunding thereof  
in an amount which, together with any amount remaining outstanding or available 
under the Senior Loan Agreement, does not exceed $100,000,000; (ii) Debt        
evidenced by the Notes; (iii) Debt owed by the Company to any Wholly Owned      
Subsidiary of the Company or Debt owed by a Subsidiary of the Company to the    
Company or a Wholly Owned Subsidiary of the Company; provided, however, that    
upon either (1) the transfer or other disposition by such Wholly Owned          
Subsidiary or the Company of any Debt so permitted to a Person other than the   
Company or another Wholly Owned Subsidiary of the Company or (2) the issuance   
(other than directors' qualifying shares), sale, transfer or other disposition  
of shares of Capital Stock (including by consolidation or merger) of such Wholly
Owned Subsidiary to a Person other than the Company or another such Wholly Owned
Subsidiary, the provisions of this Clause (iii) shall no longer be applicable to
such Debt and such Debt shall be deemed to have been Incurred at the time of    
such transfer or other disposition; (iv) Debt Incurred or Incurrable in respect 
of letters of credit, bankers' acceptances or similar facilities not to exceed  
$2,000,000 at any one time outstanding; (v) Capital Lease Obligations whose     
Attributable Value will not exceed $5,000,000 at any one time outstanding; (vi) 
Debt arising from the honoring by a bank or other financial institution of a    
check, draft or similar instrument drawn against insufficient funds in the      
ordinary course of business, provided that such Debt is extinguished within two 
Business Days of its Incurrence; (vii) Debt Incurred by a Person prior to the   
time (A) such Person became a Subsidiary of the Company, (B) such Person merges 
into or consolidates with a Subsidiary of the Company, (C) another Subsidiary of
the Company merges into or consolidates with such Person (in each case in a     
transaction in which such Person becomes a Subsidiary of the Company) or (D)    
such Person sells any of its property consisting of operating assets to a       
Subsidiary of the Company subject to such Debt (whether such Debt is recourse or
non-recourse to such Subsidiary), provided that in any such case such Debt was  
not Incurred in anticipation of such transaction; (viii) Debt evidenced by the  
7.75% Junior Subordinated Convertible Debentures due 2005 (the "Exchange        
Debentures") if the Exchange Debentures are issued in exchange for the Company's
Cumulative Convertible Exchangeable Preferred Stock; (ix) renewals, refundings, 
refinancings or extensions (collectively, "refinancings") of the Notes, the     
12.75% Debentures, the 10 3/8% Notes or any other outstanding Debt that is      
Incurred in compliance with the provisions of                                   

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the Indenture, other than Debt referred to in Clauses (i) through (vi) above, in
an aggregate principal amount not to exceed the principal amount of the Debt so 
refinanced plus the amount of any premium required to be paid in connection with
such refinancing pursuant to the terms of the Debt refinanced or the amount of  
any premium reasonably determined by the Company as necessary to accomplish such
refinancing by means of a tender offer or privately negotiated repurchase, plus 
the amount of expenses of the Company Incurred in connection with such          
refinancing, provided that, (A) to the extent such refinancing Debt is not      
Senior Debt, such refinancing Debt does not have an Average Life less than the  
Average Life of the Debt being refinanced and (B) if such Debt is subordinated  
in right of payment to the Notes such refinancing Debt is subordinated in right 
of payment to the Notes at least to the extent that the Debt to be refinanced is
subordinated to the Notes; and (x) Debt not otherwise permitted to be Incurred  
pursuant to Clauses (i) through (ix) above, which, together with any other      
outstanding Debt Incurred pursuant to this Clause (x), has an aggregate         
principal amount not in excess of $15,000,000 at any one time outstanding. (ss. 
1008)                                                                           

    Other than the limitations on incurrence of indebtedness contained in this
covenant, there are no provisions in the Indenture that would protect the       
holders of the Notes in the event of a highly leveraged transaction.            

Limitation on Certain Debt                                                  

    The Company may not Incur or permit to exist any Debt that is by its terms
both (i) subordinate in right of payment to any Senior Debt and (ii) senior in  
right of payment to the Notes, in each case other than by reason of its         
maturity. The Company may not Incur or permit to exist any Debt that is by its  
terms subordinate in right of payment to the Notes unless such Debt constitutes 
Subordinated Debt. (ss. 1009)                                                   

Limitation on Restricted Payments                                           

The Company (i) may not, directly or indirectly, declare or pay any   
dividend, or make any distribution in respect of its Capital Stock or to the    
holders thereof (including pursuant to a merger or consolidation of the Company,
but excluding (a) any dividends or distributions payable solely in shares of its
Capital Stock (other than Disqualified Stock) or in options, warrants or other  
rights to acquire its Capital Stock (other than Disqualified Stock) and (b)     
dividends in accordance with the terms of the Company's Cumulative Convertible  
Exchangeable Preferred Stock), (ii) may not, and may not permit any Subsidiary  
of the Company to, directly or indirectly, purchase, redeem or otherwise acquire
or retire for value (a) any Capital Stock of the Company or (b) any options,    
warrants, or rights to purchase or acquire shares of Capital Stock of the       
Company (in the case of either (a) or (b) other than in exchange for the        
Company's Capital Stock (other than Disqualified Stock) or options, warrants or 
other rights to purchase the Company's Capital Stock (other than Disqualified   
Stock)), (iii) may not make, or permit any Subsidiary of the Company to make,   
any loan, advance, capital contribution to or Investment in, or payment on a    
Guarantee of any obligation of, any Affiliate, other than the Company or a      
Wholly Owned Subsidiary of the Company, (iv) may not, and may not permit any    
Subsidiary of the Company to, redeem, defease, repurchase, retire or otherwise  
acquire or retire for value prior to any scheduled maturity, repayment or       
sinking fund payment, Debt of the Company which is subordinated in right of     
payment to the Notes (other than in exchange for the Company's Capital Stock    
(other than Disqualified Stock) or options, warrants or other rights to purchase
the Company's Capital Stock (other than Disqualified Stock)) and (v) may not    
make any Investment in any Subsidiary which is subject to an encumbrance or     
restriction described under "Limitations Concerning Distributions By and        
Transfers to Subsidiaries" or any Investments in any Unrestricted Subsidiary    
(each of Clauses (i) through (v) being a "Restricted Payment"), if at the time  
thereof: (1) an Event of Default, or an event that with the lapse of time or the
giving of notice, or both, would constitute an Event of Default, shall have     
occurred and is continuing, or (2) upon giving effect to such Restricted        
Payment, the aggregate of all Restricted Payments from March 31, 1995 exceeds   
the sum of: (a) the remainder of (x) 100% of the cumulative Consolidated Cash   
Flow (or, in the case Consolidated Cash Flow shall be negative, less 100% of    
such deficit) from March 31, 1995 through the last day of the last full fiscal  
quarter immediately preceding such Restricted Payment minus (y) the product of  
1.4 times the cumulative Consolidated Interest Expense from March 31, 1995      
through the last day of the last full fiscal quarter immediately preceding such 
Restricted Payment; plus (b) 100% of the aggregate net proceeds received by the 
Company, including the fair market value of property other than cash (as        
determined in good faith by the Board of Directors                              

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and evidenced by a Board Resolution filed with the Trustee), since March 31,    
1995 from the issuance (other than to a Subsidiary) of Capital Stock (other than
Disqualified Stock and other than by a Subsidiary) of the Company and options,  
warrants or other rights to purchase or acquire Capital Stock of the Company    
(other than Disqualified Stock) and the principal amount of Debt of the Company 
that has been converted into Capital Stock of the Company (other than           
Disqualified Stock and other than by a Subsidiary) since March 31, 1995; plus   
(c) an amount equal to the net reduction in Investments made by the Company and 
its Subsidiaries subsequent to the date of original issue of the Notes pursuant 
to Clauses (iii) and (v) above in any Affiliate or Unrestricted Subsidiary or   
Subsidiary subject to an encumbrance or restriction upon the disposition,       
liquidation or repayment (including by way of dividends) thereof, from          
redesignations of Unrestricted Subsidiaries as Subsidiaries or from the removal 
of such encumbrance or restriction, but only to the extent such amounts are not 
included in Consolidated Net Income and not to exceed in the case of any Person 
the amount of Investments previously made by the Company and its Subsidiaries in
such Persons; plus (d) $15,000,000.                                             

 Notwithstanding the foregoing, so long as no Event of Default, or event
that with the passing of time or the giving of notice, or both, would constitute
an Event of Default, shall have occurred and is continuing or would result      
therefrom, the Company and any Subsidiary of the Company may (i) pay any        
dividend within 60 days after declaration thereof if at the declaration date    
such payment would have complied with the foregoing provision; (ii) make any    
payment in redemption of Capital Stock of the Company or options to purchase    
such Capital Stock granted to officers or employees of the Company pursuant to  
the Company's Stock Option Plan (or any successor plan) in connection with the  
severance or termination of officers or employees (other than W. Don Cornwell   
and Stuart J. Beck) not to exceed $1,000,000 in the aggregate; (iii) make       
Investments, not to exceed $10,000,000 in the aggregate at any one time, in (A) 
any Subsidiary which is subject to any encumbrance or restriction described     
under "Limitations Concerning Distributions By and Transfers to Subsidiaries" or
(B) any Unrestricted Subsidiary; (iv) exchange its Cumulative Convertible       
Exchangeable Preferred Stock, in accordance with its terms, for the Exchange    
Debentures; (v) refinance any Debt otherwise permitted by Clause (ix) of the    
second paragraph under "Limitation on Debt" above or solely in exchange for or  
out of the proceeds of the substantially concurrent sale (other than from or to 
a Subsidiary) of shares of Capital Stock of the Company, other than Disqualified
Stock; (vi) purchase, redeem, acquire or retire any shares of Capital Stock of  
the Company solely in exchange for or out of the proceeds of the substantially  
concurrent sale (other than from or to a Subsidiary) of shares of Capital Stock 
(other than Disqualified Stock) of the Company; (vii) purchase or redeem any    
Debt from Net Available Proceeds to the extent permitted under "Limitation on   
Certain Asset Dispositions"; and (viii) make Permitted Television Investments in
an aggregate amount at any one time outstanding not to exceed $15,000,000. Any  
payment or Investment made pursuant to Clauses (i), (ii) and (iii) of this      
paragraph shall be a Restricted Payment for purposes of calculating aggregate   
Restricted Payments under the first paragraph of "Limitation on Restricted      
Payments." (ss. 1010)                                                           

Limitations Concerning Distributions By and Transfers to Subsidiaries       

   The Company may not, and may not permit any Subsidiary of the Company to,
suffer to exist any consensual encumbrance or restriction on the ability of any 
Subsidiary of the Company (i) to pay, directly or indirectly, dividends or make 
any other distributions in respect of its Capital Stock or pay any Debt or other
obligation owed to the Company or any other Subsidiary of the Company; (ii) to  
make loans or advances to the Company or any Subsidiary of the Company; or (iii)
to transfer any of its property or assets to the Company. Notwithstanding the   
foregoing limitation, the Company may permit a Subsidiary to suffer to exist any
such encumbrance or restriction (A) included in any instrument governing Debt   
Incurred by such Subsidiary pursuant to the first paragraph of "Limitation on   
Debt" for the purpose of financing all or part of the purchase price or cost of 
construction or improvements of property, provided, however, that the principal 
amount of the Debt so Incurred does not exceed the purchase price or cost of    
construction or improvements of such property; (B) included in the Senior Loan  
Agreement; (C) imposed by virtue of applicable corporate law or regulation and  
relating solely to the payment of dividends or distributions to shareholders;   
(D) pursuant to an agreement relating to any Debt Incurred by a Person prior to 
the date on which such Person became a Subsidiary of the Company and outstanding
on such date and not Incurred in anticipation of becoming a Subsidiary; (E) with
respect to restrictions of the nature described in Clause (iii) above, included 
in a contract entered into in the ordinary course of business and consistent    

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with past practices that contains provisions restricting the assignment of such 
contract; (F) pursuant to an agreement effecting a renewal, refunding or        
extension of Debt Incurred pursuant to an agreement referred to in Clause (A),  
(B) or (D) above; provided, however, that the provisions contained in such      
renewal, refunding or extension agreement relating to such encumbrance or       
restriction are no more restrictive in any material respect than the provisions 
contained in the agreement the subject thereof, as determined in good faith by  
the Board of Directors and evidenced by a resolution of the Board of Directors  
filed with the Trustee; or (G) included in any instrument governing Capital     
Lease Obligations whose Attributable Value will not exceed $5,000,000 in the    
aggregate at any one time outstanding or included in any instrument governing a 
Sale and Leaseback Transaction whose Attributable Value does not exceed         
$2,000,000 and the Attributable Value of all such Sale and Leaseback            
Transactions entered into since the date of the Indenture does not exceed       
$5,000,000 in the aggregate; provided that in each case, after giving effect to 
the Incurrence of such Capital Lease Obligation or Sale and Leaseback and the   
receipt and application of the proceeds thereof, the ratio of the aggregate     
principal amount of Debt of the Company and its Subsidiaries outstanding as of  
the most recent available balance sheet to Pro Forma Consolidated Cash Flow for 
the preceding four full fiscal quarters, determined on a pro forma basis as if  
such Capital Lease Obligation had been Incurred, or such Sale and Leaseback     
Transaction had taken place, and the proceeds therefrom had been applied at the 
beginning of such four fiscal quarters, would be less than 6.5 to 1. (ss. 1011) 

Limitation on Transactions with Affiliates                                  

   The Company may not, and may not permit any Subsidiary of the Company to,
directly or indirectly, enter into any transaction after the date of the        
Indenture with any Affiliate (other than the Company or a Wholly Owned          
Subsidiary of the Company), unless a majority of the disinterested members of   
the Board of Directors determines in its reasonable good faith judgment         
evidenced by a Board Resolution filed with the Trustee that: (1) such           
transaction is in the best interests of the Company or such Subsidiary; and (2) 
such transaction is on terms no less favorable to the Company or such Subsidiary
than those that could be obtained in a comparable arm's-length transaction with 
an entity that is not an Affiliate. Notwithstanding the foregoing, the Company  
shall not be required to file any Board Resolution referred to in the preceding 
sentence with respect to matters solely concerning the compensation of          
employees. (ss. 1012)                                                           

Limitation on Certain Asset Dispositions                                    

  The Company may not, and may not permit any Subsidiary to, make an Asset
Disposition in one or more transactions in any fiscal year unless: (i) the      
consideration for such disposition will be at least equal to the fair market    
value thereof as determined by the Board of Directors; (ii) at least 85% of the 
consideration for such disposition consists of cash or readily marketable cash  
equivalents or the assumption of Debt of the Company or a Subsidiary or other   
obligations relating to such assets and a release from all liability on the Debt
or other obligations assumed; and (iii) all Net Available Proceeds of such      
disposition and from the sale of any marketable cash equivalents received       
thereby, less any amounts invested as described in the second sentence of the   
following paragraph, are applied (A) first, within 120 days of such disposition,
to the reduction of any obligations then outstanding under the Senior Loan      
Agreement (or any successor credit facility) to the extent the terms of such    
Senior Loan Agreement (or successor credit facility) require such application or
prohibit prepayment of the Notes; (B) second, within 120 days of such           
disposition, to the repayment of any other Senior Debt to the extent the terms  
of such Senior Debt require such application or prohibit prepayment of the      
Notes; (C) third, to the extent of any remaining Net Available Proceeds and so  
long as any 12.75% Debentures are outstanding, to make an offer to purchase the 
12.75% Debentures in accordance with the requirements of the 12.75% Debenture   
Indenture; (D) fourth, to the extent of any remaining Net Available Proceeds and
so long as any 10 3/8% Notes are outstanding, to make an offer to purchase the  
10 3/8% Notes in accordance with the requirements of the 10 3/8% Note Indenture;
(E) fifth, to the extent more than $5,000,000 of Net Available Proceeds are not 
required to be applied to the repayments as specified in Clauses (A), (B), (C)  
and (D) and only if there are no 12.75% Debentures and no 10 3/8% Notes         
outstanding, to purchases of Outstanding Notes pursuant to an Offer to Purchase 
commenced within 120 days of such disposition, at a purchase price equal to 100%
of their principal amount plus accrued interest to the date of purchase; (F)    
sixth, to the extent of any remaining Net Available Proceeds following the      
completion of the Offer to Purchase Notes required by Clause (E) or if Clause   
(E) is not applicable because any 12.75% Debentures or                          

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10 3/8% Notes are outstanding, to the repayment of other Debt of the Company or 
Debt of a Subsidiary of the Company, to the extent permitted under the terms    
thereof; and (G) seventh, to the extent of any remaining Net Available Proceeds,
to any other use as determined by the Company which is not otherwise prohibited 
by the Indenture.                                                               

  Notwithstanding Clause (ii) above, all or a portion of the consideration
for any such disposition may consist of all or substantially all of the assets  
or a majority of the Voting Stock of an existing television or radio            
broadcasting or cable television business or franchise (whether existing as a   
separate entity, subsidiary, division, unit or otherwise) if after giving effect
to any such disposition and related acquisition of assets, (x) the ratio of the 
aggregate principal amount of Debt of the Company and its Subsidiaries          
outstanding as of the most recent available balance sheet to Pro Forma          
Consolidated Cash Flow for the preceding four fiscal quarters, determined on a  
pro forma basis as if such transaction had taken place and the proceeds         
therefrom had been applied at the beginning of such four fiscal quarters, would 
be less than 6.5 to 1; (y) no Event of Default or event that, with the passing  
of time or the giving of notice, or both, will constitute an Event of Default   
shall have occurred or be continuing; and (z) the Net Available Proceeds, if    
any, are invested in accordance with the next sentence of this paragraph.       
Notwithstanding Clause (iii) above, the Company shall not be required to        
repurchase or redeem any Debt to the extent that the Net Available Proceeds from
any Asset Disposition are invested within 120 days of such disposition in       
television or radio broadcasting or cable television assets or franchises or the
Company shall have entered into a definitive agreement to acquire such assets   
subject only to customary conditions, including, without limitation, the        
approval of the Federal Communications Commission (but excluding any conditions 
with respect to the financing of such acquisition or due diligence) and such    
acquisition shall have been consummated within 240 days of such disposition.    
Notwithstanding the foregoing two sentences, the Company shall not be entitled  
to take as consideration for an Asset Disposition, or invest Net Available      
Proceeds in lieu of repurchasing or redeeming Debt in, any television or radio  
broadcasting or cable television assets, business or franchise unless the       
majority of the assets (including intangibles) so acquired or the majority of   
the assets (including intangibles) of such business or franchise so acquired are
related to television or radio broadcasting. The Company will not be entitled to
any credit against its obligation to purchase Outstanding Notes pursuant to this
covenant for Notes previously acquired by reason of a redemption, tender offer  
or other repurchase. (ss. 1013)                                                 

Limitation on Liens Securing Company Subordinated Debt                      

   The Company may not, and may not permit any Subsidiary of the Company to,
Incur or suffer to exist any Lien on or with respect to any property or assets  
now owned or hereafter acquired to secure any Debt of the Company that is       
expressly by its terms subordinate or junior in right of payment (other than by 
reason of maturity) to any other Debt of the Company without making, or causing 
such Subsidiary to make, effective provision for securing the Notes (x) equally 
and ratably with such Debt as to such property or assets for so long as such    
Debt will be so secured or (y) in the event such Debt is subordinate in right of
payment (other than by reason of maturity) to the Notes, prior to such Debt as  
to such property or assets for so long as such Debt will be so secured. (ss.    
1015)                                                                           

Limitation on Guarantees of Company Subordinated Debt                       

The Company may not permit any Subsidiary, directly or indirectly, to 
assume, Guarantee or in any other manner become liable with respect to any Debt 
of the Company that is expressly by its terms subordinate or junior in right of 
payment (other than by reason of maturity) to any other Debt of the Company.    
(ss. 1016)                                                                      

  Limitation on Issuances and Sale of Capital Stock of Wholly Owned Subsidiaries

     The Company (i) may not, and may not permit any Wholly Owned Subsidiary to,
transfer, convey, sell or otherwise dispose of any Capital Stock of such or any 
other Wholly Owned Subsidiary to any Person (other than the Company or a Wholly 
Owned Subsidiary) unless such transfer, conveyance, sale or other disposition is
of all the Capital Stock of such Wholly Owned Subsidiary and the Net Available  
Proceeds from such transfer, conveyance, sale or other disposition are applied  
in accordance with "Limitation on Certain Asset Dispositions" (including the    
provisions thereof relating to the application of the Net Available Proceeds    
therefrom) and (ii) may not permit any                                          

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Wholly Owned Subsidiary to issue shares of its Capital Stock (other than        
directors' qualifying shares), or securities convertible into, or warrants,     
rights or options to subscribe for or purchase shares of, its Capital Stock to  
any Person other than to the Company or a Wholly Owned Subsidiary unless in the 
case of either Clause (i) or (ii) above (A) after giving effect to any such     
sale, disposition or issuance, the ratio of the aggregate principal amount of   
Debt of the Company and its Subsidiaries outstanding as of the most recent      
available balance sheet to Pro Forma Consolidated Cash Flow for the preceding   
four fiscal quarters, determined on a pro forma basis as if such sale,          
disposition or issuance had taken place and the Net Available Proceeds therefrom
had been applied at the beginning of such four fiscal quarters, would be less   
than 6.5 to 1; (B) immediately after giving effect to such sale, disposition or 
issuance (including any acquisition of assets with Net Available Proceeds) no   
Event of Default or event that, with the passing of time or the giving of       
notice, or both, would constitute an Event of Default shall have occurred or be 
continuing; (C) the assets acquired pursuant to such sale, disposition or       
issuance, are either (x) at least 85% cash or readily marketable cash           
equivalents and the Net Available Proceeds from such sale, disposition or       
issuance are applied in accordance with "Limitation on Certain Asset            
Dispositions" (including the provisions thereof relating to the application of  
Net Available Proceeds therefrom) or (y) all or substantially all of the assets 
or a majority of the Voting Stock of an existing television or radio            
broadcasting or cable television business or franchise (whether existing as a   
separate entity, subsidiary, division, unit or otherwise) (subject to the       
restrictions described in the last sentence of the second paragraph under       
"Limitation on Certain Asset Dispositions"); (D) after giving effect to any such
sale, disposition or issuance, such Wholly Owned Subsidiary shall be a          
Subsidiary of the Company; and (E) the consideration for such sale, disposition 
or issuance of Capital Stock will be at least equal to the fair market value    
thereof as determined by the Board of Directors. (ss. 1014)                     

Provision of Financial Information                                              

     So long as any of the Notes are Outstanding, the Company will file with the
Commission the annual reports, quarterly reports and other documents that the   
Company would have been required to file with the Commission pursuant to        
Sections 13(a) and 15(d) of the Exchange Act if the Company were subject to such
Sections, and the Company will provide to all Holders and file with the Trustee 
copies of such reports and documents. (ss. 1018)                                

Mergers, Consolidations and Certain Sales of Assets                             

    The Company (i) may not consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into the Company or any    
Subsidiary of the Company (in a transaction in which such Subsidiary remains a  
Subsidiary of the Company); and (ii) may not, directly or indirectly, transfer, 
sell, convey, lease or otherwise dispose of all or substantially all of its     
properties and assets as an entirety; unless: (1) immediately after giving      
effect to such transaction and treating any Debt that becomes an obligation of  
the Company or a Subsidiary of the Company, as a result of such transaction, as 
having been Incurred by the Company or such Subsidiary at the time of the       
transaction, no Event of Default or event that, with the passing of time or the 
giving of notice, or both, would become an Event of Default, shall have occurred
and be continuing; (2) in a transaction in which the Company does not survive or
in which the Company sells, leases or otherwise disposes of all or substantially
all of its assets, the successor entity to the Company is organized under the   
laws of the United States or any State thereof or the District of Columbia and  
will expressly assume, by a supplemental indenture executed and delivered to the
Trustee in form satisfactory to the Trustee, all of the Company's obligations   
under the Indenture; (3) immediately after giving effect to such transaction,   
the Company or the successor entity to the Company would have a ratio of        
aggregate principal amount of Debt of the Company and its Subsidiaries          
outstanding as of the most recent available balance sheet to Pro Forma          
Consolidated Cash Flow for the preceding four full fiscal quarters, determined  
on a pro forma basis as if such transaction had taken place and the proceeds    
therefrom had been applied at the beginning of such four fiscal quarters, of    
less than 6.5 to 1; (4) if, as a result of any such transaction, property or    
assets of the Company would become subject to a Lien prohibited by the          
provisions of the Indenture described under "Limitation on Liens Securing       
Company Subordinated Debt" above, the Company or the successor entity to the    
Company shall have secured the Notes as required by such covenant; and (5)      
certain other conditions are met. (ss. 801) Upon any such sale of all or        
substantially all of the assets of the Company to another Person or any merger  
or consolidation where the Company is not the surviving entity, such Person or  
survivor shall                                                                  

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become the obligor in respect of the Notes and the Company will be relieved of  
all further obligations and covenants, including the "Limitation on Certain     
Asset Dispositions," under the Indenture and the Notes. (ss. 802)               

Change of Control                                                               

     Within 30 days following the date of the consummation of a transaction that
will result in a Change of Control, the Company will commence an Offer to       
Purchase all Outstanding Notes, subject to the consummation of the Change of    
Control, at a purchase price equal to 101% of their aggregate principal amount  
plus accrued interest to the date of purchase. Prior to the commencement of the 
Offer, and in any event prior to 30 days following the date of the consummation 
of a transaction that will result in a Change of Control, the Company will (a)  
to the extent then required to be repaid, pay in full all outstanding Senior    
Debt or (b) obtain the requisite consents then required under agreements        
governing such debt. The failure to satisfy (a) or (b) above will not relieve   
the Company of its obligation to make the offer to purchase the Notes and such  
failure will constitute an Event of Default. A Change of Control will be deemed 
to have occurred at such time as any Person or any Persons (other than one or   
more Permitted Holders) acting together that would constitute a "group" (a      
"Group") for purposes of Section 13(d) of the Exchange Act becomes the          
beneficial owner of 50% or more of the total voting power of all classes of     
Voting Stock of the Company or at such time as such Person or Group succeeds in 
having sufficient of its nominees elected to the Board of Directors of the      
Company such that such nominees, when added to any existing director remaining  
on the Board of Directors of the Company after such election who is an Affiliate
of such Group, will constitute a majority of the Board of Directors of the      
Company. "Permitted Holder" means (i) W. Don Cornwell and Stuart J. Beck, (ii)  
the members of the immediate family of either of the persons referred to in     
Clause (i) above, (iii) any trust created for the benefit of the persons        
described in Clause (i) or (ii) above or any of their estates or (iv) any       
corporation that is controlled by any person described in Clause (i), (ii) or   
(iii) above. (ss. 1017)                                                         

    The Company will be required to offer to purchase all outstanding Notes at
a price equal to 101% of their principal amount plus accrued interest to the    
date of repurchase in the event of a Change of Control (as defined in the       
Indenture). The Company will also be required to offer to purchase all of the   
12.75% Debentures and the 10 3/8% Notes at 101% of the principal amount thereof,
of which $235,000,000 principal amount is currently outstanding, upon the       
occurrence of a Change of Control. If a Change of Control were to occur, there  
can be no assurance that the Company would have sufficient funds to repay all   
borrowings under the Credit Agreement and pay the Change of Control purchase    
price for all 12.75% Debentures, the 10 3/8% Notes and the Notes tendered by the
holders thereof. The Notes will be subordinated in right of payment to the prior
payment in full of all Senior Indebtedness, including the Indebtedness          
outstanding under the Credit Agreement.                                         

Certain Definitions                                                             

  Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all    
such terms, as well as any other terms used herein for which no definition is   
provided. (ss. 101)                                                             

 "Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with    
such Person. For the purposes of this definition, "control" when used with      
respect to any Person means the power to direct the management and policies of  
such Person, directly or indirectly, whether through the ownership of voting    
securities, by contract or otherwise; and the terms "controlling" and           
"controlled" have meanings correlative to the foregoing.                        

 "Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Subsidiaries (including 
a consolidation or merger of any such Subsidiaries with or into another Person  
in a transaction in which such Subsidiary ceases to be a Subsidiary, but        
excluding a disposition by a Subsidiary of such Person to such Person or a      
Wholly Owned Subsidiary of such Person or by such Person to a Wholly Owned      
Subsidiary of such Person) of (i) shares of Capital Stock (other than directors'
qualifying shares) or other ownership interests of a Subsidiary of such Person, 
(ii) substantially all of the assets of such Person or any of its Subsidiaries  
representing a division or line of business or (iii) other assets or rights of  
such Person or any of                                                           

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its Subsidiaries outside of the ordinary course of business. Asset Disposition  
shall not include a Sale and Leaseback Transaction to the extent that the       
Attributable Value of such Sale and Leaseback Transaction does not exceed       
$2,000,000 and the aggregate Attributable Value of all such Sale and Leaseback  
Transactions entered into since the date of the Indenture does not exceed       
$5,000,000.                                                                     

"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any  
date as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the initial term
thereof as determined in accordance with generally accepted accounting          
principles, discounted from the last date of such initial term to the date of   
determination at a rate per annum equal to the discount rate which would be     
applicable to a Capital Lease Obligation with like term in accordance with      
generally accepted accounting principles. The net amount of rent required to be 
paid under any such lease for any such period shall be the aggregate amount of  
rent payable by the lessee with respect to such period after excluding amounts  
required to be paid on account of insurance, taxes, assessments, utility,       
operating and labor costs and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall   
also include the amount of such penalty, but no rent shall be considered as     
required to be paid under such lease subsequent to the first date upon which it 
may be so terminated. Attributable Value means, as to a Capital Lease Obligation
under which any Person is at the time liable and at any date as of which the    
amount thereof is to be determined, the capitalized amount thereof that would   
appear on the face of a balance sheet of such Person in accordance with         
generally accepted accounting principles.                                       

    "Average Life" means, as of the date of determination, with respect to any
Debt, the quotient obtained by dividing (i) the sum of the products of the      
numbers of years from the date of determination to the dates of each successive 
scheduled principal payments of such Debt, multiplied by the amount of such     
principal payments by (ii) the sum of all such principal payments.              

   "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The Borough of Manhattan,   
The City of New York, New York are authorized or obligated by law or executive  
order to close.                                                                 

   "Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Debt arrangements conveying 
the right to use) real or personal property of such Person which is required to 
be classified and accounted for as a capital lease or a liability on the face of
a balance sheet of such Person in accordance with generally accepted accounting 
principles. The stated maturity of such obligation shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a      
penalty.                                                                        

"Capital Stock" of any Person means any and all shares, interests,    
participations or other equivalents (however designated) of corporate stock of  
such Person.                                                                    

   "Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of     
assets upon any voluntary or involuntary liquidation, dissolution or winding up 
of such Person, to shares of Capital Stock of any other class of such Person.   

"Consolidated Cash Flow" of any Person means for any period the       
Consolidated Net Income for such period increased by the sum of (i) Consolidated
Interest Expense of such Person and its Consolidated Subsidiaries for such      
period, plus (ii) Consolidated Income Tax Expense of such Person and its        
Consolidated Subsidiaries for such period, plus (iii) the consolidated          
depreciation and amortization expense included in the income statement of such  
Person and its Consolidated Subsidiaries for such period, plus (iv) other       
non-cash charges of such Person and its Consolidated Subsidiaries deducted in   
determining Consolidated Net Income (other than amortization of film and program
assets) for such period, minus (v) non-cash items of such Person and its        
Consolidated Subsidiaries added in determining Consolidated Net Income for such 
period; provided, however, Consolidated Cash Flow shall not include Consolidated
Net Income and the items specified in Clauses (i) through (iv) above to the     
extent attributable to a Consolidated Subsidiary of such Person that is subject 
to restrictions preventing the payment of dividends and                         

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the making of distributions (by loans, advances, intercompany transfers or      
otherwise) to such Person, but shall include such payments and distributions as 
could be made in accordance with such restrictions.                             

  "Consolidated Income Tax Expense" of any Person means for any period the
consolidated provision for income taxes of such Person and its Consolidated     
Subsidiaries for such period.                                                   

 "Consolidated Interest Expense" for any Person means for any period the
consolidated interest expense included in a consolidated income statement       
(without deduction of interest income) of such Person and its Consolidated      
Subsidiaries for such period, including without limitation or duplication (or,  
to the extent not so included, with the addition of), (i) the portion of any    
rental obligation in respect of any Capital Lease Obligation allocable to       
interest expense in accordance with generally accepted accounting principles,   
(ii) the amortization of Debt discounts, (iii) any payments or fees with respect
to letters of credit, bankers acceptances or similar facilities, (iv) fees with 
respect to interest rate swap or similar agreements or foreign currency hedge,  
exchange or similar agreements other than fees or charges related to the        
acquisition or termination thereof which are not allocable to interest expense  
in accordance with generally accepted accounting principles, (v) Preferred Stock
dividends declared and payable in cash and (vi) accrued Disqualified Stock      
dividends, whether or not declared or paid.                                     

"Consolidated Net Income" of any Person means for any period the      
consolidated net income (or loss) of such Person and its Consolidated           
Subsidiaries for such period determined in accordance with generally accepted   
accounting principles; provided that there shall be excluded therefrom (i) the  
net income (or loss) of any Person acquired by such Person or a Subsidiary of   
such Person in a pooling-of-interests transaction for any period prior to the   
date of such transaction, (ii) the net income (or loss) of any Person that is   
not a Consolidated Subsidiary of such Person, (iii) gains or losses on Asset    
Dispositions by such Person or its Consolidated Subsidiaries and (iv) all       
extraordinary gains and extraordinary losses; and provided, further, that there 
shall be added thereto, to the extent not otherwise included in Consolidated Net
Income, the amount of any dividends or other distributions actually paid to such
Person during such period by a Person that is not a Consolidated Subsidiary of  
such Person.                                                                    

"Consolidated Subsidiaries" of any Person means all other Persons that
would be accounted for as Consolidated Persons in such Person's financial       
statements in accordance with generally accepted accounting principles,         
provided, however, Consolidated Subsidiaries shall not include any Unrestricted 
Subsidiary created in accordance with the definition of Unrestricted Subsidiary.

 "Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person, and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every  
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the    
account of such Person, (iv) every obligation of such Person issued or assumed  
as the deferred purchase price of property or services (but excluding trade     
accounts payable, film contract rights or accrued liabilities arising in the    
ordinary course of business), (v) every Capital Lease Obligation of such Person,
(vi) the maximum fixed redemption or repurchase price of Disqualified Stock of  
such Person at the time of determination, and (vii) every obligation of the type
referred to in Clauses (i) through (vi) of another Person and all dividends of  
another Person the payment of which, in either case, such Person has Guaranteed 
or is responsible or liable, directly or indirectly, as obligor, Guarantor or   
otherwise.                                                                      

"Disqualified Stock" means any Capital Stock of the Company or any    
Subsidiary which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or otherwise (including upon the  
occurrence of an event), matures or is required to be redeemed (pursuant to a   
sinking fund obligation or otherwise) or is redeemable at the option of the     
holder thereof, in whole or in part (other than a redemption which is           
conditioned upon a change of control of the Company), on or prior to the final  
scheduled maturity of the Notes.                                                

"generally accepted accounting principles" means, with respect to any 
computation, such accounting principles as are generally accepted in the United 
States as consistently applied by the Company at the date of such computation.  

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     "Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any Debt 
of any other Person (the "primary obligor") in any manner, whether directly or  
indirectly, and including, without limitation, any obligation of such Person,   
(i) to purchase or pay (or advance or supply funds for the purchase or payment  
of) such Debt or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Debt, (ii) to purchase property, securities
or services for the purpose of assuring the holder of such Debt of the payment  
of such Debt, or (iii) to maintain working capital, equity capital or other     
financial statement condition or liquidity of the primary obligor so as to      
enable the primary obligor to pay such Debt (and "Guaranteed," "Guaranteeing"   
and "Guarantor" shall have meanings correlative to the foregoing); provided,    
however, that the Guarantee by any Person shall not include endorsements by such
Person for collection or deposit, in either case, in the ordinary course of     
business.                                                                       

    "Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,         
Guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to generally accepted accounting         
principles or otherwise, of any such Debt or other obligation on the balance    
sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring"
shall have meanings correlative to the foregoing); provided, however, that a    
change in generally accepted accounting principles that results in an obligation
of such Person that exists at such time becoming Debt shall not be deemed an    
Incurrence of such Debt.                                                        

  "Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of cash
or other property to others or payments for property or services for the account
or use of others, or otherwise) to, or purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidence of Debt issued by, any 
other Person, including any payment on a Guarantee of any obligation of such    
other Person.                                                                   

    "Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security      
interest, lien, charge, easement (other than any easement not materially        
impairing usefulness or marketability), encumbrance, preference, priority or    
other security agreement or preferential arrangement of any kind or nature      
whatsoever on or with respect to such property or assets (including, without    
limitation, any conditional sale or other title retention agreement having      
substantially the same economic effect as any of the foregoing).                

"Local Marketing Agreement" means any agreement pursuant to which the 
Company or any of its Subsidiaries agrees to provide television management      
services, television broadcasting or assets related to the provision of         
television broadcasting in exchange for cash payments and/or the right to charge
others for the provision of advertising or other services or products.          

    "Net Available Proceeds" from any Asset Disposition or issuance of Capital
Stock by any Person means cash or readily marketable cash equivalents received  
(including by way of sale or discounting of a note, installment receivable or   
other receivable, but excluding any other consideration received in the form of 
assumption by the acquiree of Debt or other obligations relating to such        
properties or assets or received in any other noncash form) therefrom by such   
Person, net of (i) all legal, title and recording tax expenses, commissions and 
other fees and expenses Incurred and all federal, state, provincial, foreign and
local taxes required to be accrued as a liability as a consequence of such Asset
Disposition or issuance, (ii) all payments made by such Person or its           
Subsidiaries on any Debt which is secured by such assets in accordance with the 
terms of any Lien upon or with respect to such assets or which must by the terms
of such Lien, or in order to obtain a necessary consent to such Asset           
Disposition or issuance or by applicable law be repaid out of the proceeds from 
such Asset Disposition or issuance, (iii) all distributions and other payments  
made to minority interest holders in Subsidiaries of such Person or joint       
ventures as a result of such Asset Disposition, and (iv) reserves established in
accordance with generally accepted accounting principles against any liabilities
associated with such assets and retained by such Person or any Subsidiary       
thereof, as the case may be, after such Asset Disposition, including, without   
limitation, liabilities under any indemnification obligations and severance and 
other employee termination costs associated with such Asset Disposition, in each
case as determined by the Board of Directors, in its reasonable good faith      
judgment evidenced by a resolution of the                                       

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Board of Directors filed with the Trustee; provided, however, that any reduction
in such reserve following the consummation of such Asset Disposition will be    
treated for all purposes of the Indenture and the Notes as a new Asset          
Disposition at the time of such reduction with Net Available Proceeds equal to  
the amount of such reduction.                                                   

     "Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each Holder at his address appearing in
the Note Register on the date of the Offer, offering to purchase up to the      
principal amount of Notes specified in such Offer at the purchase price         
specified in such Offer. Unless otherwise required by applicable law, the Offer 
shall specify an expiration date (the "Expiration Date") of the Offer to        
Purchase which shall be, subject to any contrary requirements of applicable law,
not less than 30 days or more than 60 days after the date of such Offer and a   
settlement date (the "Purchase Date") for the purchase of Notes within five     
Business Days after the Expiration Date. The Company shall notify the Trustee at
least 15 Business Days (or such shorter period as is acceptable to the Trustee) 
prior to the mailing of the Offer of the Company's obligation to make an Offer  
to Purchase, and the Offer shall be mailed by the Company or, at the Company's  
request, by the Trustee in the name and at the expense of the Company. The Offer
shall contain information concerning the business of the Company and its        
Subsidiaries which the Company in good faith believes will enable such Holders  
to make an informed decision with respect to the Offer to Purchase (which at a  
minimum will include (i) the most recent annual and quarterly financial         
statements and "Management's Discussion and Analysis of Financial Condition and 
Results of Operations" contained in the documents required to be filed with the 
Trustee pursuant to the "Provision of Financial Information" covenant described 
above (which requirements may be satisfied by delivery of such documents        
together with the Offer), (ii) a description of material developments in the    
Company's business subsequent to the date of the latest of such financial       
statements referred to in Clause (i) (including a description of the events     
requiring the Company to make the Offer to Purchase), (iii) if applicable,      
appropriate pro forma financial information concerning the Offer to Purchase and
the events requiring the Company to make the Offer to Purchase, and (iv) any    
other information required by applicable law to be included therein). The Offer 
shall contain all instructions and materials necessary to enable such Holder to 
tender Notes pursuant to the Offer to Purchase. The Offer shall also state:     

     (1) the Section of the Indenture pursuant to which the Offer to Purchase is
being made;                                                                     

(2) the Expiration Date and the Purchase Date;                        

   (3) the aggregate principal amount of the Outstanding Notes offered to be
purchased by the Company pursuant to the Offer to Purchase (including, if less  
than 100%, the manner by which such has been determined pursuant to the Section 
hereof requiring the Offer to Purchase) (the "Purchase Amount");                

    (4) the purchase price to be paid by the Company for each $1,000 aggregate
principal amount of Notes accepted for payment (as specified pursuant to the    
Indenture);                                                                     

   (5) that the Holder may tender all or any portion of the Notes registered
in the name of such Holder and that any portion of a Note tendered must be      
tendered in an integral multiple of $1,000 principal amount;                    

(6) the place or places where Notes are to be surrendered for tender  
pursuant to the Offer to Purchase;                                              

     (7) that interest on any Note not tendered or tendered but not purchased by
the Company pursuant to the Offer to Purchase will continue to accrue;          

(8) that on the Purchase Date the purchase price will become due and  
payable upon each Note accepted for payment pursuant to the Offer to Purchase   
and that interest thereon shall cease to accrue on and after the Purchase Date; 

 (9) that each Holder electing to tender a Note pursuant to the Offer to
Purchase will be required to surrender such Note at the place or places         
specified in the Offer prior to the close of business on the Expiration Date    
(such Note being, if the Company or the Trustee so requires, duly endorsed by,  
or accompanied by a written                                                     

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instrument of transfer in form reasonably satisfactory to the Company and the   
Trustee duly executed by, the Holder thereof or his attorney duly authorized in 
writing);                                                                       

    (10) that Holders will be entitled to withdraw all or any portion of Notes
tendered if the Company (or its Paying Agent) receives, not later than the close
of business on the Expiration Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Note   
the Holder tendered, the certificate number of the Note the Holder tendered and 
a statement that such Holder is withdrawing all or a portion of his tender;     

    (11) that (i) if Notes in an aggregate principal amount less than or equal
to the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer
to Purchase, the Company shall purchase all such Notes and (ii) if Notes in an  
aggregate principal amount in excess of the Purchase Amount are tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall purchase Notes   
having an aggregate principal amount equal to the Purchase Amount on a pro rata 
basis (with such adjustments as may be deemed appropriate so that only Notes in 
denominations of $1,000 or integral multiples thereof shall be purchased); and  

   (12) that in the case of any Holder whose Note is purchased only in part,
the Company shall execute, and the Trustee shall authenticate and deliver to the
Holder of such Note without service charge, a new Note or Notes, of any         
authorized denomination as requested by such Holder, in an aggregate principal  
amount equal to and in exchange for the unpurchased portion of the Notes so     
tendered.                                                                       

     In the event that the Company is required to make an Offer to Purchase, the
Company intends to comply with any applicable securities laws and regulations,  
including any applicable requirements of Rule 14e-1 under the Exchange Act.     

   "Permitted Television Investment" means an Investment in any Person which
is a Restricted Payment within the meaning of either Clause (iii) or (v) of the 
definition of Restricted Payment (i) with which the Company has entered into a  
Local Marketing Agreement or (ii) (a) for the purpose of facilitating the       
delivery by the Company or any of its Subsidiaries of advanced television       
service, including high definition television, or interactive television or (b) 
to otherwise permit the Company or any of its Subsidiaries to exploit any other 
emerging technologies relating to television broadcasting. For purposes of      
calculating the aggregate amount of outstanding Permitted Television            
Investments, any Investment (a) in a Person which, subsequent to such           
Investment, becomes a Wholly Owned Subsidiary of the Company, or (b) that       
otherwise, due to a change in the status of such person, would not, if then     
made, be deemed a Restricted Payment, shall no longer be deemed outstanding as  
of the date such Person becomes a Wholly Owned Subsidiary or otherwise changes  
its status, as the case may be.                                                 

 "Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that  
ranks prior, as to the payment of dividends or as to the distribution of assets 
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.           

   "Pro Forma Consolidated Cash Flow" of any Person means for any period the
Consolidated Cash Flow for such period; provided, that, in the event such Person
or its Subsidiaries has made Asset Dispositions or acquisitions of assets,      
properties or franchises not in the ordinary course of business (including      
acquisitions of other Persons by merger, consolidation or purchase of Capital   
Stock) or has permitted an encumbrance or restriction pursuant to the provisions
described under "Limitations Concerning Distributions By and Transfers to       
Subsidiaries" during or after such period, such computation shall be made on a  
pro forma basis (whether the acquisition is treated as a purchase or a pooling  
under generally accepted accounting principles) as if the Asset Dispositions or 
acquisitions or restriction or encumbrance had taken place on the first day of  
such period. If, during or after the period for which such calculation is made, 
the Person or any of its Subsidiaries has acquired or disposed of a television  
or radio broadcasting or cable television franchise that does not constitute an 
existing business (whether existing as a separate entity, subsidiary, division, 
unit or otherwise), the pro forma effect of such acquisition or disposition     
shall be deemed to be the Consolidated Cash Flow attributable to such franchise 
(or a reasonable estimate                                                       

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thereof) for the period for which such calculation is made prior to such        
acquisition or disposition, provided that such estimated Consolidated Cash Flow 
shall be determined on the basis of comparable franchises, evidenced in a Board 
Resolution and reported on by a nationally recognized accounting firm.          

"readily marketable cash equivalents" means (i) marketable securities 
issued or directly and 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; (ii) 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 and, at the time of acquisition,    
having the highest rating obtainable from either Standard & Poor's Ratings Group
or Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than
180 days from the date of acquisition thereof and, at the time of acquisition,  
having a rating of at least A-1 from Standard & Poor's Ratings Group or at least
P-1 from Moody's Investors Service, Inc.; and (iv) 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 having       
unimpaired capital and surplus of not less than $100,000,000.                   

  "Sale and Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing 
for the leasing by such Person of any property or asset of such Person which has
been or is being sold or transferred by such Person more than 270 days after the
acquisition thereof or the completion of construction or commencement of        
operation thereof to such lender or investor or to any person to whom funds have
been or are to be advanced by such lender or investor on the security of such   
property or asset. The stated maturity of such arrangement shall be the date of 
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangement may be terminated by the lessee without
payment of a penalty.                                                           

"Senior Loan Agreement" means the Second Amended and Restated Credit  
Agreement, dated as of May 19, 1995, by and among the Company, the Banks named  
therein and Bankers Trust Company, as Agent, as it may be amended, restated or  
modified from time to time.                                                     

  "Subordinated Debt" means Debt of the Company as to which the payment of
principal of (and premium, if any) and interest and other payment obligations in
respect of such Debt shall be subordinate to the prior payment in full of the   
Notes to at least the following extent: (i) no payments of principal of (or     
premium, if any) or interest on or otherwise due in respect of such Debt may be 
permitted for so long as any default in the payment of principal (or premium, if
any) or interest on the Notes exists; and (ii) in the event that any other      
default that with the passing of time or the giving of notice, or both, would   
constitute an event of default exists with respect to the Notes, upon notice by 
25% or more in principal amount of the Notes to the Trustee, the Trustee shall  
have the right to give notice to the Company and the holders of such Debt (or   
trustees or agents therefor) of a payment blockage, and thereafter no payments  
of principal of (or premium, if any) or interest on or otherwise due in respect 
of such Debt may be made for a period of 179 days from the date of such notice. 
Notwithstanding the foregoing, the Exchange Debentures shall constitute         
Subordinated Debt unless and until the terms thereof shall be amended or        
modified after the date of the Indenture.                                       

 "Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly by such      
Person or by one or more other Subsidiaries of such Person, or by such Person   
and one or more other Subsidiaries thereof or (ii) any other Person (other than 
a corporation) in which such Person, or one or more other Subsidiaries of such  
Person or such Person and one or more other Subsidiaries thereof, directly or   
indirectly, has at least a majority ownership and power to direct the policies, 
management and affairs thereof. Subsidiary shall not include an Unrestricted    
Subsidiary created in accordance with the definition of Unrestricted Subsidiary.

  "Unrestricted Subsidiary" means (1) any Subsidiary designated as such by
the Board of Directors as set forth below where (a) neither the Company nor any 
of its other Subsidiaries (other than another Unrestricted Subsidiary) (i)      
provides credit support for, or Guarantee of, any Debt of such Subsidiary       
(including any undertaking, agreement or instrument evidencing such Debt) or    
(ii) is directly or indirectly liable for any Debt of such Subsidiary,          

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and (b) no default with respect to any Debt of such Subsidiary (including any   
right which the holders thereof may have to take enforcement action against such
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any 
other Debt of the Company and its other Subsidiaries (other than another        
Unrestricted Subsidiary) to declare a default on such other Debt or cause the   
payment thereof to be accelerated or payable prior to its final scheduled       
maturity, (2) any Subsidiary of the Company (other than a Subsidiary existing as
of the date of the Indenture or successor to any such Subsidiary) which at the  
time of determination shall be an Unrestricted Subsidiary (as designated by the 
Board of Directors, as provided below) and (3) any Subsidiary of an Unrestricted
Subsidiary where Clauses (a) and (b) are true with respect to such Subsidiary.  
The Board of Directors may designate any Subsidiary to be an Unrestricted       
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds   
any Lien on any property of, any other Subsidiary of the Company which is not a 
Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted   
Subsidiary, provided, that either (x) the Subsidiary to be so designated has    
total assets of $1,000 or less or (y) immediately after giving effect to such   
designation, the ratio of the aggregate principal amount of Debt of the Company 
and its Subsidiaries outstanding as of the most recent available balance sheet  
to Pro Forma Consolidated Cash Flow for the preceding four full fiscal quarters,
determined on a pro forma basis as if such Subsidiary had been an Unrestricted  
Subsidiary at the beginning of such four fiscal quarters, would be less than 6.5
to 1. The Board of Directors may designate any Unrestricted Subsidiary to be a  
Subsidiary, provided that, immediately after giving effect to such designation, 
the ratio of the aggregate principal amount of Debt of the Company and its      
Subsidiaries outstanding as of the most recent available balance sheet to Pro   
Forma Consolidated Cash Flow for the preceding four full fiscal quarters,       
determined on a pro forma basis as if such Unrestricted Subsidiary had been a   
Subsidiary at the beginning of such four fiscal quarters, would be less than 6.5
to 1. Any such designation by the Board of Directors shall be evidenced to the  
Trustee by filing with the Trustee a certified copy of the resolution of the    
Board of Directors giving effect to such designation and an Officers'           
Certificate certifying that such designation complied with the foregoing        
conditions.                                                                     

"Voting Stock" of any Person means Capital Stock of such Person which 
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no   
senior class of securities has such voting power by reason of any contingency.  

   "Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which      
(other than directors' qualifying shares) shall at the time be owned by such    
Person or by one or more Wholly Owned Subsidiaries of such Person or by such    
Person and one or more Wholly Owned Subsidiaries of such Person.                

Events of Default                                                               

     The following will be Events of Default under the Indenture: (a) failure to
pay any interest on any Note when due, continued for 30 days; (b) failure to pay
principal of (or premium, if any, on) any Note when due; (c) failure to purchase
Notes required to be purchased pursuant to an Offer to Purchase as described    
under the "Limitation on Certain Asset Dispositions" and the "Change of Control"
covenants in accordance with the terms of such Offer to Purchase; (d) failure to
perform or comply with the provisions described in Clause (a) or (b) under      
"Change of Control"; (e) failure to perform or comply with the provisions       
described under "Mergers, Consolidations and Certain Sales of Assets"; (f)      
failure to perform any other covenant or warranty of the Company in the         
Indenture, continued for 30 days after written notice as provided in the        
Indenture; (g) failure to pay, at final maturity, in excess of $4,000,000       
principal amount of any indebtedness of the Company or any Subsidiary of the    
Company, or acceleration of any indebtedness of the Company or any Subsidiary of
the Company in an aggregate principal amount in excess of $4,000,000; (h) the   
rendering of a final judgment or judgments (not subject to appeal) against the  
Company or any of its Subsidiaries in an aggregate principal amount in excess of
$1,000,000 which remains unstayed, in effect and unpaid for a period of 60      
consecutive days thereafter; and (i) certain events in bankruptcy, insolvency or
reorganization affecting the Company or any Subsidiary of the Company. (ss. 501)

  Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee  
will be under no obligation to exercise any of its rights or powers under the   
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee                                               

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reasonable indemnity. (ss. 603) Subject to such provisions for the              
indemnification of the Trustee, the Holders of a majority in aggregate principal
amount of the Outstanding Notes will have the right to direct the time, method  
and place of conducting any proceeding for any remedy available to the Trustee  
or exercising any trust or power conferred on the Trustee. (ss. 512)            

     If an Event of Default shall occur and be continuing, either the Trustee or
the Holders of at least 25% in aggregate principal amount of the Outstanding    
Notes may accelerate the maturity of all Notes; provided, however, that after   
such acceleration, but before a judgment or decree based on acceleration, the   
Holders of a majority in aggregate principal amount of Outstanding Notes may,   
under certain circumstances, rescind and annul such acceleration if all Events  
of Default, other than the non-payment of accelerated principal, have been cured
or waived as provided in the Indenture. (ss. 502) For information as to waiver  
of defaults, see "Modification and Waiver."                                     

    No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall 
have previously given to the Trustee written notice of a continuing Event of    
Default and unless the Holders of at least 25% in aggregate principal amount of 
the Outstanding Notes shall have made written request, and offered reasonable   
indemnity, to the Trustee to institute such proceeding as trustee, and the      
Trustee shall not have received from the Holders of a majority in aggregate     
principal amount of the Outstanding Notes a direction inconsistent with such    
request and shall have failed to institute such proceeding within 60 days. (ss. 
507) However, such limitations do not apply to a suit instituted by a Holder of 
a Note for enforcement of payment of the principal of (and premium, if any) or, 
interest on such Note on or after the respective due dates expressed in such    
Note. (ss. 508)                                                                 

     The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the    
Indenture and as to any default in such performance. (ss. 1019)                 

Defeasance                                                                      

The Indenture provides that, at the option of the Company, (A) if     
applicable, the Company will be discharged from any and all obligations in      
respect of the Outstanding Notes or (B) if applicable, the Company may omit to  
comply with certain restrictive covenants, and that such omission shall not be  
deemed to be an Event of Default under the Indenture and the Notes, and that the
Notes shall no longer be subject to the subordination provisions in either case 
(A) or (B) upon irrevocable deposit with the Trustee, in trust, of money and/or 
U.S. government obligations which will provide money in an amount sufficient in 
the opinion of a nationally recognized accounting firm to pay the principal of  
and premium, if any, and each installment of interest, if any, on the           
Outstanding Notes. With respect to Clause (B), the obligations under the        
Indenture other than with respect to such covenants and the Events of Default   
other than the Event of Default relating to such covenants above shall remain in
full force and effect. Such trust may only be established if, among other things
(i) with respect to Clause (A), the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or there has been a change  
in law, which in the Opinion of Counsel provides that Holders of the Notes will 
not recognize gain or loss for Federal income tax purposes as a result of such  
deposit, defeasance and discharge and will be subject to Federal income tax on  
the same amount, in the same manner and at the same times as would have been the
case if such deposit, defeasance and discharge had not occurred; or, with       
respect to Clause (B), the Company has delivered to the Trustee an Opinion of   
Counsel to the effect that the Holders of the Notes will not recognize gain or  
loss for Federal income tax purposes as a result of such deposit and defeasance 
and will be subject to Federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit and defeasance
had not occurred; (ii) no Event of Default or event that, with the passing of   
time or the giving of notice, or both, shall constitute an Event of Default     
shall have occurred or be continuing; (iii) the Company has delivered to the    
Trustee an Opinion of Counsel to the effect that such deposit shall not cause   
the Trustee or the trust so created to be subject to the Investment Company Act 
of 1940; and (iv) certain other customary conditions precedent. (Article        
Thirteen)                                                                       

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Modification and Waiver                                                         

  Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate      
principal amount of the Outstanding Notes; provided, however, that no such      
modification or amendment may, without the consent of the Holder of each        
Outstanding Note affected thereby, (a) change the Stated Maturity of the        
principal of, or any installment of interest on, any Note, (b) reduce the       
principal amount of (or the premium), or interest on, any Note, (c) change the  
place or currency of payment of principal of (or premium), or interest on, any  
Note, (d) impair the right to institute suit for the enforcement of any payment 
on or with respect to any Note, (e) reduce the above-stated percentage of       
Outstanding Notes necessary to modify or amend the Indenture, (f) reduce the    
percentage of aggregate principal amount of Outstanding Notes necessary for     
waiver of compliance with certain provisions of the Indenture or for waiver of  
certain defaults, (g) modify any provisions of the Indenture relating to the    
modification and amendment of the Indenture or the waiver of past defaults or   
covenants, except as otherwise specified, (h) modify any Offer to Purchase for  
the Notes required under the "Limitation on Certain Asset Dispositions" and the 
"Change of Control" covenant thereof, or (i) modify any provisions of the       
Indenture relating to subordination of the Notes in a manner adverse to the     
Holders thereof. (ss. 902)                                                      

    The Holders of a majority in aggregate principal amount of the Outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture. (ss. 1020) The Holders of a majority in aggregate principal      
amount of the Outstanding Notes may waive any past default under the Indenture, 
except a default in the payment of principal, premium, if any, or interest or a 
default arising from failure to purchase any Note tendered required to be       
purchased pursuant to an Offer to Purchase. (ss. 513)                           

The Trustee                                                                     

   The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will 
exercise such rights and powers vested in it under the Indenture and use the    
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs. (ss.ss. 601
and 603)                                                                        

 The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it   
become a creditor of the Company, to obtain payment of claims in certain cases  
or to realize on certain property received by it in respect of any such claim as
security or otherwise. The Trustee is permitted to engage in other transactions 
with the Company or any Affiliate, provided, however, that if it acquires any   
conflicting interest (as defined in the Indenture or in the Trust Indenture     
Act), it must eliminate such conflict or resign. (ss. 608 and 613)              

 DESCRIPTION OF CERTAIN DEBT INSTRUMENTS

Set forth below is a summary of certain debt instruments to which the 
Company is a party. The summary does not purport to be complete, and where      
reference is made to particular provisions of a debt instrument, such           
provisions, including the definition of certain terms, are incorporated by      
reference as a part of such summaries or terms, which are qualified in their    
entirety by such reference. Copies of such agreements have been filed as        
Exhibits to the Registration Statement as to which this Prospectus is a part.   

Credit Agreement                                                                

     On February 1, 1995, the Company entered into the Prior Credit Agreement to
permit term loan borrowings of $100,000,000, and revolving working capital      
facility borrowings of up to $15,000,000. On May 19, 1995, the Company amended  
and restated the Prior Credit Agreement to increase the permitted term loan     
borrowings up to $102,000,000, plus increase the revolving working capital      
facility to permit borrowings of up to                                          

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$60,000,000 (as amended and restated, the "Credit Agreement"). The Company paid 
off all term loan borrowings (which amounts may not be reborrowed) and all      
revolving credit borrowings with the net proceeds of the sale of the Old Notes. 
The Company contemplates amending its Credit Agreement to increase the size of  
the revolving credit facility (currently $60,000,000) on terms no less favorable
to the Company than those currently in place.                                   
See "Use of Proceeds."                                                          

Borrowings under the Credit Agreement are (i) secured by a lien on    
substantially all of the current and future assets of the Company, other than   
broadcast licenses (except to the extent permitted by law), and the pledge of   
all issued and outstanding shares of capital stock of the Company's current and 
future subsidiaries and (ii) guaranteed by all present and future subsidiaries  
of the Company. The Credit Agreement contains a negative pledge with respect to 
the Company's broadcast licenses.                                               

    Outstanding principal balances under the Credit Agreement bear interest at
floating rates equal to the LIBOR Rate plus marginal rates between 1.50% and    
2.75% (currently 2.75%) or the agent bank's prime rate plus marginal rates      
between .25% and 1.50% (currently 1.5%). The marginal rates are subject to      
adjustment under the Credit Agreement, based upon changes in the Company's ratio
of total funded debt to operating cash flow. The Company is required to pay all 
the outstanding revolving credit borrowings on December 31, 2001. The Credit    
Agreement contains representations and warranties, funding and yield protection 
provisions, conditions precedent, financial and other covenants and             
restrictions, events of default and other provisions customary for bank credit  
agreements of this type.                                                        

  Covenants and provisions contained in the Credit Agreement restrict with
certain exceptions, among other things, the Company's and its subsidiaries'     
ability: (i) to incur additional indebtedness, (ii) to create or incur liens,   
(iii) to create or become or remain liable with respect to certain contingent   
liabilities, (iv) to make certain payments with respect to capital stock and    
subordinated indebtedness; provided, that (a) the Company may pay cash dividends
on the Cumulative Convertible Exchangeable Preferred Stock if no default exists 
or would be caused by such payment and (b) the Company may repurchase up to     
$30,000,000 of the 12.75% Debentures or the 10 3/8% Notes if certain financial  
tests are met, (v) to engage in mergers, acquisitions, divestitures, sales and  
leasebacks or changes of business, (vi) to engage in asset sales that exceed, in
the aggregate during a 12 month period, 10% of consolidated broadcast cash flow 
for such 12 month period or if such asset sales would account for greater than  
25% of consolidated broadcast cash flow for the period from the closing date to 
such date of determination, (vii) to become liable under any capital lease, if  
the total rental payments for all capital leases for any period of 12           
consecutive months would be in excess of $4,500,000, (viii) to sell with        
recourse or discount any of its notes or accounts receivable, (ix) to dispose of
any shares of capital stock of a subsidiary, (x) to engage in certain           
transactions with affiliates and holders of equity interests, (xi) to amend,    
modify or terminate certain material agreements, (xii) to invest in, or make    
loans or advances to, other persons or entities in excess of $10,000,000 or     
(xiii) to enter into agreements prohibiting the creation of liens or restricting
the ability of a subsidiary to pay money or distribute assets to the Company.   
The Credit Agreement also requires the Company to maintain specified financial  
ratios.                                                                         

   Events of default under the Credit Agreement include, among other things:
(i) any failure of the Company to pay principal thereunder when due, or to pay  
interest or any other amount due within three days after the date due; (ii)     
default or breach on any indebtedness in an individual principal amount of      
$1,000,000 or more on any items of indebtedness with an aggregate principal     
amount of $2,000,000 or more; (iii) breach by the Company of certain covenants  
contained therein; (iv) material inaccuracy of any representation or warranty   
given by the Company therein; (v) the continuance of a default by the Company in
the performance of or the compliance with other covenants and agreements for 30 
days after the occurrence thereof; (vi) certain changes of control and acts of  
bankruptcy, insolvency or dissolution; (vii) certain judgments, writs or        
warrants of attachment of similar process remaining undischarged, unvacated,    
unbonded, or unstayed for a period of 60 days; (viii) the occurrence of certain 
reportable events under ERISA; (ix) certain changes in the executive officers of
the Company; and (x) any FCC License of the Company or its subsidiaries being   
terminated, denied renewal or modified in any material adverse respect.         

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12.75% Senior Subordinated Debentures                                           

In September 1992, the Company completed an offering of $60,000,000   
aggregate principal amount of its 12.75% Rule 144A Senior Subordinated          
Debentures due September 1, 2002. All of these debentures were exchanged for a  
like principal amount of the publicly-registered 12.75% Senior Subordinated     
Debentures due September 1, 2002, pursuant to an exchange offer completed in    
January 1993 (the "12.75% Debentures"). The 12.75% Debentures are governed by an
indenture, dated as of September 1, 1992, between the Company and United States 
Trust Company of New York, as trustee (the "12.75% Debenture Indenture"). The   
12.75% Debenture Indenture is by its terms subject to and governed by the Trust 
Indenture Act of 1939, as amended.                                              

     Interest on the 12.75% Debentures is payable in cash semi-annually on March
1 and September 1 of each year. The 12.75% Debentures do not have the benefit of
any sinking fund obligations, and are not convertible or exchangeable into any  
other security.                                                                 

The 12.75% Debentures are subordinated in right of payment to the     
indebtedness under the Credit Agreement and to any other existing or future     
Senior Debt (as defined in the 12.75% Debenture Indenture, which definition is  
substantially identical to that contained in the Indenture, except that clause  
(iv) of the definition Debt is not Senior Debt under the 12.75% Debenture       
Indenture), are pari passu in right of payment, to the extent set forth in the  
12.75% Debenture Indenture, with all senior subordinated debt of the Company,   
including the Notes, and are senior in right of payment to all subordinated debt
of the Company, including the Exchange Debentures, if issued.                   

    The 12.75% Debentures are redeemable on or after September 1, 1997, at the
option of the Company, in whole or in part from time to time, at 106.375% of    
principal amount thereof, plus accrued interest, reducing to 100% of the        
principal amount thereof, plus accrued interest, on or after September 1, 1999. 

The Company is required to offer to purchase all outstanding 12.75%   
Debentures at 101% of their principal amount, plus accrued interest, in the     
event of a Change of Control (as defined in the 12.75% Debenture Indenture,     
which definition is substantially identical to that contained in the Indenture).

    The Company is required to make an offer to purchase the 12.75% Debentures
at 100% of their principal amount if the Company makes an Asset Disposition (as 
defined in the 12.75% Debenture Indenture) and the sale proceeds are not        
reinvested. The offer to purchase is limited to the net proceeds from such Asset
Disposition and is subject to (i) the prior claims of holders of Senior Debt and
(ii) there being net proceeds in excess of $5,000,000 that are not required to  
be applied to Senior Debt.                                                      

     The 12.75% Debenture Indenture contains certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to incur debt, pay
cash dividends on or repurchase capital stock, enter into agreements prohibiting
the creation of liens or restricting the ability of a subsidiary to pay money or
transfer assets to the Company, enter into certain transactions with their      
affiliates, dispose of certain assets and engage in mergers and consolidations. 

 Other than the restrictions contained in the 12.75% Debenture Indenture
relating to the incurrence of debt, there are no provisions in the 12.75%       
Debenture Indenture that would protect the holders of the Notes in the event of 
a highly leveraged transaction.                                                 

     Events of Default under the 12.75% Debenture Indenture include: (i) failure
to pay principal of or premium, if any, on the 12.75% Debentures when due at    
maturity, upon redemption or otherwise, including failure by the Company to     
purchase the 12.75% Debentures upon a Change of Control or in connection with an
Asset Disposition (whether or not such payment shall be prohibited by the       
subordination provisions of the Debenture Indenture); (ii) failure to pay any   
interest on any 12.75% Debentures when due, continued for 30 days (whether or   
not such payment shall be prohibited by the subordination provisions of the     
12.75% Debenture Indenture); (iii) failure to perform any other covenant or     
agreement of the Company in the 12.75% Debentures or the 12.75%                 

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Debenture Indenture, continued for 60 days after written notice as provided in  
the 12.75% Debenture Indenture; (iv) failure to pay at final maturity in excess 
of $2,000,000 principal amount of any indebtedness of the Company or any        
subsidiary of the Company, or acceleration of any indebtedness of the Company or
any subsidiary of the Company in an aggregate principal amount in excess of     
$2,000,000; and (v) certain events of bankruptcy, insolvency or reorganization  
of the Company or any subsidiary.                                               

10 3/8% Senior Subordinated Notes                                               

  In May 1995, the Company completed an offering of $175,000,000 aggregate
principal amount of its 10 3/8% Rule 144A Senior Subordinated Notes due May 15, 
2005. All of these notes were exchanged for a like principal amount of the      
publicly-registered 10 3/8% Senior Subordinated Notes due May 15, 2005, pursuant
to an exchange offer completed in November 1995 (the "10 3/8% Notes"). The 10   
3/8% Notes are governed by an indenture, dated as of May 19, 1995, between the  
Company and United States Trust Company of New York, as trustee (the "10 3/8%   
Note Indenture"). The 10 3/8% Note Indenture is by its terms subject to and     
governed by the Trust Indenture Act of 1939, as amended.                        

  Interest on the 10 3/8% Notes is payable in cash semi-annually on May 15
and November 15 of each year. The 10 3/8% Notes do not have the benefit of any  
sinking fund obligations, and are not convertible or exchangeable into any other
security.                                                                       

    The 10 3/8% Notes are subordinated in right of payment to the indebtedness
under the Credit Agreement and to any other existing or future Senior Debt (as  
defined in the 10 3/8% Note Indenture, which definition is substantially        
identical to that contained in the Indenture, are pari passu in right of        
payment, to the extent set forth in the 10 3/8% Note Indenture, with all senior 
subordinated debt of the Company, including the Notes, and are senior in right  
of payment to all subordinated debt of the Company, including the Exchange      
Debentures, if issued.                                                          

     The 10 3/8% Notes are redeemable on or after May 15, 2000, at the option of
the Company, in whole or in part from time to time, at 105.188% of principal    
amount thereof, plus accrued interest, reducing to 100% of the principal amount 
thereof, plus accrued interest, on or after May 15, 2002.                       

    The Company is required to offer to purchase all outstanding 10 3/8% Notes
at 101% of their principal amount, plus accrued interest, in the event of a     
Change of Control (as defined in the 10 3/8% Note Indenture, which definition is
substantially identical to that contained in the Indenture).                    

   The Company is required to make an offer to purchase the 10 3/8% Notes at
100% of their principal amount if the Company makes an Asset Disposition (as    
defined in the 10 3/8% Note Indenture) and the sale proceeds are not reinvested.
The offer to purchase is limited to the net proceeds from such Asset Disposition
and is subject to: (i) the prior claims of holders of Senior Debt and (ii) there
being net proceeds in excess of $5,000,000 that are not required to be applied  
to Senior Debt; and (iii) so long as any of the 12.75% Debentures are           
outstanding, the Company making an offer to purchase the 12.75% Debentures in   
accordance with the 12.75% Debenture Indenture.                                 

 The 10 3/8% Note Indenture contains certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to incur debt, pay
cash dividends on or repurchase capital stock, enter into agreements prohibiting
the creation of liens or restricting the ability of a subsidiary to pay money or
transfer assets to the Company, enter into certain transactions with their      
affiliates, dispose of certain assets and engage in mergers and consolidations. 

Other than the restrictions contained in the 10 3/8% Note Indenture   
relating to the incurrence of debt, there are no provisions in the 10 3/8% Note 
Indenture that would protect the holders of the Notes in the event of a highly  
leveraged transaction.                                                          

    Events of Default under the 10 3/8% Note Indenture include: (i) failure to
pay principal of or premium, if any, on the 10 3/8% Notes when due at maturity, 
upon redemption or otherwise, including failure by the Company                  

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 to purchase the 10 3/8% Notes upon a Change of Control or in connection
with an Asset Disposition (whether or not such payment shall be prohibited by   
the subordination provisions of the Debenture Indenture); (ii) failure to pay   
any interest on any 10 3/8% Notes when due, continued for 30 days (whether or   
not such payment shall be prohibited by the subordination provisions of the 10  
3/8% Note Indenture); (iii) failure to perform any other covenant or agreement  
of the Company in the 10 3/8% Notes or the 10 3/8% Note Indenture, continued for
60 days after written notice as provided in the 10 3/8% Note Indenture; (iv)    
failure to pay at final maturity in excess of $4,000,000 principal amount of any
indebtedness of the Company or any subsidiary of the Company, or acceleration of
any indebtedness of the Company or any subsidiary of the Company in an aggregate
principal amount in excess of $4,000,000; and (v) certain events of bankruptcy, 
insolvency or reorganization of the Company or any subsidiary.                  

Exchange Debentures                                                             

If the Company elects to exchange the Company's Cumulative Convertible
Exchangeable Preferred Stock, par value $.01 per share (the "Exchangeable       
Preferred Stock"), for the Exchange Debentures, the Company will issue the      
Exchange Debentures under an Indenture (the "Exchange Debenture Indenture") to  
be entered into between the Company and a trustee to be designated by the       
Company prior to such exchange that would qualify at the time of such           
designation as a trustee under the Trust Indenture Act of 1939, as amended. The 
Exchange Debentures will be issued at a rate of $25.00 principal amount of the  
Exchange Debentures for each share of Exchangeable Preferred Stock so exchanged.
The Company may only effect such exchange if accrued and unpaid dividends on the
Exchangeable Preferred Stock have been paid in full.                            

The Exchange Debentures will be general, unsecured, subordinated      
obligations of the Company, limited to an aggregate principal amount equal to   
the aggregate liquidation value of the Exchangeable Preferred Stock (excluding  
accrued and unpaid dividends payable upon liquidation) and will mature on       
December 15, 2005. The Exchange Debentures will bear interest at the rate of    
7.75% per annum from the date of issuance, or from the most recent interest     
payment date to which interest has been paid or provided for, payable           
semiannually on June 15 and December 15 of each year.                           

   The Exchange Debentures will be convertible into Common Stock (Nonvoting)
of the Company at the option of the holder at any time at the conversion price  
for the Exchangeable Preferred Stock then in effect.                            

    The payment of the principal of, premium, if any, and interest on Exchange
Debentures will, to the extent set forth in the Exchange Debenture Indenture, be
subordinated in right of payment to the prior payment in full of all Senior     
Indebtedness (as defined in the Exchange Debenture Indenture), which generally  
includes all indebtedness not expressly pari passu with or subordinated in right
of payment to the Exchange Debentures.                                          

     The Exchange Debentures will be redeemable, at the option of the Company at
any time on or after December 26, 1998, in whole or in part, at 103.875% of the 
principal amount thereof, plus accrued interest, to the date fixed for          
redemption, reducing to 100% of the principal amount thereof, plus accrued      
interest to the date fixed for redemption on or after December 15, 2003.        

The Company is required to offer to purchase all outstanding Exchange 
Debentures at 101% of their principal amount plus accrued interest in the event 
of a Change of Control (as defined in the Exchange Debenture Indenture, which   
definition is identical to that contained in the provisions of the Company's    
Certificate of Incorporation governing the Exchangeable Preferred Stock. See    
"Description of Preferred Stock -- Exchangeable Preferred Stock."). The Company 
may, at its option, pay all or a portion of the purchase price upon a Change of 
Control in shares of its Common Stock (Nonvoting) or, if the Company is not the 
survivor, common stock of the successor corporation ("Successor Stock"). Payment
may not be made in shares of Common Stock (Nonvoting) or Successor Stock unless 
such shares have been, or will be no later than the Purchase Date, registered   
under the Securities Act or are freely tradeable pursuant to an exemption       
thereunder and are listed on a United States national securities exchange or    
quoted on the Nasdaq National Market at the time of payment.                    

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There are no provisions in the Exchange Debenture Indenture that would
operate to protect the holders of the Notes in the event of a highly leveraged  
transaction.                                                                    

The following will be Events of Default under the Exchange Debenture  
Indenture: (a) failure to pay principal of or premium, if any, on the Exchange  
Debentures when due at maturity, upon redemption or otherwise, including failure
by the Company to redeem the Exchange Debentures upon a Change of Control       
(whether or not such payment shall be prohibited by the subordination provisions
of the Exchange Debenture Indenture); (b) failure to pay any interest on any    
Exchange Debentures when due, continued for 30 days (whether or not such payment
shall be prohibited by the subordination provisions of the Exchange Debenture   
Indenture); (c) failure to perform any other covenant or agreement of the       
Company in the Exchange Debentures or the Exchange Debenture Indenture,         
continued for 30 days after written notice as provided in the Exchange Debenture
Indenture; (d) failure to pay at final maturity in excess of $2,000,000         
principal amount of any indebtedness of the Company or any subsidiary of the    
Company, or acceleration of any indebtedness of the Company or any subsidiary of
the Company in an aggregate principal amount in excess of $2,000,000; and (e)   
certain events of bankruptcy, insolvency or reorganization of the Company or any
subsidiary.                                                                     

DESCRIPTION OF PREFERRED STOCK

   The following is a summary of the terms of the Company's preferred stock.
This summary is not intended to be complete and is subject to and qualified in  
its entirety by reference to the Company's Third Amended and Restated           
Certificate of Incorporation (the "Certificate of Incorporation"). A copy of the
Certificate of Incorporation has been filed as an Exhibit to the Registration   
Statement as to which this Prospectus is a part.                                

Exchangeable Preferred Stock                                                    

    Holders of the Exchangeable Preferred Stock are entitled to receive, when,
as and if declared by the Board of Directors, out of the funds of the Company   
legally available therefor, cash dividends at the annual rate of $1.9375 per    
share, payable quarterly on March 15, June 15, September 15 and December 15 of  
each year (and, in the case of any accrued but unpaid dividends, at such        
additional times and for such interim periods, if any, as determined by the     
Company's Board of Directors). Dividends on the Exchangeable Preferred Stock are
cumulative and accrue without interest from December 23, 1993, the date of      
original issuance. Payment of dividends is subject to limitations under the     
Indenture, 12.75% Debenture Indenture, the 10 3/8% Note Indenture and the Credit
Agreement. See "Description of Certain Debt Instruments."                       

    Each share of Exchangeable Preferred Stock may be converted at any time at
the option of the holder into fully paid, nonassessable shares of Common Stock  
(Nonvoting). As of December 31, 1995, the conversion price was $5.00 per share  
of Common Stock (Nonvoting), subject to adjustment from time to time as provided
in the Certificate of Incorporation. As of May 23, 1996, the closing price per  
share of the Common Stock (Nonvoting), as reported by Nasdaq, was $12-15/16%.   

All of the then outstanding shares of Exchangeable Preferred Stock are
required to be redeemed by the Company, out of funds legally available therefor,
at $25.00 per share plus accrued but unpaid dividends thereon, if any, to (and  
including) the redemption date, whether or not earned or declared, on December  
15, 2005. In the event the Company does not fulfill its mandatory redemption    
obligation, holders of Exchangeable Preferred Stock will have the voting rights 
described below. The Company's ability to redeem or repurchase its capital stock
may be subject to certain limitations under the agreements relating to the      
Company's indebtedness existing at that time. See "Description of Notes" and    
"Description of Certain Debt Instruments."                                      

    Shares of Exchangeable Preferred Stock will be redeemable at the option of
the Company at any time on or after December 26, 1998, in whole or in part, at  
any time out of funds legally available therefor, at a per share redemption     
price of $25.97, plus in each case an amount equal to accrued and unpaid        
dividends, if any, to (and including) the redemption date, whether or not earned
or declared and reducing to $25.00 per share, plus accrued and unpaid dividends,
after December 15, 2003.                                                        

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     The Exchangeable Preferred Stock is exchangeable in whole, but not in part,
at the option of the Company, for Exchange Debentures on any dividend payment   
date beginning on December 15, 1995 at the rate of $25.00 principal amount of   
Exchange Debentures for each share of Exchangeable Preferred Stock outstanding  
at the time of exchange. See "Description of Certain Debt Instruments --        
Exchange Debentures." The Company may only effect such exchange if accrued and  
unpaid dividends on the Exchangeable Preferred Stock have been paid in full.    

     The Company's exchange of the Exchangeable Preferred Stock for the Exchange
Debentures would constitute an incurrence of indebtedness, and would therefore  
be subject to certain restrictions, under the Indenture, 12.75% Debenture       
Indenture and the 10 3/8% Note Indenture, and would require the consent of a    
majority in interest of the lenders under the Credit Agreement. See "Description
of Certain Debt Instruments."                                                   

 If (i) at any time the equivalent of six quarterly dividends payable on
they Exchangeable Preferred Stock are accrued and unpaid or (ii) the Company    
fails to make any payment upon mandatory redemption of the Exchangeable         
Preferred Stock, the number of directors of the Company will be increased by two
and the holders of all outstanding shares of Exchangeable Preferred Stock,      
voting separately as a class, will be entitled to elect the additional two      
directors to serve until all dividends accrued and unpaid have been paid or     
declared and funds set aside to provide for payment in full or the Company      
fulfills its mandatory redemption obligation, as the case may be.               

If a Change of Control (as defined below) occurs, each holder of      
Exchangeable Preferred Stock shall have the right, at the holder's option, to   
require the Company to repurchase all of such holder's Exchangeable Preferred   
Stock at a price per share equal to $25.00, plus accrued and unpaid dividends to
the date of repurchase. The Company may, at its option, pay all or any portion  
of the repurchase price upon a Change of Control in shares of Common Stock      
(Nonvoting) of the Company or, if the Company is not the survivor, Successor    
Stock. Payment may not be made in shares of Common Stock (Nonvoting) or         
Successor Stock unless such shares have been, or will be, no later than the     
repurchase date, registered under the Securities Act or are freely tradeable    
pursuant to an exemption thereunder and are listed on a United States national  
securities exchange or quoted on the Nasdaq National Market at the time of      
payment. The Company may not complete any Change of Control unless it makes     
proper provision to satisfy the foregoing obligations under the Certificate of  
Incorporation.                                                                  

 A Change of Control will be deemed to have occurred at such time as any
Person or any Persons (other than one or more Permitted Holders) acting together
that would constitute a "group" (a "Group") for purposes of Section 13(d) of the
Exchange Act becomes the beneficial owner of 50% or more of the total voting    
power of all classes of voting stock of the Company or at such time as such     
Person or Group succeeds in having sufficient of its nominees elected to the    
Board of Directors of the Company such that such nominees, when added to any    
existing director remaining on the Board of Directors of the Company after such 
election who is an Affiliate of such Group, will constitute a majority of the   
Board of Directors of the Company. "Permitted Holder" means W. Don Cornwell,    
Stuart J. Beck, or the members of the immediate family of either of them or any 
trustee for either of their estates. Notwithstanding the foregoing, a Change of 
Control shall not occur if either (i) for any five trading days during the 10   
trading days immediately preceding either the public announcement by the Company
of such transaction or the consummation of such transaction, the last sale price
of the Common Stock (Nonvoting) is equal to at least 105% of the conversion     
price in effect on such trading days, or (ii) at least 90% of the consideration 
(excluding cash payments for fractional shares) in such transaction or          
transactions to the holders of Common Stock (Nonvoting) consists of shares of   
common stock that are, or immediately upon issuance will be, listed on a        
national securities exchange or quoted on the Nasdaq National Market, and as a  
result of such transaction or transactions, the Preferred Stock or Exchange     
Debentures, as the case may be, become convertible into such common stock.      

Series Preferred Stock                                                          

 Prior to August 4, 1995 there were three series of the Company's Series
Preferred Stock outstanding: the Series A Preferred Stock, the Series B         
Preferred Stock and the Series C Preferred Stock. On August 4, 1995, all of the 
shares of Series A Preferred Stock was converted into Common Stock (Nonvoting)  
and on September 15, 1995, all of the shares of Series B and Series C Preferred 
Stock were converted into Common Stock (Nonvoting).                             

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 Dividends on the Series A Preferred Stock accrued on October 31 of each
year at an annual rate of $0.40 per share until such shares were converted,     
whether or not any funds were legally available therefor. Such dividends were   
payable only as and when declared by the Board of Directors out of funds legally
available therefor, and accumulated, if not paid, without payment of interest on
such accumulations. Dividends that accrued and were unpaid prior to conversion  
remain an obligation of the Company and are payable on the later of (i) December
31, 1999 and (ii) such date as they may be paid under loan agreements or        
indentures of the Company, the obligations of which are senior in priority to   
the Series A Preferred Stock. Dividends have never been paid on the Series A    
Preferred Stock, and the aggregate amount of accrued but unpaid dividends       
thereon was approximately $263,000 as of March 31, 1996. No dividends or other  
distributions in respect of shares ranking junior in priority to the Series A   
Preferred Stock may be declared, paid or made so long as there are any accrued  
but unpaid dividends of Series A Preferred Stock.                               

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 CERTAIN U.S. TAX CONSIDERATIONS

Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel to the Company, has
opined that, subject to the qualifications set forth below, the following       
discussion accurately sets forth the anticipated material U.S. federal income   
tax consequences applicable to the exchange of Old Notes for New Notes and the  
ownership and disposition of the New Notes by holders who acquire the New Notes 
pursuant to the Exchange Offer. The discussion is limited solely to U.S. federal
income tax matters. The discussion is based upon the Internal Revenue Code of   
1986, as amended (the "Code"), Treasury regulations (including proposed         
regulations), administrative rulings and pronouncements of the Internal Revenue 
Service ("IRS"), and judicial decisions, all as of the date hereof and all of   
which are subject to change at any time, possibly with retroactive effect.      

This discussion is limited to holders who hold the Notes as "capital  
assets" for U.S. federal income tax purposes. This discussion does not cover all
aspects of federal income taxation that may be relevant to, or the actual tax   
effect that any of the matters described herein will have on, particular        
holders. This discussion does not address U.S. federal income tax consequences  
that may be applicable to particular categories of shareholders, including      
insurance companies, tax-exempt persons, financial institutions, dealers in     
securities, persons with significant holdings of Company stock, and non-United  
States persons, including foreign corporations and nonresident alien            
individuals. This discussion does not address any tax considerations under the  
laws of any state, locality, or foreign country.                                

   The Company has not sought, nor does it intend to seek, a ruling from the
IRS as to any of the matters covered by this discussion, and there can be no    
assurance that the IRS will not successfully challenge the conclusions reached  
in this discussion. BECAUSE THE U.S. FEDERAL INCOME TAX CONSEQUENCES DISCUSSED  
BELOW DEPEND UPON EACH HOLDER'S PARTICULAR TAX STATUS, AND DEPEND FURTHER UPON  
U.S. FEDERAL INCOME TAX LAWS, REGULATIONS, RULINGS AND DECISIONS WHICH ARE      
SUBJECT TO CHANGE (WHICH CHANGES MAY BE RETROACTIVE IN EFFECT), HOLDERS SHOULD  
CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES OF THE 
EXCHANGE OF OLD NOTES FOR NEW NOTES AND THE OWNERSHIP AND DISPOSITION OF THE NEW
NOTES.                                                                          

Exchange                                                                        

The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an exchange or other tax event for federal income tax  
purposes because the New Notes should not be considered to differ materially in 
kind or extent from the Old Notes. Regulations proposed by the United States    
Treasury would confirm this result. Accordingly, there should be no material    
federal income tax consequences to holders exchanging Old Notes for New Notes   
pursuant to the Exchange Offer, and a holder should have the same adjusted tax  
basis and holding period in the New Notes as it had in the Old Notes immediately
before the exchange.                                                            

Interest                                                                        

A holder of New Notes will be required to report interest income for  
federal income tax purposes for any interest earned on the Notes in accordance  
with such holder's method of tax accounting.                                    

Original Issue Discount on the Notes                                            

   The Old Notes were issued with de minimis original issue discount ("OID")
for federal income tax purposes. Accordingly, the New Notes also will have de   
minimis OID since the New Notes should be treated as a continuation of the Old  
Notes for federal income tax purposes. OID is considered de minimis if the      
amount of OID is less than .0025 multiplied by the product of the stated        
redemption price at maturity of the indebtedness and the number of complete     
years to maturity from the issue date. In the case of de minimis OID, the amount
of OID is treated as zero for federal income tax purposes.                      

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     In general, a holder of New Notes will be required to include the amount of
de minimis OID in income upon the redemption of such Notes. Any amount of de    
minimis OID includible in a holder's income will be treated as capital gain     
recognized on the retirement of the Notes. Further, any gain attributable to de 
minimis OID that is recognized on the sale or exchange of the Notes will be     
treated as capital gain. An exchanging holder who purchased an Old Note at a    
premium will not include the amount of de minimis OID in income. (For a         
discussion regarding a purchase at a discount, see "Market Discount" below.)    
Holders should consult their tax advisors concerning the treatment of de minimis
OID under these provisions.                                                     

Market Discount                                                                 

  Under the market discount rules of the Code, an exchanging holder (other
than a holder who made the election described below) who purchased an Old Note  
with "market discount" (generally defined as the amount by which the stated     
redemption price of the Old Note on the holder's date of purchase exceeded the  
holder's purchase price) will be required to treat any gain recognized on the   
redemption, sale or other disposition of the New Note received in the exchange  
as ordinary income to the extent of the market discount that accrued during the 
holder's holding period for such New Note (which period will include such       
holder's holding period for the Old Note). In addition, a holder of a Note      
acquired at market discount may be required to defer the deduction of all or a  
portion of the interest expense on any indebtedness incurred or continued to    
purchase or carry such Note. A holder who has elected under applicable Code     
provisions to include market discount in income annually as such discount       
accrues will not be required to treat any gain recognized as ordinary income (or
defer interest deductions) under the market discount rules described above.     
Holders should consult their tax advisors as to the portion of any gain that    
would be taxable as ordinary income under these provisions.                     

Amortizable Bond Premium                                                        

     In general, if a holder's initial tax basis in the Old Notes at acquisition
exceeded the amount payable at maturity, the excess will be treated as          
"amortizable bond premium" (including after the exchange of such Old Notes for  
New Notes). In such case, the holder may elect under section 171 of the Code to 
amortize the bond premium annually under a constant yield method. The holder's  
adjusted tax basis in the Note is decreased by the amount of the allowable      
amortization. Because the Notes have early call provisions, holders must take   
such call provisions into account to determine the amount of amortizable bond   
premium. Amortizable bond premium is treated as an offset to interest received  
on the obligation rather than as an interest deduction, except as may be        
provided in Treasury regulations. An election to amortize bond premium would    
apply to amortizable bond premium on all taxable bonds held on or acquired after
the beginning of the holder's taxable year for which the election is made, and  
may be revoked only with the consent of the IRS. Holders who acquire their Notes
with amortizable bond premium should consult their own tax advisors.            

Sale, Exchange, Redemption or Other Disposition of Notes                        

     On sale, exchange, redemption or other disposition of the Notes, and except
to the extent that the cash received is attributable to accrued interest (which 
generally represents ordinary interest income) or market discount (the tax      
consequences of which are described above), a holder generally will recognize   
capital gain or loss measured by the difference between the amount realized and 
such holder's adjusted tax basis in the Notes redeemed.                         

Backup Withholding                                                              

     Federal income tax backup withholding at a rate of 31 percent on dividends,
interest payments, and proceeds from a sale, exchange, or redemption of New     
Notes will apply unless the holder (i) is a corporation or comes within certain 
other exempt categories (and, when required, demonstrates this fact) or (ii)    
provides a taxpayer identification number, certifies as to no loss of exemption 
from backup withholding, and otherwise complies with applicable requirements of 
the backup withholding rules. The amount of any backup withholding from a       
payment to a holder will be allowed as a credit against the holder's federal    
income tax liability and may entitle such holder to a refund, provided that the 
required information is furnished to the IRS. A holder of Notes who does not    
provide                                                                         

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the Company with his correct taxpayer identification number may be subject to   
penalties imposed by the IRS. The Company will report to the holders of the     
Notes and the IRS the amount of any "reportable payments" and any amount        
withheld with respect to the Notes during the calendar year.                    

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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. The Company has agreed that it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection   
with any such resale for a period until 180 days after the Exchange Offer has   
been consummated, or such shorter period as will terminate when all Old Notes   
acquired by broker-dealers for their own accounts as a result of market-making  
activities or other trading activities have been exchanged for New Notes and    
resold by such broker-dealers.                                                  

 The Company 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 on 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 and/or the purchasers of any such 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, a broker-dealer will not be deemed to admit that it is an           
"underwriter" within the meaning of the Securities Act.                         

    For a period until 180 days after the Exchange Offer has been consummated,
or such shorter period as will terminate when all Old Notes acquired by         
broker-dealers for their own accounts as a result of market-making activities or
other trading activities have been exchanged for New Notes and resold by such   
broker-dealers, the Company will promptly send additional copies of this        
Prospectus and any amendment or supplement to this Prospectus to any            
broker-dealer that requests such documents in the Letter of Transmittal. The    
Company has agreed to pay all expenses incident to the Exchange Offer (including
the expenses of one counsel for the holders of the Notes) other than commissions
or concessions of any brokers or dealers and will indemnify the holders of the  
Notes (including any broker-dealers) against certain liabilities, including     
liabilities under the Securities Act.                                           

 EXPERTS

    The consolidated financial statements and schedule of the Company for each
of the three years in the period ended December 31, 1995 and the financial      
statements of Austin Television for each of the three years in the period ended 
December 31, 1994, the financial statements of WWMT for each of the three years 
in the period ended January 1, 1995, and the combined financial statements of   
San Joaquin Communications Corporation ("SJCC") and WTVH for each of the two    
years in the period ended June 30, 1993, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports dated February 22, 1996,    
with respect to the Company, February 3, 1995 with respect to Austin Television,
February 24, 1995, except for Note 1, as to which the date is May 3, 1995, with 
respect to WWMT and August 31, 1993, with respect to SJCC and WTVH, and are     
included in reliance upon such reports given upon the authority of said firm as 
an expert in accounting and auditing. The consolidated financial statements for 
Queen City for each of the three years in the period ended December 31, 1994,   
have been audited by Leslie Sufrin and Company, P.C., as set forth in their     
report dated February 18, 1995, except for Notes 1 and 12, as to which the date 
is July 24, 1995 and are included in reliance upon such report given upon the   
authority of said firm as an expert in accounting and auditing.                 

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 LEGAL MATTERS

  Certain legal matters will be passed upon for the Company by Akin, Gump,
Strauss, Hauer & Feld, L.L.P., a limited liability partnership including        
professional corporations, 1333 New Hampshire Avenue, N.W., Suite 400,          
Washington, D.C. 20036, counsel to the Company. Vernon E. Jordan, Jr., a partner
in Akin, Gump, Strauss, Hauer & Feld, L.L.P. holds, beneficially and of record, 
8,264 shares of the Company's Common Stock (Nonvoting).                         

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 INDEX TO FINANCIAL STATEMENTS

                                                        · Enlarge/Download Table

                                                                                                  Page   
                                                                                                Reference
                                                                                                ---------
                                                                                                         

GRANITE BROADCASTING CORPORATION                                                                         
Unaudited Consolidated Statements of Operations for the                                                  
  Three Months Ended March 31, 1995 and 1996...................................................    F-3   
Consolidated Balance Sheets as of December 31, 1995 and March 31, 1996 (unaudited) ............    F-4   
Unaudited Consolidated Statement of Stockholders' Equity for the                                         
  Three Months Ended March 31, 1996 ...........................................................    F-5   
Unaudited Consolidated Statements of Cash Flows for the                                                  
  Three Months Ended March 31, 1995 and 1996...................................................    F-6   
Notes to Consolidated Financial Statements (unaudited) ........................................    F-7   
Report of Independent Auditors.................................................................    F-8   
Consolidated Statements of Operations for the Years Ended December 31, 1993,                             
  1994 and 1995................................................................................    F-9   
Consolidated Balance Sheets as of December 31, 1994 and 1995 ..................................    F-10  
Consolidated Statements of Stockholders' Equity for the Years Ended                                      
  December 31, 1993, 1994 and 1995.............................................................    F-11  
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993,                             
  1994 and 1995................................................................................    F-12  
Notes to Consolidated Financial Statements.....................................................    F-13  

SAN JOAQUIN COMMUNICATIONS CORPORATION AND WTVH                                                          
Report of Independent Auditors.................................................................    F-29  
Combined Statement of Operations and Net Worth for the Years Ended                                       
  June 30, 1992 and 1993 and for the period July 1, 1992 to                                              
  December 31, 1992 and July 1, 1993 to December 23, 1993 (unaudited)                              F-30  
Combined Balance Sheet as of June 30, 1992 and 1993 and December 23, 1993 (unaudited) .........    F-31  
Combined Statement of Cash Flows for the Years Ended June 30,                                            
  1992 and 1993 and for the period July 1, 1992 to December 31, 1992 and                                 
  July 1, 1993 to December 23, 1993 (unaudited)................................................    F-32  
Notes to Combined Financial Statements.........................................................    F-33  

KBVO-TV (Austin Television, a Texas general partnership)                                                 
Report of Independent Auditors.................................................................    F-36  
Balance Sheets as of December 31, 1993 and 1994 and January 31, 1995 (unaudited) ..............    F-37  
Statements of Income and Partners' Deficit for the Years Ended December 31,                              
  1992, 1993 and 1994, and the one month ended January 31, 1994 and 1995 (unaudited) ..........    F-38  
Statements of Cash Flows for the Years Ended December 31, 1992, 1993 and                                 
  1994 and the one month ended January 31, 1995 and 1994 (unaudited) ..........................    F-39  
Notes to Financial Statements..................................................................    F-40  


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                                                        · Enlarge/Download Table

                                                                                                  Page   
                                                                                                Reference
                                                                                                ---------

                                                                                                         

WWMT-TV (A Division of Busse Broadcasting Corporation)                                                   
Report of Independent Auditors.................................................................   F-43   
Balance Sheets as of January 2, 1994, January 1, 1995 and May 31, 1995 (unaudited) ............   F-44   
Statements of Operations for each of the Three Years in the                                              
  Period Ended January 1, 1995 and the five months ended May 31, 1994 and 1995 (unaudited) ....   F-45   
Statements of Divisional Equity for each of the Three Years in the PeriodEnded                           
  January 1, 1995 and the five months ended May 31, 1995 (unaudited) ..........................   F-46   
Statements of Cash Flows for each of the Three Years in the Period Ended                                 
  January 1, 1995 and the five months ended May 31, 1994 and 1995 (unaudited) .................   F-47   
Notes to Financial Statements..................................................................   F-48   

QUEEN CITY BROADCASTING, INC.                                                                            
Report of Independent Auditors.................................................................   F-52   
Consolidated Balance Sheets as of December 31, 1993 and 1994 and                                         
  June 28, 1995 (unaudited)....................................................................   F-53   
Consolidated Statements of Operations for the Years Ended December 31, 1992,                             
  1993 and 1994 and the period January 1, 1994 to June 30, 1994 and                                      
  January 1, 1995 to June 28, 1995 (unaudited).................................................   F-54   
Consolidated Statements of Stockholders' Deficit for the Years Ended                                     
  December 31, 1992, 1993 and 1994 and the period January 1, 1995                                        
  to June 28, 1995 (unaudited).................................................................   F-55   
Consolidated Statements of Cash Flow for the Years Ended December 31, 1992,                              
  1993 and 1994 and the period January 1, 1994 to June 30, 1994 and                                      
  January 1, 1995 to June 28, 1995 (unaudited).................................................   F-56   
Notes to Consolidated Financial Statements.....................................................   F-57   

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GRANITE BROADCASTING CORPORATION
 CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                · Download Table

                                                       Three Months Ended March 31,
                                                          1995            1996     
                                                      ------------    ------------ 
                                                              (Unaudited)          
                                                                                   
Net revenues .......................................  $ 16,455,798    $ 28,629,635 
Station operating expenses .........................    10,337,693      17,517,927 
Depreciation expense ...............................       804,940       1,473,380 
Amortization expense ...............................     1,447,547       2,951,278 
Corporate expense ..................................       811,816         990,014 
Non-cash compensation expense ......................        80,913         114,537 
                                                      ------------    ------------ 

  Operating income .................................     2,972,889       5,582,499 

Other expenses:                                                                    
  Interest expense, net ............................     3,710,095       8,849,730 
  Other ............................................        94,260         125,633 
                                                      ------------    ------------ 

Loss before income taxes and extraordinary item ....      (831,466)     (3,392,864)
Provision for income taxes .........................          --           (61,089)
                                                      ------------    ------------ 

Loss before extraordinary item .....................      (831,466)     (3,453,953)
Extraordinary loss on early extinguishment of debt .          --        (3,510,152)
                                                      ------------    ------------ 

Net loss ...........................................  $   (831,466)   $ (6,964,105)
                                                      ============    ============ 

Net loss attributable to common stockholders .......  $ (1,769,942)   $ (7,845,424)
                                                      ============    ============ 

Per common share:                                                                  
  Loss before extraordinary item ...................  $      (0.39)   $      (0.51)
  Extraordinary loss on early extinguishment of debt          --             (0.42)
                                                      ------------    ------------ 
  Net loss .........................................  $      (0.39)   $      (0.93)
                                                      ============    ============ 

Weighted average common shares outstanding .........     4,577,524       8,464,012 
                                                      ------------    ------------ 

 See accompanying notes.

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GRANITE BROADCASTING CORPORATION
 CONSOLIDATED BALANCE SHEETS

                                                        · Enlarge/Download Table

                                                                                 December 31,     March 31,   
                                                                                    1995            1996      
                                                                                -------------   ------------- 
                                                                                                              
         ASSETS                                                                                  (unaudited)  

CURRENT ASSETS:                                                                                               
  Cash and cash equivalents ................................................... $      95,123   $   4,354,430 
  Accounts receivable, less allowance for doubtful accounts                                                   
    ($255,827 in 1994 and $505,759 in 1995) ...................................    26,186,579      22,633,125 
  Film contract rights ........................................................     5,813,366       4,516,019 
  Other assets ................................................................     3,854,774       4,231,351 
                                                                                -------------   ------------- 
          TOTAL CURRENT ASSETS ................................................    35,949,842      35,734,925 

PROPERTY AND EQUIPMENT, NET ...................................................    32,132,126      32,204,637 
FILM CONTRACT RIGHTS AND OTHER NONCURRENT ASSETS ..............................     3,725,612       4,281,976 
DEFERRED FINANCING FEES, less accumulated amortization                                                        
  ($1,209,275 in 1994 and $2,947,833 in 1995) .................................    14,849,529      14,045,461 
INTANGIBLE ASSETS, less accumulated amortization                                                              
  ($17,906,588 in 1994 and $25,467,092 in 1995) ...............................   365,564,029     363,503,529 
                                                                                -------------   ------------- 
                                                                                $ 452,221,138   $ 449,770,528 
                                                                                =============   ============= 

         LIABILITIES AND STOCKHOLDERS' EQUITY                                                                 

CURRENT LIABILITIES:                                                                                          
  Accounts payable ............................................................ $   4,770,793   $   2,703,803 
  Accrued interest ............................................................     5,595,610       8,477,344 
  Other accrued liabilities ...................................................     3,252,518       3,511,490 
  Film contract rights payable and other current liabilities ..................     7,708,442       8,231,029 
                                                                                  -----------     ----------- 
         TOTAL CURRENT LIABILITIES ............................................    21,327,363      22,923,666 

LONG-TERM DEBT ................................................................   341,000,000     344,454,700 
FILM CONTRACT RIGHTS PAYABLE ..................................................     3,669,534       3,881,370 
DEFERRED TAX LIABILITY AND OTHER                                                                              
  NONCURRENT LIABILITIES ......................................................    31,869,240      31,886,678 

COMMITMENTS                                                                                                   

REDEEMABLE PREFERRED STOCK (NOTE 8) ...........................................    45,487,500      45,487,500 

STOCKHOLDERS' EQUITY:                                                                                         
  Common stock: 41,000,000 shares authorized consisting of                                                    
     1,000,000 shares of Class A Common Stock, $.01 par                                                       
     value, and 40,000,000 shares of Common Stock                                                             
     (Nonvoting), $.01 par value; 178,500 shares of Voting                                                    
     Common Stock and 8,298,966 shares of Common Stock                                                        
     (Nonvoting) (8,218,240 shares at December 31, 1995)                                                      
     issued and outstanding ...................................................        83,967          84,774 
  Additional paid-in capital ..................................................    46,864,202      45,982,076 
  Accumulated deficit .........................................................   (36,590,198)    (43,554,303)
  Less:  Unearned compensation ................................................    (1,490,470)     (1,375,933)
                                                                                -------------   ------------- 
          Total stockholders' equity ..........................................     8,867,501       1,136,614 
                                                                                -------------   ------------- 
                                                                                $ 452,221,138   $ 449,770,528 
                                                                                =============   ============= 

 See accompanying notes.

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GRANITE BROADCASTING CORPORATION
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 Three Months Ended March 31, 1996
 (unaudited)

                                                        · Enlarge/Download Table

                                        Class A       Common       Additional                                     Total     
                                        Common         Stock        Paid-in      (Accumulated     Unearned     Stockholders'
                                         Stock      (Nonvoting)     Capital        Deficit)     Compensation      Equity    
                                      ------------  ------------  ------------   ------------   ------------   ------------ 
                                                                                                                            
Balance at December 31, 1995 .......  $      1,785  $     82,182  $ 46,864,202   $(36,590,198)  $ (1,490,470)  $  8,867,501 

Dividend on Cumulative                                                                                                      
  Convertible Exchangeable                                                                                                  
  Preferred Stock ..................                                  (881,319)                                    (881,319)

Issuance of Common Stock (Nonvoting)                         807          (807)                                             

Stock expense related to                                                                                                    
  Management Stock Plan ............                                                                 114,537        114,537 
Net loss ...........................                                               (6,964,105)                   (6,964,105)
                                      ------------  ------------  ------------   ------------   ------------   ------------ 
Balance at March 31, 1996 ..........  $      1,785  $     82,989  $ 45,982,076   $(43,554,303)  $ (1,375,933)  $  1,136,614 
                                      ============  ============  ============   ============   ============   ============ 

 See accompanying notes.

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GRANITE BROADCASTING CORPORATION
 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        · Enlarge/Download Table

                                                                                    Three Months Ended        
                                                                                         March 31,            
                                                                                   1995              1996     
                                                                               -------------    ------------- 
                                                                                         (unaudited)          
                                                                                                              
Cash flows from operating activities:                                                                         
  Net income (loss) .........................................................  $    (831,466)   $  (6,964,105)
  Adjustments to reconcile net income (loss) to                                                               
    net cash provided by operating activities:                                                                
      Amortization of intangible assets and deferred financing fees .........      1,447,547        2,951,278 
      Extraordinary loss on extinguishment of debt ..........................           --          3,510,152 
      Depreciation ..........................................................        804,490        1,473,380 
      Non-cash compensation expense .........................................         80,913          114,537 

Change in assets and liabilities net of effects from acquisition of stations:                                 
      Decrease in accounts receivable .......................................            989        3,553,454 
      Increase (decrease) in accrued liabilities ............................     (1,106,304)       3,140,706 
      (Decrease) increase in accounts payable ...............................        476,695       (2,066,990)
      Decrease (increase) in film contract rights and other                                                   
        noncurrent assets ...................................................       (733,385)         740,983 
      Increase in film contract rights                                                                        
        payable and other liabilities .......................................        844,303          734,423 
      Increase in other assets ..............................................     (1,756,072)        (823,238)
                                                                               -------------    ------------- 
  Net cash provided by (used in) operating activities .......................       (771,840)       6,364,580 
                                                                               -------------    ------------- 

Cash flows from investing activities:                                                                         
  Payment for acquisition of stations,                                                                        
    net of cash acquired ....................................................    (53,922,975)            --   
  Capital expenditures ......................................................     (2,184,307)      (1,443,898)
                                                                               -------------    ------------- 
    Net cash used in investing activities ...................................    (56,107,282)      (1,443,898)
                                                                               -------------    ------------- 

Cash flows from financing activities:                                                                         
  Proceeds from bank loan ...................................................     62,250,000        1,000,000 
  Repayment of bank borrowings ..............................................           --       (107,000,000)
  Redemption of Adjustable Rate Preferred Stock .............................     (2,000,000)            --   
  Payment of deferred financing fees ........................................     (1,919,009)      (3,230,056)
  Proceeds from Senior Subordinated Notes ...................................           --        109,450,000 
  Dividends paid ............................................................       (917,320)        (881,319)
                                                                               -------------    ------------- 
    Net cash provided by (used in) financing activities .....................     57,413,671         (661,375)
                                                                               -------------    ------------- 

Net increase in cash and cash equivalents ...................................        534,549        4,259,307 
Cash and cash equivalents, beginning of period ..............................      1,947,562           95,123 
                                                                               -------------    ------------- 
Cash and cash equivalents, end of period ....................................  $   2,482,111    $   4,354,430 
                                                                               =============    ============= 

Supplemental information:                                                                                     
  Cash paid for interest ....................................................  $   4,622,939    $   5,967,996 
  Cash paid for income taxes ................................................           --             12,500 
    Non-cash capital expenditures ...........................................           --            101,993 


 See accompanying notes.

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GRANITE BROADCASTING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)

Note 1 -- Basis of Presentation                                                 

  The accompanying unaudited consolidated financial statements include the
accounts of Granite Broadcasting Corporation and its subsidiaries (the          
"Company") and have been prepared in accordance with the instructions to Form   
10-Q and do not include all of the information and footnotes required by        
generally accepted accounting principles for complete financial statements.     
Operating results for the three month period ended March 31, 1996 are not       
necessarily indicative of the results that may be expected for the year ended   
December 31, 1996. For further information, refer to the Company's consolidated 
financial statements and notes thereto for the year ended December 31, 1995     
which are included herein. All significant intercompany accounts and            
transactions have been eliminated. Data at December 31, 1995 is derived from the
Company's audited consolidated financial statements.                            

    In the opinion of management, all adjustments of a normal recurring nature
which are necessary for a fair presentation of the results for the interim      
periods have been made.                                                         

Note 2 -- Long Term Debt                                                        

 On February 22, 1996, the Company completed an offering of $110,000,000
principal amount of its 9 3/8% Series A Senior Subordinated Notes (the "9 3/8%  
Notes") due December 1, 2005. Proceeds from the sale of the 9 3/8% Notes were   
used to repay all outstanding term loan and revolving credit borrowings under   
the existing bank credit agreement and for general working capital purposes. In 
connection with the repayment of the term loan (which is not subject to being   
reborrowed), the Company incurred an extraordinary loss on the early            
extinguishment of debt of $3,510,152 related to the write-off of deferred       
financing fees.                                                                 

Note 3 -- Net Loss Per Common Share                                             

    Net loss per common share for the three month periods ended March 31, 1996
and 1995 is calculated by dividing net loss attributable to common stockholders 
by the weighted average number of shares of common stock outstanding. The       
inclusion of additional shares assuming the exercise of outstanding stock       
options and the conversion of certain convertible preferred stock would have    
been antidilutive for the three month periods ended March 31, 1996 and 1995.    

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Report of Independent Auditors

The Board of Directors and Stockholders                                         
Granite Broadcasting Corporation                                            

 We have audited the accompanying consolidated balance sheets of Granite
Broadcasting Corporation as of December 31, 1995 and 1994, and the related      
consolidated statements of operations, stockholders' equity and cash flows for  
each of the three years in the period ended December 31, 1995. Our audit also   
included the financial statement schedule listed in the Index at Item 14(a) of  
the Granite Broadcasting Corporation Form 10-K for the fiscal year ended        
December 31, 1995. These financial statements and the schedule are the          
responsibility of the Company's management. Our responsibility is to express an 
opinion on these financial statements and the schedule based on our audits.     

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

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Granite        
Broadcasting Corporation at December 31, 1995 and 1994, and the consolidated    
results of its operations and its cash flows for each of the three years in the 
period ended December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,      
presents fairly in all material respects the information set forth therein.     

                 Ernst & Young LLP

New York, New York                                                              
February 22, 1996                                                               

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GRANITE BROADCASTING CORPORATION
 CONSOLIDATED STATEMENTS OF OPERATIONS

                                                        · Enlarge/Download Table

                                                           For the Years Ended December 31,       
                                                        1993            1994             1995     
                                                   --------------  --------------   --------------

                                                                                                  
Net revenue ...................................... $ 37,499,152    $ 62,856,425    $ 99,894,627   
Station operating expenses .......................   22,790,124      37,763,732      55,398,930   
Depreciation .....................................    2,398,301       3,420,850       4,513,919   
Amortization .....................................    3,864,199       4,714,721       9,329,444   
Corporate expense ................................    1,374,289       2,162,621       3,131,943   
Non-cash compensation expense ....................      123,250         281,896         363,384   
                                                   ------------    ------------    ------------   

  Operating income ...............................    6,948,989      14,512,605      27,157,007   

Other (income) expenses:                                                                          
  Equity in net income of investee ...............         --              --          (439,033)  
  Interest expense, net ..........................   10,976,680      10,707,147      27,026,680   
  Other ..........................................      479,499         307,929         797,576   
                                                   ------------    ------------    ------------   
  Income (loss) before income taxes                                                               
    and extraordinary item .......................   (4,507,190)      3,497,529        (228,216)  
  (Provision) benefit for income taxes ...........      471,735        (450,125)       (554,884)  
                                                   ------------    ------------    ------------   

Income (loss) before extraordinary item ..........   (4,035,455)      3,047,404        (783,100)  
Extraordinary loss on                                                                             
  extinguishment of debt .........................   (1,007,435)           --              --     
                                                   ------------    ------------    ------------   

    Net income (loss) ............................ $ (5,042,890)   $  3,047,404    $   (783,100)  
                                                   ============    ============    ============   

Net loss attributable to                                                                          
  common shareholders ............................ $ (5,278,109)   $   (687,730)   $ (4,333,381)  
                                                   ============    ============    ============   

    Per common share:                                                                             
      Loss before extraordinary item ............. $      (0.98)   $      (0.15)   $      (0.73)  
      Extraordinary loss on                                                                       
        extinguishment of debt ...................        (0.23)           --              --     
                                                   ------------    ------------    ------------   

        Net loss ................................. $      (1.21)   $      (0.15)   $      (0.73)  
                                                   ============    ============    ============   

Weighted average common shares outstanding .......    4,364,885       4,497,758       5,920,294   

 See accompanying notes.

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GRANITE BROADCASTING CORPORATION
 CONSOLIDATED BALANCE SHEETS

                                                        · Enlarge/Download Table

                                                                          December 31,          
                                                                 ------------------------------ 
         ASSETS                                                      1994              1995     
                                                                 -------------    ------------- 

                                                                                                
CURRENT ASSETS:                                                                                 
  Cash and cash equivalents ...................................  $   1,947,562    $      95,123 
  Accounts receivable, less allowance for doubtful accounts                                     
    ($255,827 in 1994 and $505,759 in 1995) ...................     13,095,909                  
                                                                                     26,186,579 
  Film contract rights ........................................      2,557,064        5,813,366 
  Other assets ................................................      1,909,411        3,854,774 
                                                                 -------------    ------------- 
          TOTAL CURRENT ASSETS ................................     19,509,946       35,949,842 

PROPERTY AND EQUIPMENT, NET ...................................     14,872,400       32,132,126 
INVESTMENT, AT COST ...........................................      7,500,000             --   
FILM CONTRACT RIGHTS AND OTHER NONCURRENT ASSETS ..............      2,015,748        3,725,612 
DEFERRED FINANCING FEES, less accumulated amortization                                          
  ($1,209,275 in 1994 and $2,947,833 in 1995) .................      6,050,978       14,849,529 
INTANGIBLE ASSETS, less accumulated amortization                                                
  ($17,906,588 in 1994 and $25,467,092 in 1995) ...............    139,932,022      365,564,029 
                                                                 -------------    ------------- 
                                                                 $ 189,881,094    $ 452,221,138 
                                                                 =============    ============= 

         LIABILITIES AND STOCKHOLDERS' EQUITY                                                   

CURRENT LIABILITIES:                                                                            
  Accounts payable ............................................  $   2,036,885    $   4,770,793 
  Accrued interest ............................................      3,106,660        5,595,610 
  Other accrued liabilities ...................................      2,348,005        3,252,518 
  Film contract rights payable and other current liabilities ..      3,906,642        7,708,442 
  Current portion of long-term debt ...........................      4,250,000             --   
                                                                 -------------    ------------- 
         TOTAL CURRENT LIABILITIES ............................     15,648,192       21,327,363 

LONG-TERM DEBT ................................................     95,000,000      341,000,000 
FILM CONTRACT RIGHTS PAYABLE ..................................      1,689,572        3,669,534 
DEFERRED TAX LIABILITY AND OTHER                                                                
  NONCURRENT LIABILITIES ......................................     16,643,672       31,869,240 

COMMITMENTS                                                                                     

REDEEMABLE PREFERRED STOCK (NOTE 8) ...........................     49,170,962       45,487,500 

STOCKHOLDERS' EQUITY:                                                                           
  Preferred Stock: $.01 par value, 2,276,000 shares authorized;                                 
    463,303 shares of Series B Convertible Preferred Stock                                      
    issued and outstanding at December 31, 1994; 1,007,915                                      
    shares of Series C Convertible Preferred Stock issued                                       
    and outstanding at December 31, 1994 ......................         14,712             --   

  Common stock: 41,000,000 shares authorized consisting of                                      
    1,000,000 shares of Class A Common Stock, $.01 par                                          
    value, and 40,000,000 shares of Common Stock                                                
    (Nonvoting), $.01 par value; 178,500 shares of Voting                                       
    Common Stock and 8,218,240 shares of Common Stock                                           
    (Nonvoting) (4,396,616 shares at December 31, 1994)                                         
    issued and outstanding ....................................         45,751           83,967 
  Additional paid-in capital ..................................     48,688,435       46,864,202 
  Accumulated deficit .........................................    (35,807,098)     (36,590,198)
  Less:  Unearned compensation ................................     (1,213,104)      (1,490,470)
                                                                 -------------    ------------- 
          Total stockholders' equity ..........................     11,728,696        8,867,501 
                                                                 -------------    ------------- 
                                                                 $ 189,881,094    $ 452,221,138 
                                                                 =============    ============= 

 See accompanying notes.

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GRANITE BROADCASTING CORPORATION
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Years Ended December 31, 1993, 1994 and 1995

                                                        · Enlarge/Download Table

                                                     Class A     Common     Series B     Series C     Additional  
                                                     Common       Stock     Preferred    Preferred      Paid-in   
                                                      Stock    (Nonvoting)   Stock        Stock         Capital   
                                                    --------    --------    --------    ----------    ----------- 
                                                                                                                  
Balance at December 31, 1992 ...................    $  1,785    $ 41,376    $  5,232    $ 10,592    $  50,963,660 

Accretion of and dividends on Series A                                                                            
  Redeemable Preferred Stock ...................                                                          (83,358)
Conversion of Series A Redeemable Preferred                                                                       
  Stock and Series B and Series C Preferred                                                                       
  Stock into Common Stock (Nonvoting) ..........                   1,170        (226)       (411)          17,859 
Dividend on Cumulative Convertible                                                                                
  Exchangeable Preferred Stock and                                                                                
  Adjustable Rate Preferred Stock ..............                                                         (151,861)
Grant of Stock Award under Management Stock Plan                                                          616,250 
Stock Expense Related to Management Stock Plan .                                                                  
Net loss .......................................                                                                  
                                                    --------    --------    --------    --------    ------------- 
Balance at December 31, 1993 ...................       1,785      42,546       5,006      10,181       51,362,550 

Accretion of and dividends on Series A                                                                            
  Redeemable Preferred Stock ...................                                                          (91,895)
Conversion of Redeemable Series A Preferred                                                                       
  Stock and Series B and Series C Preferred                                                                       
  Stock into Common Stock (Nonvoting) ..........                   1,080        (373)       (102)          59,359 
Dividend on Cumulative Convertible                                                                                
  Exchangeable Preferred Stock and                                                                                
  Adjustable Rate Preferred Stock ..............                                                       (3,643,239)
Issuance of 34,000 shares of Common                                                                               
  Stock (Nonvoting) ............................                     340                                     (340)
Grant of Stock Award under Management Stock Plan                                                        1,002,000 
Stock expense related to Management Stock Plan .                                                                  
Net income .....................................                                                                  
                                                    --------    --------    --------    --------    ------------- 
Balance at December 31, 1994 ...................       1,785      43,966       4,633      10,079       48,688,435 

Accretion of and dividends on Series A                                                                            
  Redeemable Preferred Stock ...................                                                          (35,116)
Conversion of Series A Redeemable Preferred                                                                       
  Stock and Series B and C Preferred                                                                              
  Stock into Common Stock (Nonvoting) ..........                  36,069      (4,633)    (10,079)       1,200,518 
Dividend on Cumulative Convertible                                                                                
  Exchangeable Preferred Stock and                                                                                
  Adjustable Rate Preferred Stock ..............                                                       (3,550,281)
Exercise of Stock Options ......................                   1,574                                   31,376 
Issuance of Common Stock (Nonvoting) ...........                     573                                     (573)
Grant of Stock Award under Management Stock Plan                                                          640,750 
Stock expense related to Management Stock Plan .                                                         (110,907)
Net loss .......................................                                                                  
                                                    --------    --------    --------    --------    ------------- 
Balance at December 31, 1995 ...................    $  1,785    $ 82,182    $     --    $     --    $  46,864,202 
                                                    ========    ========    ========    ========    ============= 

                                                                                      Total                       
                                                  (Accumulated      Unearned      Stockholders'                   
                                                     Deficit)     Compensation        Equity                      
                                                  -------------   ------------    -------------                   
                                                                                                                  
Balance at December 31, 1992 ...................  $ (33,811,612)  $        --     $  17,211,033                   

Accretion of and dividends on Series A                                                                            
  Redeemable Preferred Stock ...................                                        (83,358)                  
Conversion of Series A Redeemable Preferred                                                                       
  Stock and Series B and Series C Preferred                                                                       
  Stock into Common Stock (Nonvoting) ..........                                         18,392                   
Dividend on Cumulative Convertible                                                                                
  Exchangeable Preferred Stock and                                                                                
  Adjustable Rate Preferred Stock ..............                                       (151,861)                  
Grant of Stock Award under Management Stock Plan                       (616,250)           --                     
Stock Expense Related to Management Stock Plan .                        123,250         123,250                   
Net loss .......................................     (5,042,890)                     (5,042,890)                  
                                                  -------------   -------------   -------------                   
Balance at December 31, 1993 ...................    (38,854,502)       (493,000)     12,074,566                   

Accretion of and dividends on Series A                                                                            
  Redeemable Preferred Stock ...................                                        (91,895)                  
Conversion of Redeemable Series A Preferred                                                                       
  Stock and Series B and Series C Preferred                                                                       
  Stock into Common Stock (Nonvoting) ..........                                         59,964                   
Dividend on Cumulative Convertible                                                                                
  Exchangeable Preferred Stock and                                                                                
  Adjustable Rate Preferred Stock ..............                                     (3,643,239)                  
Issuance of 34,000 shares of Common                                                                               
  Stock (Nonvoting) ............................                                           --                     
Grant of Stock Award under Management Stock Plan                     (1,002,000)                                  
Stock expense related to Management Stock Plan .                        281,896         281,896                   
Net income .....................................      3,047,404                       3,047,404                   
                                                  -------------   -------------   -------------                   
Balance at December 31, 1994 ...................    (35,807,098)     (1,213,104)     11,728,696                   

Accretion of and dividends on Series A                                                                            
  Redeemable Preferred Stock ...................                                        (35,116)                  
Conversion of Series A Redeemable Preferred                                                                       
  Stock and Series B and C Preferred                                                                              
  Stock into Common Stock (Nonvoting) ..........                                      1,221,875                   
Dividend on Cumulative Convertible                                                                                
  Exchangeable Preferred Stock and                                                                                
  Adjustable Rate Preferred Stock ..............                                     (3,550,281)                  
Exercise of Stock Options ......................                                         32,950                   
Issuance of Common Stock (Nonvoting) ...........                                                                  
Grant of Stock Award under Management Stock Plan                       (640,750)                                  
Stock expense related to Management Stock Plan .                        363,384         252,477                   
Net loss .......................................       (783,100)                       (783,100)                  
                                                  -------------   -------------   -------------                   
Balance at December 31, 1995 ...................  $ (36,590,198)  $  (1,490,470)  $   8,867,501                   
                                                  =============   =============   =============                   

See accompanying notes

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GRANITE BROADCASTING CORPORATION
 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        · Enlarge/Download Table

                                                                                         For the Years Ended December 31,         
                                                                                    --------------------------------------------- 
                                                                                        1993            1994            1995      
                                                                                    ------------    ------------    ------------- 
                                                                                                                                  
Cash flows from operating activities:                                                                                             
  Net income (loss) ............................................................... $ (5,042,890)   $  3,047,404    $    (783,100)
  Adjustments to reconcile net income (loss) to                                                                                   
   net cash provided by operating activities:                                                                                     
      Amortization of intangible assets and deferred financing fees ...............    3,864,199       4,714,721        9,329,444 
      Extraordinary loss on extinguishment of debt ................................    1,007,435            --               --   
      Non-cash interest expense on indebtedness ...................................      930,625            --               --   
      Depreciation ................................................................    2,398,301       3,420,850        4,513,919 
      Non-cash compensation expense ...............................................      123,250         281,896          363,384 
      Income tax benefit ..........................................................     (471,735)           --               --   
      Non-cash deferred income taxes ..............................................         --              --          1,115,000 
      Deferred income taxes .......................................................         --              --           (824,116)
      Equity in net income of investee ............................................                                      (439,033)

Change in assets and liabilities net of effects from acquisition of stations:                                                     
      Increase in accounts receivable .............................................   (1,318,848)     (1,499,860)      (7,528,139)
      Increase (decrease) in accrued liabilities ..................................      (83,755)      1,496,559        2,060,230 
      Increase (decrease) in accounts payable .....................................      784,638        (420,205)       2,174,225 
      Decrease (increase) in film contract rights and other                                                                       
        noncurrent assets .........................................................    2,075,286         640,968       (3,448,429)
      (Decrease) increase in film contract rights                                                                                 
        payable and other liabilities .............................................   (1,052,022)     (3,390,646)       3,985,170 
      Decrease (increase) in other assets .........................................      396,225      (2,484,068)      (1,712,859)
                                                                                    ------------    ------------    ------------- 
  Net cash provided by operating activities .......................................    3,610,709       5,807,619        8,805,696 
                                                                                    ------------    ------------    ------------- 

Cash flows from investing activities:                                                                                             
  Payment for acquisition of stations,                                                                                            
    net of cash acquired ..........................................................  (30,000,000)           --       (228,660,507)
  Capital expenditures ............................................................   (1,088,813)     (2,627,793)      (7,682,188)
                                                                                    ------------    ------------    ------------- 
    Net cash used in investing activities .........................................  (31,088,813)     (2,627,793)    (236,342,695)
                                                                                    ------------    ------------    ------------- 

Cash flows from financing activities:                                                                                             
  Proceeds from bank loan .........................................................   39,000,000       1,500,000      174,250,000 
  Proceeds from issuance of stock .................................................   38,000,000            --               --   
  Proceeds from exercise of stock options .........................................         --              --             32,950 
  Repayment of bank borrowings ....................................................  (44,310,673)     (1,250,000)    (107,500,000)
  Redemption of Adjustable Rate Preferred Stock ...................................         --              --         (2,000,000)
  Payment of deferred financing fees ..............................................   (4,867,700)       (129,771)     (10,537,110)
  Proceeds from Senior Subordinated Notes .........................................         --              --        175,000,000 
  Dividends paid ..................................................................         --        (3,564,120)      (3,561,280)
  Other financing activities ......................................................         --           663,894             --   
                                                                                    ------------    ------------    ------------- 
    Net cash provided by (used in) financing activities ...........................   27,821,627      (2,779,997)     225,684,560 
                                                                                    ------------    ------------    ------------- 
Net increase (decrease) in cash and cash equivalents ..............................      343,523         399,829       (1,852,439)
Cash and cash equivalents, beginning of year ......................................    1,204,210       1,547,733        1,947,562 
                                                                                    ------------    ------------    ------------- 
Cash and cash equivalents, end of year ............................................ $  1,547,733    $  1,947,562    $      95,123 
                                                                                    ============    ============    ============= 

Supplemental information:                                                                                                         
  Cash paid for interest .......................................................... $  9,922,747    $ 10,176,398    $  24,699,248 
  Cash paid for income taxes ......................................................         --           251,512          149,750 
  Non-cash investing and financing activities:                                                                                    
    Non-cash capital expenditures .................................................      141,634         350,409          459,786 
    Issuance of Adjustable Rate Preferred Stock ...................................    2,000,000            --               --   
    Issuance of Cumulative Convertible Exchangeable Preferred Stock ...............    7,500,000            --               --   

 See accompanying notes.

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GRANITE BROADCASTING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies                            

Financial statement presentation                                          

   The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and    
transactions have been eliminated. Certain amounts in the prior years have been 
reclassified to conform to the 1995 presentation.                               

Revenue recognition                                                       

     The Company recognizes revenue from the sale of advertising at the time the
advertisements are aired.                                                       

Intangibles                                                               

    Intangible assets at December 31, 1994 and 1995 are summarized as follows:

                                                                · Download Table

                                                 1994                  1995     
                                             -------------        ------------- 
                                                                                
Goodwill .............................         $33,146,108          $75,192,619 
Network affiliations .................         108,908,641          247,941,641 
Broadcast licenses ...................          15,783,861           67,896,861 
                                             -------------        ------------- 
                                               157,838,610          391,031,121 
Accumulated amortization .............         (17,906,588)         (25,467,092)
                                             -------------        ------------- 

                                              $139,932,022         $365,564,029 
                                             =============        ============= 

The intangible assets are characterized as scarce assets with long and
productive lives. These intangible assets are being amortized on a straight line
basis over forty years.                                                         

     The Company continually reevaluates the propriety of the carrying amount of
intangible assets as well as the related amortization period to determine       
whether current events and circumstances warrant adjustments to the carrying    
value and/or revised estimates of useful lives. This evaluation is based on the 
Company's projections of the undiscounted cash flows over the remaining lives of
the amortization period of the related intangible asset. To the extent such     
projections indicate that the undiscounted cash flows are not expected to be    
adequate to recover the carrying amounts of intangible assets, such carrying    
amounts will be written down to their fair market value. At this time, the      
Company believes that no significant impairment of intangible assets has        
occurred and that no reduction of the estimated useful lives is warranted.      

Deferred financing fees                                                   

  The Company has incurred certain fees in connection with entering into a
bank credit agreement, the sale of 12.75% Debentures (as defined), the sale of  
Cumulative Convertible Exchangeable Preferred Stock (as defined) and the sale of
10 3/8% Notes (as defined). The deferred financing fees related to the bank     
credit agreement are being amortized over six years, ten years for the 12.75%   
Debentures and for the 10 3/8% Notes and twelve years for the Cumulative        
Convertible Exchangeable Preferred Stock.                                       

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 1 -- Summary of Significant Accounting Policies -- (Continued)             

Property and equipment                                                    

Property and equipment are recorded at cost and depreciated on a      
straight-line basis over their estimated useful lives ranging from three to 32  
years.                                                                          

Film contract rights                                                      

     Film contract rights are recorded as assets at gross value when the license
period begins and the films are available for broadcasting, are amortized on an 
accelerated basis over the estimated usage of the films, and are classified as  
current or noncurrent on that basis. Film contract rights payable are classified
as current or noncurrent in accordance with the payment terms of the various    
license agreements. Film contract rights are reflected in the consolidated      
balance sheet at the lower of unamortized cost or estimated net realizable      
value.                                                                          

At December 31, 1995, the obligation for programming that had not been
recorded because the program rights were not available for airing aggregated    
$17,776,432.                                                                    

Barter transactions                                                       

Revenue from barter transactions is recognized when advertisements are
broadcast and merchandise or services received are charged to expense when      
received or used.                                                               

Risks and uncertainties                                                   

The preparation of financial statements in conformity with generally  
accepted accounting principles requires management to make estimates and        
assumptions that affect the reported amounts of assets and liabilities and      
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.                       

Cash and cash equivalents                                                 

  Cash and cash equivalents include funds invested overnight in Eurodollar
deposits.                                                                       

Net loss per common share                                                 

   Net loss per common share for each of the three years in the period ended
December 31, 1995 are calculated by dividing net loss attributable to common    
stockholders by the weighted average number of common shares outstanding. The   
inclusion of additional shares assuming the exercise of outstanding stock       
options and the conversion of convertible preferred stock would have been       
antidilutive in all three years.                                                

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 2 -- Acquisitions                                                          

   On February 1, 1995, the Company acquired substantially all of the assets
of KEYE-TV (formerly known as KBVO-TV), the CBS affiliate serving Austin, Texas 
from Austin Television for $54,000,000 in cash and the assumption of certain    
liabilities of KEYE-TV.                                                         

                                                                · Download Table
The following comprises the allocation of the purchase price:         

                                                                      
Purchase price                                            $54,000,000 
Net tangible assets acquired, principally film                        
  contract rights and property and equipment                 (978,000)
Broadcast license                                          (5,302,000)
Network affiliation agreement                             (36,585,000)
                                                          ----------- 

Goodwill                                                  $11,135,000 
                                                          =========== 

   On June 1, 1995, the Company acquired substantially all of the assets and
certain liabilities of WWMT-TV, the CBS affiliate serving Grand Rapids, Michigan
from Busse Broadcasting Corporation for $98,942,000 in cash (including          
$3,942,000 of working capital and other adjustments) and the assumption of      
certain liabilities of WWMT-TV.                                                 

                                                                · Download Table
The following comprises the allocation of the purchase price:         

                                                                      
Purchase price                                            $98,942,000 
Net tangible assets acquired, principally film                        
  contract rights and property and equipment              (11,422,000)
Broadcast license                                          (8,752,000)
Network affiliation agreement                             (60,389,000)
                                                          ----------- 

Goodwill                                                  $18,379,000 
                                                          =========== 

     On June 29, 1995, the Company completed its acquisition of WKBW-TV, the ABC
affiliate serving Buffalo, New York. The Company paid approximately $16,000,000 
(including certain related expenses) for the equity interests it did not already
own, assumed approximately $59,000,000 of debt and received working capital of  
approximately $6,760,000, of which $3,491,000 was cash.                         

                                                                · Download Table
The following comprises the allocation of the purchase price:         

                                                                      
Purchase price                                            $23,982,000 
Net tangible liabilities assumed, principally                         
  long-term debt, partially offset by film                            
  contract rights and property and equipment               65,039,000 
Broadcast license                                         (38,059,000)
Network affiliation agreement                             (42,059,000)
                                                          ----------- 

    Goodwill                                               $8,903,000 
                                                          =========== 

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 2 -- Acquisitions -- (Continued)                                           

  Prior to April 12, 1995, the Company viewed its investment in Queen City
III Limited Partnership ("QCIII"), the ultimate parent of WKBW-TV, as temporary 
in nature given the strained relationship between the Company and QCIII. On that
basis, the Company believed it to be prudent to carry the investment at cost,   
while periodically reviewing for impairment. On April 12, 1995, the Company     
entered into a letter of intent to purchase the remaining equity interest in    
QCIII it did not already own. At that time, the Company no longer viewed the    
investment as temporary and commenced using the equity method under Accounting  
Principles Board Opinion No. 18.                                                

     The following table summarizes the unaudited consolidated pro forma results
of operations for the years ended December 31, 1994 and 1995 assuming the       
acquisitions of KEYE-TV, WWMT-TV and WKBW-TV had occurred as of January 1, 1994:

                                                                · Download Table

                                                     1994         1995     
                                                 ------------  ------------
                                                                           
Net revenue ...................................  $124,771,000  $124,749,000
Station operating expenses ....................    66,284,000    66,648,000
Depreciation and amortization .................    17,661,000    17,224,000
Loss before extraordinary item ................       490,000       460,000
Loss before extraordinary item per common share          0.91          0.68

Note 3-- Property and Equipment                                                 

     The major classifications of property and equipment are as follows:

                                                                · Download Table

                                       December 31,      
                                 ------------------------
                                     1994         1995   
                                 -----------  -----------
                                                         
Land ..........................  $ 1,299,284  $ 2,527,708
Buildings and improvements ....    7,232,842   14,729,378
Furniture and fixtures ........    3,405,365    4,380,475
Technical equipment and other .   15,767,921   27,711,903
                                 -----------  -----------
                                  27,705,412   49,349,464
Less:  Accumulated depreciation   12,833,012   17,217,338
                                 -----------  -----------

Net property and equipment ....  $14,872,400  $32,132,126
                                 ===========  ===========

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 4 -- Other Accrued Liabilities                                             

Other accrued liabilities are summarized below:               

                                                                · Download Table

                                   December 31,    
                           ------------------------
                               1994         1995   
                           -----------  -----------
                                                   
Compensation and benefits  $1,221,800   $2,001,193 
Other ...................   1,126,205    1,251,325 
                           ----------   ---------- 

Total ...................  $2,348,005   $3,252,518 
                           ==========   ========== 

Note 5 -- Other Current Assets                                                  

Other current assets are summarized below:                    

                                                                · Download Table

                                   December 31,     
                              ----------------------
                                 1994        1995   
                              ----------  ----------
                                                    
Barter and other receivables  $  966,280  $2,542,824
Other ......................     943,131   1,311,950
                              ----------  ----------

Total ......................  $1,909,411  $3,854,774
                              ==========  ==========

Note 6 -- Long-term Debt                                                        

Long-term debt outstanding consists of the following:         

                                                                · Download Table

                                              December 31,       
                                       --------------------------
                                           1994          1995    
                                       ------------  ------------
                                                                 
Senior bank debt ....................  $ 39,250,000  $106,000,000
10 3/8% Senior Subordinated Notes....          --     175,000,000
12.75% Senior Subordinated Debentures    60,000,000    60,000,000
                                       ------------  ------------
                                         99,250,000   341,000,000
Less:  Current portion ..............     4,250,000          --  
                                       ------------  ------------

Total ...............................  $ 95,000,000  $341,000,000
                                       ============  ============

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 6 -- Long-term Debt -- (Continued)                                         

Senior bank debt                                                          

The Company entered into a bank credit agreement on December 23, 1993 
permitting term loan borrowings of up to $36,000,000 plus a revolving working   
capital facility permitting borrowings of up to $4,000,000. The bank credit     
agreement was amended on June 15, 1994 to, among other things, increase the     
revolving working capital facility to $6,000,000. The bank credit agreement was 
amended and restated on February 1, 1995 (as amended and restated the "Amended  
and Restated Credit Agreement") to permit term borrowings of up to $100,000,000 
plus a revolving working capital facility permitting borrowings of up to        
$15,000,000. Additional borrowings under the Amended and Restated Credit        
Agreement were used: (i) to fund the acquisition of KEYE-TV; (ii) to repurchase 
all of the Company's outstanding Adjustable Rate Preferred Stock, par value $.01
per share, that was issued in connection with the acquisitions of WTVH-TV and   
KSEE-TV in December 1993; (iii) to pay all of the Company's then existing       
revolving bank indebtedness; (iv) to pay fees and expenses in connection with   
such transactions; and (v) for general working capital purposes.                

    The Amended and Restated Credit Agreement was further amended and restated
on May 19, 1995 (as amended and restated the "Second Amended and Restated Credit
Agreement") to permit term borrowings of up to $102,000,000 plus a revolving    
working capital facility permitting borrowings of up to $60,000,000. Proceeds   
from the incremental borrowings under the Second Amended and Restated Credit    
Agreement along with the proceeds from the sale of $175,000,000 principal amount
of the Company's 10 3/8% Senior Subordinated Notes due May 15, 2005 (the        
"10 3/8% Notes") were used to fund the acquisition of WWMT-TV and WKBW-TV and to
pay fees and expenses incurred in connection with the offering of the 10 3/8%   
Notes and the Second Amended and Restated Credit Agreement. As of December 31,  
1995, the Company had $55,000,000 available under the revolving credit facility.

     Outstanding principal balances under the Second Amended and Restated Credit
Agreement bear interest at floating rates equal to LIBOR (the "LIBOR Rate") plus
marginal rates between 1.50% and 2.75% or the prime rate plus marginal rates    
between 0.25% and 1.50%. The LIBOR Rate was 5.75% - 5.938% plus a marginal rate 
of 2.50% at December 31, 1995. The LIBOR Rate was 5.6875% - 6.0625% plus a      
marginal rate of 2.25% at December 31, 1994. The marginal rate is subject to    
change based upon changes in the ratio of outstanding principal balances to     
operating cash flow.                                                            

In April 1994, the Company entered into a two year interest rate cap  
agreement with respect to $13,000,000 of debt under the Amended and Restated    
Credit Agreement. Under the agreement, the maximum LIBOR Rate that the Company  
is required to pay with respect to the covered indebtedness is 6.5%. The        
interest rate cap had no material effect on interest expense in 1994 or 1995.   

The Second Amended and Restated Credit Agreement is secured by        
substantially all of the assets of the Company, as well as a pledge of all      
issued and outstanding shares of capital stock of the Company's present and     
future subsidiaries and guaranteed by all present and future subsidiaries of the
Company. The Second Amended and Restated Credit Agreement requires the Company  
to maintain compliance with certain financial ratios. Other provisions place    
limitations on the incurrence of additional debt, payments for capital          
expenditures, prepayment of subordinated debt, merger or consolidation with or  
acquisition of another entity, the declaration or payment of cash dividends     
other than on the Cumulative Convertible Exchangeable Preferred Stock and other 
transactions by the Company.                                                    

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 6 -- Long-term Debt -- (Continued)                                         

Senior Subordinated Debentures                                            

   The Company has outstanding $60,000,000 aggregate principal amount of its
12.75% Senior Subordinated Debentures (the "12.75% Debentures") due September 1,
2002.                                                                           

     The 12.75% Debentures are redeemable after September 1, 1997, at the option
of the Company, in whole or in part from time to time, at certain prices        
declining annually to 100% of the principal amount on or after September 1,     
1999, plus accrued interest. The Company is required to offer to repurchase all 
outstanding 12.75% Debentures at 101% of the principal amount plus accrued      
interest in the event of a Change of Control (as defined in the Indenture       
governing the 12.75% Debentures).                                               

  The 12.75% Debentures are subordinated in right of payment to the Second
Amended and Restated Credit Agreement and to future Senior Debt (as defined in  
the Indenture governing the 12.75% Debentures) and rank pari passu with all     
senior subordinated debt and senior to all subordinated debt of the Company. The
Indenture governing the 12.75% Debentures contains certain covenants that, among
other things, limit the ability of the Company and its subsidiaries to incur    
debt, pay cash dividends on or repurchase capital stock, enter into agreements  
prohibiting the creation of liens or restricting the ability of a subsidiary to 
pay money or transfer assets to the Company, enter into certain transactions    
with their affiliates, dispose of certain assets and engage in mergers and      
consolidations.                                                                 

Senior Subordinated Notes                                                 

    The Company has outstanding $175,000,000 aggregate principal amount of its
10 3/8% Notes due May 15, 2005.                                                 

     The 10 3/8% Notes will be redeemable in the event that on or before May 15,
1998 the Company receives net proceeds from the sale of its Capital Stock (other
than Disqualified Stock (each as defined in the Indenture governing the 10 3/8% 
Notes)), in which case the Company may, at its option and from time to time, use
all or a portion of any such net proceeds to redeem certain amounts of the      
10 3/8% Notes with certain limitations. In addition, the 10 3/8% Notes are      
redeemable at any time on or after May 15, 2000, at the option of the Company,  
in whole or in part from time to time, at certain prices declining annually to  
100% of the principal amount on or after May 15, 2002, plus accrued interest.   
The Company is required to offer to purchase all outstanding 10 3/8% Notes at   
101% of the principal amount plus accrued interest in the event of a Change of  
Control (as defined in the Indenture governing the 10 3/8% Notes).              

The 10 3/8% Notes are subordinated in right of payment to the Second  
Amended and Restated Credit Agreement and to future Senior Debt (as defined in  
the Indenture governing the 10 3/8% Notes) and rank pari passu with all senior  
subordinated debt and senior to all subordinated debt of the Company. The       
Indenture governing the 10 3/8% Notes contains certain covenants that, among    
other things, limit the ability of the Company and its subsidiaries to incur    
debt, pay cash dividends on or repurchase capital stock, enter into agreements  
prohibiting the creation of liens or restricting the ability of a subsidiary to 
pay money or transfer assets to the Company, enter into certain transactions    
with their affiliates, dispose of certain assets and engage in mergers and      
consolidations.                                                                 

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 6 -- Long-term Debt -- (Continued)                                         

 On February 22, 1996, the Company completed an offering of $110,000,000
principal amount of its 9 3/8% Series A Senior Subordinated Notes (the "9 3/8%  
Notes") due December 1, 2005. Proceeds from the sale of the 9 3/8% Notes were   
used to repay all outstanding term loan and revolving credit borrowings under   
the Company's Second Amended and Restated Credit Agreement and for general      
working capital purposes. In connection with the repayment of the term loan     
(which is not subject to being reborrowed), the Company will write-off          
approximately $3.6 million of deferred financing costs. Such write-off will be  
reflected as an extraordinary loss on the early extinguishment of debt in the   
1996 consolidated financial statements.                                         

As a result of the Company's subsequent offering of the 9 3/8% Notes, 
there are no scheduled principal maturities of long-term debt within the next   
five years.                                                                     

Note 7 -- Commitments                                                           

Future minimum lease payments under long-term operating leases as of  
December 31, 1995 are as follows:                                               

                                                                · Download Table
                                                                 
1996..............................................       $704,000
1997..............................................        576,000
1998..............................................        448,000
1999..............................................        357,000
2000 .............................................        295,000
2001 and thereafter...............................      2,661,000
                                                       ----------
                                                       $5,041,000
                                                       ==========

Rent expense, including escalation charges, was $128,000, $116,000 and
$559,000 for the years ended December 31, 1993, 1994 and 1995, respectively.    

Note 8 -- Redeemable Preferred Stock                                            

Redeemable preferred stock consists of the following:                 

                                                                · Download Table

                                             December 31,      
                                      -------------------------
                                          1994          1995   
                                      -----------   -----------
                                                               
Series A Preferred Stock ..........   $ 1,683,462   $      --  
Cumulative Convertible Exchangeable                            
  Preferred Stock .................    45,487,500    45,487,500
Adjustable Rate Preferred Stock ...     2,000,000          --  
                                      -----------   -----------
                                      $49,170,962   $45,487,500
                                      ===========   ===========

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 8 -- Redeemable Preferred Stock -- (Continued)                             

Series A Preferred Stock                                                  

     The Company authorized 100,000 shares of its Series A Convertible Preferred
Stock ("Series A Stock"), par value $.01 per share, which were issued at an     
aggregate price of $1,210,000. All outstanding shares of the Series A Stock were
converted into shares of the Company's Common Stock (Nonvoting), par value $.01 
per share (the "Common Stock (Nonvoting)") in August 1995. Prior to conversion, 
dividends accrued on the Series A Stock at an annual rate of $.40 per share     
which accumulated, without interest, if unpaid. Accrued but unpaid dividends on 
the Series A Stock totaled $236,800 and $262,844 at December 31, 1994 and 1995, 
respectively. Accrued dividends are due and payable on the later of December 31,
1999 or the date on which such dividends may be paid under the Company's debt   
instruments.                                                                    

Cumulative Convertible Exchangeable Preferred Stock                       

   The Company has authorized 3,000,000 shares of its Cumulative Convertible
Exchangeable Preferred Stock (the "Cumulative Convertible Exchangeable Preferred
Stock"), par value $.01 per share, of which 1,520,000 shares were issued on     
December 23, 1993 at a price of $25.00 per share. The Company also issued on    
December 23, 1993 300,000 shares of its Cumulative Convertible Exchangeable     
Preferred Stock valued at $7,500,000 as consideration for acquiring certain     
outstanding securities of QCIII, the ultimate parent of WKBW-TV. Holders of the 
Cumulative Convertible Exchangeable Preferred Stock are entitled to receive cash
dividends at an annual rate of $1.9375 per share, payable quarterly on each     
March 15, June 15, September 15 and December 15 in each year, when, as and if   
declared by the Company's Board of Directors. Dividends on the Cumulative       
Convertible Exchangeable Preferred Stock are cumulative and accrue without      
interest, if unpaid.                                                            

Each share of Cumulative Convertible Exchangeable Preferred Stock is  
convertible, at the option of the holder, into shares of Common Stock           
(Nonvoting). The Cumulative Convertible Exchangeable Preferred Stock is         
convertible into Common Stock (Nonvoting) on a 5 for 1 share basis. The current 
conversion price of the Cumulative Convertible Exchangeable Preferred Stock is  
$5.00 per share, subject to adjustment upon the occurrence of certain events.   
The Cumulative Convertible Exchangeable Preferred Stock is entitled to a        
preference of $25.00 per share plus accrued and unpaid dividends in the event of
liquidation, dissolution or winding up of the Company ($45,487,500 liquidation  
value at December 31, 1995). The Company is required, to the extent permitted by
loan agreements or indentures to which the Company is then a party, the         
obligations of which are senior in priority to the Cumulative Convertible       
Exchangeable Preferred Stock, to redeem the Cumulative Convertible Exchangeable 
Preferred Stock at a price of $25.00 per share plus accrued and unpaid dividends
on December 15, 2005.                                                           

    The Cumulative Convertible Exchangeable Preferred Stock is exchangeable in
whole, but not in part, at the option of the Company, for the Company's 7.75%   
Junior Subordinated Convertible Exchange Debentures (the "Exchange Debentures") 
on any dividend payment date beginning on December 15, 1995 at the rate of      
$25.00 principal amount of Exchange Debentures for each share of Cumulative     
Convertible Exchangeable Preferred Stock outstanding at the time of the         
exchange. The Company may only effect such exchange if accrued and unpaid       
dividends on the Cumulative Convertible Exchangeable Preferred Stock have been  
paid in full.                                                                   

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 8 -- Redeemable Preferred Stock -- (Continued)                             

Adjustable Rate Preferred Stock                                           

     The Company has authorized, issued and outstanding 200 shares of Adjustable
Rate Preferred Stock ("Adjustable Rate Stock"), par value $.01 per share as of  
December 31, 1994. The Adjustable Rate Stock was issued as partial consideration
for the acquisition of WTVH-TV and KSEE-TV on December 23, 1993. The Adjustable 
Rate Stock was redeemable, at the option of the Company, in whole or in part, at
any time, at a redemption price of $10,000 per share plus accrued and unpaid    
dividends thereon to the date of redemption. On February 1, 1995, the Company   
redeemed all 200 outstanding shares of the Adjustable Rate Stock for $2,000,000,
plus accrued and unpaid dividends.                                              

Note 9 -- Stockholders' Equity                                                  

Effective December 21, 1993, the Company amended its Certificate of   
Incorporation to authorize the issuance of 3,000,000 shares of Cumulative       
Convertible Exchangeable Preferred Stock, 200 shares of Adjustable Rate Stock   
and 310,000 shares of PIK Cumulative Convertible Exchangeable Preferred Stock.  
Effective March 7, 1994, the Company amended its Certificate of Incorporation to
cancel the authorization to issue the PIK Cumulative Convertible Exchangeable   
Preferred Stock.                                                                

Effective May 16, 1994, the Company amended its Certificate of        
Incorporation to increase the number of authorized shares of the Company's      
Common Stock (Nonvoting) from 14,000,000 to 40,000,000, and thereby increase the
total number of authorized shares of the Company's capital stock from 20,376,000
to 46,376,000.                                                                  

Series B Convertible Preferred Stock                                      

   The Company issued 592,013 shares of Series B Convertible Preferred Stock
("Series B Stock"), par value $.01 per share, in October 1988 at a price of     
$12.10 per share. All outstanding shares of the Series B Stock were converted   
into Common Stock (Nonvoting) in September 1995.                                

Series C Convertible Preferred Stock                                      

     The Company issued 1,060,163 shares of Series C Convertible Preferred Stock
("Series C Stock"), par value $.01 per share, in December 1989 and February     
1990, at a price of $15.00 per share. All outstanding shares of Series C Stock  
were converted into Common Stock (Nonvoting) in September 1995.                 

Stock option plans                                                        

  In October 1988, the Company entered into a Target Cash Flow Option Plan
and Agreement (the "Target Plan") with two members of management (the           
"Recipients"). The Target Plan granted to the Recipients options to purchase an 
aggregate of 150,000 shares of Common Stock (Nonvoting) at an exercise price of 
$.01 per share. All of these options were exercised in April 1995.              

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 9 -- Stockholders' Equity -- (Continued)                                   

     The Company has a stock option plan (the "Stock Option Plan") for officers,
directors and certain key employees. On July 25, 1995, the Stock Option Plan was
amended to increase the shares of Common Stock (Nonvoting) subject to options   
available for grant to 2,000,000 from 800,000. Options may be granted under the 
Stock Option Plan at an exercise price (for tax-qualified incentive stock       
options) of not less than 100% of the fair market value of the Common Stock     
(Nonvoting) on the date the option is granted, or 110% of such fair market value
for option recipients who hold 10% or more of the Company's voting stock. The   
exercise price for non-qualified stock options may be less than, equal to or    
greater than the fair market value of the Common Stock (Nonvoting) on the date  
the option is granted. Options are normally exercisable at a rate of 20% per    
year beginning on the date of grant (or the next preceding January 1) and expire
ten years after the date of grant, except for incentive stock options granted to
recipients who also own 10% or more of the Company's voting stock. At December  
31, 1993, 1994 and 1995, 152,800, 204,700 and 467,850, respectively, options    
were exercisable.                                                               

 On March 1, 1994, the Company adopted a Director Stock Option Plan (the
"Director Option Plan") providing for the grant, from time to time, of          
non-qualified stock options to non-employee directors of the Company to purchase
an aggregate of 300,000 shares of Common Stock (Nonvoting). As of December 31,  
1994 and 1995, options granted under the Director Option Plan were outstanding  
for the purchase of 67,600 and 101,700 shares of Common Stock (Nonvoting),      
respectively. Under the Director Option Plan as initially adopted, once every   
three years, a director was permitted to make an irrevocable triennial election 
to receive options, in lieu of cash compensation, for attendance in person at   
each regular quarterly meeting ("Regular Quarterly Meeting") of the Company's   
Board of Directors during the triennial option period covered by such election. 
Under the Director Option Plan as amended in 1995, at the end of the current    
triennial option period and each third anniversary thereafter all directors will
automatically receive an option to purchase 18,000 shares of Common Stock       
(Nonvoting) ("Automatic Director Service Awards") as compensation for attendance
at Regular Quarterly Meetings during the triennial option period subsequent to  
the grant in lieu of cash compensation. In addition, under the Director Option  
Plan, directors receive options ("Automatic Committee Awards") for service on   
certain of the committees of the Board of Directors (each a "Committee").       
Options become exercisable one year (or immediately in the case of Automatic    
Director Service Awards, or Automatic Committee Awards granted after February   
27, 1997) from the date of attendance by a director at a Regular Quarterly      
Meeting or a Committee meeting, as applicable.                                  

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 9 -- Stockholders' Equity -- (Continued)                                   

Additional information with respect to shares subject to stock options
granted under the Stock Option Plan and the Director Option Plan for the years  
ended December 31, 1993, 1994 and 1995 follows:                                 

                                                                · Download Table

                                        Option price       Number   
                                          per Share       of Shares 
                                        ------------      --------- 
                                                                    
Outstanding at December 31, 1992 ....                       299,250 
Granted .............................  $3.00 to $5.25       351,500 
Canceled ............................           $5.25        (1,500)
                                                          --------- 
Outstanding at December 31, 1993 ....                       649,250 
Granted .............................           $4.25        67,600 
Canceled ............................           $5.25        (2,000)
                                                          --------- 
Outstanding at December 31, 1994 ....                       714,850 
Granted ............................. $6.88 to $11.38       348,400 
Exercised ...........................           $4.25        (7,400)
Canceled ............................ $4.25 to $11.38        (6,900)
                                                          --------- 
Outstanding at December 31, 1995 ....                     1,048,950 
                                                          ========= 

Management Stock Plan                                                   

  In April 1993, the Company adopted a Management Stock Plan providing for
the grant from time to time of awards denominated in shares of Common Stock     
(Nonvoting) (the "Bonus Shares") to salaried executive employees of the Company.
The Company has set aside a reserve of 470,000 shares of Common Stock           
(Nonvoting) for grant under the Management Stock Plan. The Company has the      
option to distribute cash in lieu of all or any part of the Bonus Shares        
allocated to an eligible employee. Such cash payment would be made as of the    
date the corresponding Bonus Shares would otherwise be issued in an amount equal
to the fair market value of such Bonus Shares on that date. As of December 31,  
1995, a total of 466,000 Bonus Shares have been allocated pursuant to the       
Management Stock Plan.                                                          

     The total number of common shares outstanding at December 31, 1995 assuming
conversion of all outstanding convertible preferred stock and exercise of all   
outstanding stock options is as follows:                                        

                                                                · Download Table
                                                              
Class A Common Stock............................       178,500
Common Stock (Nonvoting)........................     8,218,240
Conversion of Cumulative Convertible                          
  Exchangeable Preferred Stock..................     9,097,500
Stock option plans..............................     1,048,950
                                                    ----------
                                                    18,543,190
                                                    ==========

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 10 -- Income Taxes                                                         

     The Company files a consolidated federal income tax return for its entities
with the exception of the subsidiary that holds the investment in WKBW-TV. For  
all periods presented, the Company provides for income taxes as required under  
Statement of Financial Accounting Standards No. 109, "Accounting for Income     
Taxes" ("SFAS No. 109"). Under SFAS No. 109, the Company records income taxes   
using a liability approach for financial accounting and reporting which results 
in the recognition and measurement of deferred tax assets based on the          
likelihood of realization of tax benefits in future years.                      

   The (benefit) provision for income taxes for the years ended December 31,
1993, 1994 and 1995 consists of the following:                                  

                                                                · Download Table

                                          1993         1994         1995  
                                       ---------    ---------    ---------
                                                                          
Current taxes:                                                            
   Federal .........................   $    --      $ 100,000    $    --  
   State ...........................        --        416,125      264,000
                                       ---------    ---------    ---------
                                            --        516,125      264,000

Deferred taxes:                                                           
   Federal .........................    (403,800)    (101,000)     154,400
   State ...........................     (67,935)      35,000      136,484
                                       ---------    ---------    ---------
                                        (471,735)     (66,000)     290,884
                                       ---------    ---------    ---------
(Benefit) provision for income taxes   $(471,735)   $ 450,125    $ 554,884
                                       =========    =========    =========

The provision for income taxes for the year ended December 31, 1995 is
comprised of a non-cash provision for income taxes, relating to WKBW-TV of      
$1,100,000, partially offset by the deferred tax benefit recorded on companies  
included in the Granite Broadcasting Corporation U.S. consolidated income tax   
return. Also included are the provisions for state and local taxes.             

     During 1995, the Company utilized approximately $2,800,000 of net operating
loss carryforwards relating to WKBW-TV to eliminate its income tax liability.   
This tax benefit of approximately $1,100,000 reduced goodwill. The Company has  
remaining net operating loss carryforwards relating to WKBW-TV of approximately 
$10,000,000, which expire no sooner than December 31, 2004. The net operating   
loss carryforwards are restricted to offsetting future years' U.S. federal      
income tax liabilities of that subsidiary. If realized, the benefit will be used
to further reduce goodwill.                                                     

The provision for income taxes for the year ended December 31, 1994   
includes a provision for federal alternative minimum tax and state and local    
taxes. For the year ended December 31, 1993, the Company recorded a deferred tax
benefit due to the loss incurred for the year.                                  

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 10 -- Income Taxes -- (Continued)                                          

Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting  
purposes and the amounts used for income tax purposes. Components of the        
Company's deferred tax asset and liability as of December 31, 1994 and 1995 are 
as follows:                                                                     

                                                        · Enlarge/Download Table

                                                                   December 31,         
                                                        ------------------------------- 
                                                             1994              1995     
                                                        -----------         ----------- 
                                                                                        
Deferred tax liability from excess carrying value                                       
  of non-goodwill intangible assets over tax basis..... $21,703,277         $31,245,043 
Deferred tax assets:                                                                    
  Net operating loss carryforward......................   8,750,000          15,168,786 
  Other................................................     365,134             400,134 
                                                        -----------         ----------- 
Total deferred tax assets..............................   9,115,134          15,568,920 
Valuation allowance....................................  (3,069,769)         (6,542,673)
                                                         ----------         ----------- 
Net deferred tax assets................................   6,045,365           9,026,247 
                                                         ----------         ----------- 

Net deferred tax liability............................. $15,657,912         $22,218,796 
                                                        ===========         =========== 

The difference between the U.S. federal statutory tax rate and the    
Company's effective tax rate for the years ended December 31, 1993, 1994 and    
1995 is as follows:                                                             

                                                                · Download Table

                                              1993       1994      1995 
                                            ---------  --------- -------
                                                                        
U.S. statutory rate ......................    (35.0%)   35.0%    (35.0%)
Nondeductible amortization ...............      5.1      7.4     201.4  
State and local taxes ....................      --      10.0     160.8  
Alternative minimum tax ..................      --       2.9       --   
Increase (decrease) in valuation allowance     19.4    (42.4)    (84.1) 
                                            ---------  -------  ------- 

Effective tax rate .......................    (10.5%)   12.9%    243.1% 
                                            ========   ======    =====  

     At December 31, 1995, the Company had a net operating loss carryforward for
federal tax purposes of approximately $33,000,000 which will expire no sooner   
than December 31, 2004. The future utilization of the net operating losses may  
be subject to limitation under Section 382 of the Internal Revenue Code. This   
possible limitation has been reflected in the valuation allowance. The Company  
has provided a valuation allowance against a portion of the net deferred tax    
asset as the past history of the Company makes realization of taxable income    
uncertain. During 1993, 1994 and 1995, the change in valuation allowance relates
to the utilization of or increase in net operating loss carryforwards.          

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 11 -- Defined Contribution Plan                                            

The Company has a trusteed profit sharing and savings plan covering   
substantially all of its employees. Contributions by the Company to the Plan are
based on a percentage of the amount of employee contributions to the Plan and   
are made at the discretion of the Board of Directors. Company contributions,    
which are funded quarterly, amounted to $155,000, $237,000 and $499,000 for the 
years ended December 31, 1993, 1994 and 1995, respectively.                     

Note 12 -- Related Party                                                        

The Company paid a company, as to which a director of Granite was the 
Chairman and Chief Executive Officer until August 19, 1994, $299,638 and        
$518,257 for the years ended December 31, 1993 and 1994, respectively, relating 
to services rendered as the exclusive representative and sales agent for three  
of the stations' national broadcasting revenue.                                 

     In 1995, the Company lent two of its officers an aggregate of approximately
$570,000 to pay certain personal taxes. The terms of the loans provide for an   
annual interest rate of 9% payable semi-annually on December 29 and June 29 of  
each year, with all principal and remaining interest due on December 29, 2004.  

Note 13 -- Price Range of Common Stock (Nonvoting) and                          
           Cumulative Convertible Exchangeable Preferred Stock (unaudited)

  The Company's Common Stock (Nonvoting) is traded in the over-the-counter
market and is quoted on the Nasdaq National Market under the symbol "GBTVK". The
following table sets forth the market price ranges per share of Common Stock    
(Nonvoting) during 1994 and 1995, as reported by Nasdaq:                        

                                                                · Download Table

1994                                       High                  Low
----                                       ----                  ---
                                                                    
First Quarter....................        $4-5/8               $2-7/8
Second Quarter...................         4-1/2                3-1/2
Third Quarter....................         5-1/8                3-3/4
Fourth Quarter...................         7-1/4                4-5/8

1995                                                                

First Quarter....................        $7-3/8               $6-1/8
Second Quarter...................         8-3/8                6-3/4
Third Quarter....................        13-1/4                7-1/2
Fourth Quarter...................        11-3/4                8-5/8

        As of February 29, 1996, the closing price per share for the Company's
Common Stock (Nonvoting), as reported by Nasdaq was $11 3/8 per share.          

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GRANITE BROADCASTING CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 13 -- Price Range of Common Stock (Nonvoting) and                          
           Cumulative Convertible Exchangeable Preferred Stock (unaudited)

The Cumulative Convertible Exchangeable Preferred Stock is traded     
over-the-counter and is quoted on the Nasdaq National Market under the symbol   
"GBTVP". The following table sets forth the market price ranges per share of    
Cumulative Convertible Exchangeable Preferred Stock during 1994 and 1995, as    
reported by Nasdaq:                                                             

                                                                · Download Table

1994                                        High                 Low  
----                                        ----                 ---  
                                                                      
First Quarter..................           $25-1/4              $23-1/2
Second Quarter.................            25-1/2               21-3/4
Third Quarter..................            29-1/2               24-3/4
Fourth Quarter.................            37                   28-1/2

1995                                                                  

First Quarter..................           $40-3/8              $34    
Second Quarter.................            45                   38-1/4
Third Quarter..................            67-1/2               43-1/2
Fourth Quarter.................            58-3/8               48    

 As of February 29, 1996, the closing price for the Company's Cumulative
Convertible Exchangeable Preferred Stock, as reported by Nasdaq, was $59 1/2 per
share.                                                                          

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Report of Independent Auditors

The Board of Directors and Stockholders                                         
Granite Broadcasting Corporation                                            

 We have audited the accompanying combined balance sheets of San Joaquin
Communications Corporation and WTVH as of June 30, 1993 and 1992, and the       
related combined statements of operations and net worth and cash flows for each 
of the two years in the period ended June 30, 1993. These financial statements  
are the responsibility of the Company's management. Our responsibility is to    
express an opinion on these financial statements based on our audits.           

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

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of San Joaquin        
Communications Corporation and WTVH at June 30, 1993 and 1992, and the combined 
results of their operations and their cash flows for each of the two years in   
the period ended June 30, 1993, in conformity with generally accepted accounting
principles.                                                                     

                               ERNST & YOUNG LLP

New York, New York                                                              
August 31, 1993                                                                 

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SAN JOAQUIN COMMUNICATIONS CORPORATION
 AND WTVH-TV
COMBINED STATEMENT OF OPERATIONS AND NET WORTH

                                                        · Enlarge/Download Table

                                                                                   For the Period     For the Period 
                                                 For the Years Ended June 30,     July 1, 1992 to    July 1, 1993 to 
                                                    1992             1993        December 31, 1992  December 23, 1993
                                               --------------   --------------   -----------------  -----------------
                                                                                   (unaudited)        (unaudited)    
                                                                                                                     
Net revenues ................................  $   18,182,711   $   18,395,520   $    9,269,149      $    9,211,323  
Operating expenses:                                                                                                  
  Direct operating expense ..................       9,612,202        9,782,598        4,794,741           4,544,382  
  Selling, general and administrative expense       6,172,234        6,543,717        3,349,997           3,388,003  
  Depreciation expense ......................       1,404,486        1,304,403          667,120             621,433  
  Amortization expense ......................         304,260          304,260          152,130             152,130  
                                               --------------   --------------   --------------      --------------  
     Total operating expenses ...............      17,493,182       17,934,978        8,963,988           8,705,948  
                                               --------------   --------------   --------------      --------------  

Operating income ............................         689,529          460,542          305,161             505,375  
Other income ................................          15,019           12,217            4,724               4,500  
                                               --------------   --------------   --------------      --------------  
Income before income taxes ..................         704,548          472,759          309,885             509,875  
Provision in lieu of income taxes ...........         418,993          359,914             --                  --    
                                               --------------   --------------   --------------      --------------  
     Net income .............................         285,555          112,845          309,885             509,875  
Beginning balance, net worth,                                                                                        
  beginning of period .......................      21,335,545       20,384,732       20,384,732          18,098,021  
Cash remitted to Meredith, net                                                                                       
  of expenses paid on behalf of                                                                                      
  the Stations by Meredith ..................      (1,236,368)      (2,399,556)      (1,949,493)           (905,097) 
                                               --------------   --------------   --------------      --------------  
     Net worth, end of period ...............  $   20,384,732   $   18,098,021   $   18,745,124      $   17,702,799  
                                               ==============   ==============   ==============      ==============  

See accompanying notes. 

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SAN JOAQUIN COMMUNICATIONS CORPORATION
 AND WTVH-TV
COMBINED BALANCE SHEET

                                                        · Enlarge/Download Table

                                                                June 30,                       
                                                       --------------------------  December 23,
                                                           1992          1993          1993    
                                                       ------------  ------------  ------------
                                                                                    (Unaudited)
                                                                                               
               ASSETS                                                                          

Current assets:                                                                                
  Cash ..............................................  $      1,100  $      1,100  $       --  
  Accounts receivable less allowance for doubtful                                              
    accounts ($57,532 in 1992 and $58,370 in 1993) ..     3,493,671     3,615,536     4,006,936
  Film contract rights ..............................     2,651,077     1,780,961     1,717,278
  Other assets ......................................        83,488        90,409       102,325
                                                       ------------  ------------  ------------
     Total current assets ...........................     6,229,336     5,488,006     5,826,539
Property and equipment, net .........................     6,862,965     6,019,033     5,530,311
Film contract rights and other noncurrent assets ....     2,351,466     1,687,082     1,695,178
Intangible assets, less accumulated amortization                                               
  ($3,519,645 in 1992 and $3,823,905 in 1993) .......     8,816,727     8,512,467     8,360,337
                                                       ------------  ------------  ------------
                                                       $ 24,260,494  $ 21,706,588  $ 21,412,365
                                                       ============  ============  ============
               LIABILITIES AND NET WORTH                                                       

Current liabilities:                                                                           
  Accounts payable ..................................  $    229,863  $    284,377  $     81,824
  Accrued compensation ..............................       480,571       501,118          --  
  Other accrued liabilities .........................       148,824       165,512       464,759
  Film contract rights ..............................     1,381,462     1,355,146     1,271,207
                                                       ------------  ------------  ------------
     Total current liabilities ......................     2,240,720     2,306,153     1,817,790
Film contract rights and other noncurrent liabilities     1,635,042     1,302,414     1,891,776
Net worth ...........................................    20,384,732    18,098,021    17,702,799
                                                       ------------  ------------  ------------
                                                       $ 24,260,494  $ 21,706,588  $ 21,412,365
                                                       ============  ============  ============

 See accompanying notes.

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SAN JOAQUIN COMMUNICATIONS CORPORATION
 AND WTVH-TV
COMBINED STATEMENT OF CASH FLOWS

                                                        · Enlarge/Download Table

                                                                                           For the Period      For the Period  
                                                         For the Years Ended June 30,      July 1, 1992 to     July 1, 1993 to 
                                                            1992              1993        December 31, 1992   December 23, 1993
                                                      ---------------    ---------------  -----------------   -----------------
                                                                                                       (Unaudited)             
                                                                                                                               
Cash flows from operating activities:                                                                                          
  Net income ........................................  $   285,555         $   112,845       $   309,885         $   509,875   
  Adjustment to reconcile net income to net                                                                                    
    cash provided by operating activities:                                                                                     
    Provision in lieu of income taxes ...............      418,993             359,914              --                  --     
    Amortization expense ............................      304,260             304,260           152,130             152,130   
    Depreciation expense ............................    1,404,486           1,304,403           667,120             621,143   
    Non-cash corporate allocations ..................    1,153,331           1,183,864           515,083             652,848   
  Change in assets and liabilities:                                                                                            
    (Increase) decrease in accounts receivable ......      (23,399)           (121,865)          269,556            (391,400)  
    Increase (decrease) in accrued liabilities ......      (73,599)           (305,039)          336,969            (201,871)  
    Increase (decrease) in accounts payable .........     (174,756)             54,514            38,849            (202,553)  
    (Increase) decrease in film contract rights                                                                                
      and other noncurrent assets ...................    1,443,702           1,534,500             4,242              55,587   
    Increase (decrease) in film contract rights                                                                                
      payable and other liabilities .................   (2,026,959)           (358,944)          579,955             505,423   
    (Increase) decrease in other assets .............      (24,519)             (6,921)          (86,661)            (11,916)  
  Expenses paid on behalf of the                                                                                               
    Stations by Meredith ............................    1,214,880           1,030,164           605,170             580,614   
                                                       -----------         -----------       -----------         -----------   
      Net cash provided by operating activities .....    3,901,975           5,091,695         3,392,298           2,269,880   
                                                       -----------         -----------       -----------         -----------   

Cash flows from investing activities:                                                                                          
  Capital expenditures ..............................     (297,396)           (460,471)         (322,553)           (132,421)  
                                                       -----------         -----------       -----------         -----------   
      Net cash used in investing activities               (297,396)           (460,471)         (322,553)           (132,421)  

Cash flows from financing activities:                                                                                          
  Cash remitted to Meredith .........................   (3,604,579)         (4,631,224)       (3,069,745)         (2,138,559)  
                                                       -----------         -----------       -----------         -----------   
      Net cash used in financing activities .........   (3,604,579)         (4,631,224)       (3,069,745)         (2,138,559)  
                                                       -----------         -----------       -----------         -----------   

Net increase (decrease) in cash .....................         --                  --                --                (1,100)  
Cash, beginning of period ...........................        1,100               1,100             1,100               1,100   
                                                       -----------         -----------       -----------         -----------   
Cash and cash equivalents, end of period ............  $     1,100         $     1,100       $     1,100         $      --     
                                                       ===========         ===========       ===========         ===========   

See accompanying notes. 

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SAN JOAQUIN COMMUNICATIONS CORPORATION
 AND WTVH-TV
NOTES TO COMBINED FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies                             

Financial statement presentation                                            

The combined financial statements include the accounts of San Joaquin 
Communications Corporation, a wholly-owned subsidiary of Meredith Corporation   
("Meredith") and owner and operator of television station KSEE-TV and WTVH-TV, a
division of Meredith, hereinafter referred to as the "Stations." On June 15,    
1993, Meredith entered into a definitive agreement to sell the Stations to      
Granite Broadcasting Corporation for $32,000,000.                               

Revenue recognition                                                         

     The Stations recognize revenue from the sale of advertising at the time the
advertisements are broadcast.                                                   

Barter transactions                                                         

  The Stations account for barter transactions at the fair market value of
goods or services received. Accordingly, the fair value of the goods or services
acquired is capitalized and amortized to expense as the goods or services are   
used. The related liability for these barter transactions is also recorded at   
the fair value of the goods or services acquired and is amortized to income as  
commercial time is aired. Net revenues from barter transactions were not        
material for the periods presents.                                              

Intangibles                                                                 

Intangible assets consist of amounts by which the cost of acquired net
assets exceeds the values assigned to net tangible assets and are amortized on a
straight-line basis over 40 years. The intangible assets are characterized as   
scarce assets with long and productive lives.                                   

   The Stations continually reevaluates the propriety of the carrying amount
of intangible assets as well as the related amortization period to determine    
whether current events and circumstances warrant adjustments to the carrying    
value and/or revised estimates of useful lives. This evaluation is based on the 
Stations' projections of the undiscounted cash flows over the remaining lives of
the amortization period of the related intangible asset. To the extent such     
projections indicate that the undiscounted cash flows are not expected to be    
adequate to recover the carrying amounts of intangible assets, such carrying    
amounts will be written down to their fair market value. At this time, the      
Stations' believes that no significant impairment of intangible assets has      
occurred and that no reduction of the estimated useful lives is warranted.      

Property and equipment                                                      

Property and equipment are recorded at cost and depreciated on a      
straight-line basis over their estimated useful lives ranging from 3 to 25      
years.                                                                          

Film contracts rights                                                       

   Film contract rights are recorded as assets at gross value, together with
the related liability when the license period begins and the films are available
for broadcasting. The asset is amortized on an accelerated basis over the       
estimated usage of the films, and is classified as current or noncurrent on that
basis. Film contract rights payable                                             

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are classified as current or noncurrent in accordance with the payment terms of 
the various license agreements. Film rights are reflected in the accompanying   
balance sheet at the lower of unamortized cost or estimated net realizable      
value.                                                                          

    Amortization of film contract rights amounted to $2,736,007 and $2,705,043
for the years ended June 30, 1992 and 1993, respectively.                       

     At June 30, 1993, the obligation for programming that had not been recorded
because the program rights were not available for airing aggregated $1,445,500. 

Note 2 - Property and Equipment                                                 

The major classifications of property and equipment were as follows:  

                                                                · Download Table

                                                      June 30,           
                                             ----------------------------
                                                1992             1993    
                                             ----------       ---------- 
                                                                         
Land......................................   $1,031,044       $1,031,044 
Buildings and improvements................    4,344,788        4,396,793 
Furniture and fixtures....................      688,122          688,122 
Technical equipment and other.............   13,165,640       13,460,598 
                                            -----------      ----------- 
                                            $19,229,594      $19,576,557 
Less:  Accumulated depreciation...........   12,366,629       13,557,524 
                                            -----------      ----------- 
Net property and equipment................   $6,862,965       $6,019,033 
                                            ===========      =========== 

Note 3 - Transactions with Parent Company                                       

     The accompanying financial statements include certain expenses for services
incurred by Meredith on behalf of the Stations and consist principally of       
medical and life insurance premiums, property insurance premiums, contributions 
to the defined benefit pension plan and various administrative expenses. These  
expenses totaled $1,214,880 and $1,030,164 for the years ended June 30, 1992 and
1993, respectively. Management believes the method of allocation for these      
expenses is reasonable and are representative of what would have been incurred  
by the Stations on a stand-alone basis. The net worth of the Stations represents
amounts contributed to the Stations by Meredith and the accumulated earnings of 
the Stations, offset by payments to Meredith by the Stations.                   

Note 4 - Income Taxes                                                           

 The Stations results of operations are included in the consolidated tax
return of Meredith. Meredith did not allocate income taxes to the Stations. For 
purposes of the accompanying financial statements, adjustments were made to     
reflect federal and state income taxes computed on a separate return basis. Such
income taxes have been reflected in the accompanying financial statements as a  
provision in lieu of income taxes because such provision did not require a cash 
payment.                                                                        

The difference between the statutory and effective income tax rates as
reflected in the accompanying statement of operations relates principally to    
amortization of intangible assets not deductible for income tax purposes.       
Reconciliation of these rates is as follows:                                    

                                                                · Download Table

                                                            1992     1993
                                                            ----     ----
                                                                         
Federal income tax rate ...............................      34%      34%
Amortization of goodwill ..............................      15       22 
State and local income taxes, net                                        
  of federal income tax benefit .......................      11       20 
                                                             --       -- 
                                                             60%      76%
                                                             ==       == 

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Note 5 - Commitments                                                            

      Future minimum lease payments under long-term operating leases as of
June 30, 1993 are as follows:                                                   

                                                                · Download Table
                                                                
1994...................................................  $32,473
1995...................................................   21,040
1996...................................................    9,385
1997...................................................    1,800
1998...................................................    1,800
1999 and thereafter....................................   93,600
                                                        --------
                                                        $160,098
                                                        ========

Note 6 - Supplementary Income Statement Information                             

         Supplementary income statement information for the years ended June 30,
1992 and 1993 is as follows:                                                    

                                                                · Download Table

                                             1992           1993  
                                           --------       --------
                                                                  
Maintenance and repairs.................   $301,647       $408,241
Music license fee.......................    277,111        271,865
Property tax............................    184,781        267,631
Advertising costs.......................    102,628        212,984

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Report of Independent Auditors

The Partners                                                                    
Austin Television, a Texas general partnership                                  

 We have audited the accompanying balance sheets of Austin Television, a
Texas general partnership (the "Partnership") as of December 31, 1994 and 1993, 
and the related statements of income and partners' deficit and cash flows for   
each of the three years in the period ended December 31, 1994. These financial  
statements are the responsibility of the Partnership's management. Our          
responsibility is to express an opinion on these financial statements based on  
our audits.                                                                     

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

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Partnership at December 
31, 1994 and 1993, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1994, in conformity with    
generally accepted accounting principles.                                       

                 Ernst & Young LLP

New York, New York                                                              
February 3, 1995                                                                

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AUSTIN TELEVISION, A TEXAS GENERAL PARTNERSHIP

BALANCE SHEETS

                                                        · Enlarge/Download Table

                                                                             December 31,          January 31,
                                                                        1993             1994         1995    
                                                                     ----------       ----------   -----------
                                                                                                   (Unaudited)
                                                                                                              
ASSETS                                                                                                        
CURRENT ASSETS:                                                                                               
  Cash and cash equivalents.........................................   $956,746       $1,622,629     $633,043 
  Accounts receivable, less allowance for doubtful                                                            
    accounts ($64,934 in 1993 and 1994)                               1,968,764        2,602,426    2,418,990 
  Film contract rights..............................................    586,182          421,826      339,591 
  Other assets......................................................     15,352           81,323      106,390 
                                                                     ----------       ----------    --------- 
      TOTAL CURRENT ASSETS..........................................  3,527,044        4,728,204    3,498,014 
PROPERTY AND EQUIPMENT, NET.........................................  1,397,385        1,103,669    1,071,220 
FILM CONTRACT RIGHTS AND OTHER NONCURRENT ASSETS                        866,626          590,328      590,328 
BROADCAST LICENSE, net of accumulated amortization                                                            
   ($104,170 in 1993 and $114,587 in 1994) .........................    312,525          302,108      296,840 
LOAN COSTS, net of accumulated amortization                                                                   
   ($57,193 in 1993 and $109,987 in 1994) ..........................    206,778          153,984      149,584 
                                                                     ----------       ----------   ---------- 
    TOTAL ASSETS.................................................... $6,310,358       $6,878,293   $5,605,986 
                                                                     ==========       ==========   ========== 

LIABILITIES AND PARTNERS' DEFICIT                                                                             
CURRENT LIABILITIES:                                                                                          
  Accounts payable..................................................    $38,332         $154,333      $56,906 
  Accrued compensation..............................................    113,910           87,520       81,723 
  Other accrued liabilities.........................................    116,430           65,529        8,153 
  Current maturities of long-term debt..............................    815,000          899,000      374,250 
  Film contract payable.............................................    521,302          348,317      384,157 
                                                                      ---------        ---------    --------- 
     TOTAL CURRENT LIABILITIES......................................  1,604,974        1,554,699      905,189 
COMMITMENTS AND CONTINGENCIES:                                                                                
LONG-TERM DEBT......................................................  8,443,000        5,294,000    5,294,000 
FILM CONTRACT RIGHTS PAYABLE AND OTHER                                                                        
  NONCURRENT LIABILITIES............................................    540,390          281,995      242,978 
PARTNERS' DEFICIT................................................... (4,278,006)        (252,401)    (836,181)
                                                                     -----------       ----------   ----------
     TOTAL LIABILITIES AND PARTNERS' DEFICIT                         $6,310,358       $6,878,293   $5,605,986 
                                                                     ===========      ===========  ===========

 See accompanying notes.

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AUSTIN TELEVISION, A TEXAS GENERAL PARTNERSHIP

STATEMENTS OF INCOME AND PARTNERS' DEFICIT

                                                        · Enlarge/Download Table


                                                    Years ended December 31,        One Month Ended One Month Ended
                                         ------------------------------------------    January 31,    January 31,  
                                             1992           1993           1994           1994           1995      
                                         ------------   ------------   ------------   ------------   ------------  
                                                                                       (Unaudited)    (Unaudited)  
                                                                                                                   
Net revenues ..........................  $  9,040,013   $ 10,990,381   $ 13,518,985   $    657,074   $    874,706  
Operating expenses:                                                                                                
  Direct operating expenses ...........     3,597,989      3,473,240      3,701,359        182,441        175,148  
  Selling, general and administrative                                                                              
    expense ...........................     2,334,949      2,306,440      2,513,844        193,088        204,645  
  Depreciation and amortization expense       402,284        504,065        515,107         47,688         42,117  
                                         ------------   ------------   ------------   ------------   ------------  
Total operating expenses ..............     6,335,222      6,283,745      6,730,310        423,217        421,910  
Operating income ......................     2,704,791      4,706,636      6,788,675        233,857        452,796  
                                         ------------   ------------   ------------   ------------   ------------  

Other income (expense):                                                                                            
  Interest income .....................        34,026         31,352         46,802          2,819          5,682  
  Interest expense ....................      (127,387)      (852,531)      (725,371)       (63,234)       (54,683) 
  Other, net ..........................        83,565         63,584       (147,267)          --          (20,510) 
                                         ------------   ------------   ------------   ------------   ------------  
                                               (9,796)      (757,595)      (825,836)       (60,415)       (69,511) 
                                         ------------   ------------   ------------   ------------   ------------  

Net income ............................     2,694,995      3,949,041      5,962,839        173,442        383,285  
Partners' (deficit) capital, beginning                                                                             
    of year ...........................     3,127,172     (6,779,643)    (4,278,006)    (4,278,006)      (252,401) 
  Capital distributions ...............    (1,100,000)    (1,447,404)    (1,937,234)          --         (967,065) 
  Purchase of partnership interest ....   (11,501,810)          --             --             --             --    
                                         ------------   ------------   ------------   ------------   ------------  
Partners' deficit, end of year ........  $ (6,779,643)  $ (4,278,006)  $   (252,401)  $ (4,104,564)  $   (836,181) 
                                         ============   ============   ============   ============   ============  

 See accompanying notes.

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AUSTIN TELEVISION, A TEXAS GENERAL PARTNERSHIP

STATEMENTS OF CASH FLOWS

                                                        · Enlarge/Download Table

                                                                Years ended December 31,           One Month Ended One Month Ended
                                                    --------------------------------------------      January 31,    January 31,  
                                                          1992           1993           1994             1994           1995      
                                                    ------------    ------------    ------------    ------------    ------------  
                                                                                                     (Unaudited)     (Unaudited)  
                                                                                                                                  

Cash flows from operating activities:                                                                                             
Net income ........................................ $  2,694,995    $  3,949,041    $  5,962,839    $    173,442    $    383,285  
Adjustments to reconcile net income to                                                                                            
  net cash provided by operating activities:                                                                                      
  Amortization expense ............................       14,718          63,210          63,211           9,668           9,668  
  Depreciation expense ............................      387,566         440,855         451,896          38,020          32,449  
  Change in assets and liabilities:                                                                                               
    (Increase) decrease in accounts                                                                                               
      receivable ..................................        2,791        (419,796)       (633,662)        311,958         183,436  
    Increase (decrease) in accounts                                                                                               
      payable, accrued compensation                                                                                               
      and accrued liabilities .....................      107,996        (252,207)         38,710         (67,000)       (160,600) 
    Decrease in film contract rights and                                                                                          
      other noncurrent assets .....................      148,019         401,590         440,654          77,434          82,235  
    Decrease in film contract payable and                                                                                         
      other liabilities ...........................     (116,648)       (513,930)       (431,380)        (27,336)         (3,177) 
    Increase in other assets ......................         --           (15,352)        (65,971)        (21,653)        (25,067) 
Net cash provided by operating                                                                                                    
  activities ......................................    3,239,437       3,653,411       5,826,297         494,533         502,229  

Cash flows from investing activities:                                                                                             
  Capital expenditures ............................     (330,116)       (197,716)       (158,180)           --              --    
                                                    ------------    ------------    ------------    ------------    ------------  
  Net cash used in investing activities ...........     (330,116)       (197,716)       (158,180)           --              --    
                                                    ------------    ------------    ------------    ------------    ------------  
Cash flows from financing activities:                                                                                             
  Proceeds from issuance of                                                                                                       
    long-term debt ................................   12,000,000            --              --              --              --    
  Repayments of long-term debt ....................     (800,000)     (2,742,000)     (3,065,000)       (300,000)       (524,750) 
  Purchase of partnership interest ................  (11,501,810)           --              --              --              --    
  Capitalized loan costs ..........................     (263,872)           --              --              --              --    
                                                    ------------    ------------    ------------    ------------    ------------  
  Partner capital distributions ...................   (1,100,000)     (1,447,404)     (1,937,234)           --          (967,065) 
                                                    ------------    ------------    ------------    ------------    ------------  
  Net cash used in financing activities ...........   (1,665,682)     (4,189,404)     (5,002,234)       (300,000)     (1,491,815) 
                                                    ------------    ------------    ------------    ------------    ------------  
Net increase (decrease) in cash and cash                                                                                          
  equivalents .....................................    1,243,639        (733,709)        665,883         194,533        (989,586) 
Cash and cash equivalents, beginning                                                                                              
  of period .......................................      446,816       1,690,455         956,746         956,746       1,622,629  
                                                    ------------    ------------    ------------    ------------    ------------  
Cash and cash equivalents, end of period .......... $  1,690,455    $    956,746    $  1,622,629    $  1,151,279    $    633,043  
                                                    ============    ============    ============    ============    ============  


 See accompanying notes.

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AUSTIN TELEVISION, A TEXAS GENERAL PARTNERSHIP

 NOTES TO FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies                            

Financial Statement Presentation                                            

Austin Television, a Texas general partnership (the "Partnership") was
organized as a general partnership in 1983 to acquire and operate KBVO, a UHF   
television station in Austin, Texas. The Partnership consists of two general    
partners with respective ownership percentages of 70 and 30. Capital            
attributable to each general partner is based on relative percentage of         
ownership. Revenue is generated from the sale of air time to local and national 
advertisers.                                                                    

Revenue Recognition                                                         

Revenue from the sale of advertising is recognized at the time the    
advertisements are aired.                                                       

Cash Equivalents                                                            

Cash equivalents consist of money market accounts.                    

Barter Transactions                                                         

    Barter transactions are accounted for at the fair market value of goods or
services received. Accordingly, the fair value of the programming or goods and  
services acquired is capitalized and amortized to expense as the goods or       
services are used. The related liability for these barter transactions is also  
recorded at the fair value of the programming or goods or services acquired and 
is amortized to income as commercial time is aired.                             

Broadcast License and Loan Costs                                            

    The cost of acquiring the Partnership's broadcast license are amortized on
a straight-line basis. The broadcast license is amortized over 40 years. The    
broadcast license is characterized as a scarce asset with a long and productive 
life. Loan costs are amortized over the term of the loan.                       

The Partnership continually reevaluates the propriety of the carrying 
amount of the broadcast license as well as the related amortization period to   
determine whether current events and circumstances warrant adjustments to the   
carrying value and/or revised estimates of the useful life. This evaluation is  
based on the Partnership's projections of the undiscounted cash flows over the  
remaining life of the amortization period of the broadcast license. To the      
extent such projections indicate that the undiscounted cash flows are not       
expected to be adequate to recover the carrying amount of the broadcast license,
such carrying amount will be written down to fair market value. At this time,   
the Partnership believes that no significant impairment of the broadcast license
has occurred and that no reduction of the estimated useful life is warranted.   

Property and Equipment                                                      

Property and equipment are recorded at cost and depreciated on a      
straight-line basis over their estimated useful lives ranging from 5 to 15      
years.                                                                          

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Film Contract Rights                                                        

   Film contract rights are recorded as assets at gross value, together with
the related liability when the license period begins and the films are available
for broadcasting. The asset is amortized either on a straight-line basis over   
the asset's license period or based on the usage of the assets, whichever is    
shorter, and is classified as current or noncurrent on that basis. Film contract
rights payable are classified as current or noncurrent in accordance with the   
payment terms of the various license agreements. Payments on the film rights    
payable are due as follows:                                                     

                                                                · Download Table
                                                                 
1995...............................................      $348,317
1996...............................................       156,718
1997...............................................        97,126
1998...............................................        28,151
                                                         --------
                                                         $630,312
                                                         ========

At December 31, 1994, the obligation for programming that had not been
recorded because the programming rights were not available for airing were      
$376,200.                                                                       

     Film contract rights are reflected in the accompanying balance sheet at the
lower of unamortized cost or estimated net realizable value.                    

Income Taxes                                                                    

      No provision has been made for income taxes since the Partnership is
not a taxable entity.                                                           

Note 2 -- Property and Equipment                                                

The major classifications of property and equipment are as follows:   

                                                                · Download Table

                                                            December 31,     
                                                      -----------------------
                                                        1993          1994   
                                                      ---------     ---------
                                                                             
Building improvements...........................       $214,922      $214,922
Furniture and fixtures..........................        219,392       234,771
Technical equipment and other...................      5,051,098     5,182,399
                                                      ---------     ---------
                                                      5,485,412     5,632,092
Less: Accumulated depreciation..................      4,088,027     4,528,423
                                                      ---------     ---------
Net property and equipment......................     $1,397,385    $1,103,669
                                                     ==========    ==========

Note 3 -- Long-Term Debt                                                        

A summary of long-term debt is as follows:                    

                                                        · Enlarge/Download Table

                                                                                         December 31,      
                                                                                      1993          1994   
                                                                                   ----------    ----------
                                                                                                           
Prime rate plus 2% (10.5% at December 31, 1994) principal due in quarterly                                 
   installments of $185,550 increasing to $274,750, plus interest, balance due                             
   December 1, 1997, secured by all                                                                        
   partnership assets............................................................. $9,258,000    $6,193,000

Less current installments.........................................................    815,000       899,000
                                                                                   ----------    ----------

Long-term debt, excluding current installments.................................... $8,443,000    $5,294,000
                                                                                   ==========    ==========

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    The amount of scheduled principal maturities on long-term debt for each of
the years subsequent to December 31, 1994 are as follows:                       

                                                                · Download Table
                                                              
1995...............................................   $899,000
1996...............................................    995,000
1997...............................................  4,299,000
                                                    ----------
                                                    $6,193,000
                                                    ==========

The loan agreement restricts partner distributions, limits capital    
expenditures to $200,000 annually without approval of lender, and requires      
maintenance of certain ratios and debt service coverage.                        

     The Partners have issued person guarantees on the loan totaling $3,500,000.

  Interest paid was $127,387, $852,531 and $725,371, during 1992, 1993 and
1994.                                                                           

Note 4 -- Commitments                                                           

The Company leases its main offices and tower space under long-term   
operating lease agreements expiring in 1998.                                    

     Future minimum rental payments required under long-term operating leases as
of December 31, 1994 are as follows:                                            

                                                                · Download Table
                                                                        
1995......................................................      $236,124
1996......................................................       241,104
1997......................................................       185,276
1998......................................................        38,890
                                                                --------
                                                                $701,394
                                                                ========

  Rental expense under these leases was $221,149, $228,507 and $231,132 in
1992, 1993 and 1994, respectively.                                              

Note 5 -- Purchase of Partnership Interests                                     

  In November 1992, two Austin Television partners purchased the remaining
partnership interests for $11,501,810, using the proceeds from the issuance of  
long-term debt. The purchase has been recorded as a reduction in partners'      
capital.                                                                        

Note 6 -- Subsequent Event                                                      

On February 1, 1995, the Partnership sold certain assets to Granite   
Broadcasting Corporation for $54,000,000 and the assumption of certain          
liabilities by Granite.                                                         

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Report of Independent Auditors

The Board of Directors                                                          
Busse Broadcasting Corporation                                                  

   We have audited the accompanying balance sheets of WWMT-TV, a division of
Busse Broadcasting Corporation (the "Company"), as of January 1, 1995 and       
January 2, 1994, and the related statements of operations, divisional equity and
cash flows for each of the three years in the period ended January 1, 1995.     
These financial statements are the responsibility of the Company's management.  
Our responsibility is to express an opinion on these financial statements based 
on our audits.                                                                  

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

As discussed in Note 1, WWMT-TV is a division of Busse Broadcasting   
Corporation and has no separate legal status or existence. As more fully        
described in Note 5, Busse Broadcasting Corporation has entered into an         
agreement to sell the broadcasting assets of WWMT-TV.                           

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WWMT-TV as of January 1,    
1995 and January 2, 1994, and the results of its operations and its cash flows  
for each of the three years in the period ended January 1, 1995, in conformity  
with generally accepted accounting principles.                                  

The accompanying financial statements have been prepared assuming that
WWMT-TV will continue as a going concern. As more fully described in Note 1,    
Busse Broadcasting Corporation is in default under substantially all of its debt
agreements and on March 10, 1995, Busse Broadcasting Corporation and its wholly 
owned subsidiary, WWMT, Inc., filed voluntary petitions for a joint plan of     
reorganization under Chapter 11 of the United States Bankruptcy Code. On April  
20, 1995, the United States Bankruptcy Court for the district of Delaware       
confirmed the joint plan of reorganization and such plan became effective on May
3, 1995. The financial statements do not include any adjustments that will      
result from the adoption of fresh start reporting on the effective date of the  
confirmation as discussed in Note 1.                                            

                   Ernst & Young LLP

Milwaukee, Wisconsin                                                            
February 24, 1995, except for Note 1,                                           
as to which the date is May 3, 1995                                             

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 WWMT-TV
(A DIVISION OF BUSSE BROADCASTING CORPORATION)

BALANCE SHEETS

                                                        · Enlarge/Download Table

                                                                    January 2,   January 1,    May 31,  
                                                                      1994         1995         1995    
                                                                   -----------  -----------  -----------
                                                                                             (Unaudited)
                                                                                                        
ASSETS                                                                                                  
CURRENT ASSETS:                                                                                         

 Cash............................................................. $   504,000  $   299,000  $ 1,969,000
 Accounts receivable, net of allowances of $67,000 and                                                  
   $81,000, respectively..........................................   3,784,000    4,641,000    4,724,000
 Film contract rights.............................................   1,784,000    1,793,000      735,000
 Other assets.....................................................      65,000      125,000      187,000
                                                                   -----------  -----------  -----------
    TOTAL CURRENT ASSETS..........................................   6,137,000    6,858,000    7,615,000

PROPERTY, PLANT AND EQUIPMENT, NET................................   8,865,000    8,044,000    7,733,000
FILM CONTRACT RIGHTS..............................................     203,000       82,000       82,000
INTANGIBLE ASSETS.................................................  20,912,000   20,272,000   20,019,000
                                                                   -----------  -----------  -----------
    TOTAL ASSETS.................................................. $36,117,000  $35,256,000  $35,449,000
                                                                   ===========  ===========  ===========

LIABILITIES AND DIVISION EQUITY                                                                         

CURRENT LIABILITIES:                                                                                    

 Accounts payable................................................. $   138,000  $   139,000  $   162,000
 Film contracts payable...........................................   1,633,000    1,451,000      606,000
 Accrued payroll..................................................     218,000      277,000       94,000
 Other............................................................     261,000      226,000      248,000
                                                                   -----------  -----------  -----------
    TOTAL CURRENT LIABILITIES.....................................   2,250,000    2,093,000    1,110,000

FILM CONTRACT RIGHTS PAYABLE......................................     106,000           --           --
DEFERRED INCOME TAXES.............................................   8,101,000    7,655,000    7,655,000
COMMITMENTS AND CONTINGENCIES:                                                                          
DIVISIONAL EQUITY.................................................  25,660,000   25,508,000   26,684,000
                                                                   -----------  -----------  -----------
    TOTAL LIABILITIES AND PARTNERS' DEFICIT                        $36,117,000  $35,256,000  $35,449,000
                                                                   ===========  ===========  ===========

 See accompanying notes.

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 WWMT-TV
(A DIVISION OF BUSSE BROADCASTING CORPORATION)

STATEMENTS OF OPERATIONS

                                                        · Enlarge/Download Table

                                                                Years ended                                                 
                                               ----------------------------------------------   Five Months    Five Months  
                                                 January 3,      January 2,        January 1,   Ended May 31,  Ended May 31,
                                                   1993             1994              1995          1994            1995    
                                               ------------     ------------     ------------    ----------     ----------  
                                                                                                 (Unaudited)    (Unaudited) 
                                                                                                                            
Net revenues ................................. $ 15,713,000     $ 16,740,000     $ 19,083,000    $7,214,000     $7,934,000  
Operating costs and expenses, excluding                                                                                     
  depreciation and amortization ..............    8,418,000        8,869,000        9,007,000     3,742,000      4,182,000  
 Depreciation ................................    1,314,000        1,155,000        1,225,000       478,000        360,000  
 Amortization of intangible assets ...........    1,593,000        1,659,000          640,000       265,000        253,000  
                                               ------------     ------------     ------------    ----------     ----------  
Total operating costs and expenses ...........   11,325,000       11,683,000       10,872,000     4,485,000      4,795,000  
Corporate expenses ...........................      282,000          282,000          282,000          --             --    
                                               ------------     ------------     ------------    ----------     ----------  
Income from operations .......................    4,106,000        4,775,000        7,929,000     2,729,000      3,139,000  
Other income (expense):                                                                                                     
 Loss on disposition of property, plant and                                                                                 
  equipment ..................................     (400,000)        (228,000)         (52,000)         --             --    
 Other .......................................       (1,000)           8,000           19,000         4,000         43,000  
                                               ------------     ------------     ------------    ----------     ----------  
Income before income taxes ...................    3,705,000        4,555,000        7,896,000     2,733,000      3,182,000  
Income taxes .................................    1,377,000        1,674,000        2,824,000          --             --    
                                               ------------     ------------     ------------    ----------     ----------  
Net income ................................... $  2,328,000     $  2,881,000     $  5,072,000    $2,733,000     $3,182,000  
                                               ============     ============     ============    ==========     ==========  

See accompaning notes.

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 WWMT-TV
(A DIVISION OF BUSSE BROADCASTING CORPORATION)

 STATEMENTS OF DIVISIONAL EQUITY

                                                                · Download Table
                                                                                
Divisional equity of WWMT-TV at December 29, 1991 ............     $ 28,438,000 
  Net income for year ended January 3, 1993 ..................        2,328,000 
  Net intercompany transactions ..............................       (3,985,000)
                                                                   ------------ 
Balance at January 3, 1993 ...................................       26,781,000 
  Net income for year ended January 2, 1994 ..................        2,881,000 
  Net intercompany transactions ..............................       (4,002,000)
                                                                   ------------ 
Balance at January 2, 1994 ...................................       25,660,000 
  Net income for year ended January 1, 1995 ..................        5,072,000 
  Net intercompany transactions ..............................       (5,224,000)
                                                                   ------------ 
Balance at January 1, 1995 ...................................       25,508,000 
  Net income for the five months ended May 31, 1995 ..........        3,182,000 
  Net intercompany transactions ..............................       (2,006,000)
                                                                   ------------ 
Balance at May 31, 1995 (unaudited) ..........................     $ 26,684,000 
                                                                   ============ 


 See accompanying notes.

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 WWMT-TV
(A DIVISION OF BUSSE BROADCASTING CORPORATION)

STATEMENTS OF CASH FLOWS

                                                        · Enlarge/Download Table

                                                                    Years ended                                             
                                                    -----------------------------------------   Five Months    Five Months  
                                                     January 3,     January 2,     January 1,   Ended May 31,  Ended May 31,
                                                        1993           1994           1995          1994           1995     
                                                    -----------    -----------    -----------   ------------   -------------
                                                                                                        (Unaudited)         
                                                                                                                            
Cash flows from operating activities:                                                                                       

Net income ........................................ $ 2,328,000    $ 2,881,000    $ 5,072,000   $ 2,733,000    $ 3,182,000  
Adjustments to reconcile net income                                                                                         
  to net cash provided by operating                                                                                         
  activities:                                                                                                               
 Depreciation and amortization ....................   2,907,000      2,814,000      1,865,000       743,000        613,000  
 Film payments in excess of                                                                                                 
   film amortization ..............................    (293,000)      (567,000)      (176,000)      (82,000)       213,000  
 Loss on disposition of property, plant and                                                                                 
   equipment ......................................     400,000        228,000         52,000          --             --    
 Deferred income taxes ............................    (671,000)      (525,000)      (446,000)         --             --    
 Change in current assets and liabilities:                                                                                  
  Accounts receivable .............................    (401,000)       (96,000)      (857,000)       61,000        (83,000) 
  Other current assets ............................     (46,000)        34,000        (60,000)     (114,000)       (62,000) 
  Accounts payable and accrued expenses ...........       9,000        (35,000)        25,000       (84,000)      (138,000) 
                                                    -----------    -----------    -----------   -----------    -----------  
Net cash provided by operating activities .........   4,233,000      4,734,000      5,475,000     3,257,000      3,725,000  
Investing activities:                                                                                                       
Additions to property, plant                                                                                                
  and equipment ...................................    (490,000)      (333,000)      (464,000)     (227,000)       (49,000) 
Proceeds from disposition of property,                                                                                      
  plant and equipment .............................       3,000           --            8,000          --             --    
                                                    -----------    -----------    -----------   -----------    -----------  
Net cash used for investing activities ............    (487,000)      (333,000)      (456,000)     (227,000)       (49,000) 
Financing activity:                                                                                                         
Net intercompany transactions .....................  (3,985,000)    (4,002,000)    (5,224,000)   (3,256,000)    (2,006,000) 
                                                    -----------    -----------    -----------   -----------    -----------  
Net increase (decrease) in cash ...................    (239,000)       399,000       (205,000)     (226,000)     1,670,000  
Cash at beginning of period .......................     344,000        105,000        504,000       504,000        299,000  
                                                    -----------    -----------    -----------   -----------    -----------  
Cash at end of period ............................. $   105,000    $   504,000    $   299,000   $   278,000    $ 1,969,000  
                                                    ===========    ===========    ===========   ===========    ===========  
Supplemental cash flow information --                                                                                       
 Income taxes paid ................................ $ 2,048,000    $ 2,199,000    $ 3,270,000   $      --      $      --    
                                                    ===========    ===========    ===========   ===========    ===========  

 See accompanying notes.

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 WWMT-TV
(A DIVISION OF BUSSE BROADCASTING CORPORATION)

 NOTES OF FINANCIAL STATEMENTS
 January 1, 1995
(Dollars in Thousands)

Note 1 -- Summary of Significant Accounting Policies                            

Basis of Presentation                                                       

The financial statements present the financial position, results of   
operations, divisional equity, and cash flows of WWMT-TV, a division of Busse   
Broadcasting Corporation (the "Company"). WWMT-TV has no separate legal status  
or existence. Its assets are legally available for the satisfaction of debts of 
the Company of which it is a part, not solely those appearing on the            
accompanying financial statements, and its debts may result in claims against   
assets not appearing herein.                                                    

The accompanying financial statements have been prepared assuming that
WWMT-TV will continue as a going concern. The Company is in default under       
substantially all of its debt agreements, and on March 10, 1995, the Company and
its wholly owned subsidiary filed voluntary petitions for a joint plan of       
reorganization under Chapter 11 of the United States Bankruptcy Code. On April  
30, 1995, the United States Bankruptcy Court for the district of Delaware       
confirmed the joint plan of reorganization and such plan became effective on May
3, 1995. The prepackaged plan of reorganization provides for a restructuring of 
substantially all of the Company's debt and the cancellation of all prior equity
interests. The Company will account for the reorganization using fresh start    
accounting. These financial statements do not include any adjustments that will 
result from the adoption of fresh start accounting.                             

Divisional equity includes net intercompany balances that result from 
various transactions between WWMT-TV and the Company. There are no terms of     
settlement or interest charges associated with these balances. The balances are 
primarily the result of WWMT-TV's participation in the Company's central cash   
management program, wherein the month-end cash balances in excess of certain    
levels are remitted to the Company. Other transactions include the allocation of
corporate expenses to WWMT-TV and the current income taxes that would have been 
due to the Company. WWMT-TV's receivable from the Company, which has been netted
in the divisional equity balance, totaled $27,784,000 and $36,561,000 at January
2, 1994 and January 1, 1995, respectively, and averaged $19,533,000, $24,886,000
and $32,173,000 for the years ended January 3, 1993, January 2, 1994 and January
1, 1995, respectively.                                                          

  WWMT-TV is a CBS affiliate operating in the Grand Rapids -- Kalamazoo --
Battle Creek, Michigan television market.                                       

Revenue recognition                                                         

   WWMT recognizes revenue from the sale of advertising time at the time the
advertisements are aired.                                                       

Barter transactions                                                         

Revenue from barter transactions is recognized when advertisements are
broadcast and merchandise or services received are charged to expense when      
received or used.                                                               

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Television Program Contract Rights                                          

   The rights to broadcast non-network programs are recorded at gross value.
These costs are amortized based upon the usage of the programs, under methods   
which generally result in accelerated amortization. The cost of program rights  
expected to be used within one year is classified as a current asset.           

Property, Plant and Equipment                                               

Property, plant and equipment is recorded at cost. Depreciation is    
calculated generally on the straight-line method based on the following useful  
lives:                                                                          

                                                                · Download Table

                                                                       Years 
                                                                       ----- 
                                                                             
Leasehold and land improvements..................................      5 - 10
Buildings........................................................          30
Machinery and equipment..........................................      3 - 20
Automobiles and trucks...........................................      3 -  7

Intangible Assets                                                           

The amounts allocated to FCC licenses, network contracts and goodwill 
represent the excess of the purchase price of assets acquired over the fair     
market value assigned to the net tangible and certain other intangible assets at
the date of acquisition and are being amortized on a straight-line basis over   
forty years. The broadcasting intangible assets are characterized as scarce     
assets with long and productive lives. The costs of other intangible assets with
determinable lives are charged to operations based on their respective economic 
lives, under methods which generally result in accelerated amortization.        
Accumulated amortization of intangible assets at January 2, 1994 and January 1, 
1995, was $20,544 and $21,184, respectively.                                    

  WWMT continually reevaluates the propriety of the carrying amount of the
broadcast license as well as the related amortization period to determine       
whether current events and circumstances warrant adjustments to the carrying    
value and/or revised estimates of the useful life. This evaluation is based on  
WWMT's projections of the undiscounted cash flows over the remaining life of the
amortization period of the broadcast license. To the extent such projections    
indicate that the undiscounted cash flows are not expected to be adequate to    
recover the carrying amount of the broadcast license, such carrying amount will 
be written down to fair market value. At this time, WWMT believes that no       
significant impairment of the broadcast license has occurred and that no        
reduction of the estimated useful life is warranted.                            

Income Taxes                                                                

  WWMT-TV is included in the consolidated federal income tax return of the
Company. For financial reporting purposes, WWMT-TV has provided for federal     
income taxes as if it filed a separate income tax return. Current income taxes  
reflect the payments that would have been required had WWMT-TV filed a separate 
income tax return. WWMT-TV adopted Statement of Financial Accounting Standards  
No. 109, "Accounting for Income Taxes" on January 4, 1993 and the adoption has  
no effect on the deferred tax liability at that date. Deferred income taxes     
reflect the net tax effects of temporary differences between the carrying       
amounts of assets and liabilities for financial reporting purposes and the      
amounts used for income tax purposes.                                           

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Reporting Period                                                            

  The Company's annual reporting period is a 52/53-week year ending on the
Sunday nearest December 31. The year ended January 3, 1993, included 53 weeks,  
whereas the years ended January 2, 1994 and January 1, 1995, each included 52   
weeks.                                                                          

Note 2 -- Supplementary Balance Sheet Information                               

The composition of property, plant and equipment is as follows:       

                                                                · Download Table

                                                           January 2, January 1,
                                                             1994       1995    
                                                             ----       ----    
                                                                                
Land, land improvements, buildings and improvements .....  $ 5,571    $ 5,594   
Machinery and equipment .................................    9,074      9,310   
Office equipment ........................................      975        973   
Vehicles ................................................      316        325   
                                                           -------    -------   
                                                            15,936     16,202   
Accumulated depreciation ................................    7,071      8,158   
                                                           -------    -------   
                                                           $ 8,865    $ 8,044   
                                                           =======    =======   

The composition of intangible assets is as follows:                   

                                                                · Download Table

                                                           January 2, January 1,
                                                             1994       1995    
                                                             ----       ----    
                                                                                
Broadcasting licenses, network contracts and goodwill ...  $15,745    $15,278   
Other tangible assets ...................................    5,167      4,994   
                                                           -------    -------   
                                                           $20,912    $20,272   
                                                           =======    =======   

Note 3 -- Income Taxes                                                          

The income tax provisions consist of the following:                   

                                                                · Download Table

                                                     For the Year Ended         
                                                     ------------------         
                                            January 3,   January 2,   January 1,
                                               1993         1994         1995   
                                               ----         ----         ----   
                                                                                
Current -- federal .......................   $ 1,874     $ 2,010     $ 3,061    
Current -- state .........................       174         189         209    
Deferred .................................      (671)       (525)       (446)   
                                             -------     -------     -------    
                                             $ 1,377     $ 1,674     $ 2,824    
                                             =======     =======     =======    

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   The income tax provisions differ from the amount computed by applying the
U.S. statutory rate due to the following:                                       

                                                                · Download Table

                                                     For the Year Ended         
                                                     ------------------         
                                           January 3,    January 2,   January 1,
                                              1993          1994         1995   
                                              ----          ----         ----   
                                                                                
Provision at federal statutory rate....     $1,260        $1,549       $2,685   
State taxes, net of federal benefit....        115           125          138   
Other..................................          2            --            1   
                                                 -            --            -   
                                            ------        ------       ------   
                                            $1,377        $1,674       $2,824   
                                            ======        ======       ======   

 The significant components of WWMT-TV's deferred tax liabilities are as
follows:                                                                        

                                                                · Download Table

                                                       January 2,    January 1,
                                                          1994          1995   
                                                          ----          ----   
                                                                               
Property, plant and equipment basis differences...      $1,820        $1,512   
Intangible assets basis differences...............       6,304         6,174   
Other.............................................         (23)          (31)  
                                                        ------        ------   
                                                        $8,101        $7,655   
                                                        ======        ======   

Note 4 -- Commitments                                                           

  The Company has entered into contracts to purchase rights to air certain
programs at future dates. The Company records these contracts as assets and     
corresponding liabilities when the license period begins. The aggregate amount  
of these contracts is approximately $7,885.                                     

Note 5 -- Subsequent Events                                                     

   In February 1995, the Company contributed substantially all of the assets
and liabilities of WWMT-TV to WWMT, Inc., a newly formed, wholly owned          
subsidiary.                                                                     

     On February 20, 1995, the Company and WWMT, Inc., entered into an agreement
to sell substantially all of the assets of WWMT-TV. The sales agreement provides
for a base purchase price of $95 million and an increase or decrease, as the    
case may be, for the net working capital of WWMT, Inc. as of the closing date,  
as defined in the agreement. The sale agreement also includes a condition       
requiring the approval of the joint plan of reorganization by the bankruptcy    
court.                                                                          

A significant portion of the Company's debt that is to be restructured
(including the debt claims that are expected to receive 100% of the new common  
stock of the Company) is owned by six investment funds whose investment advisor 
is Greycliff Partners (collectively, the "Greycliff Investment Funds"). One of  
the nine members of the board of directors of the buyer is a general partner of 
Greycliff Partners and, together with his immediate family, owns an aggregate   
1.75% limited partnership interest in the Greycliff Investment Funds. The       
Greycliff Investment Funds and the general partner of the Greycliff Partners    
also hold equity interests in the buyer.                                        

The termination provisions of the sales agreement require, among other
things, that if the buyer is not then in material default of the agreement and  
the transaction is not approved by the bankruptcy court, then (i) the Company is
required to pay the buyer a non-approval fee of up to $500,000 and (ii) if,     
within 15 months after termination, the Company sells substantially all of the  
assets of WWMT-TV or more than 50% of the stock of WWMT, Inc. or more than 50%  
of the stock of the Company then the buyer is entitled to a non-completion fee  
of $1,000,000.                                                                  

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Independent Auditor's Report

The Board of Directors and Stockholders                                         
Queen City Broadcasting, Inc.                                                   

    We have audited the accompanying consolidated balance sheets of Queen City
Broadcasting, Inc. ("Queen City") as of December 31, 1993 and 1994, and the     
related consolidated statements of operations, stockholders' deficit and cash   
flows for the years ended December 31, 1992, 1993 and 1994. These financial     
statements are the responsibility of Queen City's management. Our responsibility
is to express an opinion on these financial statements based on our audits.     

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

 In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Queen City at December 31, 1993 and 1994, and the consolidated results of its   
operations and its cash flows for the years ended December 31, 1992, 1993 and   
1994 in conformity with generally accepted accounting principles.               

     As discussed in Notes 1 and 5, approximately $23 million and as much as $22
million of the debt of Queen City Broadcasting of New York, Inc. (the           
"Company"), a wholly-owned subsidiary of Queen City, was scheduled to mature on 
June 29, 1995 and January 2, 1996, respectively. Furthermore, Queen City III    
Limited Partnership ("QC III"), which owns approximately 98% of Queen City's    
outstanding stock, has pledged such stock of Queen City, QC III's principal     
asset, as collateral for an approximate $28,750,000 note (the "QC III Note")    
which also became due on June 29, 1995. A default in the payment of the QC III  
Note could have caused defaults in the Company's debt (See Note 5). The         
Company's and QC III's operating cash flow was insufficient to fully fund their 
respective 1995 and 1996 scheduled payments of debt. As discussed in Note 12,   
Granite Broadcasting Corporation ("GBC"), the sole limited partner of QC III and
the owner of the QC III Note, prior to its acquisition of all the General       
Partnership Interests of QC III on June 29, 1995, converted the QC III Note into
additional capital of QC III. In connection with the acquisition of all of the  
General Partnership Interests of QC III, GBC lent the Company funds sufficient  
to repay substantially all of the Company's debt. The GBC acquisition was       
consummated prior to the FCC's approval of the transaction becoming a final     
order. On July 24, 1995, the FCC order approving the transaction became final.  
The accompanying consolidated financial statements do not include any           
adjustments as a result of these transactions.                                  

Leslie Sufrin and Company, P.C.                                                 

New York, N.Y.                                                                  

February 18, 1995, except for Notes 1 and 12,                                   
as to which date is July 24, 1995.                                          

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 QUEEN CITY BROADCASTING, INC.

 CONSOLIDATED BALANCE SHEETS

                                                        · Enlarge/Download Table

                                                               December 31,  December 31,    June 28,  
                                                                   1993          1994          1995    
                                                               -----------   -----------   ----------- 
                                                                                           (Unaudited) 
                                                                                                       
ASSETS                                                                                                 
Current assets:                                                                                        
  Cash and cash equivalents................................... $ 1,735,257   $ 2,920,270   $ 5,231,818 
  Accounts receivable, less allowance for doubtful                                                     
    accounts of $106,491 in 1993 and $85,951 in 1994 .........   4,589,383     5,708,256     5,298,274 
  Program rights -- current portion...........................     951,497     1,227,169       403,296 
  Prepaid expenses and other current assets ..................     186,936       212,943       520,928 
                                                               -----------   -----------   ----------- 
    Total current assets......................................   7,463,073    10,068,638    11,454,316 
                                                               -----------   -----------   ----------- 
Property, plant and equipment, less accumulated                                                        
  depreciation of $11,493,136 in 1993 and                                                              
  $12,199,488 in 1994 (Note 3)................................   4,525,273     4,317,270     4,476,665 
Intangible assets, net (Note 4)...............................  40,582,571    39,313,301    38,687,430 
Deferred financing charges, net...............................     417,129       311,681       262,470 
Program rights -- non-current portion ........................     124,875       210,508       137,800 
Other assets..................................................       1,793         1,152         7,758 
                                                               -----------   -----------   ----------- 
                                                               $53,114,714   $54,222,550   $55,026,439 
                                                               ===========   ===========   =========== 

LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                  

Current liabilities:                                                                                   
  Accounts payable and accrued liabilities ................... $   464,717   $   581,070   $   495,254 
  Accrued interest............................................   1,092,491     1,093,474     2,464,664 
  Accrued compensation........................................     434,857       710,499       608,349 
  Program rights payable -- current portion ..................   1,265,317     1,337,102       351,156 
  Long-term debt -- current portion (Note 5) .................     471,206    23,000,000    45,058,850 
  Revolving credit line (Note 5)..............................     625,000       614,500            -- 
                                                               -----------   -----------   ----------- 
    Total current liabilities.................................   4,353,588    27,336,645    48,978,273 
                                                               -----------   -----------   ----------- 
Program rights payable -- non-current portion ................      78,000       328,011       266,001 
Long-term debt (Note 5).......................................  64,495,985    41,102,222    19,355,000 
Commitments and contingencies (Note 10)                                                                

Stockholders' deficit:                                                                                 
  Common stock -- $.01 par value, authorized 2,000,000                                                 
    shares, outstanding 1,010,000 shares after deducting                                               
    10,000 shares held in treasury............................      10,100        10,100        10,100 
  Additional paid-in capital..................................  10,089,900    10,089,900    10,089,900 
  Accumulated deficit......................................... (25,912,859)  (24,644,328)  (23,672,835)
                                                               -----------   -----------   ----------- 
    Total stockholders' deficit............................... (15,812,859)  (14,544,328)  (13,572,835)
                                                               -----------   -----------   ----------- 
                                                               $53,114,714   $54,222,550   $55,026,439 
                                                               ===========   ===========   =========== 

 See accompanying notes.

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 QUEEN CITY BROADCASTING, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS

                                                        · Enlarge/Download Table


                                                          For Years Ended December 31,            Six Months      For the Period  
                                                 --------------------------------------------   Ended June 30,  January 1, 1995 to
                                                     1992            1993            1994            1994          June 28, 1995  
                                                 ------------    ------------    ------------   --------------  ------------------
                                                                                                        (unaudited)               
                                                                                                                                  
Net revenues ................................... $ 21,966,637    $ 22,633,806    $ 25,563,951    $ 11,376,703    $ 12,889,476     
 Direct operating expenses .....................    9,746,655       9,252,898       9,158,059       4,348,826       5,139,477     
 Selling, general and                                                                                                             
   administrative expenses .....................    4,518,523       4,818,669       5,402,472       2,612,927       2,437,904     
General and administrative-- New York ..........      397,031         399,687         396,000         198,229         395,195     
Interest expense ...............................    7,788,142       7,342,685       7,180,546       3,529,165       3,001,736     
Depreciation ...................................      616,301         648,006         706,352         353,250         331,200     
Amortization of intangible assets ..............    1,269,270       1,269,270       1,269,270         634,704         629,381     
Amortization of deferred                                                                                                          
  financing charges ............................      125,287         121,181         105,449          52,793          45,696     
Other income, net ..............................      (76,422)       (152,721)        (55,728)        (10,868)        (86,606)    
                                                 ------------    ------------    ------------    ------------    ------------     
Income (loss) before income taxes                                                                                                 
  and extraordinary gain .......................   (2,418,150)     (1,065,869)      1,401,531        (342,323)        995,493     
Income taxes (Note 6) ..........................        8,968          10,000         133,000           9,000          24,000     
                                                 ------------    ------------    ------------    ------------    ------------     
Income (loss) before extraordinary gain ........   (2,427,118)     (1,075,869)      1,268,531        (351,323)        971,493     
Extraordinary gain (Note 7) ....................      219,705         347,732            --              --              --       
                                                 ------------    ------------    ------------    ------------    ------------     
Net income (loss) .............................. $ (2,207,413)   $   (728,137)   $  1,268,531    $   (351,323)   $    971,493     
                                                 ============    ============    ============    ============    ============     
Per common share:                                                                                                                 

 Income (loss) before extraordinary gain ....... $      (2.40)   $      (1.07)   $       1.26    $      (0.35)   $       0.96     
 Extraordinary gain ............................         0.22            0.34            --              --              --       
                                                 ------------    ------------    ------------    ------------    ------------     
 Net income (loss) ............................. $      (2.18)   $      (0.73)   $       1.26    $      (0.35)   $       0.96     
                                                 ============    ============    ============    ============    ============     
Average common shares outstanding during the                                                                                      
    period .....................................    1,010,000       1,010,000       1,010,000       1,010,000       1,010,000     
                                                 ============    ============    ============    ============    ============     

 See accompanying notes.

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 QUEEN CITY BROADCASTING, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

                                                                · Download Table


                                          Additional                               
                                 Common    Paid-in      Accumulated                
                                  Stock    Capital        Deficit         Total    
                                  -----    -------        -------         -----    
                                                                                   
Balance at January 1, 1992 ..... $10,100  $10,089,900  $(22,977,309)  $(12,877,309)
Net loss .......................    --           --      (2,207,413)    (2,207,413)
                                 -------  -----------  ------------   ------------ 
Balance at December 31, 1992 ...  10,100   10,089,900   (25,184,722)   (15,084,722)
Net loss .......................    --           --        (728,137)      (728,137)
                                 -------  -----------  ------------   ------------ 
Balance at December 31, 1993 ...  10,100   10,089,900   (25,912,859)   (15,812,859)
Net income .....................    --           --       1,268,531      1,268,531 
                                 -------  -----------  ------------   ------------ 
Balance at December 31, 1994 ...  10,100   10,089,900   (24,644,328)   (14,544,328)
Net income (unaudited) .........    --           --         971,493        971,493 
                                 -------  -----------  ------------   ------------ 
Balance at June 28, 1995 ....... $10,100  $10,089,900  $(23,672,835)  $(13,572,835)
                                 =======  ===========  ============   ============ 

 See accompanying notes.

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 QUEEN CITY BROADCASTING, INC.

 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        · Enlarge/Download Table

                                                         For Years Ended December 31,           Six Months        For the Period  
                                                    -----------------------------------------   Ended June 30,  January 1, 1995 to
                                                        1992           1993           1994          1994           June 28, 1995  
                                                    ------------   ------------   -----------   ------------    ------------------
                                                                                                         (unaudited)              
                                                                                                                                  
Cash flows from operating activities:                                                                                             
 Net income (loss) ................................ $(2,207,413)   $  (728,137)   $ 1,268,531   $  (351,323)     $   971,493      
 Adjustments to reconcile net income                                                                                              
   (loss) to net cash provided by                                                                                                 
   operating activities:                                                                                                          
     Depreciation and amortization of                                                                                             
       intangibles ................................   1,885,571      1,917,276      1,975,622       987,954          960,581      
     Deferred interest--                                                                                                          
       subordinated note ..........................   1,917,869      1,208,432       (393,764)     (258,646)         311,628      
     Amortization of deferred                                                                                                     
       financing charges ..........................     125,287        121,181        105,449        52,793           45,696      
     Extraordinary gain ...........................    (219,705)      (347,732)          --            --                 --      
     Decrease (increase) in:                                                                                                      
       Accounts receivable ........................     177,331        142,037     (1,118,873)     (719,557)         409,982      
       Program rights .............................   1,022,577      1,004,400       (361,305)      697,644          896,631      
       Prepaid expenses and other                                                                                                 
         current assets ...........................      (8,649)        (6,893)       (25,366)      (56,742)        (314,591)     
     Increase (decrease) in:                                                                                                      
       Accounts payable and accrued                                                                                               
         liabilities ..............................    (430,960)       109,448        116,353       130,508          (85,816)     
       Accrued interest ...........................     (38,215)       (94,775)           983        (3,327)       1,371,140      
       Accrued compensation .......................     (48,389)        83,883        275,642        34,797         (102,150)     
       Program rights payable .....................    (634,388)      (872,261)       321,796      (793,082)      (1,047,956)     
                                                    -----------    -----------    -----------   -----------      -----------      
         Net cash provided by (used in)                                                                                           
           operating activities ...................   1,540,916      2,536,859      2,165,068      (278,981)       3,416,638      
                                                    -----------    -----------    -----------   -----------      -----------      
Cash flows from investing activities:                                                                                             
  Capital expenditures ............................    (210,942)      (848,799)      (498,349)     (248,847)        (490,190)     
  Proceeds from disposition of                                                                                                    
    other assets ..................................       2,651            806           --             518             (400)     
                                                    -----------    -----------    -----------   -----------      -----------      
      Net cash used for investing activities ......    (208,291)      (847,993)      (498,349)     (248,329)        (490,590)     
                                                    -----------    -----------    -----------   -----------      -----------      
Cash flows from financing activities:                                                                                             
  Purchase of subordinated debentures .............    (438,750)    (1,365,000)          --            --               --        
  Payments on Senior Notes ........................  (1,528,798)    (1,000,000)      (471,206)     (471,206)            --        
  Borrowings under revolving credit line ..........        --          625,000      1,000,000          --               --        
  Payments on revolving credit line ...............        --             --       (1,010,500)     (625,000)        (614,500)     
                                                    -----------    -----------    -----------   -----------      -----------      
    Net cash used for financing activities ........  (1,967,548)    (1,740,000)      (481,706)   (1,096,206)        (614,500)     
                                                    -----------    -----------    -----------   -----------      -----------      
Net increase (decrease) in cash and cash                                                                                          
  equivalents .....................................    (634,923)       (51,134)     1,185,013    (1,623,516)       2,311,548      
Cash and cash equivalents at                                                                                                      
  beginning of period .............................   2,421,314      1,786,391      1,735,257     1,735,257        2,920,270      
                                                    -----------    -----------    -----------   -----------      -----------      
Cash and cash equivalents at end                                                                                                  
  of period ....................................... $ 1,786,391    $ 1,735,257    $ 2,920,270   $   111,741      $ 5,231,818      
                                                    ===========    ===========    ===========   ===========      ===========      
Supplemental disclosures of cash flow information:                                                                                
  Interest paid ................................... $ 5,908,494    $ 6,229,034    $ 7,573,320   $ 3,791,133      $ 1,318,918      
                                                    ===========    ===========    ===========   ===========      ===========      
  Income taxes paid ............................... $     8,530    $    10,723    $    41,122   $     6,502      $   161,849      
                                                    ===========    ===========    ===========   ===========      ===========      

 See accompanying notes.

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 QUEEN CITY BROADCASTING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1992, 1993 and 1994

Note 1 -- Business, ownership and basis of presentation                         

  Queen City Broadcasting, Inc. ("Queen City") was organized as a Delaware
corporation in July 1985. On January 2, 1986, Queen City acquired, through its  
wholly-owned subsidiary, Queen City Broadcasting of New York, Inc. (the         
"Company"), American Broadcasting Company ("ABC") network-affiliated television 
station WKBW-TV (the "Station") in Buffalo, New York.                           

  In connection with the acquisition, Queen City obtained $10,000,000 from
accredited investors and certain WKBW-TV employees by selling 1,000,000 shares  
of stock at $10 per share.                                                      

    During 1988, Queen City repurchased 10,000 shares of common stock owned by
a retired employee at $10 per share, as required by covenants in the            
subscription agreements which are now no longer in effect.                      

    During 1989, options on 20,000 shares were exercised at $10 per share. The
options were granted in a prior year to two officers (including a then member of
the Board of Directors of the Company) of a company that received consulting    
fees in connection with the acquisition transaction.                            

   On June 29, 1989, all but one of the shareholders of Queen City exchanged
their shares for a 55% general partnership interest and other consideration in  
Queen City III Limited Partnership ("QCIII"). The Prudential Insurance Company  
of America ("Prudential") was the sole limited partner of QC III, owning a 45%  
interest in that partnership. As a result of the exchange, the individuals who  
previously controlled the Company remain in control. The shares of Queen City's 
common stock owned by QC III have been pledged to Prudential as security for    
certain obligations of QC III to Prudential (the "QC III obligations") incurred 
in connection with the financing of the exchange. As discussed below, prior to  
the conversion of the QC III obligations into additional capital of QC III, the 
QC III obligations were due on June 29, 1995 and approximated $28,750,000.      
Further, as a result of a series of transfers in 1993 (See Note 10), Granite    
Broadcasting Corporation ("GBC") purportedly acquired the entire interest of the
sole limited partner of QC III, which was originally purchased by Prudential on 
June 29, 1989 as well as the QC III obligations.                                

     The shares that were not exchanged on June 29, 1989 are subject to transfer
restrictions pursuant to the subscription agreement under which such shares were
issued. The agreement provides that shares cannot be sold to others unless first
offered to Queen City.                                                          

  As further discussed in Note 5, approximately $23 million and as much as
$22 million of Company debt was scheduled to mature on June 29, 1995 and January
2, 1996, respectively. Furthermore, QC III has pledged its shares of Queen      
City's stock, QC III's principal asset, as collateral for the QC III            
obligations. A default in the payment of the QC III obligations could have      
caused defaults in the Company's debt (See Note 5). The Company's and QC III's  
operating cash flow was insufficient to fully fund their respective 1995 and    
1996 scheduled payments of debt. As discussed in Note 12, in June 1995, Granite 
Broadcasting Corporation ("GBC"), the sole limited partner of QC III and owner  
of the QC III obligations, prior to its acquisition of all the General          
Partnership Interests of QC III, converted the QC III obligations into          
additional limited partnership interests of QC III. In connection with its      
acquisition of all of the General Partnership Interests of QC III, GBC lent the 
Company funds sufficient to repay substantially all of the Company's debt. The  
GBC acquisition was consummated prior to the FCC's approval of the transaction  
becoming a final order. On July 24, 1995, the FCC order approving the           
transaction became final. The accompanying consolidated financial statements do 
no include any adjustments that might result from the outcome of this           
uncertainty.                                                                    

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Note 2 -- Summary of significant accounting principles                          

Principles of consolidation -- Queen City's consolidated financial    
statements include the accounts of Queen City and the Company. All significant  
intercompany accounts and transactions have been eliminated in consolidation.   
Certain amounts in prior years have been reclassified to conform to the 1994    
presentation.                                                                   

   Summarized financial information with respect to the Company has not been
presented herein because such financial information does not differ             
significantly from that reflected in the consolidated financial statements of   
Queen City. The parent has no significant operations separate from the          
subsidiary.                                                                     

   Cash and cash equivalents -- Cash and cash equivalents consist of cash in
bank and overnight time deposits and other investments that can be liquidated on
demand or within 90 days. The Company maintains substantially all of its cash   
balances in one financial institution located in Buffalo, New York. The balances
are insured by the Federal Deposit Insurance Corporation up to $100,000. The    
Company has not experienced any losses in such accounts and believes it is not  
exposed to any significant credit risk on cash and cash equivalents.            

     Program rights -- Program rights consist principally of rights to broadcast
films and programs and are recorded as an asset at cost, together with the      
related liability, when the programs are available for first showing. Program   
rights are amortized, beginning with the first broadcast, primarily using       
accelerated methods over the terms of the contracts or the usage of films. The  
current portion of the program rights represents the estimated costs to be      
amortized in the next fiscal year. The liability to licensor is classified as   
current or long-term in accordance with the payment terms of various licenses.  
Program rights are reflected in the accompanying balance sheet at the lower of  
unamortized cost or estimated net realizable value.                             

   Amortization of program rights was $3,344,702 in 1992, $2,143,730 in 1993
and $1,497,603 in 1994.                                                         

  Depreciation -- Depreciation has been computed over the estimated useful
lives of the related assets using the straight-line method.                     

  Deferred financing charges -- Deferred financing charges represent costs
incurred in connection with refinancing of the Company's debt and are being     
amortized by the straight-line method over the term of the related debt.        

     Intangible assets -- Intangible assets consist principally of FCC licenses,
network affiliation and goodwill, which represents the excess of the purchase   
price over the fair value of the other assets acquired. These intangible assets 
are being amortized by the straight-line method over 40 years. The broadcasting 
intangible assets are characterized as scarce assets with long and productive   
lives. Queen City continually reevaluates the propriety of the carrying amount  
of intangible assets as well as the related amortization period to determine    
whether current events and circumstances warrant adjustments to the carrying    
value and/or revised estimates of useful lives. This evaluation is based on the 
Company's projections of the undiscounted cash flows over the remaining lives of
the amortization period of the related intangible asset. To the extent such     
projections indicate that the undiscounted cash flows are not expected to be    
adequate to recover the carrying amounts of intangible assets, such carrying    
amounts will be written down to their fair market value. At this time, Queen    
City believes that no significant impairment of intangible assets has occurred  
and that no reduction of the estimated useful lives is warranted.               

Income taxes -- In 1993, Queen City, as required, adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," ("SFAS   
109"). SFAS 109 requires that the deferred tax effects of timing differences in 
income and expense recognition be reflected at tax rates expected to be in      
effect at the time such timing differences are realized for tax purposes. In    
addition, SFAS 109 requires that tax benefits related to the future realization 
of net operating loss carryforwards be reflected net of a valuation allowance to
the extent realization of such tax benefits is considered to be less than       
likely.                                                                         

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  Revenue -- Revenue is presented net of advertising agency commissions of
$3,476,035 in 1992, $3,576,236 in 1993 and $4,114,803 in 1994. Revenues are     
derived principally from national and local advertising and to a lesser extent  
from network compensation and are recognized at the time the advertisement is   
aired.                                                                          

   Barter transactions - Revenue from barter transactions is recognized when
advertisements are broadcast and merchandise or services received are charged to
expense when received or used.                                                  

    Net income (loss) per share -- Net income (loss) per share is based on the
weighted average number of common shares outstanding during the periods.        

Note 3 -- Property, plant and equipment                                         

Property, plant and equipment consists of:                            

                                                                · Download Table

                                                                   Estimated
                                                                     Useful 
                                                                    Life in 
                                        1993           1994          years  
                                        ----           ----          -----  
                                                                            
Land and improvements ............  $    946,120   $    946,120             
Building and improvements ........     2,585,762      2,589,147        30   
Broadcasting and other equipment .    12,486,527     12,981,491       3-6   
                                    ------------   ------------             
                                      16,018,409     16,516,758             

Less accumulated depreciation ....   (11,493,136)   (12,199,488)            
                                    ------------   ------------             

                                    $  4,525,273   $  4,317,270             
                                    ============   ============             

Note 4 -- Intangible assets                                                     

Intangible assets consist of:                                         

                                                                · Download Table

                                                        1993           1994     
                                                        ----           ----     
                                                                                
Goodwill, FCC licenses and network affiliation ...  $ 49,955,001   $ 49,955,001 
Other intangible assets ..........................       777,067        777,067 
                                                    ------------   ------------ 
                                                      50,732,068     50,732,068 
Less accumulated amortization ....................   (10,149,497)   (11,418,767)
                                                    ------------   ------------ 
                                                    $ 40,582,571   $ 39,313,301 
                                                    ============   ============ 

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Note 5 -- Long-term debt                                                        

Long-term debt consists of the following:                                       

                                                                · Download Table

                                                         1993         1994     
                                                         ----         ----     
                                                                               
(a) Subordinated debentures, due August 1, 1999,                               
    13.50% interest payable semi-annually........... $19,355,000   $19,355,000 
(b) Senior Guaranteed Notes due June 29, 1995,                                 
    interest ranging from 11.75%-11.875% payable                               
    semi-annually ..................................  23,471,206    23,000,000 
(c) Subordinated Note due January 2, 1996...........  20,775,130    20,775,130 
    Subordinated note -- accrued interest...........   1,365,855       545,348 
                      -- deferred interest (d)......          --       426,744 
                                                     -----------   ----------- 
                                                      64,967,191    64,102,222 
    Less current portion............................    (471,206)  (23,000,000)
                                                     -----------   ----------- 
    Long-term debt.................................. $64,495,985   $41,102,222 
                                                     ===========   =========== 

(a)  The indenture agreement provides for a sinking fund payment of $4,355,000  
on August 1, 1998. This amount can be reduced by the redemption of    
outstanding debentures.                                               

  In addition, under the terms of the debenture agreement, the Company and
   Queen City are restricted from paying dividends and transferring funds in
the form of cash dividends.                                           

(b)  Senior Guaranteed Notes (the "Notes") originally issued to Prudential in   
  the amount of $26,000,000 were the principal funds used to finance prior
     repurchases of the subordinated debentures. The terms of the Notes restrict
   the ability of the Company and Queen City to incur additional borrowings,
sell certain assets, and pay cash dividends, among other restrictions.

  The terms of the Notes also required the prepayment on June 29, 1992 and
 1993 of 10% of the sum of the outstanding principal amount of the Notes
     outstanding as of July 1, 1990. The amount of the Notes outstanding at July
1, 1990 was $20,000,000. In 1992 and 1993, the Company and Prudential 
entered into Agreements permitting the deferral of a portion of the   
required prepayments equal to the amount paid to repurchase its       
   subordinated debentures. In accordance with these Agreements, the Company
   made prepayments to the holder of the Notes of $1,000,000 and $471,206 in
1993 and 1994, respectively.                                          

    On August 5, 1993, Prudential transferred ownership of the Notes to Lazard
Freres & Co. (See Notes 1 and 10).                                    

(c)  The Subordinated Note due to Capital Cities/ABC was issued in connection   
with the acquisition of WKBW - TV. The Note, in the face amount of    
     $18,425,836, is due January 2, 1996 and originally provided for no interest
    payments until April 2, 1992, when interest payments were to commence on a
   quarterly basis until maturity. In August 1987, the Subordinated Note was
amended to increase the interest rate to the same interest rate as is 
  payable on the (13.50%) subordinated debentures, discussed in (a) above.
    The Subordinated Note has been discounted using the interest method on the
  basis of the average expected yield to maturity. The resulting effective
   annual interest rate is 12.47%. In December 1991, the Company and Capital
     Cities/ABC agreed to further amend the terms of the Subordinated Note. This
     amendment deferred the interest payments through July 2, 1993. The deferred
  interest payments were added to the principal amount of the Subordinated
   Note effective July 2, 1993. The rate of interest was changed to 8.5% per
annum effective January 2, 1992 through July 2, 1993 resulting in an  
effective annual interest rate of 9.739%. As of July 3, 1993, the     
     Subordinated Note was again amended to change the rate of interest to 10.5%
per annum, resulting in an effective interest rate of 8.127%.         

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     In January 1995, the Company and Capital Cities/ABC agreed to further amend
   the terms of the Subordinated Note; certain provisions of which were made
in conjunction with the extension of the Company's network affiliation
    agreement (the "Network Affiliation Agreement") with American Broadcasting
Companies, Inc. ("ABC") (See Note 10). As a result of this amendment, 
commencing on January 2, 1995, interest on the Subordinated Note is to
  accrue and be added to the agreed principal and interest balance at that
date (the "Agreed Principal and Interest Balance") in the amount of   
$262,500 per calendar quarter until the principal balance reaches     
$22,000,000. Thereafter, the Company agrees to pay interest to Capital
Cities/ABC in the amount of $262,500 per calendar quarter (or portion 
    thereof based on a 90 day calendar quarter) on October 2, 1995 and January
2, 1996.                                                              

(d)  At December 31, 1994, Queen City's consolidated financial statements       
reflect aggregate principal, accrued and deferred interest due on the 
Subordinated Note of $21,747,222 (the "Aggregate Subordinated Note    
     Amount"). The Agreed Principal and Interest Balance is $21,320,478 with the
    $426,744 difference between the Aggregate Subordinated Note Amount and the
     Agreed Principal and Interest reflected as deferred interest (the "Deferred
    Interest"). From an accounting perspective, the impact of the January 1995
  modification of payment terms is required to be reflected prospectively.
 Accordingly, the Deferred Interest will be amortized, as a reduction of
interest expense, over the remaining term of the Subordinated Note.   

    Furthermore, Capital Cities/ABC agreed to forgive between $5.3 million and
   $12 million of the Subordinated Note at the earlier of January 2, 1996 or
   the date the Station is sold; provided that, if sold, the Station's buyer
  agrees to assume the Company's Network Affiliation Agreement, as amended
     prior to such sale. The extent of the Subordinated Note forgiveness will be
  principally a function of the extent, if any, ABC agrees to increase the
   Station's annual network affiliation fees from existing levels. (See Note
     10). The Subordinated Note provides that if there is a change in control of
   the Company within the meaning of the FCC rules and regulations, the face
amount of the Note, as adjusted, together with any additional accrued 
interest thereon, will become immediately due and payable.            

  The Company has an unsecured revolving credit facility with a bank which
  provides for aggregate borrowings up to $5,000,000 of which $625,000 and
$614,500 was outstanding at December 31, 1993 and 1994, respectively. 
Borrowings under the revolving credit facility are due on demand with 
    interest at prime (6% at December 31, 1993 and 8.5% at December 31, 1994).
     Subsequent to December 31, 1994, $257,000 of borrowings under the revolving
   credit facility were repaid. Further, all remaining unpaid borrowings are
   due and scheduled to be repaid by March 31, 1995. No fees are charged for
this revolving credit facility.                                       

Maturities of long-term debt are:                                     

                                                                · Download Table
                                                                        
1995......................................................   $23,000,000
1996......................................................    21,747,222
1997......................................................            --
1998......................................................     4,355,000
1999......................................................    15,000,000
                                                             -----------
                                                             $64,102,222
                                                             ===========

    All Company debt is subject to certain cross default provisions, wherein a
   default in one class of debt will become, under certain circumstances, an
event of default in all other Company debt.                           

   In addition, a default in the payment of the QC III obligations (See Note
  1) constitutes an event of default under the Company's Senior Guaranteed
   Notes. In addition, Queen City, whose principal asset is the stock of the
Company, guarantees the Subordinated debentures, the Notes and, on a  
subordinated basis, the Subordinated Note.                            

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Note 6 -- Income Taxes                                                          

     Queen City files a consolidated federal tax return with the Company and the
Company files a separate New York State tax return. At December 31, 1994, Queen 
City had net operating loss carryforwards of approximately $13,800,000 for      
federal income tax purposes which expire in varying amounts from the years 2001 
through 2007, subject to adjustment on examination by income tax authorities.   
Operating loss carryforwards on a book basis approximate $13,000,000 at December
31, 1994, reflecting an adjustment for amortization of certain intangible assets
that is not deductible for tax purposes. It was determined that there was no    
cumulative effect on prior year earnings for fiscal year 1993.                  

At December 31, 1993 and 1994, Queen City had unused tax benefits of  
approximately $5,500,000 and $4,800,000, respectively, related to net operating 
loss carryforwards for income tax purposes. A valuation allowance at December   
31, 1993 and 1994 of $5,500,000 and $4,800,000, respectively, has been          
recognized to offset the related deferred tax assets due to the uncertainty of  
realizing the benefit of the loss carryforwards. The tax provision reflected in 
the financial statements for the year ended December 31, 1994 represents Federal
AMT ($54,000), New York AMT ($71,000) and Delaware franchise tax ($8,000). The  
tax provision for the years ended December 31, 1992 and 1993 represents New York
AMT and Delaware franchise tax (See Note 12).                                   

The difference between the U.S. Federal statutory tax rate and the    
Company's effective tax rate on income (loss) before income taxes and           
extraordinary gain are summarized as follows:                                   

                                                                · Download Table

                                                        1992     1993     1994 
                                                        ----     ----     ---- 
                                                                               
U.S. Federal statutory tax rate on income (loss) ..    (34.0)%  (34.0)%   34.0%
Amortization of intangible assets .................     17.8     40.5     30.8 
(Utilization) Deferral of net operating                                        
  loss carryforwards ..............................     16.2     (6.5)   (64.8)
Federal and state AMT and franchise taxes .........       .4       .9      9.5 
                                                       -----    -----     ---- 
Effective tax rate ................................       .4%      .9%     9.5%
                                                       =====    =====     ==== 

Note 7 -- Extraordinary gain                                                    

In 1992, the Company repurchased $675,000 of its 13.50% subordinated  
debentures for $438,750 resulting in an extraordinary gain of $219,705 after    
writing off $16,545 of applicable deferred financing charges. In 1993, the      
Company repurchased $1,750,000 of its 13.50% subordinated debentures for        
$1,365,000 resulting in an extraordinary gain of $347,732 after writing off     
$37,268 of applicable deferred financing charges.                               

Note 8 -- Employee benefits                                                     

   The Company adopted a profit sharing plan (the "Plan") for the benefit of
employees who are not covered by other retirement plans under collective        
bargaining agreements. Contributions, other than voluntary employee             
contributions, are solely within the discretion of the Board of Directors. In   
1991, the Company amended the Plan to include a 401(K) Plan. Participants may   
elect to contribute up to 15% of their compensation to the Plan. The Company may
contribute to the Plan a percentage of each participants' contribution. For     
1992, 1993 and 1994, the Company's contribution to the Plan was $24,989, $27,549
and $28,480, respectively.                                                      

The Company has adopted a Stock Appreciation Plan, which provides for 
payments of cash based on increases in value of the Company's common stock as   
determined by a formula prescribed in the plan. The plan provides that the      
granting of units is solely within the discretion of the Board of Directors. The
valuation of the units at the date of grant was set at $10 for purposes of      
determining the appreciation in value under the formula. At December 31, 1994,  
no amount was required to be provided relative to awards granted to date.       

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Note 9 -- Other income, net                                                     

    In 1993, the American Society of Composers, Authors & Publishers ("ASCAP")
and the Television Music License Committee reached an agreement regarding       
additional royalty fees for the years 1985 through 1994 to be paid to ASCAP by  
television stations. The Company's share of this settlement for years prior to  
1993 was approximately $26,000. Accordingly, the reversal of prior years' excess
accruals of $104,000 has been reflected in the 1993 statement of operations as  
other income. The remaining balance consists principally of interest earned on  
cash and cash equivalents.                                                      

Note 10 -- Commitments and contingencies                                        

(a)  Network affiliation agreement                                              

     In accordance with the Network Affiliation Agreement, the Company agreed to
serve as ABC's primary affiliate to broadcast network programs in the 
Buffalo market. The Network Affiliation Agreement also provides for   
    compensation to the Company based upon "daypart" percentages as determined
by, among other things, the Station's level of clearance of network   
     programming in the 1993 -- 1994 television broadcast season (i.e., the last
    two quarters of 1993 and the first two quarters of 1994.) The extension of
     the Network Affiliation Agreement is effective December 1, 1994 and expires
on December 1, 2004. Network affiliation fees for 1992, 1993 and 1994 
     approximated $1,094,000, $1,042,000 and $971,000, respectively. The Network
     Affiliation Agreement is cancelable, at the option of ABC, upon a change in
control of the Company.                                               

(b)  Consulting agreement                                                       

   Queen City has entered into consulting contracts with an officer/director
   of the Company and a corporation wholly-owned by an officer and director.
     The consulting agreements provide for aggregate base annual compensation of
    $200,000 and $100,000, respectively. The terms of these agreements are for
     one year, with automatic one year extensions. However, these agreements can
  be terminated by either party on their anniversary dates upon prescribed
notice.                                                               

(c)  Programming commitments                                                    

At December 31, 1994, the obligation for programming that had not been
recorded because the program rights were not available for airing     
aggregated $4,994,570.                                                

(d)  Litigation matters                                                         

The Company is a defendant in various lawsuits arising in the ordinary
 course of business. In the opinion of management, none of these actions
will result in a material adverse effect on the Company's financial   
position.                                                             

   On December 21, 1993, the Company, QC III and certain general partners of
QC III commenced a lawsuit in the Superior Court of New Jersey, Law   
   Division -- Essex County, against Prudential, GBC, Lazard Freres & Co. et
al (See Notes 1 and 5). Such suit charges the defendants with fraud,  
    tortious interference with contract, and breach of contract. The complaint
seeks money damages in an unliquidated amount, recision of certain    
     transactions and other forms of relief. The court has ruled that the action
should be stayed pending arbitration of the issues before the American
    Arbitration Association. Management believes in the merits of this lawsuit
  and intends to vigorously pursue arbitration, but the outcome of neither
     this suit nor this arbitration can be predicted at this time (See Note 12).

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Note 11 -- Supplementary information                                            

Supplementary statement of operations information is as follows:      

                                                                · Download Table

                                         1992          1993         1994  
                                         ----          ----         ----  
                                                                          
Music license fees...............      $310,185      $285,635     $307,395
Maintenance and repairs..........       249,207       287,716      405,049

Valuation and qualifying accounts                                       

                                                                · Download Table

                                Balance at    Charged to              Balance at
                                 Beginning    Costs and                 End of  
                                  of Year      Expenses   Deductions     Year   
                                  -------      --------   ----------     ----   
                                                                                
Allowance for doubtful accounts:                                                

1992............................  $133,953    $100,000    $ 41,880    $192,073  
1993............................   192,073     151,000     236,582     106,491  
1994............................   106,491     133,000     153,540      85,951  

Note 12 -- Subsequent event (Unaudited)                                         

On June 29, 1995, GBC effectively acquired the Station through its    
acquisition of all of the General Partnership Interests of QC III. GBC paid     
$16,000,000 for the General Partnership Interests and lent the Company funds    
sufficient to repay substantially all of Company's debt. In addition, prior to  
the acquisition, GBC, on June 28, 1995, converted the QC III obligations into   
additional limited partnership interests of QC III. Furthermore, all the assets 
of the Company and of QC III were pledged to guaranty certain GBC bank          
obligations incurred, in connection with the acquisition.                       

The sale was consummated prior to the FCC's approval becoming a final 
order. On July 24, 1995, the FCC issued its final order approving the           
transaction. In addition, in connection with the sale, the Company, QC III and  
the general partners of QC III executed general releases with GBC, Lazard Freres
& Co. et al (except for continuing litigation with Prudential), See Note 10(d). 

  Furthermore, the timing and extent of Queen City's future utilization of
its net operating loss carryforward will be affected by Section 382 of the      
Internal Revenue Code. Under Section 382, after a change in ownership, the      
preacquisition net operating loss carryforwards which are available annually to 
offset taxable income is limited to an amount computed by multiplying the value 
of the equity of the corporation just prior to the ownership change by the      
federal long-term tax-exempt rate in effect on the date of the change. The      
amount of this limitation has not been determined at this time.                 

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 PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20.    Indemnification of Directors and Officers                           

    Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), Article Eighth of the Company's Third Amended and Restated Certificate 
of Incorporation, as amended (the "Certificate of Incorporation") (incorporated 
by reference as Exhibit 3.1 to this Registration Statement), eliminates the     
liability of the Company's directors to the Company or its stockholders, except 
for liabilities related to breach of duty of loyalty, actions not in good faith 
and certain other liabilities.                                                  

    Section 145 of the DGCL provides, in substance, that Delaware corporations
shall have the power, under specified circumstances, to indemnify their         
directors, officers, employees and agents in connection with actions, suits or  
proceedings brought against them by a third party or in the right of the        
corporation, by reason of the fact that they were or are such directors,        
officers, employees or agents, against expenses incurred in any such action,    
suit or proceeding. The DGCL also provides that Delaware corporations may       
purchase insurance on behalf of any such director, officer, employee or agent.  

Article Eighth of the Certificate of Incorporation provides that the
Company shall indemnify any current or former director or officer to the fullest
extent permitted by the DGCL. Article Eighth further contemplates that the      
indemnification provisions permitted thereunder are not exclusive of any other  
rights to which such directors and officers are otherwise entitled by means of  
Bylaw provisions, contracts, agreements, or otherwise. Article VIII of the      
Company's Bylaws provides that the Company shall indemnify to the fullest extent
permitted by DGCL its current and former directors and officers and persons     
serving as directors and officers of any corporation at the request of the      
Company. The Company also maintains officers' and directors' liability insurance
which insures against liabilities that officers and directors of the Company may
incur in such capacities.                                                       

     Reference is made to the Granite Broadcasting Corporation Stock Option Plan
(incorporated by reference as Exhibit 10.1 to this Registration Statement),     
which provides that the Company shall indemnify and hold harmless each member of
the Stock Option Committee of the Plan against certain liabilities arising by   
reason of such person's membership on such committee and the board of directors 
of the Company, except liabilities arising from such person's gross negligence  
or willful misconduct.                                                          

   Reference is made to the Exchange and Registration Rights Agreement filed
as Exhibit 4.39 to this Registration Statement which provides for               
indemnification for the officers and directors of the Company signing a Resale  
Registration Statement and certain control persons of the Company against       
certain liabilities, including those arising under the Securities Act in certain
circumstances by selling Holders.                                               

Item 21.  Exhibits and Financial Statement Schedules                            

(a) Exhibits                                                          

1.14(6)     Agreement Among Purchasers, dated February 13, 1996, among
            Granite Broadcasting Corporation, Goldman, Sachs & Co., BT
     Securities Corporation, Lazard Freres & Co. LLC for
               $110,000,000 of 9 3/8% Series A Senior Subordinated Notes due
December 1, 2005.                             

1.24(6)     Purchase Agreement, dated February 13, 1996, among Granite
               Broadcasting Corporation, Goldman, Sachs & Co., BT Securities
                 Corporation, Lazard Freres & Co. LLC for $110,000,000 of 9 3/8%
          Series A Senior Subordinated Notes due December 1, 2005.

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   3.1(i)     Third Amended and Restated Certificate of Incorporation of the
Company, as amended.                            

3.2(i)     Amended and Restated Bylaws of the Company, as amended.    

4.27(2)    Indenture dated as of September 1, 1992 between Granite    
               Broadcasting Corporation and The United States Trust Company of
           New York, as Trustee, relating to the Company's $60,000,000
          Principal Amount 12.75% Senior Subordinated Debentures due
September 1, 2002.                              

  4.28(2)    Form of 12.75% Senior Subordinated Debenture due September 1,
2002.                                           

    4.30(3)    Form of Indenture relating to the Company's Junior Subordinated
        Convertible Debentures issuable upon the exchange of the
              Company's Cumulative Convertible Exchangeable Preferred Stock.

4.31(3)    Form of Junior Subordinated Convertible Debenture.         

  4.35(f)    Second Amended and Restated Credit Agreement, dated as of May
             19, 1995, among Granite Broadcasting Corporation, the Lenders
              party thereto, Bankers Trust Company, as Administrative Agent,
              Collateral Agent and Documentation Agent, First Union National
            Bank of North Carolina, as Co-Agent, Pearl Street L.P., as a
               Co-Agent, BT Securities Corporation, as a Co-Syndication Agent,
           and Goldman, Sachs & Co., as a Co-Syndication Agent for the
Lenders.                                        

     4.36(4)    First Amendment to Second Amended and Restated Credit Agreement,
dated as of June 2, 1995.                       

4.37(4)    Indenture, dated as of May 19, 1995, between Granite       
               Broadcasting Corporation and United States Trust Company of New
            York for the Company's $175,000,000 Principal Amount 10 3/8%
Senior Subordinated Notes due May 15, 2005.     

4.38(5)    Form of 10 3/8% Senior Subordinated Note due May 15, 2005. 

     4.39(i)    Exchange and Registration Rights Agreement, dated as of February
             22, 1996, by and between Granite Broadcasting Corporation and
                Goldman Sachs & Co., BT Securities Corporation and Lazard Freres
& Co. LLC.                                      

4.40(i)    Second Amendment to Second Amended and Restated Credit     
Agreement, dated as of February 12, 1996.       

4.41(i)    Indenture, dated as of February 22, 1996, between Granite  
             Broadcasting Corporation and The Bank of New York relating to
           the Company's $110,000,000 Principal Amount 9 3/8% Series A
Senior Subordinated Notes due December 1, 2005. 

     4.42(i)    Form of 9 3/8% Series A Senior Subordinated Note due December 1,
2005.                                           

  4.43       Form of 9 3/8% Senior Subordinated Note due December 1, 2005.

5.1        Legal Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. 
         concerning the legality of the 9 3/8% Subordinated Notes.

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7.1        Legal Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. 
concerning liquidation preference.              

8.1        Legal Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. 
concerning certain tax matters.                 

   10.1(5)    Granite Broadcasting Corporation Stock Option Plan, as amended
on July 25, 1995.                               

   10.2(1)    Target Cash Flow Option Plan and Agreement dated as of October
                31, 1988 among Granite Broadcasting Corporation, W. Don Cornwell
and Stuart J. Beck.                             

10.9(5)    Network Affiliation Agreement (KBJR-TV).                   

10.10(5)   Network Affiliation Agreement (WEEK-TV).                   

10.11(i)   Network Affiliation Agreement (KNTV(TV)).                  

10.12(i)   Network Affiliation Agreement (WPTA-TV).                   

10.13(1)   Employment Agreement dated as of September 20, 1991 between
     Granite Broadcasting Corporation and W. Don Cornwell.

10.14(1)   Employment Agreement dated as of September 20, 1991 between
    Granite Broadcasting Corporation and Stuart J. Beck.

10.15(5)   Granite Broadcasting Corporation Management Stock Plan, as 
amended July 25, 1995.                          

 10.16(a)   Purchase and Sale Agreement between the Company and Meredith
Corporation, dated June 15, 1993.               

     10.17(b)   Letter Agreement between the Company and the Sellers (as defined
                therein) to acquire certain securities of Queen City III Limited
Partnership dated as of October 20, 1993.       

  10.18(3)   Letter Agreement, dated December 7, 1993, between Granite and
              Meredith Corporation, amending the Purchase and Sale Agreement
dated June 15, 1993.                            

    10.19(h)   Granite Broadcasting Corporation Director Stock Option Plan, as
amended on July 25, 1995.                       

10.20(4)   Network Affiliation Agreement (WTVH-TV).                   

10.21(5)   Network Affiliation Agreement (KSEE-TV).                   

10.22(c)   Purchase and Sale Agreement among Granite Broadcasting     
            Corporation, Austin Television, a Texas general partnership,
               Cannan Communications, Inc. and Beard Management, Inc. dated as
of October 2, 1994.                             

10.23(d)   Purchase and Sale Agreement, dated as of February 20, 1995,
          among Granite Broadcasting Corporation, Busse Broadcasting
Corporation and WWMT, Inc.                      

10.24(4)   Network Affiliation Agreement (KEYE-TV).                   

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   10.25(d)   Granite Broadcasting Corporation Employee Stock Purchase Plan,
dated February 28, 1995.                        

10.26(4)   Network Affiliation Agreement (WWMT).                      

10.27(e)   Purchase Agreement, dated May 15, 1995, among Granite      
             Broadcasting Corporation, Queen City III Limited Partnership,
         Queen City Broadcasting of New York, Inc. and the General
Partners of Queen City III Limited Partnership. 

10.28(g)   Network Affiliation Agreement (WKBW).                      

11.        Statement of Computation of Per Share Earnings.            

12.        Statement of Computation of Financial Ratios.              

22.(i)     Subsidiaries of the Company.                               

23.1       Consent of Independent Auditors (Ernst & Young LLP).       

23.2       Consent of Independent Auditors (Leslie Suffrin & Company, 
P.C.).                                          

   23.3       Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included
in Exhibit 5.1).                                

24.        Power of Attorney for the Company (included as part of the 
               signature page to the Company's Registration No. 333-3376 filed
on April 11, 1996).                             

   25.(6)     Statement of Eligibility of Trustee (bound separately from the
other exhibits).                                

99.1       Letter of Transmittal.                                     

99.2       Notice of Guaranteed Delivery.                             

----------                                                                      

(1)             Incorporated by reference to the similarly numbered exhibits to 
          the Company's Registration Statement No. 33-43770 filed on
November 5, 1991.                               

(2)             Incorporated by reference to the similarly numbered exhibits to 
          the Company's Registration Statement No. 33-52988 filed on
October 6, 1992.                                

(3)             Incorporated by reference to the similarly numbered exhibits to 
            Amendment No. 2 to Registration Statement No. 33-71172 filed
December 16, 1993.                              

(4)             Incorporated by reference to the similarly numbered exhibits to 
               the Company's Registration Statement No. 33-94862 filed on July
21, 1995.                                       

(5)             Incorporated by reference to the similarly numbered exhibits to 
               Amendment No. 2 to Registration Statement No. 33-94862 filed on
October 6, 1995.                                

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(6)             Incorporated by reference to the similarly numbered exhibits to 
                the Company's Registration No. 333-3376 filed on April 11, 1996.

(a)             Incorporated by reference to Exhibit 10.1 to the Company's      
   Current Report on Form 8-K, filed on June 25, 1993.

(b)             Incorporated by reference to the similarly numbered exhibit to  
           the Company's Quarterly Report on Form 10-Q for the quarter
               ended September 30, 1993, Commission File No. 0-19728, filed on
November 15, 1993.                              

(c)             Incorporated by reference to the similarly numbered exhibit to  
           the Company's Quarterly Report on Form 10-Q for the quarter
               ended September 30, 1994, Commission File No. 0-19728, filed on
November 14, 1994.                              

(d)             Incorporated by reference to the similarly numbered exhibit to  
            the Company's Annual Report on Form 10-K for the fiscal year
 ended December 31, 1994, filed on March 29, 1995.

(e)             Incorporated by reference to Exhibit Number 3 to the Company's  
Report on Form 8-K filed on May 19, 1995.       

(f)             Incorporated by reference to the similarly numbered exhibit to  
        the Company's Report on Form 8-K filed on June 16, 1995.

(g)             Incorporated by reference to the similarly numbered exhibit to  
        the Company's Report on Form 8-K filed on July 14, 1995.

(h)             Incorporated by reference to the similarly numbered exhibit to  
           the Company's Quarterly Report on Form 10-Q for the quarter
                ended September 30, 1995, Commission File No. 0- 19728, filed on
November 14, 1995.                              

(i)             Incorporated by reference to the similarly numbered exhibits to 
            the Company's Annual Report on Form 10-K for the fiscal year
 ended December 31, 1995, filed on March 28, 1996.

(b)    Financial Statement Schedules                          

            Schedule II - Granite Broadcasting Corporation: Valuation of
Qualifying Assets.                              

Item 22. Undertakings                                                           

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the          
Registrant pursuant to the DGCL, the Certificate of Incorporation and Bylaws, 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 such Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than 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                                                                            

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indemnification by it is against public policy as expressed in such Securities  
Act and will be governed by the final adjudication of such issue.               

 The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to   
items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of    
such request, and to send the incorporated documents by first class mail or     
other equally prompt means. This includes information contained in documents    
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.                                              

The undersigned Registrant hereby undertakes to supply by means of a  
post-effective amendment all information concerning a transaction, and the      
company being acquired involved therein, that was not the subject of and        
included in the Registration Statement when it became effective.                

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SIGNATURES

     Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 1 to the Registration Statement to be signed on its   
behalf by the undersigned, thereunto duly authorized, in the City of New York,  
State of New York, on the 3rd day of June, 1996.                                

                        GRANITE BROADCASTING CORPORATION

               By: /s/ W. DON CORNWELL
                                   -----------------------------------
               W. Don Cornwell
                           Chief Executive Officer and
                                  Chairman of the Board of Directors

Pursuant to the requirements of the Securities Act of 1933, this      
Registration Statement has been signed by the following persons in the          
capacities and on the dates indicated:                                          

   Signature                            Title                       Date
   ---------                            -----                       ----

/s/ W. DON CORNWELL            Chief Executive Officer (Principal   June 3, 1996
----------------------------   Executive Officer) and Chairman of               
W. Don Cornwell                the Board of Directors                           

/s/ STUART J. BECK*            President, Secretary (Principal      June 3, 1996
----------------------------   Financial Officer) and Director                  
Stuart J. Beck                                                                  

/s/ LAWRENCE I. WILLS*         Vice President, Finance and          June 3, 1996
----------------------------   Controller (Principal Accounting                 
Lawrence I. Wills              Officer)                                         

/s/ ELLEN McCLAIN*                                                              
----------------------------   Vice President, Corporate            June 3, 1996
Ellen McClain                  Development and Treasurer                        

/s/ MARTIN F. BECK*            Director                             June 3, 1996
----------------------------                                                    
Martin F. Beck                                                                  

/s/ JAMES L. GREENWALD*        Director                             June 3, 1996
----------------------------                                                    
James L. Greenwald                                                              

/s/ VICKEE JORDAN ADAMS*       Director                             June 3, 1996
----------------------------                                                    
Vickee Jordan Adams                                                             

/s/ EDWARD DUGGER III*         Director                             June 3, 1996
----------------------------                                                    
Edward Dugger III                                                               

/s/ CHARLES J. HAMILTON, JR.*  Director                             June 3, 1996
----------------------------                                                    
Charles J. Hamilton, Jr.                                                        

/s/ THOMAS R. SETTLE*          Director                             June 3, 1996
----------------------------                                                    
Thomas R. Settle                                                                

/s/ MIKAEL SALOVAARA*         Director                             June 3, 1996 
----------------------------                                                    
Mikael Salovaara                                                                

*By: /s/ W. DON CORNWELL                                                        
----------------------------                                                    
W. Don Cornwell                                                         
As Attorney-in fact                                                     

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 SCHEDULE II
GRANITE BROADCASTING CORPORATION
 VALUATION AND QUALIFYING ACCOUNTS

                                                        · Enlarge/Download Table

                                      Balance at       Acquired      Amount charged                   Balance 
       Allowance for                   beginning    allowance for       to costs      Amount           at end 
     Doubtful Accounts                 of period  doubtful accounts   and expenses   written off(1)  of period
     -----------------                 ---------  -----------------   ------------   --------------  ---------
                                                                                                              
For the year ended December 31, 1993  $ 165,999       $   --           $ 186,198       $ 124,832     $ 227,365

For the year ended December 31, 1994    227,365           --             347,382         318,920       255,827

For the year ended December 31, 1995    255,827        229,171           402,619         381,858       505,759


----------                                                                      
(1)     Net of recoveries.                                                      

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 INDEX TO EXHIBITS

                                                                    Sequentially
 Exhibit                                                            Numbered
Number                       Exhibit                                 Page 
------                       -------                                 ---- 

1.14(6)     Agreement Among Purchasers, dated February 13,                
1996, among Granite Broadcasting Corporation,     
Goldman, Sachs & Co., BT Securities Corporation,  
Lazard Freres & Co. LLC for $110,000,000 of 9 3/8%
Series A Senior Subordinated Notes due December 1,
2005.                                             

1.24(6)     Purchase Agreement, dated February 13, 1996, among            
Granite Broadcasting Corporation, Goldman, Sachs &
Co., BT Securities Corporation, Lazard Freres &   
Co. LLC for $110,000,000 of 9 3/8% Series A Senior
Subordinated Notes due December 1, 2005.          

3.1(i)      Third Amended and Restated Certificate of                     
Incorporation of the Company, as amended.         

3.2(i)      Amended and Restated Bylaws of the Company, as                
amended.                                          

4.27(2)     Indenture dated as of September 1, 1992 between               
Granite Broadcasting Corporation and The United   
States Trust Company of New York, as Trustee,     
relating to the Company's $60,000,000 Principal   
Amount 12.75% Senior Subordinated Debentures due  
September 1, 2002.                                

4.28(2)     Form of 12.75% Senior Subordinated Debenture due              
September 1, 2002.                                

4.30(3)     Form of Indenture relating to the Company's Junior            
Subordinated Convertible Debentures issuable upon 
the exchange of the Company's Cumulative          
Convertible Exchangeable Preferred Stock.         

4.31(3)     Form of Junior Subordinated Convertible Debenture.            

4.35(f)     Second Amended and Restated Credit Agreement,                 
dated as of May 19, 1995, among Granite           
Broadcasting Corporation, the Lenders party       
thereto, Bankers Trust Company, as Administrative 
Agent, Collateral Agent and Documentation Agent,  
First Union National Bank of North Carolina, as   
Co- Agent, Pearl Street L.P., as a Co-Agent, BT   
Securities Corporation, as a Co-Syndication Agent,
and Goldman, Sachs & Co., as a Co-Syndication     
Agent for the Lenders.                            

4.36(4)     First Amendment to Second Amended and Restated                
Credit Agreement, dated as of June 2, 1995.       

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 Exhibit                                                            Numbered
Number                       Exhibit                                 Page 
------                       -------                                 ---- 

4.37(4)     Indenture, dated as of May 19, 1995, between                  
Granite Broadcasting Corporation and United States
Trust Company of New York for the Company's       
$175,000,000 Principal Amount 10 3/8% Senior      
Subordinated Notes due May 15, 2005.              

4.38(5)     Form of 10 3/8% Senior Subordinated Note due May 15,          
2005.                                             

4.39(i)     Exchange and Registration Rights Agreement, dated             
as of February 22, 1996, by and between Granite   
Broadcasting Corporation and Goldman Sachs & Co., 
BT Securities Corporation and Lazard Freres & Co. 
LLC.                                              

4.40(i)     Second Amendment to Second Amended and Restated               
Credit Agreement, dated as of February 12, 1996.  

4.41(i)     Indenture, dated as of February 22, 1996, between             
Granite Broadcasting Corporation and The Bank of  
New York relating to the Company's $110,000,000   
  Principal Amount 9 3/8% Series A Senior Subordinated
Notes due December 1, 2005.                       

4.42(i)     Form of 9 3/8% Series A Senior Subordinated Note due          
December 1, 2005.                                 

4.43        Form of 9 3/8% Senior Subordinated Note due December          
1, 2005.                                          

5.1         Legal Opinion of Akin, Gump, Strauss, Hauer &                 
Feld, L.L.P. concerning the legality of the 9 3/8%
Subordinated Notes.                               

7.1         Legal Opinion of Akin, Gump, Strauss, Hauer &                 
Feld, L.L.P. concerning liquidation preference.   

8.1         Legal Opinion of Akin, Gump, Strauss, Hauer &                 
Feld, L.L.P. concerning certain tax matters.      

10.1(5)     Granite Broadcasting Corporation Stock Option                 
Plan, as amended on July 25, 1995.                

10.2(1)     Target Cash Flow Option Plan and Agreement dated              
as of October 31, 1988 among Granite Broadcasting 
Corporation, W. Don Cornwell and Stuart J. Beck.  

10.9(5)     Network Affiliation Agreement (KBJR-TV).                      

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 Exhibit                                                            Numbered
Number                       Exhibit                                 Page 
------                       -------                                 ---- 

10.10(5)    Network Affiliation Agreement (WEEK-TV).                      

10.11(i)    Network Affiliation Agreement (KNTV(TV)).                     

10.12(i)    Network Affiliation Agreement (WPTA-TV).                      

10.13(1)    Employment Agreement dated as of September 20,                
1991 between Granite Broadcasting Corporation and 
W. Don Cornwell.                                  

10.14(1)    Employment Agreement dated as of September 20,                
1991 between Granite Broadcasting Corporation and 
Stuart J. Beck.                                   

10.15(5)    Granite Broadcasting Corporation Management Stock             
Plan, as amended July 25, 1995.                   

10.16(a)    Purchase and Sale Agreement between the Company               
and Meredith Corporation, dated June 15, 1993.    

10.17(b)    Letter Agreement between the Company and the                  
Sellers (as defined therein) to acquire certain   
securities of Queen City III Limited Partnership  
dated as of October 20, 1993.                     

10.18(3)    Letter Agreement, dated December 7, 1993, between             
Granite and Meredith Corporation, amending the    
Purchase and Sale Agreement dated June 15, 1993.  

10.19(h)    Granite Broadcasting Corporation Director Stock               
Option Plan, as amended on July 25, 1995.         

10.20(4)    Network Affiliation Agreement (WTVH-TV).                      

10.21(5)    Network Affiliation Agreement (KSEE-TV).                      

10.22(c)    Purchase and Sale Agreement among Granite                     
Broadcasting Corporation, Austin Television, a    
Texas general partnership, Cannan Communications, 
Inc. and Beard Management, Inc. dated as of       
October 2, 1994.                                  

10.23(d)    Purchase and Sale Agreement, dated as of February             
20, 1995, among Granite Broadcasting Corporation, 
Busse Broadcasting Corporation and WWMT, Inc.     

10.24(4)    Network Affiliation Agreement (KEYE-TV).                      

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10.25(d)    Granite Broadcasting Corporation Employee Stock               
Purchase Plan, dated February 28, 1995.           

10.26(4)    Network Affiliation Agreement (WWMT).                         

10.27(e)    Purchase Agreement, dated May 15, 1995, among                 
Granite Broadcasting Corporation, Queen City III  
Limited Partnership, Queen City Broadcasting of   
New York, Inc. and the General Partners of Queen  
City III Limited Partnership.                     

10.28(g)    Network Affiliation Agreement (WKBW).                         

11.         Statement of Computation of Per Share Earnings.               

12.         Statement of Computation of Financial Ratios.                 

22.(i)      Subsidiaries of the Company.                                  

23.1        Consent of Independent Auditors (Ernst & Young LLP).          

23.2        Consent of Independent Auditors (Leslie Suffrin &             
Company, P.C.).                                   

23.3        Consent of Akin, Gump, Strauss, Hauer & Feld,                 
L.L.P. (included in Exhibit 5.1).                 

24.         Power of Attorney for the Company (included as                
part of the signature page to the Company's       
Registration No. 333-3376 filed on April 11,      
1996).                                            

25.(6)      Statement of Eligibility of Trustee (bound                    
separately from the other exhibits).              

99.1        Letter of Transmittal.                                        

99.2        Notice of Guaranteed Delivery.                                

--------                                                                        
(1)  Incorporated by reference to the similarly numbered exhibits               
to the Company's Registration Statement No. 33-43770 filed            
on November 5, 1991.                                                  

(2)  Incorporated by reference to the similarly numbered exhibits               
to the Company's Registration Statement No. 33-52988 filed            
on October 6, 1992.                                                   

(3)  Incorporated by reference to the similarly numbered exhibits               
to Amendment No. 2 to Registration Statement No. 33-71172             
filed December 16, 1993.                                              

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                                                                    Sequentially
 Exhibit                                                            Numbered
Number                       Exhibit                                 Page 
------                       -------                                 ---- 

(4)  Incorporated by reference to the similarly numbered exhibits               
to the Company's Registration Statement No. 33-94862 filed            
on July 21, 1995.                                                     

(5)  Incorporated by reference to the similarly numbered exhibits               
to Amendment No. 2 to Registration Statement No. 33-94862             
filed on October 6, 1995.                                             

(6)  Incorporated by reference to the similarly numbered exhibits               
to the Company's Registration No. 333-3376 filed on April             
11, 1996.                                                             

(a)  Incorporated by reference to Exhibit 10.1 to the Company's                 
Current Report on Form 8-K, filed on June 25, 1993.                   

(b)  Incorporated by reference to the similarly numbered exhibit                
to the Company's Quarterly Report on Form 10-Q for the                
quarter ended September 30, 1993, Commission File No. 0-              
19728, filed on November 15, 1993.                                    

(c)  Incorporated by reference to the similarly numbered exhibit                
to the Company's Quarterly Report on Form 10-Q for the                
quarter ended September 30, 1994, Commission File No. 0-              
19728, filed on November 14, 1994.                                    

(d)  Incorporated by reference to the similarly numbered exhibit                
to the Company's Annual Report on Form 10-K for the fiscal            
year ended December 31, 1994, filed on March 29, 1995.                

(e)  Incorporated by reference to Exhibit Number 3 to the                       
Company's Report on Form 8-K filed on May 19, 1995.                   

(f)  Incorporated by reference to the similarly numbered exhibit                
to the Company's Report on Form 8-K filed on June 16, 1995.           

(g)  Incorporated by reference to the similarly numbered exhibit                
to the Company's Report on Form 8-K filed on July 14, 1995.           

(h)  Incorporated by reference to the similarly numbered exhibit                
to the Company's Quarterly Report on Form 10-Q for the                
quarter ended September 30, 1995, Commission File No. 0-              
19728, filed on November 14, 1995.                                    

(i)  Incorporated by reference to the similarly numbered exhibits               
to the Company's Annual Report on Form 10-K for the fiscal            
year ended December 31, 1995, filed on March 28, 1996.