UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549







FORM
10-K







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




For
the fiscal year ended December 31, 2009




OR




 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the transition period from
             to
            .




Commission
File Number: 333-62916-02







MISSION
BROADCASTING, INC.


(Exact
name of registrant as specified in its charter)








Delaware
            51-0388022(State
      of Organization or Incorporation)
            (IRS
      Employer Identification No.)7650
      Chippewa Road, Suite 305
              Brecksville,
      Ohio 44141
            (440)
      526-2227(Address
      of Principal Executive Offices, including Zip Code)
            (Registrant’s
      Telephone Number, Including Area
Code)







Securities
Registered Pursuant to Section 12(b) of the Act: None




Securities
Registered Pursuant to Section 12(g) of the Act: None







Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.    Yes   ̈    No  x




Indicate
by check mark if the Registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the
Act.    Yes  x    No   ̈




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




Indicate
by checkmark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes   ̈    No   ̈




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




Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (check one):





Large accelerated filer
             ̈
            Accelerated filer
             ̈Non-accelerated
      filer
            x  (Do
      not check if a smaller reporting company)
            Smaller reporting company
             ̈




Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  ̈    No x




As of
June 30, 2009, Mission Broadcasting, Inc. had one shareholder, David S.
Smith. Mr. Smith held all 1,000 shares of the outstanding common stock of
Mission Broadcasting, Inc. at June 30, 2009. As of March 1, 2010, Mission
Broadcasting, Inc. had 1,000 shares of outstanding common stock.








TABLE
OF CONTENTS





PagePART IITEM 1.
            Business
            2ITEM 1A.
            Risk
      Factors
            8ITEM 1B.
            Unresolved
      Staff Comments
            14ITEM 2.
            Properties
            15ITEM 3.
            Legal
      Proceedings
            16ITEM 4.
            Reserved
            16PART IIITEM 5.
            Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
            16ITEM 6.
            Selected
      Financial Data
            17ITEM 7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            18ITEM 7A.
            Quantitative
      and Qualitative Disclosures About Market Risk
            30ITEM 8.
            Financial
      Statements and Supplementary Data
            31ITEM 9.
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            31ITEM 9A.
            Controls
      and Procedures
            31ITEM 9B.
            Other
      Information
            31PART IIIITEM 10.
            Directors,
      Executive Officers and Corporate Governance
            32ITEM 11.
            Executive
      Compensation
            32ITEM 12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            33ITEM 13.
            Certain
      Relationships and Related Transactions, and Director
      Independence
            34ITEM 14.
            Principal
      Accountant Fees and Services
            36PART
      IVITEM 15.
            Exhibits
      and Financial Statement Schedules
            36Index
      to Financial Statements
            F-1Index
      to Exhibits
            E-1








General




As used
in this Annual Report on Form 10-K and unless the context indicates otherwise,
“Mission,” “we,” “our,” “ours”, “us” and the “Company” refer to Mission
Broadcasting, Inc. Mission has entered into time brokerage, shared services and
joint sales agreements (which we generally refer to as local service agreements)
with certain television stations owned by Nexstar Broadcasting, Inc.
(“Nexstar”), but Mission does not own any equity interests in Nexstar and
Nexstar does not own any equity interests in Mission. For a description of the
relationship between Mission and Nexstar, see Item 13. “Certain
Relationships and Related Transactions, and Director Independence.”




There are
210 generally recognized television markets, known as Designated Market Areas,
or DMAs, in the United States. DMAs are ranked in size according to various
factors based upon actual or potential audience. DMA rankings contained in this
Annual Report on Form 10-K are from Investing in Television Market
Report 2009 4thEdition, as published by BIA
Financial Network, Inc.




Cautionary
Note Regarding Forward-Looking Statements




This
Annual Report on Form 10-K contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. All statements other than statements of
historical fact are “forward-looking statements” for purposes of federal and
state securities laws, including: any projections or expectations of earnings,
revenue, financial performance, liquidity and capital resources or other
financial items; any assumptions or projections about the television
broadcasting industry; any statements of our plans, strategies and objectives
for our future operations, performance, liquidity and capital resources or other
financial items; any statements concerning proposed new products, services or
developments; any statements regarding future economic conditions or
performance; any statements of belief; and any statements of assumptions
underlying any of the foregoing. Forward-looking statements may include the
words “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,”
“continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,”
“estimates,” and other similar words.




Although
we believe that the expectations reflected in any of our forward-looking
statements are reasonable, actual results could differ from a projection or
assumption in any of our forward-looking statements. Our future financial
position and results of operations, as well as any forward-looking statements,
are subject to change and inherent risks and uncertainties discussed under
Item 1A. “Risk Factors” elsewhere in this Annual Report on Form 10-K and in
our other filings with the Securities and Exchange Commission (“SEC”). The
forward-looking statements made in this Annual Report on Form 10-K are made only
as of the date hereof, and we do not have or undertake any obligation to update
any forward-looking statements to reflect subsequent events or circumstances
unless otherwise required by law.




Available
Information




We file
annual, quarterly and current reports, and other information with the SEC. You
may read and copy any reports, statements and other information filed by us at
the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549-0102. Please call (800) SEC-0330 for further information on the
Public Reference Room. The SEC maintains an Internet website that contains
reports, proxy and information statements and other information regarding
issuers, including us, that file electronically with the SEC. The address for
the SEC’s website is http://www.sec.gov.





1


PART
I




Item 1.                      Business




Overview




We are a
television broadcasting company focused exclusively on the acquisition,
development and operation of television stations in medium-sized markets in the
United States, primarily markets that rank from 50 to 175, as reported by A.C.
Nielsen Company. As of December 31, 2009, we owned and operated 16
stations. The stations that we own and operate are in markets located in New
York, Pennsylvania, Illinois, Indiana, Missouri, Arkansas, Louisiana, Texas and
Montana. These stations are diverse in their network affiliations: 14 have
primary affiliation agreements with one of the four major networks—3 with NBC, 5
with Fox, 4 with ABC, and 2 with CBS, and 2 stations have an agreement with
MyNetworkTV.  Additionally, one of the stations has a secondary
network affiliation with MyNetworkTV that is broadcast over a digital multicast
(DM).




We
believe that medium-sized markets offer significant advantages over large-sized
markets, most of which result from a lower level of competition. First, because
there are fewer well-capitalized acquirers with a medium-market focus, we have
been successful in purchasing stations on more favorable terms than acquirers of
large market stations. Second, in many of our markets only four or five local
commercial television stations exist. As a result, we achieve lower programming
costs than stations in larger markets because the supply of quality programming
exceeds the demand.




The
stations we own and operate provide free over-the-air programming to our
markets’ television viewing audiences. This programming includes
(a) programs produced by networks with which the stations are affiliated;
(b) programs that the stations produce; and (c) first-run and rerun
syndicated programs that the stations acquire. Our primary source of revenue is
indirectly derived from the sale of commercial air time to local and national
advertisers that is paid to us by Nexstar under local service
agreements.




Our
principal offices are located at 7650 Chippewa Road, Suite 305, Brecksville,
Ohio 44141. Our telephone number is (440) 526-2227.




Local
Service Agreements and Purchase Options




The
following table summarizes the various local service agreements our stations had
in effect as of December 31, 2009 with Nexstar-owned stations:





Service Agreements
            StationsTBA Only(1)
            WFXP
      and KHMTSSA & JSA(2)
            KJTL,
      KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WFXW, WYOU, KODE,
      KTVE and WTVO





(1)
            Mission
      has a time brokerage agreement (“TBA”) for each of these stations which
      allows Nexstar to program most of each station’s broadcast time, sell each
      station’s advertising time and retain the advertising revenue generated in
      exchange for monthly payments to
Mission.


(2)
            Mission
      has both a shared services agreement (“SSA”) and a joint sales agreement
      (“JSA”) for each of these stations. The SSA allows the sharing of services
      including news production, technical maintenance and security, in exchange
      for Nexstar’s right to receive certain payments from Mission as described
      in the SSAs. The JSAs permit Nexstar to sell and retain a percentage of
      the net revenue from the station’s advertising time in return for monthly
      payments to Mission of the remaining percentage of net revenue, as
      described in the JSAs.




In
conjunction with its acquisition of KTVE, the NBC affiliate in the Monroe,
Louisiana – El Dorado, Arkansas market, effective January 16, 2008, Mission
entered into an SSA and JSA with Nexstar. The terms of the SSA and JSA are
comparable to the terms of the SSAs and JSAs between Nexstar and Mission as
discussed above.




Under
these agreements, Mission is responsible for certain operating expenses of its
stations and therefore may have unlimited exposure to any potential operating
losses. Mission will continue to operate its stations under the SSAs and JSAs or
TBAs until the termination of such agreements. The SSAs and JSAs generally have
terms of ten years. Nexstar indemnifies Mission for Nexstar’s activities
pursuant to the local service agreements.




The
arrangements under the SSAs and JSAs have had the effect of Nexstar receiving
substantially all of the available cash, after debt service costs, generated by
the stations listed above. The arrangements under the TBAs have also had the
effect of Nexstar receiving substantially all of the available cash generated by
the TBA stations listed above. Mission anticipates that, through these local
service agreements, Nexstar will continue to receive substantially all of
Mission’s available cash, after payments for debt service costs, generated by
the stations listed above.


2




Nexstar
Broadcasting Group, Inc. and its subsidiaries (“Nexstar Broadcasting Group”)
guarantee all obligations incurred under our senior credit facility. We are a
guarantor of the senior credit facility entered into by Nexstar and the senior
subordinated notes issued by Nexstar. In consideration of Nexstar Broadcasting
Group’s guarantee of our senior credit facility, Mission’s sole shareholder has
granted Nexstar purchase options to acquire the assets and assume the
liabilities of each Mission television station, subject to FCC consent, for
consideration equal to the greater of (1) seven times the station’s cash
flow, as defined in the option agreement, less the amount of its indebtedness as
defined in the option agreement, or (2) the amount of its indebtedness.
These option agreements (which expire on various dates between 2011 and 2018)
are freely exercisable or assignable by Nexstar without consent or approval by
Mission’s sole shareholder. We expect these option agreements to be renewed upon
expiration.




Refer to
Part III, Item 13. “Certain Relationships and Related Transactions, and
Director Independence” for a more complete disclosure of the local service and
option agreements our stations had in effect as of December 31,
2009.




Nexstar
does not own Mission or Mission’s television stations. However, as a result of
Nexstar Broadcasting Group’s guarantee of all obligations incurred under our
senior credit facility and the arrangements under the local service agreements
and purchase option agreements with us, Nexstar is deemed under accounting
principles generally accepted in the United States of America (“U.S. GAAP”) to
have a controlling financial interest in Mission while complying with the
Federal Communications Commission (“FCC”) rules regarding ownership limits in
television markets. In order for both Nexstar and Mission to comply with FCC
regulations, Mission maintains complete responsibility for and control over
programming, finances, personnel and operations of its stations.




Business
Strategy




The
operating revenue of our stations is derived primarily from broadcast
advertising revenue sold and collected by Nexstar and paid to us under the JSAs.
Broadcast advertising revenue is affected by a number of factors, including the
economic conditions of the markets in which we operate, the demographic makeup
of those markets and the marketing strategy employed in each market. Our primary
operating expense consists of fixed monthly SSA fees paid to Nexstar for news
production and technical and other services. To a lesser extent, our operating
expenses include employee compensation and related benefits. A large percentage
of the costs involved in the operation of our stations remain
fixed.




The
Stations




The
following chart sets forth general information about the stations that we owned
and operated as of December 31, 2009:




MarketRank(1)
              Market
              Station
              Affiliation
              Commercial
                  Stations
      in
                  Market(2)
              FCC
                  License
                  Expiration
                  Date54
              Wilkes
      Barre-Scranton, PA
              WYOU
              CBS
              7
              (3)74
              Springfield,
      MO
              KOLR
              CBS
              6
              (3)131
              Amarillo,
      TX
              KCIT
              Fox
              5
              (3)KCPN-LP
              MyNetworkTV
              
              (3)134
              Rockford,
      IL
              WTVO
              ABC/MyNetworkTV
              4
              (3)138
              Monroe,
      LA-El Dorado, AR
              KTVE
              NBC
              6
              6/1/13143
              Lubbock,
      TX
              KAMC
              ABC
              5
              (3)146
              Erie,
      PA
              WFXP
              Fox
              4
              (3)147
              Joplin,
      MO-Pittsburg, KS
              KODE
              ABC
              4
              (3)149
              Wichita
      Falls, TX- Lawton, OK
              KJTL
              Fox
              5
              (3)KJBO-LP
              MyNetworkTV
              
              (3)152
              Terre
      Haute, IN
              WFXW
              Fox
              3
              (3)165
              Abilene-Sweetwater,
      TX
              KRBC
              NBC
              4
              (3)169
              Billings,
      MT
              KHMT
              Fox
              4
              (3)170
              Utica,
      NY
              WUTR
              ABC
              4
              (3)198
              San
      Angelo, TX
              KSAN
              NBC
              4
              (3)





(1)
            Market
      rank refers to ranking the size of the Designated Market Area (“DMA”) in
      which the station is located in relation to other DMAs. Source: Investing in Television Market
      Report 2009 4thEdition,
      as published by BIA Financial Network,
Inc.


(2)
            The
      term “commercial station” means a television broadcast station and
      excludes non-commercial stations, religious and Spanish-language stations,
      cable program services or networks. Source: Investing in Television Market
      Report 2009 4thEdition, as published
      by BIA Financial Network, Inc.


(3)
            Application
      for renewal of license timely was submitted to the FCC. Under the FCC’s
      rules, a license expiration date automatically is extended pending review
      of and action on the renewal application by the
  FCC.


3


Industry
      Background




Commercial
television broadcasting began in the United States on a regular basis in the
1940s. Currently a limited number of channels are available for over-the-air
broadcasting in any one geographic area and a license to operate a television
station must be granted by the FCC. All television stations in the country are
grouped by A.C. Nielsen Company, a national audience measuring service, into 210
generally recognized television markets, known as designated market areas
(“DMAs”), that are ranked in size according to various metrics based upon actual
or potential audience. Each DMA is an exclusive geographic area consisting of
all counties in which the home-market commercial stations receive the greatest
percentage of total viewing hours. A.C. Nielsen periodically publishes data on
estimated audiences for the television stations in the DMA. The estimates are
expressed in terms of a “rating,” which is a station’s percentage of the total
potential audience in the market, or a “share,” which is the station’s
percentage of the audience actually watching television. A station’s rating in a
market can be a factor in determining advertising rates.




Most
television stations are affiliated with networks and receive a significant part
of their programming, including prime-time hours, from networks. Whether or not
a station is affiliated with one of the four major networks (NBC, ABC, CBS or
Fox) has a significant impact on the composition of the station’s revenue,
expenses and operations. Network programming, along with cash payments for some
NBC, ABC and CBS affiliates, is provided to the affiliate by the network in
exchange for the network’s retention of a substantial majority of the
advertising time during network programs. The network then sells this
advertising time and retains the revenue. The affiliate retains the revenue from
the remaining advertising time it sells during network programs and from
advertising time it sells during non-network programs.




Broadcast
television stations compete for advertising revenue primarily with other
commercial broadcast television stations, cable and satellite television systems
and, to a lesser extent, with newspapers, radio stations and internet
advertising serving the same market. Non-commercial, religious and
Spanish-language broadcasting stations in many markets also compete with
commercial stations for viewers. In addition, the Internet and other leisure
activities may draw viewers away from commercial television
stations.




The
television broadcast industry transitioned to an advanced digital television
(“DTV”) transmission system on June 12, 2009. DTV transmissions deliver improved
video and audio signals including high definition television and have
substantial multiplexing and data transmission capabilities. For each licensed
television station, the FCC allocated a matching DTV channel for the transition
period. Television broadcasters were required to cease analog broadcasting by
June 12, 2009 and return one of their channels to the FCC.




Network
Affiliations




Each of
our stations is affiliated with a network pursuant to an affiliation agreement,
as described below:




Station
            Market
            Affiliation
            ExpirationKCIT
            Amarillo,
      TX
            Fox
            June
      2010KHMT
            Billings,
      MT
            Fox
            June
      2010KJTL
            Wichita
      Falls, TX-Lawton, OK
            Fox
            June
      2010WFXP
            Erie,
      PA
            Fox
            June
      2010WFXW
            Terre
      Haute, IN
            Fox
            June
      2010KSAN
            San
      Angelo, TX
            NBC
            December 2010KRBC
            Abilene-Sweetwater,
      TX
            NBC
            December
      2010WUTR
            Utica,
      NY
            ABC
            December
      2010WTVO
            Rockford,
      IL
            ABC
            December
      2010KAMC
            Lubbock,
      TX
            ABC
            December
      2010KCPN-LP
            Amarillo,
      TX
            MyNetworkTV
            August
      2011KJBO-LP
            Wichita
      Falls, TX-Lawton, OK
            MyNetworkTV
            August
      2011WTVO-DM
            Rockford,
      IL
            MyNetworkTV
            August
      2011KTVE
            Monroe,
      LA-El Dorado, AR
            NBC
            December
      2011KODE
            Joplin,
      MO-Pittsburg, KS
            ABC
            December
      2012KOLR
            Springfield,
      MO
            CBS
            June
      2013WYOU
            Wilkes
      Barre-Scranton, PA
            CBS
            June
      2015




Each
affiliation agreement provides the affiliated station 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 these broadcasts. In addition, some stations receive
compensation from the network based on the hours of network programming they
broadcast.




We expect
all of the network affiliation agreements listed above to be renewed upon
expiration.




Competition




Competition
in the television industry takes place on several levels: competition for
audience, competition for programming and competition for
advertising.


4




Audience. Our stations
compete for audience share specifically on the basis of program popularity. The
popularity of a station’s programming has a direct effect on the advertising
rates it can charge its advertisers. A portion of the daily programming on the
stations that we own is supplied by the network with which each station is
affiliated. In those periods, the stations are dependent upon the performance of
the network programs in attracting viewers. Stations program non-network time
periods with a combination of self-produced news, public affairs and other
entertainment programming, including movies and syndicated programs. The major
television networks have also begun to sell their programming directly to the
consumer via portable digital devices such as video iPods and cell phones which
presents an additional source of competition for television broadcaster audience
share. Other sources of competition for audiences include home entertainment
systems, such as VCRs, DVDs, and DVRs; video-on-demand and pay-per-view; the
Internet; and television game devices.




Although
the commercial television broadcast industry historically has been dominated by
the ABC, NBC, CBS and Fox television networks, other newer television networks
and the growth in popularity of subscription systems, such as local cable and
direct broadcast satellite (“DBS”) systems which air exclusive programming not
otherwise available in a market, have become significant competitors for the
over-the-air television audience.




Programming. Competition
for programming involves negotiating with national program distributors or
syndicators that sell first-run and rerun packages of programming. Stations
compete against in-market broadcast station operators for exclusive access to
off-network reruns (such as Seinfeld) and first-run
product (such as Entertainment
Tonight) in their respective markets. Cable systems generally do not
compete with local stations for programming, although various national cable
networks from time to time have acquired programs that would have otherwise been
offered to local television stations. Time Warner Inc., General Electric
Company, Viacom Inc., News Corporation and the Walt Disney Company each owns a
television network and also owns or controls major production studios, which are
the primary source of programming for the networks. It is uncertain whether in
the future such programming, which is generally subject to short-term agreements
between the studios and the networks, will be moved to the networks. Television
broadcasters also compete for non-network programming unique to the markets they
serve. As such, stations strive to provide exclusive news stories, unique
features such as investigative reporting and coverage of community events and to
secure broadcast rights for regional and local sporting events.




Advertising. Stations compete
for advertising revenue with other television stations in their respective
markets; and other advertising media such as newspapers, radio stations,
magazines, outdoor advertising, transit advertising, yellow page directories,
direct mail, local cable systems, DBS systems and the Internet. Competition
for advertising dollars in the broadcasting industry occurs primarily within
individual markets. Generally, a television broadcast station in a particular
market does not compete with stations in other market areas.




Additional Competitive
Factors. The broadcasting industry is continually faced with
technological change and innovation which increase the popularity of competing
entertainment and communications media. Further advances in technology may
increase competition for household audiences and advertisers. The increased use
of digital technology by cable systems and DBS, along with video compression
techniques, will reduce the bandwidth required for television signal
transmission. These technological developments are applicable to all video
delivery systems, including over-the-air broadcasting, and have the potential to
provide vastly expanded programming to highly targeted audiences. Reductions 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 narrowly defined audiences is expected
to alter the competitive dynamics for advertising expenditures. We are unable to
predict the effect that these or other technological changes will have on the
broadcast television industry or on the future results of our
operations.




Federal
Regulation




Television
broadcasting is subject to the jurisdiction of the FCC under the Communications
Act of 1934, as amended (the “Communications Act”). The following is a brief
discussion of certain provisions of the Communications Act and the FCC’s
regulations and policies that affect the business operations of television
broadcasting stations. Over the years, Congress and the FCC have added, amended
and deleted statutory and regulatory requirements to which station owners are
subject. Some of these changes have a minimal business impact whereas others may
significantly affect the business or operation of individual stations or the
broadcast industry as a whole. The following discussion summarizes some of the
statutory and regulatory rules and policies currently in effect. For more
information about the nature and extent of FCC regulation of television
broadcast stations you should refer to the Communications Act and the FCC’s
rules, public notices, and policies.




License Grant and
Renewal. The Communications Act prohibits the operation of broadcast
stations except under licenses issued by the FCC. Television broadcast licenses
are granted for a maximum term of eight years and are subject to renewal upon
application to the FCC. The FCC is required to grant an application for license
renewal if during the preceding term the station served the public interest, the
licensee did not commit any serious violations of the Communications Act or the
FCC’s rules, and the licensee committed no other violations of the
Communications Act or the FCC’s rules which, taken together, would constitute a
pattern of abuse. A majority of renewal applications are routinely granted under
this standard. If a licensee fails to meet this standard the FCC may still grant
renewal on terms and conditions that it deems appropriate, including a monetary
forfeiture or renewal for a term less than the normal eight-year
period.


5




After a
renewal application is filed, interested parties, including members of the
public, may file petitions to deny a renewal application, to which the
licensee/renewal applicant is entitled to respond. After reviewing the
pleadings, if the FCC determines that there is a substantial and material
question of fact whether grant of the renewal application would serve the public
interest, the FCC is required to hold a trial-type hearing on the issues
presented. If, after the hearing, the FCC determines that the renewal applicant
has met the renewal standard the FCC will grant the renewal application. If the
licensee/renewal applicant fails to meet the renewal standard or show that there
are mitigating factors entitling it to renewal subject to appropriate sanctions,
the FCC can deny the renewal application. In the vast majority of cases where a
petition to deny is filed against a renewal application, the FCC ultimately
grants the renewal without a hearing. No competing application for authority to
operate a station and replace the incumbent licensee may be filed against a
renewal application.




In
addition to considering rule violations in connection with a license renewal
application, the FCC may sanction a station license for failing to observe FCC
rules and policies during the license term, including the imposition of a
monetary forfeiture.




The
Communications Act prohibits the assignment or the transfer of control of a
broadcast license without prior FCC approval.




Ownership
Restrictions. The FCC has rules which establish limits on the
ownership of broadcast stations. These ownership limits apply to attributable
interests in a station licensee held by an individual, corporation, partnership
or other entity. In the case of corporations, officers, directors and voting
stock interests of 5% or more (20% or more in the case of qualified investment
companies, such as insurance companies and bank trust departments) are
considered attributable interests. For partnerships, all general partners and
non-insulated limited partners are attributable. Limited liability companies are
treated the same as partnerships. The FCC also considers attributable the holder
of more than 33% of a licensee’s total assets (defined as total debt plus total
equity), if that person or entity also provides over 15% of the station’s total
weekly broadcast programming or has an attributable interest in another media
entity in the same market which is subject to the FCC’s ownership rules, such as
a radio or television station, cable television system or daily
newspaper.




Local Ownership (Duopoly
Rule). Under the current duopoly rule, a single entity is allowed to
own or have attributable interests in two television stations in a market if
(1) the two stations do not have overlapping service areas, or
(2) after the combination there are at least eight independently owned and
operating full-power television stations and one of the combining stations is
not ranked among the top four stations in the DMA. The duopoly rule allows the
FCC to consider waivers to permit the ownership of a second station only in
cases where the second station has failed or is failing or unbuilt.




Under the
duopoly rule, the FCC attributes toward the local television ownership limits
another in-market station when one station owner programs a second in-market
station pursuant to a time brokerage or local marketing agreement, if the
programmer provides more than 15% of the second station’s weekly broadcast
programming. However, local marketing agreements entered into prior to
November 5, 1996 are exempt attributable interests until the FCC determines
otherwise. This “grandfathered” period, when reviewed by the FCC, is subject to
possible extension or termination.




In
certain of our markets, we own and operate both full-power and low-power
television broadcast stations (in Wichita Falls, we own and operate KJTL and
KJBO-LP; and in Amarillo, we own and operate KCIT and KCPN-LP). The FCC’s
duopoly rules and policies regarding ownership of television stations in the
same market apply only to full-power television stations and not low-power
television stations such as KJBO-LP and KCPN-LP.




We
currently do not operate two full-power stations in any market.




National
Ownership.  There is no nationwide limit on the number of
television stations which a party may own.  However, the
Communications Act and FCC’s rules limit the percentage of U.S. television
households which a party may reach through its attributable interests in
television stations to 39%.  The stations that Mission owns have a
combined national audience reach of 2.4%.




Radio/Television Cross-Ownership
Rule (One-to-a-Market Rule).In markets with at least 20
independently owned media outlets, ownership of one television station and up to
seven radio stations, or two television stations (if allowed under the
television duopoly rule) and six radio stations is permitted. If the number of
independently owned media outlets is fewer than 20 but greater than or equal to
10, ownership of one television station (or two if allowed) and four radio
stations is permitted. In markets with fewer than 10 independent media voices,
ownership of one television station (or two if allowed) and one radio station is
permitted. In calculating the number of independent media voices in a market,
the FCC includes all radio and television stations, independently owned cable
systems (counted as one voice), and independently owned daily newspapers which
have circulation that exceeds 5% of the households in the market.




Local Television/Newspaper
Cross-Ownership Rule.Under this rule, a party is prohibited from
having an attributable interest in a television station and a daily newspaper
except in cases where the market at issue is one of the 20 largest DMAs, and
subject to other criteria and limitations.




As a
result of the FCC’s 2006 rulemaking proceeding, which provided a comprehensive
review of all of its media ownership rules, in February 2008, the FCC made
modest changes to its newspaper cross-ownership rule, while retaining the rest
of its rules as then currently in effect.  Multiple challenges to this
proceeding were filed with the U.S. Court of Appeals, which remain
pending.  Sometime during 2010, the FCC is expected to officially
initiate the next statutorily-mandated review of its media ownership rules and
request public comments thereon.


6




Local Television/Cable
Cross-Ownership.There is no FCC rule prohibiting common ownership
of a cable television system and a television broadcast station in the same
area.




Cable “Must-Carry” or Retransmission
Consent Rights.Every three years television broadcasters are
required to make an election between “must-carry” or retransmission consent
rights in connection with the carriage of their signal on cable television
systems within their DMA. The most recent election date was October 1,
2008, for the three-year period beginning January 1, 2009.




If a
broadcaster chooses to exercise its must-carry rights, it may request cable
system carriage on its over-the-air channel or another channel on which it was
carried on the cable system as of a specified date. A cable system generally
must carry the station’s signal in compliance with the station’s carriage
request, and in a manner that makes the signal available to all cable
subscribers. However, must-carry rights are not absolute, and whether a cable
system is required to carry the station on its system, or in the specific manner
requested, depends on variables such as the location, size and number of
activated channels of the cable system and whether the station’s programming
duplicates, or substantially duplicates, the programming of another station
carried on the cable system. If certain conditions are met, a cable system may
decline to carry a television station that has elected must-carry status,
although it is unusual for all the required conditions to exist.




If a
broadcaster chooses to exercise its retransmission consent rights, a cable
television system which is subject to that election may not carry the station’s
signal without the station’s consent. This generally requires the cable system
and television station operator to negotiate the terms under which the
broadcaster will consent to the cable system’s carriage of its station’s
signal.




We have
elected to exercise retransmission consent rights for all of our stations where
we have a legal right to do so. We have negotiated retransmission consent
agreements with substantially all of the cable systems which carry our stations’
signals.




Direct-to-Home Satellite Services
and Carriage Rights. DBS providers are permitted to carry local
channels including “significantly viewed” out-of-market stations when local
service is provided. Under certain circumstances, DBS providers also are
permitted to provide network service from a station outside a local market for
subscribers in the market who are “unserved” by a local station affiliated with
the same network. In addition, DBS subscribers who were not receiving a digital
signal as of December 8, 2004 may receive distant signals for digital
television programming from their DBS provider if they were receiving the local
analog signal of a network affiliate and the subscriber cannot receive a local
digital signal of that network-affiliated station over-the-air.




Satellite
carriers that provide any local-into-local service in a market must carry, upon
request, all stations in that market that have elected mandatory carriage, and
DBS operators are now carrying other local stations in local-into-local markets,
including some noncommercial, independent and foreign language stations.
However, satellite carriers are not required to carry duplicative network
signals from a local market unless the stations are licensed to different
communities in different states. Satellite carriers are required to carry all
local television stations in a contiguous manner on their channel line-up and
may not discriminate in their carriage of stations.




Commercial
television stations make elections between retransmission consent and must-carry
status for satellite services on the same schedule as cable elections, with the
most recent elections made by October 1, 2008 for the three-year period
that began on January 1, 2009. DirecTV currently provides satellite
carriage of our stations in the Rockford, Springfield and Wilkes Barre-Scranton
markets. Dish Network currently provides satellite carriage of our stations in
the Abilene-Sweetwater, Amarillo, Billings, Erie, Joplin, MO-Pittsburg, KS,
Lubbock, Rockford, San Angelo, Springfield, Terre Haute, Wichita Falls,
TX-Lawton, OK and Wilkes Barre-Scranton markets. We have long-term carriage
agreements that expire in 2011 with both DirecTV and Dish Network that provide
for the carriage of the currently carried stations, as well as those
subsequently added in new local-to-local markets, or those added by acquisition
or other means.




Digital Television
(“DTV”). In February 2009, President Obama signed into law
legislation that established June 12, 2009 as the deadline for television
broadcasters to complete their transition to DTV-only operations and return
their analog spectrum to the FCC. The DTV transmission system delivers video and
audio signals of higher quality (including high definition television) than the
existing analog transmission system. DTV also has substantial capabilities for
multiplexing (the broadcast of several channels of programs concurrently) and
data transmission. The introduction of digital television requires consumers to
purchase new television sets that are capable of receiving and displaying the
DTV signals, or adapters to receive DTV signals and convert them to analog
signals for display on their existing receivers.




On June
12, 2009, all full-power television broadcasters were required to cease
operating in an analog format and operate exclusively in digital (DTV)
format.  All of Mission’s stations have completed the transition from
analog to digital and hold DTV authorizations issued by the FCC.




Television
station operators may use their DTV signals to provide ancillary services, such
as computer software distribution, Internet, interactive materials, e-commerce,
paging services, audio signals, subscription video, or data transmission
services. To the extent a station provides such ancillary services it is subject
to the same regulations as are applicable to other analogous services under the
FCC’s rules and policies. Commercial television stations also are required to
pay the FCC 5% of the gross revenue derived from all ancillary services provided
over their DTV signals for which a station received a fee in exchange for the
service or received compensation from a third party in exchange for transmission
of material from that third party, not including commercial advertisements used
to support broadcasting.


7




Programming and
Operation. The Communications Act requires broadcasters to serve
“the public interest.” Television station licensees are required to present
programming that is responsive to community problems, needs and interests and to
maintain certain records demonstrating such responsiveness. The FCC may consider
complaints from viewers concerning programming when it evaluates a station’s
license renewal application, although viewer complaints also may be filed and
considered by the FCC at any time. Stations also must follow various rules
promulgated under the Communications Act that regulate, among other
things:




•
            political
      advertising (its price and
availability);




•
            sponsorship
      identification;




•
            contest
      and lottery advertising;




•
            obscene
      and indecent broadcasts;




•
            technical
      operations, including limits on radio frequency
  radiation;




•
            discrimination
      and equal employment opportunities;




•
            closed
      captioning;




•
            children’s
      programming;




•
            program
      ratings guidelines; and




•
            network
      affiliation agreements.




Employees




As of
December 31, 2009, we had a total of 32 employees, all of which were
full-time. As of December 31, 2009, none of our employees were covered by a
collective bargaining agreement. We believe that our employee relations are
satisfactory, and we have not experienced any work stoppages at any of our
facilities.




Item 1A.                      Risk
Factors




You
should carefully consider the following risk factors, which we believe are the
most significant risks related to our business, as well as the other information
contained in this document.




Risks
Related to Our Operations




The continued
economic slowdown in the United States and the national and world-wide financial
crisis may adversely affect our results of operations, cash flows and financial
condition. Among other things, these negative economic trends could adversely
affect demand for television advertising, reduce the availability, and increase
the cost, of short-term funds for liquidity requirements, and adversely affect
our ability to meet long-term commitments. In addition, general trends in the
television industry could adversely affect demand for television advertising as
consumers turn to alternative media, including the Internet, for entertainment.




The
continued economic slowdown in the United States is likely to adversely affect
our results of operations and cash flows by, among other things, reducing demand
for local and national television advertising and making it more difficult for
customers to pay their accounts. Moreover, television viewing among consumers
has been negatively impacted by the increasing availability of alternative
media, including the Internet. As a result, in recent years demand for
television advertising has been declining and demand for advertising in
alternative media has been increasing, and we expect this trend to
continue.




Disruptions
in the capital and credit markets, as have been experienced during 2009 and may
continue in 2010, could adversely affect our ability to draw on our bank
revolving credit facilities. Our access to funds under the revolving credit
facilities is dependent on the ability of the banks that are parties to the
facilities to meet their funding commitments. Those banks may not be able to
meet their funding commitments to us if they experience shortages of capital and
liquidity or if they experience excessive volumes of borrowing requests from us
and other borrowers within a short period of time.




Longer
term disruptions in the capital and credit markets as a result of uncertainty,
changing or increased regulation, reduced alternatives or failures of
significant financial institutions could adversely affect our access to
liquidity needed for our business. Any disruption could require us to take
measures to conserve cash until the markets stabilize or until alternative
credit arrangements or other funding for our business needs can be arranged.
Such measures could include deferring capital expenditures and other
discretionary uses of cash.




We
have a history of net losses.




We had
net losses of $2.6 million, $7.5 million and $4.0 million, respectively, for the
years ended December 31, 2009, 2008 and 2007. We may not be able to achieve
or maintain profitability.


8




Our substantial debt could limit our
ability to grow and compete.




As of
December 31, 2009, we had $172.4 million of debt which represented 254.6%
of our total capitalization. Our high level of debt could have important
consequences to our business. For example, it could:




•
            limit
      our ability to borrow additional funds or obtain additional financing in
      the future;




•
            limit
      our ability to pursue acquisition
opportunities;




•
            expose
      us to greater interest rate risk since the interest rate on borrowings
      under our senior credit facility is
variable;




•
            limit
      our flexibility to plan for and react to changes in our business and our
      industry; and




•
            impair
      our ability to withstand a general downturn in our business and place us
      at a disadvantage compared to our competitors that are less
      leveraged.




Refer to
Part II, Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations––Contractual Obligations” for disclosure of
the approximate aggregate amount of principal indebtedness scheduled to
mature.




We could
also incur additional debt in the future. The terms of our senior credit
facility limit, but do not prohibit, us from incurring substantial amounts of
additional debt. To the extent we incur additional debt, we would become even
more susceptible to the leverage-related risks described above.




The
agreement governing our debt contains various covenants that limit our
management’s discretion in the operation of our business.




Our
senior credit facility contains various covenants that restrict our ability to,
among other things:




•
            incur
      additional debt and issue preferred
stock;




•
            pay
      dividends and make other
distributions;




•
            make
      investments and other restricted
payments;




•
            make
      acquisitions;




•
            merge,
      consolidate or transfer all or substantially all of our
      assets;




•
            enter
      into sale and leaseback
transactions;




•
            create
      liens;




•
            sell
      assets or stock of our subsidiaries;
and




•
            enter
      into transactions with affiliates.




Our bank
credit facility agreement does not contain financial covenant ratio
requirements, but does provide for default in the event Nexstar does not comply
with all covenants contained in its credit agreement. Future financing
agreements may contain financial covenants which could limit our management’s
ability to operate our business at its discretion, and consequently we may be
unable to compete effectively, pursue acquisitions or take advantage of new
business opportunities, any of which could harm our business.




If we
fail to comply with the restrictions in present or future financing agreements,
a default may occur. A default could allow creditors to accelerate the related
debt as well as any other debt to which a cross-acceleration or cross-default
provision applies. A default could also allow creditors to foreclose on any
collateral securing such debt.




Our
ability to continue as a going concern is dependent on Nexstar’s pledge to
continue the local services agreements described in a letter of support dated
March 9, 2010. Nexstar’s senior secured credit facility agreement contains
covenants which require them to comply with certain financial ratios, including:
(a) maximum total and senior leverage ratios, (b) a minimum interest coverage
ratio, and (c) a minimum fixed charge coverage ratio. The covenants, which are
calculated on a quarterly basis, include the combined results of Nexstar
Broadcasting and us. Our senior secured credit facility agreement does not
contain financial covenant ratio requirements; however it does include an event
of default if Nexstar does not comply with all covenants contained in its credit
agreement. As of September 30, 2009, Nexstar was in compliance with all
indentures governing their publicly-held notes. As of September 30, 2009,
Nexstar was not in compliance with all covenants contained in the credit
agreements governing their senior credit facility. On October 8, 2009,
Nexstar amended their credit facility to modify certain covenants. The
October 8, 2009 amendment contained a limited waiver for the leverage
ratios which cured the violation as of September 30, 2009 contained in the
credit agreement governing Nexstar’s senior credit facility.  As of
December 31, 2009, Nexstar was in compliance with all covenants contained in the
credit agreements governing their senior secured credit facility and the
indentures governing their publicly-held notes.


9




On
March 30, 2009, Nexstar closed an offer to exchange $143,600,000 of the 7%
senior subordinated notes due 2014 in exchange for $142,320,761 7% senior
subordinated PIK Notes due 2014 (the “PIK Notes”). Based on the financial
covenants in the Nexstar senior credit facility, the PIK Notes are not included
in the debt amount used to calculate the total leverage ratio until January
2011.




Nexstar
believes the consummation of the exchange offer combined with the actions
described above, will allow them to maintain compliance with all covenants
contained in the credit agreements governing their senior secured credit
facility and the indentures governing their publicly held notes for a period of
at least the next twelve months from December 31, 2009.




We
guarantee the aggregate principal amount of $47.9 million of 7% senior
subordinated notes, $142.9 million of 7% senior subordinated PIK notes and the
aggregate principal amount of $226.3 million of outstanding bank facility term
and revolving loans issued or drawn by Nexstar Broadcasting, Inc.




If
Nexstar, which is highly leveraged with debt, is unable to meet its obligations
under the indentures governing its senior subordinated notes or its senior
credit facility agreement, we can be held liable for those obligations under
guarantees. Additionally, Nexstar has $12.5 million of unused revolver
commitments available under its senior credit facility, which is also guaranteed
by us.




Our
broadcast operations could be adversely affected if our stations fail to
maintain or renew their network affiliation agreements on favorable terms, or at
all.




Due to
the quality of the programming provided by the networks, stations that are
affiliated with a network generally have higher ratings than unaffiliated
independent stations in the same market. As a result, it is important for
stations to maintain their network affiliations. All of the stations that we
operate have network affiliation agreements – 3 stations have primary
affiliation agreements with NBC, 2 with CBS, 4 with ABC, 5 with Fox and 2 with
MyNetworkTV. Each of NBC, CBS and ABC generally provides affiliated stations
with up to 22 hours of prime time programming per week, while each of Fox and
MyNetworkTV provides affiliated stations with up to 15 hours of prime time
programming per week. In return, affiliated stations broadcast the respective
network’s commercials during the network programming. Under the affiliation
agreements with NBC, CBS and ABC, most of the stations we operate also receive
compensation from these networks.




All of
the network affiliation agreements of the stations that we own and operate are
scheduled to expire at various times beginning in June 2010 through June 2015.
Network affiliation agreements are also subject to earlier termination by the
networks under limited circumstances. For more information regarding these
network affiliation agreements, see Item 1. “Business––Network
Affiliations.”




The loss of or
material reduction in retransmission consent revenues could have an adverse
effect on our business, financial condition, and results of operations.




Mission’s
retransmission consent agreements with cable operators, direct broadcast
satellite operators, and others permit the operators to carry our stations’
signals in exchange for the payment of compensation to us from the system
operators as consideration. The television networks have recently asserted to
their local television station affiliates the networks’ position that they, as
the owners or licensees of programming we broadcast and provide for
retransmission, are entitled to a portion of the compensation under the
retransmission consent agreements. Networks have proposed to include these
provisions in their network affiliation agreements. Inclusion of these or
similar provisions in our network affiliation agreements could materially reduce
this revenue source to Mission and could have an adverse effect on our business,
financial condition, and results of operations.




The
FCC could decide not to grant renewal of the FCC license of any of the stations
we operate which would require that station to cease operations.




Television
broadcast licenses are granted for a maximum term of eight years and are subject
to renewal upon application to the FCC. The FCC is required to grant an
application for license renewal, if during the preceding term, the station
served the public interest, the licensee did not commit any serious violations
of the Communications Act or the FCC’s rules, and the licensee committed no
other violations of the Communications Act or the FCC’s rules which, taken
together, would constitute a pattern of abuse. A majority of renewal
applications are routinely granted under this standard. If a licensee fails to
meet this standard the FCC may still grant renewal on terms and conditions that
it deems appropriate, including a monetary forfeiture or renewal for a term less
than the normal eight-year period.


10




On
January 3, 2006, Cable America Corporation (“Cable America”) submitted a
petition to deny the applications for renewal of license for Nexstar’s station,
KSFX, and our station, KOLR, both licensed to Springfield, Missouri. Cable
America alleged that Nexstar’s local service agreement arrangements with us give
Nexstar improper control over our operations. We and Nexstar submitted a joint
opposition to this petition to deny and Cable America submitted a reply. Cable
America subsequently requested that the FCC dismiss its petition. However, the
petition remains pending with the FCC.




We began
to submit renewal of license applications for our stations beginning in April
2005. We expect the FCC to renew the licenses for our stations in due
course.




Our
growth may be limited if we are unable to implement our acquisition
strategy.




We intend
to continue our growth by selectively pursuing acquisitions of television
stations. The television broadcast industry is undergoing consolidation, which
may reduce the number of acquisition targets and increase the purchase price of
future acquisitions. Some of our competitors may have greater financial or
management resources with which to pursue acquisition targets. Therefore, even
if we are successful in identifying attractive acquisition targets, we may face
considerable competition and our acquisition strategy may not be
successful.  On October 8, 2009, we amended our credit facility and
the amendment also specifically restricts our ability to pursue our acquisition
strategy.




FCC rules
and policies may also make it more difficult for us to acquire additional
television stations. Television station acquisitions are subject to the approval
of the FCC and, potentially, other regulatory authorities. The need for FCC and
other regulatory approvals could restrict our ability to consummate future
transactions if, for example, the FCC or other government agencies believe that
a proposed transaction would result in excessive concentration in a market, even
if the proposed combinations may otherwise comply with FCC ownership
limitations.




Growing
our business through acquisitions involves risks and if we are unable to manage
effectively our growth, our operating results will suffer.




Since
January 1, 2003, we have tripled the number of stations that we operate,
having acquired 10 stations. We will continue to actively pursue additional
acquisition opportunities. To manage effectively our growth and address the
increased reporting requirements and administrative demands that will result
from future acquisitions, we will need, among other things, to continue to
develop our financial and management controls and management information
systems. We will also need to continue to identify, attract and retain highly
skilled finance and management personnel. Failure to do any of these tasks in an
efficient and timely manner could seriously harm our business.




There are
other risks associated with growing our business through acquisitions. For
example, with any past or future acquisition, there is the possibility
that:




•
            we
      may not be able to successfully reduce costs, increase advertising revenue
      or audience share or realize anticipated synergies and economies of scale
      with respect to any acquired
station;




•
            an
      acquisition may increase our leverage and debt service requirements or may
      result in our assuming unexpected
liabilities;




•
            our
      management may be reassigned from overseeing existing operations by the
      need to integrate the acquired
business;




•
            we
      may experience difficulties integrating operations and systems, as well
      as, company policies and cultures;




•
            we
      may fail to retain and assimilate employees of the acquired business;
      and




•
            problems
      may arise in entering new markets in which we have little or no
      experience.




The
occurrence of any of these events could have a material adverse effect on our
operating results, particularly during the period immediately following any
acquisition.




The
FCC may decide to terminate “grandfathered” time brokerage
agreements.




The FCC
attributes time brokerage agreements and local marketing agreements (“TBAs”) to
the programmer under its ownership limits if the programmer provides more than
15% of a station’s weekly broadcast programming. However, TBAs entered into
prior to November 5, 1996 are exempt attributable interests for
now.  Our TBA’s with Nexstar were entered into prior to November 2006
and are grandfathered.




The FCC
will review these “grandfathered” TBAs in the future. During this review, the
FCC may determine to terminate the “grandfathered” period and make all TBAs
fully attributable to the programmer. If the FCC does so, we will be required to
terminate the TBAs with Nexstar for stations WFXP and KHMT unless the FCC
simultaneously changes its duopoly rules to allow ownership of two stations in
the applicable markets


11




FCC
actions may restrict our ability to enter into local service agreements with
Nexstar, which would harm our operations.




We have
entered into local service agreements with Nexstar for our stations. While all
of our existing local service agreements comply with FCC rules and policies, we
cannot assure you that the FCC will continue to permit local service agreements
as a means of creating substantial operating efficiencies, and the FCC may
challenge our existing arrangements with Nexstar in the future.




On
August 2, 2004, the FCC initiated a rule making proceeding to determine
whether to make television joint sales agreements attributable under its
ownership rules. Comments and reply comments were filed in this proceeding in
the fourth quarter of 2004. The FCC has not yet issued a decision in this
proceeding. However, if the FCC adopts a JSA attribution rule for television
stations we will be required to comply with the rule.




Cable
America has alleged that our local service agreements with Nexstar give Nexstar
improper control over our operations. If the FCC challenges our existing
arrangements with Nexstar and determines that our arrangements violate the FCC’s
rules and policies, we may be required to terminate such arrangements and we
could be subject to sanctions, fines and/or other penalties.




We
have a material amount of goodwill and intangible assets, and therefore we could
suffer losses due to future asset impairment charges.




As of
December 31, 2009, approximately $64.9 million, or 63.0%, of total assets
consisted of goodwill and intangible assets, including FCC licenses and network
affiliation agreements.  We recorded an impairment charge of $2.3
million during the third quarter of 2009 that included an impairment to the
carrying values of FCC licenses of $2.0 million, related to eight of our
stations and an impairment to the carrying values of goodwill of $0.3 million,
related to one reporting unit consisting of one of our television
stations.  We recorded an impairment charge of $11.4 million during
the year ended December 31, 2008 that included an impairment to the carrying
value of FCC licenses of $8.7 million, related to 9 of our television stations;
an impairment to the carrying value of network affiliation agreements of $1.4
million related to 2 of our television stations; and an impairment to the
carrying values of goodwill of $1.3 million, related to 3 of our television
stations. We test goodwill and FCC licenses annually, and on an interim date if
factors or indicators become apparent that would require an interim test of
these assets, in accordance with accounting and disclosure requirements for
goodwill and other intangible assets.  We test network affiliation
agreements whenever circumstances or indicators become apparent the asset may
not be recoverable through expected future cash flows. The methods used to
evaluate the impairment of our goodwill and intangible assets would be affected
by a significant reduction in operating results or cash flows at one or more of
our television stations, or a forecast of such reductions, a significant adverse
change in the advertising marketplaces in which our television stations operate,
the loss of network affiliations, or by adverse changes to FCC ownership rules,
among others, which may be beyond our control. If the carrying amount of
goodwill and intangible assets is revised downward due to impairment, such
non-cash charge could materially affect our financial position and results of
operations.




Risks
Related to Our Industry




Preemption
of regularly scheduled programming by network news coverage may affect our
revenue and results of operations.




We may
experience a loss of advertising revenue and incur additional broadcasting
expenses due to preemption of our regularly scheduled programming by network
coverage of a major global news event such as a war or terrorist attack. As a
result, advertising may not be aired and the revenue for such advertising may be
lost unless the station is able to run the advertising at agreed-upon times in
the future. Advertisers may not agree to run such advertising in future time
periods, and space may not be available for such advertising. The duration of
such preemption of local programming cannot be predicted if it occurs. In
addition, our stations may incur additional expenses as a result of expanded
news coverage of a war or terrorist attack. The loss of revenue and increased
expenses could negatively affect our results of operations.




If we are unable
to respond to changes in technology and evolving industry trends, our television
businesses may not be able to compete effectively.




New
technologies could also adversely affect our television stations. Information
delivery and programming alternatives such as cable, direct satellite-to-home
services, pay-per-view, the Internet, telephone company services, mobile
devices, digital video recorders and home video and entertainment systems have
fractionalized television viewing audiences and expanded the numbers and types
of distribution channels for advertisers to access. Over the past decade, cable
television programming services, other emerging video distribution platforms and
the Internet have captured an increasing market share, while the aggregate
viewership of the major television networks has declined. In addition, the
expansion of cable and satellite television, the Internet and other
technological changes have increased, and may continue to increase, the
competitive demand for programming. Such increased demand, together with rising
production costs, may increase our programming costs or impair our ability to
acquire or develop desired programming.


12




In
addition, video compression techniques, now in use with direct broadcast
satellites, cable and wireless cable, are expected to permit greater numbers of
channels to be carried within existing bandwidth. These compression techniques
as well as other technological developments are applicable to all video delivery
systems, including over-the-air broadcasting, and have the potential to provide
vastly expanded programming to 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,
resulting in more audience fractionalization. This ability to reach very
narrowly defined audiences may alter the competitive dynamics for advertising
expenditures. We are unable to predict the effect that these and other
technological changes will have on the television industry or on the future
results of our television businesses.




If
direct broadcast satellite companies do not carry the stations that we own and
operate, we could lose audience share and revenue.




Direct
broadcast satellite television companies are permitted to transmit local
broadcast television signals to subscribers in local markets provided that they
offer to carry all local stations in that market. However, satellite providers
have limited satellite capacity to deliver local station signals in local
markets. Satellite providers, such as DirecTV and Dish Network, carry our
stations in only some of our markets and may choose not to carry local stations
in any of our other markets. DirecTV currently provides satellite carriage of
our stations in the Rockford, Springfield and Wilkes Barre-Scranton markets.
Dish Network currently provides satellite carriage of our stations only in the
Abilene-Sweetwater, Amarillo, Billings, Erie, Joplin, MO-Pittsburg, KS, Lubbock,
Rockford, San Angelo, Springfield, Terre Haute, Wichita Falls, TX-Lawton, OK and
Wilkes Barre-Scranton markets. In those markets in which the satellite providers
do not carry local station signals, subscribers to those satellite services are
unable to view local stations without making further arrangements, such as
installing antennas and switches. Furthermore, when direct broadcast satellite
companies do carry local television stations in a market, they are permitted to
charge subscribers extra for such service. Some subscribers may choose not to
pay extra to receive local television stations. In the event subscribers to
satellite services do not receive the stations that we own and operate, we could
lose audience share which would adversely affect our revenue and
earnings.




The
FCC can sanction us for programming broadcast on our stations which it finds to
be indecent.




In 2004,
the FCC began to impose substantial fines on television broadcasters for the
broadcast of indecent material in violation of the Communications Act and its
rules. The FCC also revised its indecency review analysis to more strictly
prohibit the use of certain language on broadcast television. Because our
stations’ programming is in large part comprised of programming provided by the
networks with which the stations are affiliated, we do not have full control
over what is broadcast on our stations, and we may be subject to the imposition
of fines if the FCC finds such programming to be indecent.  The fines
which may be imposed on a television broadcaster for an indecency violation can
reach a maximum of $325 thousand per violation.




Intense
competition in the television industry could limit our growth and impair our
ability to become profitable.




As a
television broadcasting company, we face a significant level of competition,
both directly and indirectly. Generally we compete for our audience against all
the other leisure activities in which one could choose to engage rather than
watch television. Specifically, stations we own compete for audience share,
programming and advertising revenue with other television stations in their
respective markets and with other advertising media, including newspapers, radio
stations, cable television, DBS systems and the Internet.




The
entertainment and television industries are highly competitive and are
undergoing a period of consolidation. Many of our current and potential
competitors have greater financial, marketing, programming and broadcasting
resources than we do. The markets in which we operate are also in a constant
state of change arising from, among other things, technological improvements and
economic and regulatory developments. Technological innovation and the resulting
proliferation of television entertainment, such as cable television, wireless
cable, satellite-to-home distribution services, pay-per-view and home video and
entertainment systems, have fractionalized television viewing audiences and have
subjected free over-the-air television broadcast stations to increased
competition. We may not be able to compete effectively or adjust our business
plans to meet changing market conditions. We are unable to predict what form of
competition will develop in the future, the extent of the competition or its
possible effects on our businesses.




The
FCC could implement regulations or Congress could adopt legislation that might
have a significant impact on the operations of the stations we own and operate
or the television broadcasting industry as a whole.




The FCC
has initiated proceedings to determine whether to make TV joint sales agreements
attributable interests under its ownership rules; to determine whether it should
establish formal rules under which broadcasters will be required to serve the
local public interest; and to determine whether to modify or eliminate certain
of its broadcast ownership rules, including the radio-television cross-ownership
rule and the newspaper-television cross-ownership rule. A change to any of these
rules may have a significant impact on us and the stations we own and
operate.




In
addition, the FCC may decide to initiate other new rule making proceedings on
its own or in response to requests from outside parties, any of which might have
such an impact. Congress also may act to amend the Communications Act in a
manner that could impact our stations and the stations we provide services to or
the television broadcast industry in general.


13




The
FCC may reallocate some portion of the spectrum available for use by television
broadcasters to wireless broadband use which alteration could substantially
impact our future operations and may reduce viewer access to our
programming.




The FCC
has initiated a proceeding to assess the availability of spectrum to meet future
wireless broadband needs pursuant to which the FCC is examining whether some
portion of the spectrum currently used for commercial broadcast television can
be made available for wireless broadband use. The FCC has proposed requiring
television stations to co-locate their antennas and/or reducing the amount of
spectrum allocated to each television station from 6 megahertz to 3 megahertz.
If the FCC determines to move forward with reducing the spectrum available to
television broadcasters for their use, it may render our investment in digital
facilities worthless and consequently reduce the useful lives of certain digital
equipment, could require substantial additional investment to continue our
operations, and may require viewers to invest in additional equipment or
subscription services to continue receiving broadcast television
signals.









Item 1B.
            Unresolved
      Staff Comments




None


14




Item 2.                      Properties




We own
and lease facilities in the following locations:





Station
      Metropolitan Area and Use
            Owned or
                Leased
            Square
                Footage/Acreage
                Approximate Size
            Expiration
                of
      LeaseWYOU—Wilkes Barre-Scranton, PAOffice-Studio(1)
            —
            —
            —Tower/Transmitter
      Site—Penobscot Mountain
            100% Owned
            120.33 Acres
            —Tower/Transmitter
      Site—Bald Mountain
            100%
      Owned
            7.2
      Acres
            —Tower/Transmitter
      Site—Williamsport
            33% Owned
            1.35
      Acres
            —Tower/Transmitter
      Site—Sharp Mountain
            33% Owned
            0.23
      Acres
            —Tower/Transmitter
      Site—Stroudsburg
            Leased
            10,000 Sq. Ft.
            Month to MonthWFXW—Terre
      Haute, INOffice-Studio(2)
            —
            —
            —Tower/Transmitter
      Site (3)
            —
            —
            —WFXP—Erie,
      PAOffice-Studio(3)
            —
            —
            —Tower/Transmitter
      Site(3)
            —
            —
            —KJTL—Wichita
      Falls, TX—Lawton, OKOffice-Studio(4)
            —
            —
            —Tower/Transmitter
      Site
            Leased
            40
      Acres
            1/30/15KJBO-LP—Wichita
      Falls, TX-Lawton, OKOffice-Studio(4)
            —
            —
            —Tower/Transmitter
      Site
            Leased
            5
      Acres
            Year
      to YearKODE—Joplin,
      MO-Pittsburg, KSOffice-Studio
            100%
      Owned
            2.74
      Acres
            —Tower/Transmitter
      Site
            Leased
            215
      Sq. Ft.
            5/1/27KRBC—Abilene-Sweetwater,
      TXOffice-Studio
            100% Owned
            5.42
      Acres
            —Office-Studio
            100% Owned
            19,312
      Sq. Ft.
            —Tower/Transmitter
      Site(10)
            —
            —
            —KSAN—San
      Angelo, TXOffice-Studio(5)
            —
            —
            —Tower/Transmitter
      Site
            Leased
            10
      Acres
            5/15/15KOLR—Springfield,
      MOOffice-Studio
            100%
      Owned
            30,000
      Sq. Ft.
            —Office-Studio
            100%
      Owned
            7
      Acres
            —Tower/Transmitter
      Site
            Leased
            0.5
      Acres
            5/12/21KCIT/KCPN-LP—Amarillo,
      TXOffice-Studio(6)
            —
            —
            —Tower/Transmitter
      Site
            Leased
            100
      Acres
            5/12/21Tower/Transmitter
      Site—Parmer County, TX
            Leased
            80
      Sq. Ft.
            Month
      to MonthTower/Transmitter
      Site—Guyman, OK
            Leased
            80
      Sq. Ft.
            Month
      to MonthTower/Transmitter
      Site—Curry County, NM
            Leased
            6
      Acres
            Month
      to MonthKTVE—Monroe,
      LA-El Dorado, AROffice-Studio(9)
            —
            —
            —Tower/Transmitter
      Site
            Leased
            2
      Acres
            4/30/32Tower/Transmitter
      Site – El Dorado
            Leased
            3
      Acres
            4/30/32Tower/Transmitter
      Site – Union Parrish
            Leased
            2.7
      Acres
            4/30/32Tower/Transmitter
      Site – Bolding
            Leased
            11.5
      Acres
            4/30/32KAMC—Lubbock,
      TXOffice-Studio(7)
            —
            —
            —Tower/Transmitter
      Site
            Leased
            40
      Acres
            5/12/21Tower/Transmitter
      Site
            Leased
            1,200
      Sq. Ft.
            Month
      to MonthKHMT—Billings,
      MTOffice-Studio(8)
            —
            —
            —Tower/Transmitter
      Site
            Leased
            4
      Acres
            5/12/21


15





Station
      Metropolitan Area and Use
            Owned or
                Leased
            Square
                Footage/Acreage
                Approximate Size
            Expiration
                of
      LeaseWUTR—Utica,
      NYOffice-Studio
            100% Owned
            12,100 Sq. Ft.
            —Tower/Transmitter
      Site
            100%
      Owned
            21
      Acres
            —WTVO—Rockford,
      ILOffice-Studio-Tower/Transmitter
      Site
            100%
      Owned
            20,000
      Sq. Ft.
            —Corporate
      Office—Brecksville, OH
            Leased
            540
      Sq. Ft.
            10/31/10





(1)
            The
      office space and studio used by WYOU are owned by
  Nexstar.


(2)
            The
      office space and studio used by WFXW are owned by
  Nexstar.


(3)
            The
      office space, studio and tower used by WFXP are owned by
      Nexstar.


(4)
            The
      office space and studio used by KJTL and KJBO-LP are owned by
      Nexstar.


(5)
            The
      office space and studio used by KSAN are owned by
  Nexstar.


(6)
            The
      office space and studio used by KCIT/KCPN-LP are owned by
      Nexstar.


(7)
            The
      office space and studio used by KAMC are owned by
  Nexstar.


(8)
            The
      office space and studio used by KHMT are owned by
  Nexstar.


(9)
            The
      office space and studio used by KTVE are owned by
  Nexstar.


(10)
            The
      tower/transmitter used by KRBC is owned by
  Nexstar.




Item 3.                      Legal
Proceedings




From time
to time, we are involved in litigation that arises from the ordinary operations
of our business, such as contractual or employment disputes or other general
actions. In the event of an adverse outcome of these proceedings, we believe the
resulting liabilities would not have a material adverse effect on our financial
condition or results of operations.




Item 4.                      Reserved










PART
II




Item 5.                      Market
For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities Market Information




As of
December 31, 2009, Mission’s common stock was not traded on any market and
David S. Smith, the sole shareholder of Mission, held 1,000 shares of common
stock. Mission has never paid any dividends.


16




Item 6.                      Selected
Financial Data




We have
derived the following statement of operations data for 2009, 2008, and 2007 and
balance sheet data as of December 31, 2009 and 2008 from our financial
statements included herein. We have derived the following statement of
operations data for 2006 and 2005 and balance sheet data as of December 31,
2007, 2006, and 2005 from our 2007 Form 10-K filed on March 11, 2008 and
our 2006 Form 10-K filed on March 15, 2007. This information should be read in
conjunction with “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and our Financial Statements and the related Notes to
Financial Statements, which are included herein.





Years ended
      December 31,2009
            
            
            2008
            
            
            2007
            
            
            2006
            
            
            2005(in
      thousands)Statement
      of Operations Data:Net
      broadcast revenue (1)
            
            $
            8,388
            
            
            $
            6,635
            
            
            $
            6,726
            
            
            $
            5,757
            
            
            $
            4,959Revenue
      from Nexstar Broadcasting, Inc. (2)
            
            
            25,435
            
            
            
            35,283
            
            
            
            30,556
            
            
            
            32,556
            
            
            
            28,141Net
      revenue
            
            
            33,823
            
            
            
            41,918
            
            
            
            37,282
            
            
            
            38,313
            
            
            
            33,100Operating
      expenses (income):Direct
      operating expenses (exclusive of depreciation and amortization shown
      separately below)
            
            
            5,810
            
            
            
            6,405
            
            
            
            5,148
            
            
            
            4,710
            
            
            
            4,271Selling,
      general and administrative expenses (exclusive of depreciation and
      amortization shown separately below)
            
            
            2,790
            
            
            
            2,595
            
            
            
            2,280
            
            
            
            2,390
            
            
            
            2,232Fees
      incurred pursuant to local service agreements with Nexstar Broadcasting,
      Inc.(3)
            
            
            7,425
            
            
            
            8,090
            
            
            
            7,860
            
            
            
            7,820
            
            
            
            11,400Impairment
      of goodwill
            
            
            261
            
            
            
            1,289
            
            
            
            —
            
            
            
            —
            
            
            
            —Impairment
      of other intangible assets
            
            
            1,997
            
            
            
            10,149
            
            
            
            —
            
            
            
            —
            
            
            
            —Gain
      on asset exchange
            
            
            (2,385
            )
            
            
            (869
            )
            
            
            (317
            )
            
            
            —
            
            
            
            —(Gain)
      loss on asset disposal, net
            
            
            28
            
            
            
            (352
            )
            
            
            92
            
            
            
            12
            
            
            
            94Amortization
      of broadcast rights
            
            
            4,681
            
            
            
            4,729
            
            
            
            4,269
            
            
            
            3,939
            
            
            
            4,408Depreciation
      and amortization
            
            
            8,806
            
            
            
            8,740
            
            
            
            8,603
            
            
            
            8,682
            
            
            
            8,918Income
      from operations
            
            
            4,410
            
            
            
            1,142
            
            
            
            9,347
            
            
            
            10,760
            
            
            
            1,777Interest
      expense
            
            
            (6,056
            )
            
            
            (9,472
            )
            
            
            (12,344
            )
            
            
            (12,315
            )
            
            
            (9,193
            )Loss
      on extinguishment of debt
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (269
            )
            
            
            (508
            )Interest
      income
            
            
            5
            
            
            
            53
            
            
            
            92
            
            
            
            60
            
            
            
            30Loss
      before income taxes
            
            
            (1,641
            )
            
            
            (8,277
            )
            
            
            (2,905
            )
            
            
            (1,764
            )
            
            
            (7,894
            )Income
      tax benefit (expense)
            
            
            (986
            )
            
            
            737
            
            
            
            (1,135
            )
            
            
            (1,172
            )
            
            
            (1,330
            )Net
      loss
            
            $
            (2,627
            )
            
            $
            (7,540
            )
            
            $
            (4,040
            )
            
            $
            (2,936
            )
            
            $
            (9,224
            )Balance
      Sheet Data (end of period):Cash
      and cash equivalents
            
            $
            903
            
            
            $
            1,426
            
            
            $
            9,916
            
            
            $
            3,577
            
            
            $
            1,404Working
      capital deficit
            
            
            (14,700
            )
            
            
            (18,141
            )
            
            
            (11,995
            )
            
            
            (20,024
            )
            
            
            (23,406
            )Net
      intangible assets and goodwill
            
            
            64,944
            
            
            
            71,995
            
            
            
            82,226
            
            
            
            87,588
            
            
            
            92,984Total
      assets
            
            
            103,031
            
            
            
            110,078
            
            
            
            118,955
            
            
            
            117,726
            
            
            
            119,804Total
      debt
            
            
            172,360
            
            
            
            174,087
            
            
            
            175,814
            
            
            
            170,541
            
            
            
            172,268Total
      shareholder’s deficit
            
            
            (104,654
            )
            
            
            (102,027
            )
            
            
            (94,487
            )
            
            
            (91,947
            )
            
            
            (89,011
            )Cash
      Flow Data:Net
      cash provided by (used for):Operating
      activities
            
            $
            4,196
            
            
            $
            8,768
            
            
            $
            3,908
            
            
            $
            6,516
            
            
            $
            3,220Investing
      activities
            
            
            (1,171
            )
            
            
            (15,531
            )
            
            
            (2,842
            )
            
            
            (2,616
            )
            
            
            (7,529
            )Financing
      activities
            
            
            (3,548
            )
            
            
            (1,727
            )
            
            
            5,273
            
            
            
            (1,727
            )
            
            
            (1,268
            )Other
      Financial Data:Capital
      expenditures, net of proceeds from asset sales
            
            $
            1,171
            
            
            $
            8,102
            
            
            $
            2,455
            
            
            $
            2,616
            
            
            $
            1,400Cash
      payments for broadcast rights
            
            
            1,866
            
            
            
            1,773
            
            
            
            1,678
            
            
            
            1,726
            
            
            
            2,211





(1)
            Net
      broadcast revenue is defined as revenue, excluding revenue from Nexstar
      Broadcasting, Inc.


(2)
            We
      have joint sales agreements with Nexstar, which permits Nexstar to sell
      and retain a percentage of the net revenue from the advertising time on
      our stations in return for monthly payments to us of the remaining
      percentage of the net revenue. We also have time brokerage agreements with
      Nexstar that allow Nexstar to program most of the broadcast time for us,
      sell the advertising time and retain the advertising revenue generated in
      exchange for monthly payments to
us.


(3)
            We
      have shared services agreements with Nexstar, which allows the sharing of
      services including news production, technical maintenance and security, in
      exchange for Nexstar’s right to receive certain payments from
      us.





17


Item 7.                      Management’s
Discussion and Analysis of Financial Condition and Results of
Operations




The
following discussion and analysis should be read in conjunction with
Item 6. “Selected Financial Data” and the financial statements and related
notes included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
As used in this discussion, unless the context indicates otherwise, “Mission”
refers to Mission Broadcasting, Inc., and all references to “we”, “our”, “us”
and the “Company” refer to Mission.




Overview
of Operations




As of
December 31, 2009, we owned and operated 16 television stations. We have
local service agreements with certain television stations owned by Nexstar
Broadcasting, Inc. (“Nexstar”), through which Nexstar provides various
programming, sales or other services to our television stations. In order for
both Nexstar and us to comply with Federal Communications Commission (“FCC”)
regulations, we maintain complete responsibility for and control over
programming, finances, personnel and operations of our stations.




The
following table summarizes the various local service agreements our stations had
in effect as of December 31, 2009 with Nexstar:





Service Agreements
            StationsTBA Only (1)
            WFXP
      and KHMTSSA & JSA (2)
            KJTL,
      KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WFXW, WYOU, KODE,
      KTVE and WTVO





(1)
            We
      have a time brokerage agreement (“TBA”) for each of these stations which
      allows Nexstar to program most of each station’s broadcast time, sell each
      station’s advertising time and retain the advertising revenue generated in
      exchange for monthly payments to
us.


(2)
            We
      have both a shared services agreement (“SSA”) and a joint services
      agreement (“JSA”) for each of these stations. The SSA allows the sharing
      of services including news production, technical maintenance and security,
      in exchange for Nexstar’s right to receive certain payments from us as
      described in the SSAs. The JSAs permit Nexstar to sell the station’s
      advertising time and retain a percentage of the net revenue from the
      station’s advertising time in return for monthly payments to us of the
      remaining percentage of the net revenue, as described in the
      JSAs.




In
conjunction with its acquisition of KTVE, the NBC affiliate in the Monroe,
Louisiana – El Dorado, Arkansas market, effective January 16, 2008, Mission
entered into a SSA and JSA with Nexstar. The terms of the SSA and JSA are
comparable to the terms of the SSAs and JSAs between Nexstar and Mission as
discussed above.




The
arrangements under the SSAs and JSAs have had the effect of Nexstar receiving
substantially all of the available cash, after debt service costs, generated by
the stations listed above. The arrangements under the TBAs have also had the
effect of Nexstar receiving substantially all of the available cash generated by
the TBA stations listed above. Mission anticipates that Nexstar will continue to
receive substantially all of Mission’s available cash, after payments for debt
service costs, generated by the stations listed above. For more information
about our local service agreements with Nexstar, refer to Note 5 of our
financial statements in Part IV, Item 15(a) of this Annual Report on Form
10-K.




Nexstar
Broadcasting Group, Inc. and its subsidiaries (“Nexstar Broadcasting Group”)
guarantee all obligations incurred under our senior credit facility. We are a
guarantor of the senior credit facility entered into by Nexstar and the senior
subordinated notes issued by Nexstar. In consideration of Nexstar’s guarantee of
our senior credit facility, our sole shareholder has granted Nexstar purchase
options to acquire the assets and assume the liabilities of each of our
television stations, subject to FCC consent. These option agreements (which
expire on various dates between 2011 and 2018) are freely exercisable or
assignable by Nexstar without consent or approval by our sole shareholder. We
expect these option agreements to be renewed upon expiration.




The
operating revenue of our stations is derived primarily from broadcast
advertising revenue sold and collected by Nexstar and paid to us under the JSAs.
Broadcast advertising revenue is affected by a number of factors, including the
economic conditions of the markets in which we operate, the demographic makeup
of those markets and the marketing strategy employed in each market. Advertising
revenue is positively affected by strong local economies, national and regional
political election campaigns, and certain events such as the Olympic Games or
the Super Bowl. Because television broadcast stations rely on advertising
revenue, declines in advertising budgets, particularly in recessionary periods,
adversely affect the broadcast industry, and as a result may contribute to a
decrease in the revenue of broadcast television stations. The stations’
advertising revenue is generally highest in the second and fourth quarters of
each year, due in part to increases in consumer advertising in the spring and
retail advertising in the period leading up to, and including, the holiday
season. In addition, advertising revenue is generally higher during
even-numbered years resulting from political advertising and advertising aired
during the Olympic Games.


18




Each of
our stations has a network affiliation agreement pursuant to which the network
provides programming to the station during specified time periods, including
prime time. NBC, CBS and ABC compensate some of our affiliated stations for
distributing the network’s programming over the air and for allowing the network
to keep a portion of advertising inventory during those time periods. The
affiliation agreements with Fox and MyNetworkTV do not provide for compensation.
In recent years, in conjunction with the renewal of affiliation agreements with
NBC, CBS and ABC, the amount of network compensation has been declining from
year to year. We expect this trend to continue in the future. Therefore, revenue
associated with network compensation agreements is expected to decline in future
years and may be eliminated altogether at some point in time.




Each
station acquires licenses to broadcast programming in non-news and non-network
time periods. The licenses are either purchased from a program distributor for
cash or the program distributor is allowed to sell some of the advertising
inventory as compensation to eliminate or reduce the cash cost for the license.
The latter practice is referred to as barter broadcast rights. The station
records the estimated fair market value of the licenses, including any
advertising inventory given to the program distributor, as a broadcast right
asset and liability. Barter broadcast rights are recorded at management’s
estimate of the value of the advertising time exchanged using historical
advertising rates, which approximates the fair value of the program material
received. The assets are amortized as a component of amortization of broadcast
rights. Amortization is computed using the straight-line method based on the
license period or usage, whichever yields the greater expense. The cash
broadcast rights liabilities are reduced by monthly payments while the barter
liability is amortized over the life of the contract as barter
revenue.




Our
primary operating expense consists of fixed monthly SSA fees paid to Nexstar for
news production and technical and other services. To a lesser extent our
operating expenses include employee compensation and related benefits. A large
percentage of the costs involved in the operation of our stations remains
fixed.




Pending
Transaction




On
April 11, 2006, we and Nexstar filed an application with the FCC for
consent to assignment of the license for KFTA Channel 24 (Ft. Smith, Arkansas)
from Nexstar to us. Consideration for this transaction is set at $5.6 million.
Also in 2006, we entered into an affiliation agreement with the Fox network
which provides Fox programming to KFTA. On August 28, 2006, we and Nexstar
entered into a local service agreement whereby we pay Nexstar for the right to
broadcast programming on KFTA and Nexstar pays us for the right to sell all
advertising time within certain time periods. The time brokerage agreement will
terminate upon the assignment of KFTA’s FCC license from Nexstar to us. Upon
completing the assignment of KFTA’s license, we plan to enter into joint sales
and shared services agreements with Nexstar-owned KNWA in Fort
Smith-Fayetteville-Springdale-Rogers, Arkansas, whereby KNWA will provide local
news, sales and other non-programming services to KFTA. In March 2008, the FCC
granted the application to assign the license for KFTA from Nexstar to Mission
with certain restrictions. Mission and Nexstar are appealing the
restrictions.




Historical
Performance




Revenue




The
following table sets forth the principal types of revenue earned by our stations
for the periods indicated and each type of revenue (other than barter revenue
and revenue from Nexstar Broadcasting, Inc.) as a percentage of total gross
revenue:





Year Ended
      December 31,2009
            
            
            2008
            
            
            2007Amount
            
            
            %
            
            
            Amount
            
            
            %
            
            
            Amount
            
            
            %(dollars
      in thousands)Retransmission
      compensation
            
            $
            4,883
            
            
            
            81.8
            
            
            $
            2,982
            
            
            
            72.8
            
            
            $
            2,423
            
            
            
            55.1Network
      compensation
            
            
            1,000
            
            
            
            16.7
            
            
            
            1,013
            
            
            
            24.7
            
            
            
            1,842
            
            
            
            41.8Other
            
            
            87
            
            
            
            1.5
            
            
            
            101
            
            
            
            2.5
            
            
            
            136
            
            
            
            3.1Net
      broadcast revenue before barter revenue
            
            
            5,970
            
            
            
            100.0
            
            
            
            4,096
            
            
            
            100.0
            
            
            
            4,401
            
            
            
            100.0Barter
      revenue
            
            
            2,418
            
            
            
            
            
            
            
            2,539
            
            
            
            
            
            
            
            2,325Revenue
      from Nexstar Broadcasting, Inc.
            
            
            25,435
            
            
            
            
            
            
            
            35,283
            
            
            
            
            
            
            
            30,556Net
      revenue
            
            $
            33,823
            
            
            
            
            
            
            $
            41,918
            
            
            
            
            
            
            $
            37,282







19




Results
of Operations




The
following table sets forth a summary of our operations for the periods indicated
and their percentages of net revenue:





Year Ended
      December 31,2009
            
            
            2008
            
            
            2007Amount
            
            
            %
            
            
            Amount
            
            
            %
            
            
            Amount
            
            
            %(dollars
      in thousands)Net
      revenue
            
            $
            33,823
            
            
            
            100.0
            
            
            $
            41,918
            
            
            
            100.0
            
            
            $
            37,282
            
            
            
            100.0Operating
      expenses (income):Corporate
      expenses
            
            
            1,263
            
            
            
            3.7
            
            
            
            908
            
            
            
            2.2
            
            
            
            954
            
            
            
            2.6Station
      direct operating expenses
            
            
            5,810
            
            
            
            17.2
            
            
            
            6,405
            
            
            
            15.3
            
            
            
            5,148
            
            
            
            13.8Selling,
      general and administrative expenses
            
            
            1,527
            
            
            
            4.5
            
            
            
            1,687
            
            
            
            4.0
            
            
            
            1,326
            
            
            
            3.6Fees
      incurred pursuant to local service agreements with Nexstar Broadcasting,
      Inc.
            
            
            7,425
            
            
            
            22.0
            
            
            
            8,090
            
            
            
            19.3
            
            
            
            7,860
            
            
            
            21.1Gain
      on asset exchange
            
            
            (2,385
            )
            
            
            (7.1
            )
            
            
            (869
            )
            
            
            (2.1
            )
            
            
            (317
            )
            
            
            (0.9
            )(Gain)
      loss on asset disposal, net
            
            
            28
            
            
            
            0.1
            
            
            
            (352
            )
            
            
            (0.8
            )
            
            
            92
            
            
            
            0.2Trade
      and barter expense
            
            
            2,418
            
            
            
            7.1
            
            
            
            2,539
            
            
            
            6.1
            
            
            
            2,325
            
            
            
            6.2Depreciation
      and amortization
            
            
            8,806
            
            
            
            26.0
            
            
            
            8,740
            
            
            
            20.9
            
            
            
            8,603
            
            
            
            23.1Impairment
      of goodwill
            
            
            261
            
            
            
            0.8
            
            
            
            1,289
            
            
            
            3.1
            
            
            
            —
            
            
            
            —Impairment
      of other intangible assets
            
            
            1,997
            
            
            
            5.9
            
            
            
            10,149
            
            
            
            24.2
            
            
            
            —
            
            
            
            —Amortization
      of broadcast rights, excluding barter
            
            
            2,263
            
            
            
            6.7
            
            
            
            2,190
            
            
            
            5.2
            
            
            
            1,944
            
            
            
            5.2Income
      from operations
            
            $
            4,410
            
            
            
            
            
            
            $
            1,142
            
            
            
            
            
            
            $
            9,347




Year
Ended December 31, 2009 Compared to Year Ended December 31,
2008




Revenue




Net
revenue for the year ended December 31, 2009, decreased by $8.1 million, or
19.3%, from the same period in 2008. This decrease was primarily attributed to
the decrease in revenue from Nexstar, partially offset by an increase in
retransmission compensation, as discussed below.




Revenue
from Nexstar was $25.4 million for the year ended December 31, 2009,
compared to $35.3 million for the same period in 2008, a decrease of $9.9
million, or 27.9%. The decrease was primarily attributed to a decrease in the
local, national and political revenue that Nexstar generated from selling all of
the advertising of our stations, which in turn decreased the revenue we earned
from Nexstar through the JSAs.




Compensation
from retransmission consent and network affiliation agreements was $5.9 million
for the year ended December 31, 2009, compared to $4.0 million for the same
period in 2008, an increase of $1.9 million, or 47.3%. The increase was
primarily due to an increase in the compensation we receive under retransmission
consent agreements which resulted from cable agreements being renegotiated at
higher rates at the end of 2008.




Operating
Expenses




Corporate
expenses were $1.3 million for the year ended December 31, 2009 compared to
$0.9 million for the same period in 2008, an increase of $0.4 million or
39.1%.  The increase was primarily due to legal fees associated with
the amendment of the credit facility in 2009, combined with a reduction in
employee bonuses in 2008.  Corporate expense relates to costs
associated with the centralized management of our stations.




Station
direct operating expenses, consisting primarily of news, engineering and
programming, and selling, general and administrative expenses decreased by $0.8
million, or 9.3% for the year ended December 31, 2009, compared to the same
period in 2008. The decrease was primarily due to a reduction in network fees, a
decrease in utilities expense as a result of switching to DTV and a reduction in
medical health claims.




Local
service agreement fees associated with Nexstar relate to services provided by
Nexstar in the production of newscasts, technical maintenance, promotional and
administrative support under the SSAs. SSA fees decreased by $0.7 million, or
8.2%, for the year ended December 31, 2009 compared to the same period in
2008. These fees decreased due to the elimination of the newscast in
Wilkes-Barre in the first quarter of 2009.


20




In 2009,
we recorded an impairment charge of $2.3 million that included an impairment to
the carrying values of FCC licenses of $2.0 million, related to eight of our
stations and an impairment to the carrying values of goodwill of $0.3 million,
related to one reporting unit consisting of one of our television
stations.  We recorded impairment charges of $11.4 million during 2008
that included an impairment to the carrying values of FCC licenses of $8.7
million, related to 9 of our television stations; an impairment to the carrying
value of network affiliation agreements of $1.4 million, related to 2 of our
television stations; and an impairment to the carrying values of goodwill of
$1.3 million, related to 3 of our television stations. As required by the
authoritative guidance for goodwill and other intangible assets, we tested our
FCC licenses and goodwill for impairment at September 30, 2009, between the
required annual tests, because we believed events had occurred and circumstances
changed that would more likely than not reduce the fair value of our reporting
units below their carrying amounts and that our FCC licenses might be
impaired.  These events and circumstances include the overall economic
recession and a continued decline in demand for advertising at several of our
stations.  See Note 7 in the Notes to Financial Statements in Item 8
of this document.




Amortization
of broadcast rights, excluding barter, increased by $0.1 million, or 3.3%, for
the year ended December 31, 2009, compared to the same period in 2008. The
increase was primarily due to the write-down of broadcast rights related to a
program at one of the stations.




Amortization
of intangible assets decreased by $0.3 million or 4.7% for the year ended
December 31, 2009, compared to the same period in 2008.  The decrease
was due to the 2008 impairment of network affiliation agreements at two
stations.




Depreciation
of property and equipment increased by $0.3 million, or 9.6%, for the year ended
December 31, 2009, compared to the same period in 2008.  The
increase was primarily due to new additions relating to the exchange of
equipment with Sprint Nextel.




For the
years ended December 31, 2009 and 2008, we recognized gains of $2.4 million
and $0.9 million, respectively from the exchange of equipment under an
arrangement with Sprint Nextel Corporation. During 2008, we recognized a gain of
$0.5 million related to an insurance recovery of a casualty loss, partially
offset by a loss on disposal of assets of $0.1 million.




Income
from Operations




Income
from operations was $4.4 million for the year ended December 31, 2009,
compared to $1.1 million for the same period of 2008, an increase of $3.3
million, or 286.2%. Income from operations increased primarily due to the
reduction in the impairment charge; the reduction in station direct operating
expenses, including selling, general and administrative expenses; the reduction
in LSA fees; the increase in gain on asset exchange; partially offset by the
decrease in net revenue.




Interest
Expense




Interest
expense, including amortization of debt financing costs, decreased by $3.4
million, or 36.1%, for the year ended December 31, 2009, compared to the
same period in 2008. The decrease in interest expense was primarily attributed
to lower average interest rates incurred during the year ended December 31,
2009 compared to the same period in 2008.




Income
Taxes




Income
tax expense was $1.0 million for the year ended December 31, 2009, compared to
income tax benefit of $0.7 million for the same period in 2008, an increase of
$1.7 million or 233.8%. The increase was primarily due to the tax benefit
recognized in 2008 as a result of the impairment charge on indefinite-lived
assets. Our provision for income taxes is primarily created by an increase in
the deferred tax liabilities position during the year arising from the
amortizing of goodwill and other indefinite-lived intangible assets for income
tax purposes which are not amortized for financial reporting purposes. The 2008
impairment charge reduced the book value and therefore decreased the deferred
tax liability position. No tax benefit was recorded with respect to the losses
for 2009 and 2008, as the utilization of such losses is not likely to be
realized in the foreseeable future.




Year
Ended December 31, 2008 Compared to Year Ended December 31,
2007.




Revenue




Net
revenue for the year ended December 31, 2008, increased by $4.6 million, or
12.4%, from the same period in 2007. This increase was primarily attributed to
the increase in revenue from Nexstar.




Revenue
from Nexstar was $35.3 million for the year ended December 31, 2008,
compared to $30.6 million for the same period in 2007, an increase of $4.7
million, or 15.5%. The increase was primarily attributed to an increase in the
political revenue that Nexstar generated from selling all of the advertising of
our stations, which in turn increased the revenue we earned from Nexstar through
the JSAs.




Compensation
from retransmission consent and network affiliation agreements was $4.0 million
for the year ended December 31, 2008, compared to $4.3 million for the same
period in 2007, a decrease of $0.3 million, or 6.3%. The increase was primarily
due to an increase in the compensation we receive under retransmission consent
agreements which resulted from increases in the number cable and satellite
subscribers in our markets.


21




Operating
Expenses




Corporate
expenses were $0.9 million for the year ended December 31, 2008.
Corporate expense relates to costs associated with the centralized management of
our stations.




Station
direct operating expenses, consisting primarily of news, engineering and
programming, and selling, general and administrative expenses increased by $1.6
million, or 25.0% for the year ended December 31, 2008, compared to the
same period in 2007. Of the increase $1.2 million was due to the addition of
KTVE which was acquired in January 2008.




Local
service agreement fees associated with Nexstar relate to services provided by
Nexstar in the production of newscasts, technical maintenance, promotional and
administrative support under the SSAs. SSA fees increased by $0.2 million, or
2.9%, for the year ended December 31, 2008 compared to the same period in
2007. These fees increased due to the addition of KTVE in January
2008.




We
recorded impairment charges of $11.4 million during 2008 that included an
impairment to the carrying values of FCC licenses of $8.7 million, related to 9
of our television stations; an impairment to the carrying value of network
affiliation agreements of $1.4 million, related to 2 of our television stations;
and an impairment to the carrying values of goodwill of $1.3 million, related to
3 of our television stations. See Note 7 in the Notes to Financial Statements in
Item 8.




Amortization
of broadcast rights, excluding barter, increased by $0.2 million, or 12.7%, for
the year ended December 31, 2008, compared to the same period in 2007. The
increase was primarily due to the addition of KTVE in 2008.




Amortization
of intangible assets was $5.4 million for both the years ended December 31,
2008 and 2007.




Depreciation
of property and equipment increased by $0.1 million, or 3.0%, for the year ended
December 31, 2008, compared to the same period in 2007.




For the
years ended December 31, 2008 and 2007, we recognized non-cash gains of
$0.9 million and $0.3 million, respectively from the exchange of equipment under
an arrangement we first transacted with Sprint Nextel Corporation in the third
quarter of 2007. Additionally, we recognized a gain of $0.5 million related to
an insurance recovery of a casualty loss, partially offset by a loss on disposal
of assets of $0.1 million.




Income
from Operations




Income
from operations was $1.1 million for the year ended December 31, 2008,
compared to $9.3 million for the same period of 2007, a decrease of $8.2
million, or 87.8%. Income from operations decreased primarily due to the
non-cash impairment charge related to goodwill and other intangible assets,
combined with an increase in operating costs from newly acquired KTVE, partially
offset by the increase in net revenue.




Interest
Expense




Interest
expense, including amortization of debt financing costs, decreased by $2.9
million, or 23.3%, for the year ended December 31, 2008, compared to the
same period in 2007. The decrease in interest expense was primarily attributed
to lower average interest rates incurred during the year ended December 31,
2008 compared to the same period in 2007, partially offset by an increase in the
average amount outstanding during 2008 under our senior credit
facility.




Income
Taxes




Income
tax benefit was $0.7 million for the year ended December 31, 2008, compared to
income tax expense of $1.1 million for the same period in 2007, a decrease of
$1.8 million. The decrease was primarily due to the tax benefit recognized as a
result of the impairment charge on indefinite-lived assets. Our provision for
income taxes is primarily created by an increase in the deferred tax liabilities
position during the year arising from the amortizing of goodwill and other
indefinite-lived intangible assets for income tax purposes which are not
amortized for financial reporting purposes. The impairment charge reduced the
book value and therefore decreased the deferred tax liability position. No tax
benefit was recorded with respect to the losses for 2008 and 2007, as the
utilization of such losses is not likely to be realized in the foreseeable
future.


22




Liquidity
and Capital Resources




We are
highly leveraged, which makes us vulnerable to changes in general economic
conditions. Our ability to meet the future cash requirements described below
depends on our ability to generate cash in the future, which is subject to
general economic, financial, competitive, legislative, regulatory and other
conditions, many of which are beyond our control. Our ability to meet future
cash requirements is also dependent upon the local service agreements we have
entered into with Nexstar. Under our local service agreements, Nexstar sells our
advertising time and pays us a percentage of the amount collected. The payments
we receive from Nexstar under the local service agreements are a significant
component of our cash flows. On March 9, 2010, Nexstar represented to us
that it will continue the various local service agreements under which it
provides sales and other services to our television stations thereby providing
financial support to enable us to continue to operate as a going concern. We
believe that with Nexstar’s pledge to continue the local service agreements, our
available cash, anticipated cash flow from operations and available borrowings
under our senior credit facility should be sufficient to fund working capital,
capital expenditure requirements, interest payments and scheduled debt principal
payments for at least the next twelve months from December 31, 2009. In
order to meet future cash needs we may, from time to time, borrow under our
available credit facility. We will continue to evaluate the best use of our
operating cash flow among capital expenditures, acquisitions and debt
reduction.




Overview




The
following tables present summarized financial information management believes is
helpful in evaluating the Company’s liquidity and capital
resources:





Year Ended
      December 31,2009
            
            
            2008
            
            
            2007(in
      thousands)Net
      cash provided by operating activities
            
            $
            4,196
            
            
            $
            8,768
            
            
            $
            3,908Net
      cash used for investing activities
            
            
            (1,171
            )
            
            
            (15,531
            )
            
            
            (2,842
            )Net
      cash provided by (used for) financing activities
            
            
            (3,548
            )
            
            
            (1,727
            )
            
            
            5,273Net
      increase (decrease) in cash and cash equivalents
            
            $
            (523
            )
            
            $
            (8,490
            )
            
            $
            6,339Cash
      paid for interest
            
            $
            5,848
            
            
            $
            9,441
            
            
            $
            12,369Cash
      paid for income taxes, net
            
            $
            80
            
            
            $
            75
            
            
            $
            —





December 31,2009
            
            
            2008(in
      thousands)Cash
      and cash equivalents
            
            $
            903
            
            
            $
            1,426Long-term
      debt including current portion
            
            $
            172,360
            
            
            $
            174,087Unused
      commitments under senior secured credit facility(1)
            
            $
            8,000
            
            
            $
            8,000





(1)
            As
      of December 31, 2009, all $8.0 million of total unused commitments
      under Mission’s credit facility were available for
    borrowing.




Cash
Flows – Operating Activities




The
comparative net cash flows provided by operating activities decreased by $4.6
million during the year ended December 31, 2009 compared to the same period
in 2008. The decrease was primarily due to the overall decrease in net revenue
of $8.1 million, partially offset by the decrease in cash paid for interest of
$3.6 million.




Cash paid
for interest decreased $3.6 million for the year ended December 31, 2009
compared to the same period in 2008 due to lower average interest rates incurred
in 2009 compared to 2008.




The
comparative net cash flows provided by operating activities increased by $4.9
million during the year ended December 31, 2008 compared to the same period
in 2007. The increase was primarily due to: (1) our increase in net revenue
of $4.6 million, partially offset by an increase in direct operating and general
and administrative expenses of $1.6 million; (2) a decrease in cash paid
for interest of $2.9 million; and (3) an increase of $0.7 million in cash
flows from deferred revenue, partially offset by a decrease of $1.5 million
resulting from the timing of payments made to reduce our payable to
Nexstar.




Cash paid
for interest decreased $2.9 million for the year ended December 31, 2008
compared to the same period in 2007 due to lower average interest rates incurred
in 2008 compared to 2007, partially offset by an increase in the average amount
outstanding during 2008 under the senior credit facility.




Due to
our recent history of net operating losses, we currently do not pay any federal
income taxes. These net operating losses may be carried forward, subject to
expiration and certain limitations, and used to reduce taxable earnings in
future years. Through the use of available loss carryforwards, it is possible
that we may not pay significant amounts of federal income taxes in the
foreseeable future.


23




Cash
Flows – Investing Activities




The
comparative net cash flows used for investing activities decreased by $14.4
million during the year ended December 31, 2009 compared to the same period
in 2008. Cash flows from investing activities consisted of cash used for capital
additions.




Capital
expenditures were $1.2 million for the year ended December 31, 2009,
compared to $8.2 million for the same period in 2008. The decrease was primarily
attributed to the conversion of more stations to DTV in 2008.




The
comparative net cash flows used for investing activities increased by $12.7
million during the year ended December 31, 2008 compared to the same period
in 2007. Cash flows from investing activities consisted of cash used for capital
additions and acquisition-related payments.




Capital
expenditures were $8.2 million for the year ended December 31, 2008,
compared to $2.5 million for the same period in 2007. The increase was primarily
attributed to digital conversion expenditures, which increased from $2.3 million
in 2007 to $7.3 million in 2008.




Acquisition
related payments for the years ended December 31, 2008 and 2007 were $7.9
million and $0.4 million, respectively, both of which were related to the
acquisition of KTVE. The $0.4 million spent in 2007 related to the down payment
on KTVE and the remainder was paid in 2008.




Cash
Flows – Financing Activities




The
comparative net cash flows from financing activities decreased by $1.8 million
during the year ended December 31, 2009 compared to the same period in 2008
due to payments for debt finance costs related to the October 2009 amendment of
our senior credit facility.  Scheduled term loan maturities under our
senior secured credit facility were $1.7 million for both the years ended
December 31, 2009 and 2008.




The
comparative net cash flows from financing activities decreased by $7.0 million
during the year ended December 31, 2008 compared to the same period in 2007
due to $7.0 million of proceeds from revolving loan borrowings made in 2007
under our senior secured credit facility. The $7.0 million borrowing in December
2007 was made in contemplation of closing on our pending acquisition of KTVE. We
made a remaining payment of $7.4 million on January 16, 2008 to complete
our acquisition of KTVE. Scheduled term loan maturities under our senior secured
credit facility were $1.7 million for both the years ended December 31,
2008 and 2007.




Although
our senior credit facility now allows for the payment of cash dividends, we do
not currently intend to declare or pay a cash dividend.




Future
Sources of Financing and Debt Service Requirements




As of
December 31, 2009, we had debt of $172.4 million, which represented 254.6%
of our total capitalization. Our high level of debt requires that a substantial
portion of cash flow be dedicated to pay principal and interest on debt which
will reduce the funds available for working capital, capital expenditures,
acquisitions and other general corporate purposes.




The total
amount of borrowings available to us under the revolving loan commitment of our
senior secured credit facility is based on covenant calculations contained in
Nexstar’s credit agreement. As of December 31, 2009, $8.0 million of total
unused commitments under our credit facility were available for
borrowing.




The
following table summarizes the approximate aggregate amount of principal
indebtedness scheduled to mature for the periods referenced as of
December 31, 2009:





Total
            
            
            2010
            
            
            
            2011-2012
            
            
            
            2013-2014
            
            
            Thereafter(in
      thousands)Mission
      senior credit facility
            
            $
            172,360
            
            
            $
            1,727
            
            
            $
            170,633
            
            
            $
            —
            
            
            $
            —




Interest
payments on our senior credit facility are generally paid every one to three
months and are payable based on the type of interest rate selected.




The terms
of our senior credit facility limit, but do not prohibit, us from incurring
substantial amounts of additional debt in the future.




We do not
have any rating downgrade triggers that would accelerate the maturity dates of
our debt. However, a downgrade in our credit rating could adversely affect our
ability to renew existing, or obtain access to new, credit facilities in the
future and could increase the cost of such facilities.


24




Collateralization
and Guarantees of Debt




Nexstar
Broadcasting Group and its subsidiaries guarantee full payment of all
obligations under our bank credit facility in the event of our default.
Similarly, we are a guarantor of Nexstar’s bank credit facility and the senior
subordinated notes issued by Nexstar. The bank credit facilities are
collateralized by a security interest in substantially all the combined assets,
excluding FCC licenses, of Nexstar and us. As of December 31, 2009, Nexstar
had a maximum commitment of $238.8 million under its bank credit facility, of
which $226.3 million of debt was outstanding, and had issued an aggregate
principal amount outstanding of $47.9 million of 7% senior subordinated notes
and $142.9 million of 7% PIK senior subordinated notes.




Debt
Covenants


Our
ability to continue as a going concern is dependent on Nexstar’s pledge to
continue the local services agreements described in a letter of support dated
March 9, 2010. Nexstar’s senior secured credit facility agreement contains
covenants which require them to comply with certain financial ratios, including:
(a) maximum total and senior leverage ratios, (b) a minimum interest coverage
ratio, and (c) a minimum fixed charge coverage ratio. The covenants, which are
calculated on a quarterly basis, include the combined results of Nexstar
Broadcasting and us. Our senior secured credit facility agreement does not
contain financial covenant ratio requirements; however it does include an event
of default if Nexstar does not comply with all covenants contained in its credit
agreement. On October 8, 2009, Nexstar amended its senior secured credit
facility to modify certain terms of the underlying credit
agreement.  The modifications included, but are not limited to,
changes to financial covenants, including the Consolidated Total Leverage Ratio
and Consolidated Senior Leverage Ratio, a general tightening of the
exceptions to the negative covenants (principally by means of reducing
the types and amounts of permitted transactions) and an increase to the
interest rates and fees payable with respect to the borrowings under the amended
credit agreement.   The following table compares the old and new
covenant requirements.





Prior
            
            As
      AmendedConsolidated
      Total Leverage Ratio:July
      1, 2009 through September 30, 2009
            6.50
      to 1.00
            
            6.75
      to 1.00October
      1, 2009 to December 31, 2009
            6.50
      to 1.00
            
            8.75
      to 1.00January
      1, 2010 through March 31, 2010
            6.50
      to 1.00
            
            9.50
      to 1.00April
      1, 2010 through June 30, 2010
            6.50
      to 1.00
            
            10.25
      to 1.00July
      1, 2010 through September 30, 2010
            6.25
      to 1.00
            
            9.25
      to 1.00October
      1, 2010 through and including March 31, 2011
            6.25
      to 1.00
            
            7.75
      to 1.00April
      1, 2011 and thereafter
            6.00
      to 1.00
            
            6.00
      to 1.00Consolidated
      Senior Leverage Ratio:July
      1, 2009 through September 30, 2009
            4.50
      to 1.00
            
            5.50
      to 1.00October
      1, 2009 to December 31, 2009
            4.50
      to 1.00
            
            7.00
      to 1.00January
      1, 2010 through March 31, 2010
            4.25
      to 1.00
            
            7.00
      to 1.00April
      1, 2010 through June 30, 2010
            4.25
      to 1.00
            
            7.50
      to 1.00July
      1, 2010 through September 30, 2010
            4.25
      to 1.00
            
            6.75
      to 1.00October
      1, 2010 through and including March 31, 2011
            4.25
      to 1.00
            
            5.50
      to 1.00April
      1, 2011 and thereafter
            4.00
      to 1.00
            
            4.00
      to 1.00




As of
September 30, 2009, Nexstar was in compliance with all indentures governing
their publicly-held notes.  As of September 30, 2009, Nexstar was not
in compliance with all covenants contained in the credit agreement governing
their senior secured credit facility.  The October 8, 2009 debt
amendment contained a limited waiver for the leverage ratios which cured the
violation as of September 30, 2009.  As of December 31, 2009, Nexstar
was in compliance with all covenants contained in the credit agreements
governing their senior secured credit facility and the indentures governing
their publicly-held notes.




On March
30, 2009, Nexstar closed an offer to exchange $143,600,000 of the 7% senior
subordinated notes due 2014 in exchange for $142,320,761 7% senior subordinated
PIK Notes due 2014 (the “PIK Notes”). Based on the financial covenants in the
Nexstar senior secured credit facility, the PIK Notes are not included in the
debt amount used to calculate the total leverage ratio until January
2011.




Nexstar
believes the consummation of the exchange offer and debt amendment along with
the actions described above, will allow Nexstar to maintain compliance with
all covenants contained in the credit agreements governing its senior
secured facility and the indentures governing its publicly held notes for a
period of at least the next twelve months from December 31, 2009.




Cash
Expenditures for DTV Conversion




On June
12, 2009, all full-power television broadcasters were required to cease
operating in an analog format and operate exclusively in digital (DTV)
format.  All of Mission’s stations have completed the transition from
analog to digital and hold DTV authorizations issued by the
FCC.


25




DTV
conversion expenditures were $1.0 million, $7.3 million and $2.3 million,
respectively, for the years ended December 31, 2009, 2008 and
2007.




Cash
Requirements for Pending Transaction




On
April 18, 2006, we and Nexstar announced that we had filed an application
with the FCC for consent to assignment of the license for KFTA Channel 24 (Ft.
Smith, Arkansas) from Nexstar to us. The FCC granted the application in March
2008 with certain restrictions. Mission and Nexstar are appealing the
restrictions. Consideration for this transaction was set at $5.6 million. We
intend to finance this transaction through cash on hand and borrowings under our
senior secured credit facility.




No
Off-Balance Sheet Arrangements




At
December 31, 2009, 2008 and 2007, we did not have any relationships with
unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or variable interest entities, which would
have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes. We are,
therefore, not materially exposed to any financing, liquidity, market or credit
risk that could arise if we had engaged in such relationships.




Contractual
Obligations




The
following summarizes our contractual obligations at December 31, 2009, and
the effect such obligations are expected to have on our liquidity and cash flow
in future periods:





Total
            
            
            2010
            
            
            
            2011-2012
            
            
            
            2013-2014
            
            
            Thereafter(in
      thousands)Senior
      credit facility
            
            $
            172,360
            
            
            $
            1,727
            
            
            $
            170,633
            
            
            $
            —
            
            
            $
            —Cash
      interest on debt
            
            
            23,346
            
            
            
            8,648
            
            
            
            14,698
            
            
            $
            —
            
            
            $
            —Broadcast
      rights current cash commitments (1)
            
            
            3,104
            
            
            
            1,579
            
            
            
            1,248
            
            
            
            277
            
            
            
            —Broadcast
      rights future cash commitments
            
            
            1,433
            
            
            
            230
            
            
            
            954
            
            
            
            242
            
            
            
            7Operating
      lease obligations
            
            
            23,780
            
            
            
            1,135
            
            
            
            2,420
            
            
            
            2,658
            
            
            
            17,567Total
      contractual cash obligations
            
            $
            224,023
            
            
            $
            13,319
            
            
            $
            189,953
            
            
            $
            3,177
            
            
            $
            17,574





(1)
            Excludes
      broadcast rights barter payable commitments recorded on the financial
      statements at December 31, 2009 in the amount of $3.0
      million.




As
discussed in Note 11, “Income Taxes” of the Notes to the Financial
Statements, we adopted interpretive guidance related to accounting for
uncertainty in income taxes as of January 1, 2007. At December 31,
2009, we had $3.7 million of unrecognized tax benefits. This liability
represents an estimate of tax positions that the corporation has taken in its
tax returns which may ultimately not be sustained upon examination by the tax
authorities. The resolution of these tax positions may not require cash
settlement due to the existence of net operating loss
carryforwards.




Critical
Accounting Policies and Estimates




Our
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) which requires
us to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenue and expenses
during the period. On an ongoing basis, we evaluate our estimates, including
those related to goodwill and intangible assets, bad debts, broadcast rights,
barter, income taxes, commitments and contingencies. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from those
estimates.




For an
overview of our significant accounting policies, we refer you to Note 2 to the
financial statements in Part IV, Item 15(a) of this Annual Report on Form
10-K. We believe the following critical accounting policies are those that are
the most important to the presentation of our financial statements, affect our
more significant estimates and assumptions, and require the most subjective of
complex judgments by management.




Valuation
of Goodwill and Intangible Assets




Approximately
$64.9 million, or 63.0%, of our total assets as of December 31, 2009
consisted of intangible assets. Intangible assets principally include FCC
licenses, goodwill and network affiliation agreements. If the fair value of
these assets is less than the carrying value, we may be required to record an
impairment charge.




As
required by authoritative guidance, we test the impairment of our FCC licenses
annually or whenever events or changes in circumstances indicate that such
assets might be impaired. The impairment test consists of a comparison of the
fair value of FCC licenses with their carrying amount on a station-by-station
basis using a discounted cash flow valuation method, assuming a hypothetical
startup scenario.


26




Also as
required by authoritative guidance, we test the impairment of our goodwill
annually or whenever events or changes in circumstances indicate that goodwill
might be impaired. The first step of the goodwill impairment test compares the
fair value of the station (“reporting unit”) to its carrying amount, including
goodwill. The fair value of a reporting unit is determined through the use of a
discounted cash flow analysis. The valuation assumptions used in the discounted
cash flow model reflect historical performance of the reporting unit and the
prevailing values in the markets for broadcasting properties. If the fair value
of the reporting unit exceeds its carrying amount, goodwill is not considered
impaired. If the carrying amount of the reporting unit exceeds its fair value,
the second step of the goodwill impairment test is performed to measure the
amount of impairment loss, if any. The second step of the goodwill impairment
test compares the implied fair value of goodwill with the carrying amount of
that goodwill. The implied fair value of goodwill is determined by performing an
assumed purchase price allocation, using the reporting unit’s fair value (as
determined in the first step described above) as the purchase price. If the
carrying amount of goodwill exceeds the implied fair value, an impairment loss
is recognized in an amount equal to that excess but not more than the carrying
value of goodwill.




In
accordance with authoritative guidance for accounting for the impairment or
disposal of long-lived assets, the Company tests network affiliation agreements
whenever events or circumstances indicate that their carrying amount may not be
recoverable, relying on a number of factors including operating results,
business plans, economic projections and anticipated future cash flows. An
impairment in the carrying amount of a network affiliation agreement is
recognized when the expected future operating cash flow derived from the
operations to which the asset relates is less than its carrying
value.




We
recorded an impairment charge of $2.3 million during the third quarter of 2009
that included an impairment to the carrying values of FCC licenses of $2.0
million, related to eight of our stations and an impairment to the carrying
values of goodwill of $0.3 million, related to one reporting unit consisting of
one of our television stations.  As required by the authoritative
guidance for goodwill and other intangible assets, we tested our FCC licenses
and goodwill for impairment at September 30, 2009, between the required annual
tests, because we believed events had occurred and circumstances changed that
would more likely than not reduce the fair value of our reporting units below
their carrying amounts and that our FCC licenses might be
impaired.  These events and circumstances include the overall economic
recession and a continued decline in demand for advertising at several of our
stations.




We
completed our annual test for impairment of goodwill and FCC licenses as of
December 31, 2009 which resulted in no additional impairment
charge.  Based on our annual assessment, the Company has no reporting
units at risk for impairment.




We tested
our network affiliation, FCC licenses and goodwill for impairment as of
September 30, 2008, between the required annual tests, because we believed
events had occurred and circumstances changed that would more likely than not
reduce the fair value of our reporting units below their carrying amounts and
that our FCC licenses and network affiliation agreements might be impaired.
These events included the decline in overall economic conditions and the
resulting decline in advertising revenues at some of our television stations. We
recorded an impairment charge of $5.9 million as a result of that test which
included an impairment to the carrying values of FCC licenses of $4.7 million,
related to 6 of our television stations; an impairment to the carrying value of
network affiliation agreements of $1.0 million, related to 2 of our television
stations; and an impairment to the carrying values of goodwill of $0.2 million,
related to 2 of our television stations.




We
performed our annual test for impairment at December 31, 2008 and due to
the continued decline in overall economic conditions during the fourth quarter
of 2008 and the further decline in our forecasts for advertising revenues at
some stations, the Company recorded an additional $5.5 million in impairment
charges, for an annual total of $11.4 million. Of the additional $5.5 million
impairment charges, $4.0 million was for FCC licenses, related to 9 of our
television stations, $0.4 million was for network affiliation agreements related
to 1 television station, and $1.1 million was for goodwill, related to 3 of our
television stations.




Further
deterioration in the advertising marketplaces in which Nexstar and Mission
operate could lead to further impairment and reduction of the carrying value of
the Company’s goodwill and intangible assets, including FCC licenses and network
affiliation agreements. If such a condition were to occur, the resulting
non-cash charge could have a material adverse effect on Nexstar and Mission’s
financial position and results of operations.




The
tables below illustrate how assumptions used in the fair value calculations
varied from period to period in 2009 and 2008. The increase in the discount rate
between third and fourth quarter 2008 reflects the volatility of stock prices of
public companies within the media sector along with the increase in the
corporate borrowing rate. The changes in the market growth rates and operating
profit margins reflect the general economic pressures impacting both the
national and a number of local economies, and specifically, national and local
advertising expenditures in the markets where our stations operate.




The
assumptions used in the valuation testing have certain subjective components
including anticipated future operating results and cash flows based on our own
internal business plans as well as future expectations about general economic
and local market conditions.


27




We based
the valuation of FCC licenses on the following basic assumptions:





September 30, 2009
            December 31, 2008
            September 30, 2008Market
      growth rates
            0.0% to 4.1%
            2.0% to 2.8%
            2.0% to 2.8%Operating
      profit margins
            11.5% to 24.3%
            11.9% to 25.4%
            12.1% to 25.4%Discount
      rate
            10.5%
            10.8%
            9.5%Tax
      rate
            35.2% to 40.6%
            34.0% to 40.6%
            34.0% to 40.6%Capitalization
      rate
            7.8% to 8.5%
            8.0%
      to 8.8%
            6.8% to 7.5%




We based
the valuation of network affiliation agreements on the following basic
assumptions:





September 30, 2009
            December 31, 2008
            September 30, 2008Market
      growth rates
            2.3% to 3.7%
            2.0% to 2.8%
            2.0% to 2.5%Operating
      profit margins
            20.0% to 30.8%
            14.0% to 26.3%
            14.3% to 26.4%Discount
      rate
            10.5%
            10.8%
            9.5%Tax
      rate
            35.2% to 40.6%
            34.0%
      to 39.6%
            34.0% to 39.6%Capitalization
      rate
            7.8% to 8.5%
            8.3%
      to 8.8%
            7.0% to 7.5%




We based
the valuation of goodwill on the following basic assumptions:





September 30, 2009
            December 31, 2008
            September 30, 2008Market
      growth rates
            0.0% to 4.1%
            2.0% to 2.8%
            2.0% to 2.8%Operating
      profit margins
            20.0% to 30.8%
            20.0% to 32.1%
            20.0% to 34.1%Discount
      rate
            10.5%
            10.8%
            9.5%Tax
      rate
            35.2% to 40.6%
            34.0%
      to 40.6%
            34.0% to 40.6%Capitalization
      rate
            7.8% to 8.5%
            8.0%
      to 8.8%
            6.8% to 7.5%




The
assumptions utilized for our annual impairment assessment for FCC licenses and
goodwill as of December 31,2009 were consistent with those utilized at September
30, 2009.




Allowance
for Doubtful Accounts




We
provide for allowances for doubtful accounts when necessary for estimated losses
resulting from the inability of our customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required. There was no allowance for doubtful accounts at December 31, 2009
and 2008 since the accounts receivable balance consisted primarily of billings
to cable and satellite carriers for compensation associated with retransmission
consent agreements and amounts due from the major television networks under the
network affiliation agreements.




Broadcast
Rights Carrying Amount




Broadcast
rights are stated at the lower of unamortized cost or net realizable value. Cash
broadcast rights are initially recorded at the amount paid or payable to program
distributors for the limited right to broadcast the distributors’ programming.
Barter broadcast rights are recorded at our estimate of the fair value of the
advertising time exchanged, which approximates the fair value of the programming
received. The fair value of the advertising time exchanged is estimated by
applying average historical rates for specific time periods. Amortization of
broadcast rights is computed using the straight-line method based on the license
period or programming usage, whichever period yields the shorter life. The
current portion of broadcast rights represents those rights available for
broadcast which will be amortized in the succeeding year. When projected future
net revenue associated with a program is less than the current carrying amount
of the program broadcast rights, for example, due to poor ratings, we write-down
the unamortized cost of the broadcast rights to equal the amount of projected
future net revenue. If the expected broadcast period was shortened or cancelled
, we would be required to write-off the remaining value of the related broadcast
rights to operations on an accelerated basis or possibly immediately. As of
December 31, 2009, the amounts of our current broadcast rights and
non-current broadcast rights were $3.0 million and $1.8 million,
respectively.




Characterization
of SSA Fees




We
present the fees incurred pursuant to SSAs with Nexstar as an operating expense
in our financial statements. Our decision to characterize the SSA fees in this
manner is based on our conclusion that (a) the benefit our stations receive
from these local service agreements is sufficiently separate from the
consideration paid to us from Nexstar under JSAs, (b) we can reasonably
estimate the fair value of the benefit our stations receive under the SSA
agreement, and (c) the SSA fee we pay to Nexstar does not exceed the
estimated fair value of the benefit our stations receive.


28




Barter
Transactions




We barter
advertising time for certain program material. These transactions, except those
involving exchange of advertising time for network programming, are recorded at
management’s estimate of the fair value of the advertising time exchanged, which
approximates the fair value of the program material received. The fair value of
advertising time exchanged is estimated by applying average historical
advertising rates for specific time periods. We recorded both barter revenue and
barter expense of $2.4 million, $2.5 million and $2.3 million for the years
ended December 31, 2009, 2008 and 2007, respectively.




Income
Taxes


We account for
income taxes under the asset and liability method which requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of temporary differences between the carrying amounts and tax basis of assets
and liabilities. A valuation allowance is applied against net deferred tax
assets if, based on the weight of available evidence, it is more likely than not
that some or all of the deferred tax assets will not be realized. While we have
considered future taxable income and feasible tax planning strategies in
assessing the need for a valuation allowance, in the event that we were to
determine that we would not be able to realize all or part of our deferred tax
assets in the future, an adjustment to the valuation allowance would be charged
to income in the period such a determination was made.




On
January 1, 2007, we adopted interpretive guidance related to income taxes,
which addresses the determination of whether tax benefits claimed or expected to
be claimed on a tax return should be recorded in the financial statements. Under
this guidance, we may recognize the tax benefit from an uncertain tax position
only if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities. The determination is based on the
technical merits of the position and presumes that each uncertain tax position
will be examined by the relevant taxing authority that has full knowledge of all
relevant information. For interest and penalties relating to income taxes we
recognize these items as components of income tax expense.




Claims
and Loss Contingencies




In the
normal course of business, we are party to various claims and legal proceedings.
We record a liability for these matters when an adverse outcome is probable and
the amount of loss is reasonably estimated. We consider a combination of factors
when estimating probable losses, including judgments about potential actions by
counterparties.




Nonmonetary
Asset Exchanges




In
connection with a spectrum allocation exchange ordered by the FCC within the 1.9
GHz band, Sprint Nextel Corporation (“Nextel”) is required to replace certain
existing analog equipment with comparable digital equipment. The Company has
agreed to accept the substitute equipment that Nextel will provide and in turn
must relinquish its existing equipment to Nextel. Neither party will have any
continuing involvement in the equipment transferred following the exchange. We
account for this arrangement as an exchange of assets in accordance with
accounting and disclosure requirements for exchanges of nonmonetary
assets.




These
transactions are recorded at the estimated fair market value of the equipment
received. We derive our estimate of fair market value from the most recent
prices paid to manufacturers and vendors for the specific equipment we acquire.
As equipment is exchanged, the Company records a gain to the extent that the
fair market value of the equipment received exceeds the carrying amount of the
equipment relinquished.




Recent
Accounting Pronouncements




In June
2009 the Financial Accounting Standards Board (“the FASB”) issued the FASB
Accounting Standards CodificationTM (“the Codification”). The Codification is the
official single source of authoritative U.S. generally accepted accounting
principles (“GAAP”). All existing accounting standards are superseded. All other
accounting guidance not included in the Codification is considered
non-authoritative. The Codification also includes all relevant Securities and
Exchange Commission (“SEC”) guidance organized using the same topical structure
in separate sections within the Codification. The Codification was effective for
our September 30, 2009 financial statements. The Codification does not change
existing GAAP. The principal impact on our financial statements from the
Codification adoption is limited to disclosures as all references to
authoritative accounting literature are now referenced in accordance with the
Codification.




In June
2009, the FASB issued an amendment to the accounting and disclosure requirements
for the consolidation of VIE’s.  This amendment requires an analysis
to determine whether a variable interest gives the entity a controlling
financial interest in a variable interest entity. The amendment requires an
ongoing reassessment and eliminates the quantitative approach previously
required for determining whether an entity is the primary beneficiary. This
amendment is effective for our fiscal year beginning January 1, 2010. We are
currently evaluating the impact of adopting this amendment on our consolidated
financial statements.


29




In June
2009, the FASB issued an amendment to the accounting and disclosure requirements
for transfers of financial assets.  This amendment removes the concept
of a qualifying special-purpose entity. This amendment also clarifies the
requirements for isolation and limitations on portions of financial assets that
are eligible for sale accounting. The amendment is effective for our fiscal year
beginning January 1, 2010. We are currently evaluating the impact of adopting
this amendment on our consolidated financial statements.




In May
2009, the FASB issued a general standard of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued.  This standard became
effective for our second quarter ended June 30, 2009.




In April
2009, the FASB issued a new accounting and disclosure requirement, which
increases the frequency of fair value disclosures from an annual to a quarterly
basis. The guidance relates to fair value disclosures for any financial
instruments that are not currently reflected on the balance sheet at fair value.
The new authoritative guidance is effective for interim and annual periods
ending after June 15, 2009.  We adopted this guidance in the
second quarter of 2009, and it did not impact our financial position or results
of operations.  It did, however, result in additional disclosures
related to the fair value of our debt.




In April
2009, the FASB issued guidance for estimating fair values when there is no
active market or where the price inputs being used represent distressed sales
and identifying circumstances that indicate a transaction is not orderly. This
guidance is effective for interim and annual reporting periods ending after
June 15, 2009. We adopted this guidance in the second quarter of 2009, and
it did not have any effect on the Company’s financial position or results of
operations.




In April
2008, the FASB issued guidance related to the determination of the useful life
of intangible assets. This guidance amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under the accounting and disclosure
requirements related to goodwill and other intangible assets. This new guidance
also provides additional disclosure requirements related to recognized
intangible assets. We adopted this guidance in January 2009 and it did not have
a material impact on our financial position or results of
operations.




In
January 2008, we adopted the FASB’s accounting and disclosure requirements
related to fair value measurements as they pertain to financial assets and
liabilities. The adoption did not have a material impact on our financial
position or results of operations. These new requirements established a
framework for measuring fair value, and enhanced the disclosures for fair value
measurements. This authoritative guidance applies when other accounting
pronouncements require or permit fair value measurements, but it does not
require new fair value measurements. In February 2008, the FASB issued a
one-year deferral for the application of this standard as it pertains to
non-financial assets and liabilities. We adopted this standard for non-financial
assets and liabilities in the first quarter of 2009. There were no material
effects on our financial statements upon adoption of this new accounting
pronouncement; however, this pronouncement could have a material impact in
future periods.




In
December 2007, the FASB issued authoritative guidance related to business
combinations, as well as guidance for the accounting and reporting of
noncontrolling interests in consolidated financial statements.  These
new standards significantly change the accounting for and reporting of business
combination transactions and noncontrolling (minority) interests in consolidated
financial statements. We adopted these standards on January 1, 2009. The
impact of adopting the standard related to business combinations will be
primarily limited to business combinations occurring on or after January 1,
2009. Adoption of the guidance related to noncontrolling interests in
consolidated financial statements had no impact on our financial position or
results of operations.




Item 7A.                      Quantitative
and Qualitative Disclosures About Market Risk




Interest
Rate Risk




Our
exposure to market risk for changes in interest rates relates primarily to our
long-term debt obligations.




All term
loan borrowings at December 31, 2009 under our senior credit facility bear
interest at 5.0%, which represented the base rate, or LIBOR, plus the applicable
margin, as defined. All revolving loan borrowings at December 31, 2009
under our senior credit facility bear interest at 5.0%, which represented the
base rate, or prime, plus the applicable margin, as defined. Interest is payable
in accordance with the credit agreement.




The
following table estimates the changes to cash flow from operations as of
December 31, 2009 if interest rates were to fluctuate by 100 or 50 basis
points, or BPS (where 100 basis points represents one percentage point), for a
twelve-month period:





Interest
      rate
                decrease
            
            
            Interest
      rate
                increase100 BPS
            
            
            50 BPS
            
            
            50 BPS
            
            
            100
      BPS(in
      thousands)
            
            
            (in
      thousands)Senior
      credit facility
            
            $
            1,724
            
            
            $
            862
            
            
            $
            (862
            )
            
            $
            (1,724
            )




The
estimated fair value of the Company’s total long-term debt at December 31,
2009 was approximately $161.5 million, which was approximately $10.9 million
less than its carrying value. Fair values are determined from quoted market
prices where available or based on estimates made by investment banking
firms.


30




Given the
interest rates that were in effect at December 31, 2008, as of that date,
we estimated that our cash flows from operations would have increased by
approximately $1.7 million and $0.9 million, respectively, for a 100 BPS and 50
BPS interest rate decrease, and decreased by approximately $0.9 million and $1.7
million, respectively, for a 50 BPS and 100 BPS interest rate
increase.




Impact
of Inflation




We
believe that our results of operations are not affected by moderate changes in
the inflation rate.




Item 8.
            Financial
      Statements and Supplementary Data




Our
Financial Statements are filed with this report. The Financial Statements and
supplementary data are included in Part IV, Item 15(a) of this Annual
Report on Form 10-K.




Item 9.
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure




None.




Item 9A.
            Controls
      and Procedures




Evaluation
of Disclosure Controls and Procedures




Mission’s
management, with the participation of Mission’s President and Treasurer (who is
Mission’s principal executive officer and principal financial and accounting
officer), conducted an evaluation as of the end of the period covered by this
report of the effectiveness of the design and operation of Mission’s disclosure
controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934.




Based
upon that evaluation, Mission’s President and Treasurer concluded that as of the
end of the period covered by this report Mission’s disclosure controls and
procedures were effective in ensuring that information required to be disclosed
by Mission in the reports it files or submits under the Securities Exchange Act
of 1934 (i) is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms and (ii) is accumulated and
communicated to Mission’s management, including its President and Treasurer, as
appropriate to allow timely decisions regarding required disclosure.




Changes
in Internal Control over Financial Reporting




During
the quarterly period as of the end of the period covered by this report, there
have been no changes in Mission’s internal control over financial reporting that
have materially affected, or are reasonably likely to materially affect,
Mission’s internal control over financial reporting.




Management’s
Report on Internal Control over Financial Reporting




Mission’s
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934. Mission’s internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles.




Management
assessed the effectiveness of Mission’s internal control over financial
reporting as of December 31, 2009 based upon the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based
on management’s assessment, we have concluded that, as of December 31,
2009, Mission’s internal control over financial reporting was effective based on
those criteria.




This
Annual Report on Form 10-K does not include an attestation report of Mission’s
independent registered public accounting firm regarding the effectiveness of
Mission’s internal control over financial reporting. Management’s report was not
subject to attestation by Mission’s independent registered public accounting
firm pursuant to temporary rules of the Securities and Exchange Commission that
permit Mission to provide only management’s report in this Annual Report on Form
10-K.




Item 9B.
            Other
      Information




None.


31




PART
III




Item 10.
            Directors,
      Executive Officers of the Registrant and Corporate
    Governance




The table
below sets forth information about Mission’s director and executive
officers:





Name
            Age
            Position
      With CompanyDavid
      S. Smith
            55
            President, Treasurer and DirectorNancie
      J. Smith
            57
            Vice
      President and SecretaryDennis
      Thatcher
            63
            Executive
      Vice President and Chief Operating
Officer




David S. Smith has served as
Mission’s President and Treasurer since December 1997. Prior to that,
Mr. Smith was the General Manager of WSTR television in Cincinnati, Ohio
from 1990 to 1995. He is currently an ordained Evangelical Lutheran Church of
America pastor at Zion Lutheran Church in Youngstown, Ohio.




Mr.
Smith’s qualifications for being a director of the Company include his years of
experience in the television broadcast industry.  He is also the sole
shareholder of the Company.




Nancie J. Smith has served as
Mission’s Vice President and Secretary since December 1997. Nancie J. Smith is
married to David S. Smith.




Dennis Thatcherhas served as
Executive Vice President and Chief Operating Officer since October 2004. From
November 2003 to March 2004, Mr. Thatcher served as Regional Market Manager
for United Media Partners. From November 2002 to October 2003, Mr. Thatcher
served as General Sales Manager of KZTV for Eagle Creek Broadcasting. From July
2000 to October 2002, Mr. Thatcher pursued personal interests. From April
1998 to June 2000, Mr. Thatcher served as Senior Vice President and Central
Regional Manager for Paxson Communications.




Code
of Ethics




Our sole
director adopted a code of ethics that applies to our president and treasurer,
vice president and secretary, and executive vice president and chief operating
officer. The purpose of the code of ethics is to promote honest and ethical
conduct, including the ethical handling of actual or apparent conflicts of
interest between personal and professional relationships, to promote full, fair,
accurate, timely and understandable disclosure in periodic reports required to
be filed by us, and to promote compliance with all applicable rules and
regulations that apply to us and our officers and directors. The code of ethics
is filed hereby as Exhibit 14.1 to this Annual report on Form 10-K. Any
amendments to or waivers from a provision of this code of ethics will be filed
on a Current Report on Form 8-K.




Item 11.
            Executive
      Compensation




David S.
Smith, as the sole director of Mission’s Board of Directors, has submitted the
following report and has recommended that the Compensation Discussion and
Analysis set forth below be included in this Annual Report on Form 10-K for the
year ended December 31, 2009 for filing with the SEC.




Compensation
Discussion and Analysis




The
Company has entered into a management services agreement with its President
which provides for compensation in exchange for performing certain services in
connection with the ownership and operations of the Company’s television
stations. Under the agreement, our President David S. Smith is compensated up to
$0.4 million per year.




Our Chief
Operating Officer is compensated based on his scope of responsibilities, taking
into account competitive market compensation paid by other similarly situated
companies for this position. The Chief Operating Officer’s salary is reviewed
annually, and adjusted to ensure its alignment with market levels and taking
into account individual accomplishments and overall performance in the past
year.




At this
time, no other form of compensation is provided to the Company’s executive
officers.


32




The
following table sets forth the compensation earned or awarded for services
rendered to the Company by our executive officers for the fiscal year ended
December 31, 2009.




Summary
Compensation Table





Year
            
            Salary
            
            
            Bonus
            
            
            Stock
                Awards
            
            
            Option
                Awards
            
            
            Non-Equity
                Incentive
      Plan
                Compensation
            
            
            Change
      inPension
                ValueandNon-Qualified
                DeferredCompensationEarnings
            
            
            All
      Other
                Compensation
            
            
            Total(in
      thousands)David
      S. Smith
              President,
      Treasurer and Director
            2009
            
            $
            405,000
            
            
            $
            —
            
            
            $
            —
            
            
            $
            —
            
            
            $
            —
            
            
            $
            —
            
            
            $
            —
            
            
            $
            405,0002008
            
            
            305,000
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            305,0002007
            
            
            250,000
            
            
            
            130,000
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            380,000Nancie
      J. Smith
              Vice
      President and Secretary
            2009
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —2008
            
            
            3,120
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            3,1202007
            
            
            6,240
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            6,240Dennis
      Thatcher
              Executive
      Vice President and Chief Operating Officer
            2009
            
            
            142,120
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            142,1202008
            
            
            139,600
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            139,6002007
            
            
            111,538
            
            
            
            25,000
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            136,538




Employment
Agreements




We are a
party to a management services agreement with David S. Smith and Nancie J.
Smith. Under this agreement, David S. Smith is paid up to $0.4 million per year
for certain management services and Nancie J. Smith is paid by the hour for
certain management services.  Effective July 1, 2008, Nancie J. Smith
is no longer an employee of the Company.




Item 12.                      Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters




David S.
Smith owns 100% of the equity interests in Mission, which comprises 1,000 shares
of common stock.





33




Item 13.                      Certain
Relationships and Related Transactions, and Director Independence




The
following table summarizes the various local service agreements Mission-owned
stations had in effect with Nexstar as of December 31, 2009:





Station
            Market
            Affiliation
            Type
      of
                Agreement
            Expiration
            Consideration received from or paid to NexstarMission-owned:WFXP
            Erie,
      PA
            Fox
            TBA
            8/16/11
            Monthly
      payments received from Nexstar(1)KJTL and
              KJBO-LP
            Wichita
      Falls, TX-Lawton, OK
            Fox
              MyNetworkTV
            SSA
              JSA
            5/31/19
              5/31/19
            $60
      thousand per month paid to Nexstar
              70%
      of the KJTL/KJBO-LP net revenue collected each month received from
      NexstarWYOU
            Wilkes
      Barre-Scranton, PA
            CBS
            SSA
              JSA
            1/4/18
              9/30/14
            $35
      thousand per month paid to Nexstar
              70%
      of the WYOU net revenue collected each month received from
      NexstarKODE
            Joplin,
      MO-Pittsburg, KS
            ABC
            SSA
              JSA
            3/31/12
              9/30/14
            $75
      thousand per month paid to Nexstar
              70%
      of the KODE net revenue collected each month received from
      NexstarKRBC
            Abilene-Sweetwater,
      TX
            NBC
            SSA
              JSA
            6/12/13
              6/30/14
            $25
      thousand per month paid to Nexstar
              70%
      of the KRBC net revenue collected each month received from
      NexstarKSAN
            San
      Angelo, TX
            NBC
            SSA
              JSA
            5/31/14
              5/31/14
            $10
      thousand per month paid to Nexstar
              70%
      of the KSAN net revenue collected each month received from
      NexstarWFXW
            Terre
      Haute, IN
            Fox
            SSA
              JSA
            5/8/13
              5/8/13
            $10
      thousand per month paid to Nexstar
              70%
      of the WFXW net revenue collected each month received from
      NexstarKCIT and
              KCPN-LP
            Amarillo,
      TX
            Fox
              MyNetworkTV
            SSA
              JSA
            4/30/19
              4/30/19
            $50
      thousand per month paid to Nexstar
              70%
      of the KCIT/KCPN-LP net revenue collected each month received from
      NexstarKHMT
            Billings,
      MT
            Fox
            TBA
            12/13/17
            Monthly
      payments received from Nexstar(1)KAMC
            Lubbock,
      TX
            ABC
            SSA
              JSA
            2/15/19
              2/15/19
            $75
      thousand per month paid to Nexstar
              70%
      of the KAMC net revenue collected each month received from
      NexstarKOLR
            Springfield,
      MO
            CBS
            SSA
              JSA
            2/15/19
              2/15/19
            $150
      thousand per month paid to Nexstar
              70%
      of the KOLR net revenue collected each month received from
      NexstarWUTR
            Utica,
      NY
            ABC
            SSA
              JSA
            3/31/14
              3/31/14
            $10
      thousand per month paid to Nexstar
              70%
      of the WUTR net revenue collected each month received from
      NexstarWTVO
            Rockford,
      IL
            ABC/
              MyNetworkTV
            SSA
              JSA
            10/31/14
              10/31/14
            $75
      thousand per month paid to Nexstar
              70%
      of the WTVO net revenue collected each month received from
      NexstarKTVE
            Monroe,
      LA-El Dorado, AR
            NBC
            SSA
              JSA
            1/16/18
              1/16/18
            $20
      thousand per month paid to Nexstar
              70%
      of the KTVE net revenue collected each month received from
      NexstarNexstar-owned:KFTA
            Ft.
      Smith-Fayetteville-Springdale-Rogers, AR
            Fox/NBC
            TBA
            (2)
            $5
      thousand per month paid to Nexstar
              $20
      thousand per month received from
Nexstar





(1)
            Payments
      are variable based on station’s monthly operating
  expenses.


(2)
            TBA
      will terminate upon the assignment of KFTA’s FCC license from
      Nexstar.


34




Under
these agreements, Mission is responsible for certain operating expenses of its
stations and therefore may have unlimited exposure to any potential operating
losses. Mission will continue to operate its stations under the SSAs and JSAs or
TBAs until the termination of such agreements. The SSAs and JSAs generally have
a term of ten years. Nexstar indemnifies Mission for Nexstar’s activities
pursuant to the local service agreements.




For
disclosure of the amounts of revenue associated with and the fees incurred by
Mission pursuant to the local service agreements Mission’s stations have with
Nexstar, we refer you to Note 5 to the financial statements included in Part IV,
Item 15(a) of this Annual Report on Form 10-K.




Option
Agreements




In
consideration of Nexstar’s guarantee of our indebtedness, Nexstar has options to
purchase the assets of all of our stations, subject to prior FCC approval. Our
owner, David S. Smith, is a party to these option agreements.




The
following table summarizes the option agreements Mission and David S. Smith have
in effect with Nexstar as of December 31, 2009:





Station
            Market
            Affiliation
            Date
      ofExecution
            ExpirationDateWFXP
            Erie,
      PA
            Fox
            12/01/05
            12/01/14KJTL and
            Wichita
      Falls, TX-Lawton, OK
            Fox
            06/01/99
            06/01/18KJBO-LP
            
            MyNetworkTV
            06/01/99
            06/01/18WYOU
            Wilkes
      Barre-Scranton, PA
            CBS
            05/19/98
            05/19/18KODE
            Joplin,
      MO-Pittsburg, KS
            ABC
            04/24/02
            04/24/11KRBC
            Abilene-Sweetwater,
      TX
            NBC
            06/13/03
            06/13/12KSAN
            San
      Angelo, TX
            NBC
            06/13/03
            06/13/12WFXW
            Terre
      Haute, IN
            Fox
            05/09/03
            05/09/12KCIT and
            Amarillo,
      TX
            Fox
            03/17/09
            05/01/18KCPN-LP
            
            MyNetworkTV
            03/17/09
            05/01/18KHMT
            Billings,
      MT
            Fox
            12/30/03
            12/30/12KAMC
            Lubbock,
      TX
            ABC
            12/30/03
            12/30/12KTVE
            Monroe,
      LA-El Dorado, AR
            NBC
            1/16/08
            1/16/17KOLR
            Springfield,
      MO
            CBS
            12/30/03
            12/30/12WUTR
            Utica,
      NY
            ABC
            04/01/04
            04/01/13WTVO
            Rockford,
      IL
            ABC/MyNetworkTV
            11/01/04
            11/01/13




Under the
terms of these option agreements, Nexstar may exercise its option upon written
notice to us and David S. Smith. In each option agreement, the exercise price is
the greater of (1) seven times the station’s cash flow, as defined in the
option agreement, less the amount of its indebtedness as defined in the option
agreement, or (2) the amount of its indebtedness. We and/or David S. Smith
may terminate each option agreement by written notice any time after the seventh
anniversary date of the relevant option agreement.




Management
Services Agreement




Mission,
David S. Smith and Nancie J. Smith, the wife of David S. Smith, are parties to a
management services agreement. Under this agreement, Mission pays David S. Smith
up to $0.4 million per year for certain management services and pays Nancie J.
Smith by the hour for certain management services.  Effective July 1, 2008,
Nancie J. Smith is no longer an employee of the Company.


35




Item 14.                      Principal
Accountant Fees and Services




We
retained PricewaterhouseCoopers LLP to audit the financial statements of Mission
Broadcasting, Inc. for the fiscal years ended December 31, 2009 and 2008,
and review the financial statements included in each of its Quarterly Reports on
Form 10-Q during such fiscal years and for tax compliance matters. The aggregate
fees billed for professional services rendered by PricewaterhouseCoopers LLP in
fiscal years 2009 and 2008 for these various services were:





Type
      of Fees
            
            Fiscal Year
      EndedDecember 31, 2009
            
            
            December 31, 2008Audit
      Fees (1)
            
            $
            193,000
            
            
            $
            198,450Audit
      Related Fees (2)
            
            
            —
            
            
            
            55,474Tax
      Fees (3)
            
            
            53,000
            
            
            
            53,138All
      Other Fees (4)
            
            
            —
            
            
            
            —Total
            
            $
            246,000
            
            
            $
            307,062





(1)
            “Audit
      Fees” are fees billed by PricewaterhouseCoopers LLP for professional
      services for the audit of the financial statements included in our Annual
      Report on Form 10-K and review of financial statements included in our
      Quarterly Reports on Form 10-Q, or for services that are normally provided
      by the auditors in connection with statutory and regulatory filings or
      engagements.


(2)
            “Audit
      Related Fees” are fees billed by PricewaterhouseCoopers LLP for assurance
      and related services that are reasonably related to the performance of the
      audit or review of our financial
statements.


(3)
            “Tax
      Fees” are fees billed by PricewaterhouseCoopers LLP for tax compliance,
      tax advice and tax planning.


(4)
            “All
      Other Fees” are fees billed by PricewaterhouseCoopers LLP for any services
      not included in the first three categories. Amount represents fees
      incurred to audit acquired company financial
  statements.







PART
IV




Item 15.
            Exhibits
      and Financial Statement Schedules




(a)
Documents filed as part of this report:




(1) Financial Statements. The
following financial statements of Mission Broadcasting, Inc. have been included
on pages F-1 through F-27 of this Annual Report on Form 10-K:




•
            See the Index to the
      Financial Statements on page F-1 for a list of financial statements filed
      with this report.




(2)Financial Statement
Schedules. The schedule of Valuation and Qualifying Accounts appears
in Note 15 to the financial statements filed as a part of this
report.




(3)Exhibits. The exhibits
filed in response to Item 601 of Regulation S-K are listed in the Exhibit
Index beginning on page E-1 of this Annual Report on Form 10-K.





36




SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.





Mission
      Broadcasting, Inc./s/
      DAVID S. SMITHDavid
      S. SmithPresident
      and Treasurer(Principal
      Executive Officer and

              Principal
      Financial and Accounting Officer)




Dated:
March 15, 2010




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following person on behalf of the registrant and in the capacities
indicated on March 15, 2010.





Name
            Title/s/ David S.
      Smith
            President,
      Treasurer and DirectorDavid
      S. Smith
            (Principal
      Executive Officer and
              Principal
      Financial and Accounting Officer)





37


MISSION
BROADCASTING, INC.




INDEX
TO FINANCIAL STATEMENTS





Report
      of Independent Registered Public Accounting Firm
            F-2Balance
      Sheets at December 31, 2009 and 2008
            F-3Statements
      of Operations for the years ended December 31, 2009, 2008 and
      2007
            F-4Statements
      of Changes in Shareholder’s Deficit for the years ended December 31,
      2009, 2008 and 2007
            F-5Statements
      of Cash Flows for the years ended December 31, 2009, 2008 and
      2007
            F-6Notes
      to Financial Statements
            F-7





F-1











Report
of Independent Registered Public Accounting Firm





To the
Shareholder of Mission Broadcasting Inc:





In our
opinion, the financial statements listed in the accompanying index present
fairly, in all material respects, the financial position of Mission
Broadcasting, Inc. at December 31, 2009 and 2008, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2009in conformity with
accounting principles generally accepted in the United States of
America.  These financial statements are the responsibility of the
Company’s management.  Our responsibility is to express an opinion on
these financial statements based on our audits.  We conducted our
audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board(United
States).  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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
  As
discussed in Note 2 to the financial statements, the Company changed the manner
in which it accounts for uncertain tax positions in 2007.





The
Company has a significant relationship with Nexstar Broadcasting Group, Inc.
which is discussed in Notes 1, 2, 4, 5, 8 and 13 to the financial
statements.











/s/PricewaterhouseCoopers,
LLP


Dallas,
Texas


March 15,
2010







F-2


MISSION
BROADCASTING, INC.




BALANCE
SHEETS


December 31,
2009 and 2008


(in
thousands, except share information)





2009
            
            
            2008ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            903
            
            
            $
            1,426Accounts
      receivable
            
            
            1,430
            
            
            
            1,017Current
      portion of broadcast rights
            
            
            3,014
            
            
            
            3,410Prepaid
      expenses and other current assets
            
            
            216
            
            
            
            230Deferred
      tax asset
            
            
            8
            
            
            
            8Total
      current assets
            
            
            5,571
            
            
            
            6,091Property
      and equipment, net
            
            
            28,610
            
            
            
            29,269Broadcast
      rights
            
            
            1,785
            
            
            
            2,215Goodwill
            
            
            18,729
            
            
            
            18,635FCC
      licenses
            
            
            20,698
            
            
            
            22,695Other
      intangible assets, net
            
            
            25,517
            
            
            
            30,665Other
      noncurrent assets
            
            
            1,785
            
            
            
            164Deferred
      tax asset
            
            
            336
            
            
            
            344Total
      assets
            
            $
            103,031
            
            
            $
            110,078LIABILITIES
      AND SHAREHOLDER’S DEFICITCurrent
      liabilities:Current
      portion of debt
            
            $
            1,727
            
            
            $
            1,727Current
      portion of broadcast rights payable
            
            
            3,362
            
            
            
            3,579Taxes
      payable
            
            
            56
            
            
            
            74Accounts
      payable
            
            
            111
            
            
            
            549Accrued
      expenses
            
            
            629
            
            
            
            945Interest
      payable
            
            
            24
            
            
            
            16Deferred
      revenue
            
            
            992
            
            
            
            1,874Due
      to Nexstar Broadcasting, Inc.
            
            
            13,370
            
            
            
            15,468Total
      current liabilities
            
            
            20,271
            
            
            
            24,232Debt
            
            
            170,633
            
            
            
            172,360Broadcast
      rights payable
            
            
            2,714
            
            
            
            2,926Deferred
      tax liabilities
            
            
            7,180
            
            
            
            6,263Deferred
      revenue
            
            
            709
            
            
            
            316Deferred
      gain on sale of assets
            
            
            1,737
            
            
            
            1,910Other
      liabilities
            
            
            4,441
            
            
            
            4,098Total
      liabilities
            
            
            207,685
            
            
            
            212,105Commitments
      and contingenciesShareholder’s
      deficit:Common
      stock, $1 dollar par value, 1,000 shares authorized; 1,000 shares issued
      and outstanding at December 31, 2009 and 2008,
      respectively
            
            
            1
            
            
            
            1Subscription
      receivable
            
            
            (1
            )
            
            
            (1
            )Accumulated
      deficit
            
            
            (104,654
            )
            
            
            (102,027
            )Total
      shareholder’s deficit
            
            
            (104,654
            )
            
            
            (102,027
            )Total
      liabilities and shareholder’s deficit
            
            $
            103,031
            
            
            $
            110,078




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





F-3


MISSION
BROADCASTING, INC.




STATEMENTS
OF OPERATIONS


For
the Years Ended December 31, 2009, 2008 and 2007


(in
thousands)





2009
            
            
            2008
            
            
            2007Net
      broadcast revenue
            
            $
            8,388
            
            
            $
            6,635
            
            
            $
            6,726Revenue
      from Nexstar Broadcasting, Inc.
            
            
            25,435
            
            
            
            35,283
            
            
            
            30,556Net
      revenue
            
            
            33,823
            
            
            
            41,918
            
            
            
            37,282Operating
      expenses (income):Direct
      operating expenses (exclusive of depreciation and amortization shown
      separately below)
            
            
            5,810
            
            
            
            6,405
            
            
            
            5,148Selling,
      general, and administrative expenses (exclusive of depreciation and
      amortization shown separately below)
            
            
            2,790
            
            
            
            2,595
            
            
            
            2,280Fees
      incurred pursuant to local service agreements with Nexstar Broadcasting,
      Inc.
            
            
            7,425
            
            
            
            8,090
            
            
            
            7,860Impairment
      of goodwill
            
            
            261
            
            
            
            1,289
            
            
            
            —Impairment
      of other intangible assets
            
            
            1,997
            
            
            
            10,149
            
            
            
            —Amortization
      of broadcast rights
            
            
            4,681
            
            
            
            4,729
            
            
            
            4,269Amortization
      of intangible assets
            
            
            5,148
            
            
            
            5,403
            
            
            
            5,362Depreciation
            
            
            3,658
            
            
            
            3,337
            
            
            
            3,241Gain
      on asset exchange
            
            
            (2,385
            )
            
            
            (869
            )
            
            
            (317
            )(Gain)
      loss on asset disposal, net
            
            
            28
            
            
            
            (352
            )
            
            
            92Total
      operating expenses
            
            
            29,413
            
            
            
            40,776
            
            
            
            27,935Income
      from operations
            
            
            4,410
            
            
            
            1,142
            
            
            
            9,347Interest
      expense, including amortization of debt financing costs
            
            
            (6,056
            )
            
            
            (9,472
            )
            
            
            (12,344
            )Interest
      income
            
            
            5
            
            
            
            53
            
            
            
            92Loss
      before income taxes
            
            
            (1,641
            )
            
            
            (8,277
            )
            
            
            (2,905
            )Income
      tax benefit (expense)
            
            
            (986
            )
            
            
            737
            
            
            
            (1,135
            )Net
      loss
            
            $
            (2,627
            )
            
            $
            (7,540
            )
            
            $
            (4,040
            )




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





F-4


MISSION
BROADCASTING, INC.




STATEMENTS
OF CHANGES IN SHAREHOLDER’S DEFICIT


For
the Years Ended December 31, 2009, 2008 and 2007


(in
thousands, except share information)





Common
      StockShares
            
            
            Par Value
            
            
            Subscription
                Receivable
            
            
            Accumulated
                Deficit
            
            
            Total
                Shareholder’s
                DeficitBalance
      at January 1, 2007
            
            
            1,000
            
            
            $
            1
            
            
            $
            (1
            )
            
            $
            (91,947
            )
            
            $
            (91,947
            )Adjustment
      for the cumulative effect of adopting interpretive guidance related to
      income taxes
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,500
            
            
            
            1,500Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (4,040
            )
            
            
            (4,040
            )Balance
      at December 31, 2007
            
            
            1,000
            
            
            
            1
            
            
            
            (1
            )
            
            
            (94,487
            )
            
            
            (94,487
            )Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (7,540
            )
            
            
            (7,540
            )Balance
      at December 31, 2008
            
            
            1,000
            
            
            
            1
            
            
            
            (1
            )
            
            
            (102,027
            )
            
            
            (102,027
            )Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (2,627
            )
            
            
            (2,627
            )Balance
      at December 31, 2009
            
            
            1,000
            
            
            $
            1
            
            
            $
            (1
            )
            
            $
            (104,654
            )
            
            $
            (104,654
            )




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





F-5


MISSION
BROADCASTING, INC.




STATEMENTS
OF CASH FLOWS


For
the Years Ended December 31, 2009, 2008 and 2007


(in
thousands)





2009
            
            
            2008
            
            
            2007Cash
      flows from operating activities:Net
      loss
            
            $
            (2,627
            )
            
            $
            (7,540
            )
            
            $
            (4,040
            )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Deferred
      income taxes
            
            
            925
            
            
            
            (814
            )
            
            
            1,063Depreciation
      of property and equipment
            
            
            3,658
            
            
            
            3,337
            
            
            
            3,241Amortization
      of intangible assets
            
            
            5,148
            
            
            
            5,403
            
            
            
            5,362Amortization
      of debt financing costs
            
            
            200
            
            
            
            45
            
            
            
            44Amortization
      of broadcast rights, excluding barter
            
            
            2,263
            
            
            
            2,190
            
            
            
            1,944Payments
      for broadcast rights
            
            
            (1,866
            )
            
            
            (1,773
            )
            
            
            (1,678
            )Impairment
      of goodwill and intangible assets
            
            
            2,258
            
            
            
            11,438
            
            
            
            —Gain
      on asset exchange
            
            
            (2,385
            )
            
            
            (869
            )
            
            
            (317
            )(Gain)
      loss on asset disposal, net
            
            
            28
            
            
            
            (352
            )
            
            
            92Deferred
      gain recognition
            
            
            (173
            )
            
            
            (175
            )
            
            
            (173
            )Changes
      in operating assets and liabilities, net of acquisitions:Accounts
      receivable
            
            
            (413
            )
            
            
            914
            
            
            
            (230
            )Prepaid
      expenses and other current assets
            
            
            14
            
            
            
            (20
            )
            
            
            (53
            )Other
      noncurrent assets
            
            
            —
            
            
            
            —
            
            
            
            (204
            )Taxes
      payable
            
            
            (18
            )
            
            
            2
            
            
            
            72Accounts
      payable and accrued expenses
            
            
            (1,380
            )
            
            
            (1,015
            )
            
            
            166Interest
      payable
            
            
            8
            
            
            
            (16
            )
            
            
            (70
            )Deferred
      revenue
            
            
            (489
            )
            
            
            829
            
            
            
            138Other
      noncurrent liabilities
            
            
            343
            
            
            
            383
            
            
            
            233Due
      to Nexstar Broadcasting, Inc
            
            
            (1,298
            )
            
            
            (3,199
            )
            
            
            (1,682
            )Net
      cash provided by operating activities
            
            
            4,196
            
            
            
            8,768
            
            
            
            3,908Cash
      flows from investing activities:Additions
      to property and equipment
            
            
            (1,171
            )
            
            
            (8,186
            )
            
            
            (2,461
            )Proceeds
      from sale of assets
            
            
            —
            
            
            
            84
            
            
            
            6Acquisition
      of broadcast properties and related transaction costs
            
            
            —
            
            
            
            (7,923
            )
            
            
            (387
            )Proceeds
      from insurance on casualty loss
            
            
            —
            
            
            
            494
            
            
            
            —Net
      cash used for investing activities
            
            
            (1,171
            )
            
            
            (15,531
            )
            
            
            (2,842
            )Cash
      flows from financing activities:Repayment
      of long-term debt
            
            
            (1,727
            )
            
            
            (1,727
            )
            
            
            (1,727
            )Payments
      for debt finance costs
            
            
            (1,821
            )
            
            
            —
            
            
            
            —Proceeds
      from revolver draws
            
            
            —
            
            
            
            —
            
            
            
            7,000Net
      cash provided by (used for) financing activities
            
            
            (3,548
            )
            
            
            (1,727
            )
            
            
            5,273Net
      increase (decrease) in cash and cash equivalents
            
            
            (523
            )
            
            
            (8,490
            )
            
            
            6,339Cash
      and cash equivalents at beginning of year
            
            
            1,426
            
            
            
            9,916
            
            
            
            3,577Cash
      and cash equivalents at end of year
            
            $
            903
            
            
            $
            1,426
            
            
            $
            9,916Supplemental
      schedule of noncash activities:Cash
      paid during the period for:Interest
            
            $
            5,848
            
            
            $
            9,441
            
            
            $
            12,369Income
      taxes, net
            
            $
            80
            
            
            $
            75
            
            
            $
            —Non-cash
      investing activities:Acquisition
      of equipment
            
            $
            8
            
            
            $
            182
            
            
            $
            —




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





F-6


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS




1.
Business Operations




As of
December 31, 2009, Mission Broadcasting, Inc. (“Mission” or the “Company”)
owned and operated 16 television stations all of which were affiliated with the
NBC, ABC, CBS, Fox or MyNetworkTV television networks in markets located in New
York, Pennsylvania, Illinois, Indiana, Missouri, Arkansas, Louisiana, Texas and
Montana. The Company operates in one reportable television broadcasting segment.
Through local service agreements, Nexstar Broadcasting, Inc. (“Nexstar”)
provides sales and operating services to all of the Mission television stations
(see Notes 2 and 5).




The
Company is highly leveraged, which makes it vulnerable to changes in general
economic conditions. The Company’s ability to repay or refinance its debt will
depend on, among other things, financial, business, market, competitive and
other conditions, many of which are beyond its control, as well as Nexstar
maintaining its pledge to continue the local service agreements with the
Company’s stations. Management believes that with Nexstar’s pledge to continue
the local service agreements, as described in a letter of support dated March 9,
2010, our available cash, anticipated cash flow from operations and available
borrowings under our senior credit facility should be sufficient to fund working
capital, capital expenditure requirements, interest payments and scheduled debt
principal payments for at least the next twelve months from December 31,
2009, enabling Mission to continue to operate as a going concern.




On
October 8, 2009, Nexstar and Mission both amended their senior credit
facilities.  See Note 8 for a more complete discussion of the changes
to the credit facilities. Nexstar’s senior secured credit facility agreement
contains covenants which require them to comply with certain financial ratios,
including (a) maximum total and senior leverage ratios, (b) a minimum
interest coverage ratio, and (c) a minimum fixed charge coverage ratio. The
covenants, which are calculated on a quarterly basis, include the combined
results of Nexstar and us. Our senior secured credit facility agreement does not
contain financial covenant ratio requirements; however it does include an event
of default if Nexstar does not comply with all covenants contained in its credit
agreement. As of September 30, 2009, Nexstar was not in compliance with all
covenants contained in the credit agreements governing their senior secured
credit facility.  On October 8, 2009, Nexstar amended their credit
facility to modify certain covenants.  The October 8, 2009 debt
amendment contained a limited waiver for the leverage ratios which cured the
violation as of September 30, 2009.  As of December 31, 2009, Nexstar
was in compliance with all covenants contained in the credit agreements
governing their senior secured credit facility.




On March
30, 2009, Nexstar closed an offer to exchange $143,600,000 of the 7% senior
subordinated notes due 2014 in exchange for $142,320,761 7% senior subordinated
PIK Notes due 2014 (the “PIK Notes”). Based on the financial covenants in the
Nexstar senior secured credit facility, the PIK Notes are not included in the
debt amount used to calculate the total leverage ratio until January
2011.




Nexstar
believes the consummation of the debt amendment will allow Nexstar to
maintain compliance with all covenants contained in the credit agreements
governing its senior secured facility and the indentures governing its
publicly held notes for a period of at least the next twelve months from
December 31, 2009.




2.
Summary of Significant Accounting Policies




Local
Service Agreements and Purchase Options




The
following table summarizes the various local service agreements Mission’s
stations had in effect as of December 31, 2009 with Nexstar:





Service Agreements
            StationsTBA Only (1)
            WFXP
      and KHMTSSA & JSA (2)
            KJTL,
      KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WFXW, WYOU, KODE,
      KTVE and WTVO





(1)
            Mission
      has a time brokerage agreement (“TBA”) for each of these stations which
      allows Nexstar to program most of each station’s broadcast time, sell each
      station’s advertising time and retain the advertising revenue generated in
      exchange for monthly payments to
Mission.


(2)
            Mission
      has both a shared service agreement (“SSA”) and a joint services agreement
      (“JSA”) for each of these stations. The SSA allows the sharing of services
      including news production, technical maintenance and security, in exchange
      for Nexstar’s right to receive certain payments from Mission as described
      in the SSAs. The JSAs permit Nexstar to sell the station’s advertising
      time and retain a percentage of the net revenue from the station’s
      advertising time in return for monthly payments to Mission of the
      remaining percentage of the net revenue, as described in the
      JSAs.




Under
these agreements, Mission is responsible for certain operating expenses of its
stations and therefore may have unlimited exposure to any potential operating
losses. Mission will continue to operate its stations under the SSAs and JSAs or
TBAs until the termination of such agreements. The SSAs and JSAs generally have
terms of ten years. Nexstar indemnifies Mission from Nexstar’s activities
pursuant to the local service agreements.


F-7


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




2.
Summary of Significant Accounting Policies—(Continued)




The
arrangements under the SSAs and JSAs have had the effect of Nexstar receiving
substantially all of the available cash, after debt service costs, generated by
the stations listed above. The arrangements under the TBAs have also had the
effect of Nexstar receiving substantially all of the available cash generated by
the TBA stations listed above. Mission anticipates that through these local
service agreements, Nexstar will continue to receive substantially all of
Mission’s available cash, after payments for debt service costs, generated by
the stations listed above.




Mission’s
sole shareholder has granted Nexstar purchase options to acquire the assets and
assume the liabilities of each Mission station, subject to Federal
Communications Commission (“FCC”) consent, for consideration equal to the
greater of (1) seven times the station’s cash flow, as defined in the
option agreement, less the amount of its indebtedness as defined in the option
agreement, or (2) the amount of its indebtedness. Cash flow is defined as
income or loss from operations, plus depreciation and amortization (including
amortization of broadcast rights), interest income, non-cash trade and barter
expenses, nonrecurring expenses (including time brokerage agreement fees),
network compensation payments received or receivable and corporate management
fees, less payments for broadcast rights, non-cash trade and barter revenue and
network compensation revenue. These option agreements (which expire on various
dates between 2011 and 2018) are freely exercisable or assignable by Nexstar
without consent or approval by Mission’s sole shareholder. The Company expects
these option agreements to be renewed upon expiration.




Nexstar
does not own Mission or Mission’s television stations. However, as a result of
the guarantee of all obligations incurred under Mission’s senior secured credit
facility by Nexstar Broadcasting Group, Inc. (Nexstar’s ultimate parent) and its
subsidiaries (“Nexstar Broadcasting Group”) and the arrangements under the local
service agreements and purchase option agreements with Nexstar, Nexstar is
deemed, under accounting principles generally accepted in the United States of
America (“U.S. GAAP”), to have a controlling financial interest in Mission while
complying with the FCC’s rules regarding ownership limits in television markets.
In order for both Nexstar and Mission to comply with the FCC regulations,
Mission maintains complete responsibility for and control over programming,
finances, personnel and operations of its stations.




Characterization
of SSA Fees




We
present the fees incurred pursuant to SSAs with Nexstar as an operating expense
in our financial statements. Our decision to characterize the SSA fees in this
manner is based on our conclusion that (a) the benefit our stations receive
from these local service agreements is sufficiently separate from the
consideration paid to us from Nexstar under JSAs, (b) we can reasonably
estimate the fair value of the benefit our stations receive under the SSA
agreement, and (c) the SSA fee we pay to Nexstar does not exceed the
estimated fair value of the benefit our stations receive.




Variable
Interest Entities




In
accordance with interpretive guidance for the consolidation of variable interest
entities, the Company will consolidate an entity when it is determined that the
Company is the primary beneficiary of such entity.




Use
of Estimates




The
preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and use assumptions that affect the reported
amounts of assets and liabilities and the disclosure for contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. The more significant estimates
made by management include those relating to the allowance for doubtful
accounts, barter transactions, income taxes, the recoverability of broadcast
rights, the carrying amounts, recoverability, and useful lives of intangible
assets and the fair values of non-monetary asset exchanges. Actual results may
vary from estimates used.




Cash
and Cash Equivalents




The
Company considers all highly liquid investments purchased with an original
maturity of ninety days or less to be cash equivalents.


F-8


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




2.
Summary of Significant Accounting Policies—(Continued)




Accounts
Receivable and Allowance for Doubtful Accounts




The
Company’s accounts receivable consists primarily of billings to cable and
satellite carriers for compensation associated with retransmission consent
agreements and amounts due from the major television networks under the network
affiliation agreements. The Company maintains an allowance for doubtful accounts
when necessary for estimated losses resulting from the inability of customers to
make required payments. Management evaluates the collectability of accounts
receivable based on a combination of factors. In circumstances where management
is aware of a specific customer’s inability to meet its financial obligations,
an allowance is recorded to reduce their receivable amount to an amount
estimated to be collected. The Company had no allowance for doubtful accounts at
December 31, 2009 and 2008 given the composition of its accounts receivable
at those dates. The Company had no bad debt expense for the years ended
December 31, 2009, 2008 and 2007.




Concentration
of Credit Risk




Financial
instruments which potentially expose the Company to a concentration of credit
risk consist principally of cash and cash equivalents. Cash deposits are
maintained with several financial institutions. Deposits held with banks may
exceed the amount of insurance provided on such deposits; however, the Company
believes these deposits are maintained with financial institutions of reputable
credit and are not subject to any unusual credit risk.




Revenue
Recognition




The
Company’s revenue is primarily derived from the sale of television advertising
by Nexstar under JSAs, network compensation and other broadcast related
revenues. Advertising revenue is recognized, net of agency commissions, in the
period during which the commercial is aired.




•
            Revenue
      from Nexstar, representing a percentage of net advertising revenue derived
      from the sale of commercials on the Company’s stations, is recognized in
      the period during which the time spots are
  aired.




•
            Retransmission
      compensation is recognized based on the number of subscribers over the
      contract period.




•
            Other
      revenues, which may include tower rent revenue and other similar
      activities from time to time, are recognized in the period during which
      the services are provided.




•
            Network
      compensation is either recognized when the Company’s station broadcasts
      specific network programming based upon a negotiated hourly-rate, or on a
      straight-line basis based upon the total negotiated compensation to be
      received by the Company over the term of the
  agreement.




The
Company barters advertising time for certain program material. These
transactions, except those involving exchange of advertising time for network
programming, are recorded at management’s estimate of the fair value of the
advertising time exchanged, which approximates the fair value of the program
material received. The fair value of advertising time exchanged is estimated by
applying average historical advertising rates for specific time periods. Revenue
from barter transactions is recognized as the related advertisement spots are
broadcast. The Company recorded $2.4 million, $2.5 million and $2.3 million of
barter revenue for the years ended December 31, 2009, 2008 and 2007,
respectively.




Barter
expense is recognized at the time program broadcast rights assets are used. The
Company recorded $2.4 million, $2.5 million and $2.3 million of barter expense
for the years ended December 31, 2009, 2008 and 2007, respectively, which
was included in amortization of broadcast rights in the Company’s statement of
operations.


F-9


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




2.
Summary of Significant Accounting Policies—(Continued)




Broadcast
Rights and Broadcast Rights Payable




The
Company records rights to programs, primarily in the form of syndicated programs
and feature movie packages obtained under license agreements for the limited
right to broadcast the suppliers’ programming when the following criteria are
met: 1) the cost of each program is known or reasonably determinable, 2) the
license period has begun, 3) the program material has been accepted in
accordance with the license agreement, and 4) the programming is available for
use. Broadcast rights are initially recorded at the amount paid or payable to
program suppliers; or, in the case of barter transactions, at management’s
estimate of the fair value of the advertising time exchanged using historical
advertising rates, which approximates the fair value of the program material
received. Broadcast rights are stated at the lower of unamortized cost or net
realizable value. The current portion of broadcast rights represents those
rights available for broadcast which will be amortized in the succeeding year.
Amortization of broadcast rights is computed using the straight-line method
based on the license period or programming usage, whichever period yields the
shorter life. Broadcast rights liabilities are reduced by monthly payments to
program suppliers; or, in the case of barter transactions, are amortized over
the life of the associated programming license contract as a component of trade
and barter revenue. When projected future net revenue associated with a program
is less than the current carrying amount of the program broadcast rights, for
example, due to poor ratings, the Company writes down the unamortized cost of
the broadcast rights to equal the amount of projected future net revenue. If the
expected broadcast period was shortened or cancelled, the Company would be
required to write-off the remaining value of the related broadcast rights on an
accelerated basis or possibly immediately. Such reductions in unamortized costs
is included in amortization of broadcast rights in the statement of
operations.




Property
and Equipment




Property
and equipment is stated at cost. The cost and related accumulated depreciation
applicable to assets sold or retired are removed from the accounts and the gain
or loss on disposition is recognized. Major renewals and betterments are
capitalized and ordinary repairs and maintenance are charged to expense in the
period incurred. Depreciation is computed on a straight-line basis over the
estimated useful lives of the assets ranging from 3 to 39 years (see Note 6).




Network
Affiliation Agreements




Network
affiliation agreements are stated at estimated fair value at the date of
acquisition using a discounted cash flow method. Amortization is computed on a
straight-line basis over the estimated useful life of 15 years.




Each of
the Company’s stations has a network affiliation agreement pursuant to which the
broadcasting network provides programming to the station during specified time
periods, including prime time. Under the affiliation agreements with NBC, CBS
and ABC, most of the Company’s stations receive compensation for distributing
the network’s programming over the air and for allowing the network to keep a
portion of advertising inventory during those time periods. The affiliation
agreements with Fox and MyNetworkTV do not provide for
compensation.




Intangible
Assets




Intangible
assets consist primarily of goodwill, broadcast licenses (“FCC licenses”) and
network affiliation agreements that are stated at estimated fair value at the
date of acquisition using a discounted cash flow method. The Company’s goodwill
and FCC licenses are considered to be indefinite-lived intangible assets and are
not amortized but instead are tested for impairment annually or whenever events
or changes in circumstances indicate that such assets might be impaired. Network
affiliation agreements are subject to amortization computed on a straight-line
basis over the estimated useful life of 15 years.




As
required by authoritative guidance for goodwill and other intangible assets, we
test our FCC licenses and goodwill for impairment annually or whenever we
believe events have occurred and circumstances changed that would more likely
than not reduce the fair value of our reporting units below their carrying
amounts. The impairment test for FCC licenses consists of a station-by-station
comparison of the carrying amount of FCC licenses with their fair value, using a
discounted cash flow analysis. The impairment test for goodwill utilizes a
two-step fair value approach. The first step of the goodwill impairment test is
used to identify potential impairment by comparing the fair value of the station
(“reporting unit”) to its carrying amount. The fair value of a reporting unit is
determined using a discounted cash flows analysis. If the fair value of the
reporting unit exceeds its carrying amount, goodwill is not considered impaired.
If the carrying amount of the reporting unit exceeds its fair value, the second
step of the goodwill impairment test is performed to measure the amount of
impairment loss, if any. The second step of the goodwill impairment test
compares the implied fair value of the reporting unit’s goodwill with the
carrying amount of that goodwill. The implied fair value of goodwill is
determined by performing an assumed purchase price allocation, using the
reporting unit fair value (as determined in Step 1) as the purchase price. If
the carrying amount of goodwill exceeds the implied fair value, an impairment
loss is recognized in an amount equal to that excess.


F-10


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




2.
Summary of Significant Accounting Policies—(Continued)




In
accordance with authoritative guidance for accounting for the impairment or
disposal of long-lived assets, the Company tests network affiliation agreements
whenever events or changes in circumstances indicate that their carrying amount
may not be recoverable, relying on a number of factors including operating
results, business plans, economic projections and anticipated future cash flows.
An impairment in the carrying amount of a network affiliation agreement is
recognized when the expected future operating cash flow derived from the
operation to which the asset relates is less than its carrying value. The
impairment test for network affiliation agreements consists of a
station-by-station comparison of the carrying amount of network affiliation
agreements with their fair value, using a discounted cash flow analysis. See
Note 7 for additional information.




Debt
Financing Costs




Debt
financing costs represent direct costs incurred to obtain long-term financing
and are amortized to interest expense over the term of the related debt.
Previously capitalized debt financing costs are expensed and included in loss on
extinguishment of debt if the Company determines that there has been a
substantial modification of the related debt. As of December 31, 2009 and
2008, debt financing costs of $1.8 million and $0.2 million, respectively, were
included in other noncurrent assets.




Advertising
Expense




The cost
of advertising is expensed as incurred. The Company had $2 thousand in
advertising expense for the year ended December 31, 2009 and no advertising
expense for the years ended December 31, 2008 and 2007.




Financial
Instruments




The
carrying amount of cash and cash equivalents, broadcast rights payable, accounts
payable and accrued expenses approximates fair value due to their short-term
nature. The interest rates on the Company’s term loan and revolving credit
facility are adjusted regularly to reflect current market rates.




Income
Taxes




The
Company accounts for income taxes under the asset and liability method which
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts
and tax basis of assets and liabilities. A valuation allowance is applied
against net deferred tax assets if, based on the weight of available evidence,
it is more likely than not that some or all of the deferred tax assets will not
be realized.




On
January 1, 2007, the Company adopted interpretive guidance related to
income taxes that addresses the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in the financial
statements. Under this guidance, the Company may recognize the tax benefit from
an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities. The
determination is based on the technical merits of the position and presumes that
each uncertain tax position will be examined by the relevant taxing authority
that has full knowledge of all relevant information. For interest and penalties
relating to income taxes the Company recognizes these items as components of
income tax expense.




Nonmonetary
Asset Exchanges




In
connection with a spectrum allocation exchange ordered by the FCC within the 1.9
GHz band, Sprint Nextel Corporation (“Nextel”) is required to replace certain
existing analog equipment with comparable digital equipment. The Company has
agreed to accept the substitute equipment that Nextel will provide and in turn
must relinquish its existing equipment to Nextel. Neither party will have any
continuing involvement in the equipment transferred following the exchange. We
account for this arrangement as an exchange of assets in accordance with
accounting and disclosure requirements for exchanges of nonmonetary assets. The
equipment the Company receives under this arrangement is recorded at their
estimated fair market value and depreciated over estimated useful lives ranging
from 5 to 15 years. Management’s determination of the fair market value is
derived from the most recent prices paid to manufacturers and vendors for the
specific equipment acquired. As equipment is exchanged, the Company records a
gain to the extent that the fair market value of the equipment received exceeds
the carrying amount of the equipment relinquished.


F-11


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




2.
Summary of Significant Accounting Policies—(Continued)




Recent
Accounting Pronouncements




In June
2009 the Financial Accounting Standards Board (“the FASB”) issued the FASB
Accounting Standards Codification (“the Codification”). The Codification is the
official single source of authoritative U.S. generally accepted accounting
principles (“GAAP”). All existing accounting standards are superseded. All other
accounting guidance not included in the Codification is considered
non-authoritative. The Codification also includes all relevant Securities and
Exchange Commission (“SEC”) guidance organized using the same topical structure
in separate sections within the Codification. The Codification was effective for
our September 30, 2009 financial statements. The Codification does not change
existing GAAP. The principal impact on our financial statements from the
Codification adoption is limited to disclosures as all references to
authoritative accounting literature are now referenced in accordance with the
Codification.




In June
2009, the FASB issued an amendment to the accounting and disclosure requirements
for the consolidation of VIE’s.  This amendment requires an analysis
to determine whether a variable interest gives the entity a controlling
financial interest in a variable interest entity. The amendment requires an
ongoing reassessment and eliminates the quantitative approach previously
required for determining whether an entity is the primary beneficiary. This
amendment is effective for our fiscal year beginning January 1, 2010. We are
currently evaluating the impact of adopting this amendment on our consolidated
financial statements.




In June
2009, the FASB issued an amendment to the accounting and disclosure requirements
for transfers of financial assets.  This amendment removes the concept
of a qualifying special-purpose entity. This amendment also clarifies the
requirements for isolation and limitations on portions of financial assets that
are eligible for sale accounting. The amendment is effective for our fiscal year
beginning January 1, 2010. We are currently evaluating the impact of adopting
this amendment on our consolidated financial statements.




In May
2009, the FASB issued a general standard of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. This standard became effective for our
second quarter ended June 30, 2009.




In April
2009, the FASB issued a new accounting and disclosure requirement, which
increases the frequency of fair value disclosures from an annual to a quarterly
basis. The guidance relates to fair value disclosures for any financial
instruments that are not currently reflected on the balance sheet at fair value.
The new authoritative guidance is effective for interim and annual periods
ending after June 15, 2009.  We adopted this guidance in the
second quarter of 2009, and it did not impact our financial position or results
of operations.  It did, however, result in additional disclosures
related to the fair value of our debt.




In April
2009, the FASB issued guidance for estimating fair values when there is no
active market or where the price inputs being used represent distressed sales
and identifying circumstances that indicate a transaction is not orderly. This
guidance is effective for interim and annual reporting periods ending after
June 15, 2009. We adopted this guidance in the second quarter of 2009, and
it did not have any effect on the Company’s financial position or results of
operations.




In April
2008, the FASB issued guidance related to the determination of the useful life
of intangible assets. This guidance amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under the accounting and disclosure
requirements related to goodwill and other intangible assets. This new guidance
also provides additional disclosure requirements related to recognized
intangible assets. We adopted this guidance in January 2009 and it did not have
a material impact on our financial position or results of
operations.




In
January 2008, we adopted the FASB’s accounting and disclosure requirements
related to fair value measurements as they pertain to financial assets and
liabilities. The adoption did not have a material impact on our financial
position or results of operations. These new requirements established a
framework for measuring fair value, and enhanced the disclosures for fair value
measurements. This authoritative guidance applies when other accounting
pronouncements require or permit fair value measurements, but it does not
require new fair value measurements. In February 2008, the FASB issued a
one-year deferral for the application of this standard as it pertains to
non-financial assets and liabilities. We adopted this standard for non-financial
assets and liabilities in the first quarter of 2009. There were no material
effects on our financial statements upon adoption of this new accounting
pronouncement; however, this pronouncement could have a material impact in
future periods.




In
December 2007, the FASB issued authoritative guidance related to business
combinations, as well as guidance for the accounting and reporting of
noncontrolling interests in consolidated financial statements.  These
new standards significantly change the accounting for and reporting of business
combination transactions and noncontrolling (minority) interests in consolidated
financial statements. We adopted these standards on January 1, 2009. The
impact of adopting the standard related to business combinations will be
primarily limited to business combinations occurring on or after January 1,
2009. Adoption of the guidance related to noncontrolling interests in
consolidated financial statements had no impact on our financial position or
results of operations.


F-12


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




3.
Acquisitions




Purchase
Acquisitions




During
2008, the Company consummated the acquisition listed below. This acquisition was
accounted for using the purchase method of accounting and, accordingly, the
purchase price was allocated to assets acquired and liabilities assumed based on
their estimated fair value on the acquisition date. The excess of the purchase
price over the fair values assigned to the net assets acquired was recorded as
goodwill.





Station
            Network
      Affiliation
            Market
            Date
      AcquiredKTVE
            NBC
            Monroe, Louisiana – El
      Dorado, Arkansas
            January 16,
      2008




KTVE




On
June 27, 2007, Mission entered into a purchase agreement with Piedmont
Television Holdings LLC to acquire substantially all the assets of KTVE, the NBC
affiliate serving the Monroe, Louisiana/El Dorado, Arkansas market. On
January 16, 2008, Mission completed the acquisition of KTVE for total
additional consideration of $8.3 million, inclusive of transaction costs of $0.5
million which is included in goodwill. Pursuant to the terms of the agreement,
Mission made a down payment of $0.4 million against the purchase price in June
2007 and paid the remaining $7.4 million, exclusive of transaction costs, on
January 16, 2008 from available cash on hand. Upon closing the purchase of
KTVE, Mission entered into a JSA and SSA with Nexstar-owned KARD, the Fox
affiliate in the market, whereby KARD provides local news, sales and other
non-programming services to KTVE.




The
following table summarizes the estimated fair values of the assets acquired and
liabilities assumed at the date of acquisition.





(in
      thousands)Accounts
      receivable
            
            $
            1,081Current
      portion of broadcast rights
            
            
            408Prepaid
      expenses and other current assets
            
            
            12Property
      and equipment
            
            
            3,534Intangible
      assets
            
            
            3,808Goodwill
            
            
            2,802Total
      assets acquired
            
            
            11,645Less:
      current portion of broadcast rights payable
            
            
            152Less:
      accounts payable
            
            
            113Less:
      deferred gain on lease
            
            
            2,216Less:
      accrued expenses and other liabilities
            
            
            854Net
      assets acquired
            
            $
            8,310




Of the
$3.8 million of acquired intangible assets, $2.7 million was assigned to FCC
licenses that are not subject to amortization and $1.1 million was assigned to
network affiliation agreements (estimated useful life of 15 years). Goodwill of
$2.8 million is expected to be deductible for tax purposes. The $2.2 million of
acquired lease cost is included in other long term liabilities.




Unaudited
Pro Forma Information




The
following unaudited pro forma information has been presented as if the
acquisition of KTVE had occurred on January 1, 2007:





Year
      Ended
                December 31, 2008
            
            
            Year
      Ended
                December 31, 2007(in thousands, except per share amounts)Net
      revenue
            
            $
            42,168
            
            
            
            43,793Income
      (loss) from operations
            
            
            1,148
            
            
            
            9,838Loss
      before income taxes
            
            
            (8,290
            )
            
            
            (2,870
            )Net
      loss
            
            
            (7,558
            )
            
            
            (4,117
            )





The above
selected unaudited pro forma information is presented for illustrative purposes
only and is not necessarily indicative of results of operations in future
periods or results that would have been achieved had the Company owned the
acquired station during the specified period.


F-13


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




4.
Pending Transaction with Nexstar




On
April 11, 2006, Nexstar and Mission filed an application with the FCC for
consent to assignment of the license for KFTA Channel 24 (Ft. Smith, Arkansas)
from Nexstar to Mission. Consideration for this transaction is set at $5.6
million. On August 28, 2006, Mission and Nexstar entered into a local
service agreement whereby Mission pays Nexstar for the right to broadcast
programming on KFTA and Nexstar pays Mission for the right to sell all
advertising time on KFTA within certain time periods. Also in 2006, Mission
entered into an affiliation agreement with the Fox network which provides Fox
programming to KFTA. Upon completing the assignment of KFTA’s license, the
Company plans to enter into JSA and SSA agreements with Nexstar-owned KNWA in
Fort Smith-Fayetteville-Springdale-Rogers, Arkansas, whereby KNWA will provide
local news, sales and other non-programming services to KFTA. See Note 5 for a
more complete discussion of the KFTA local service agreement.




In March
2008, the FCC granted the application to assign the license for KFTA from
Nexstar to Mission.  The grant contained conditions which Nexstar is
currently appealing.




5.
Related Party Transactions




Local
Service Agreements




Mission
has entered into local service agreements with Nexstar to provide sales and
operating services to all of the Mission stations. Under the terms of a shared
services agreement (“SSA”), the Nexstar station in the market provides certain
services including news production, technical maintenance and security, in
exchange for monthly payments from Mission to Nexstar. For each station that
Mission has entered into an SSA, it has also entered into a joint sales
agreement (“JSA”). Under the terms of the JSA, Nexstar sells the advertising
time of the Mission station and retains a percentage of the net revenue it
generates in return for monthly payments to Mission of the remaining percentage
of net revenue. Under the terms of a time brokerage agreement (“TBA”), Nexstar
programs most of the station’s broadcast time, sells the station’s advertising
time and retains the advertising revenue it generates in exchange for monthly
payments to Mission. JSA and TBA fees generated from Nexstar under the
agreements are reported as “Revenue from Nexstar Broadcasting, Inc.”, and SSA
fees incurred by Mission under the agreements are reported as “Fees incurred
pursuant to local service agreements with Nexstar Broadcasting, Inc.” in the
accompanying statement of operations.




The
arrangements under the local service agreements each Mission station has entered
into with Nexstar has had the effect of Nexstar receiving substantially all of
the available cash, after Mission’s payment of operating costs and debt service,
generated by the Company’s stations. Mission anticipates that Nexstar will
continue to receive substantially all of Mission’s available cash, after
payments for operating costs and debt service, generated by its
stations.




In order
for both Nexstar and Mission to comply with FCC regulations, Mission maintains
complete responsibility for and control over programming, finances, personnel
and operations of its stations.





F-14


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




5.
Related Party Transactions—(Continued)




The
following table summarizes the various local service agreements Mission-owned
stations had in effect with Nexstar as of December 31, 2009:





Station
            Market
            Affiliation
            Type
      of
                Agreement
            Expiration
            Consideration received from or paid to NexstarMission-owned:WFXP
            Erie,
      PA
            Fox
            TBA
            8/16/11
            Monthly
      payments received from Nexstar(1)KJTL
      and
              KJBO-LP
            Wichita
      Falls, TX-Lawton, OK
            Fox
              MyNetworkTV
            SSA
              JSA
            5/31/19
              5/31/19
            $60
      thousand per month paid to Nexstar
              70%
      of the KJTL/KJBO-LP net revenue collected each month received from
      NexstarWYOU
            Wilkes
      Barre-Scranton, PA
            CBS
            SSA
            1/4/18
            $35
      thousand per month paid to NexstarJSA
            9/30/14
            70%
      of the WYOU net revenue collected each month received from
      NexstarKODE
            Joplin,
      MO-Pittsburg, KS
            ABC
            SSA
            3/31/12
            $75
      thousand per month paid to NexstarJSA
            9/30/14
            70%
      of the KODE net revenue collected each month received from
      NexstarKRBC
            Abilene-Sweetwater,
      TX
            NBC
            SSA
            6/12/13
            $25
      thousand per month paid to NexstarJSA
            6/30/14
            70%
      of the KRBC net revenue collected each month received from
      NexstarKSAN
            San
      Angelo, TX
            NBC
            SSA
            5/31/14
            $10
      thousand per month paid to NexstarJSA
            5/31/14
            70%
      of the KSAN net revenue collected each month received from
      NexstarWFXW
            Terre
      Haute, IN
            Fox
            SSA
            5/8/13
            $10
      thousand per month paid to NexstarJSA
            5/8/13
            70%
      of the WFXW net revenue collected each month received from
      NexstarKCIT
      and
              KCPN-LP
            Amarillo,
      TX
            Fox
              MyNetworkTV
            SSA
              JSA
            4/30/19
              4/30/19
            $50
      thousand per month paid to Nexstar
              70%
      of the KCIT/KCPN-LP net revenue collected each month received from
      NexstarKHMT
            Billings,
      MT
            Fox
            TBA
            12/13/17
            Monthly
      payments received from Nexstar(1)KAMC
            Lubbock,
      TX
            ABC
            SSA
            2/15/19
            $75
      thousand per month paid to NexstarJSA
            2/15/19
            70%
      of the KAMC net revenue collected each month received from
      NexstarKOLR
            Springfield,
      MO
            CBS
            SSA
            2/15/19
            $150
      thousand per month paid to NexstarJSA
            2/15/19
            70%
      of the KOLR net revenue collected each month received from
      NexstarWUTR
            Utica,
      NY
            ABC
            SSA
            3/31/14
            $10
      thousand per month paid to NexstarJSA
            3/31/14
            70%
      of the WUTR net revenue collected each month received from
      NexstarWTVO
            Rockford,
      IL
            ABC/
              MyNetworkTV
            SSA
              JSA
            10/31/14
              10/31/14
            $75
      thousand per month paid to Nexstar
              70%
      of the WTVO net revenue collected each month received from
      NexstarKTVE
            Monroe,
      LA-El Dorado, AR
            NBC
            SSA
            1/16/18
            $20
      thousand per month paid to NexstarJSA
            1/16/18
            70%
      of the KTVE net revenue collected each month received from
      NexstarNexstar-owned:KFTA
            Ft.
      Smith-Fayetteville-Springdale-Rogers, AR
            Fox/NBC
            TBA
            (2)
            $5
      thousand per month paid to Nexstar
              $20
      thousand per month received from
Nexstar





(1)
            Payments
      are variable based on station’s monthly operating
  expenses.


(2)
            TBA
      will terminate upon the assignment of KFTA’s FCC license from
      Nexstar.


F-15


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




5.
Related Party Transactions—(Continued)




Under
these agreements, Mission is responsible for certain operating expenses of its
stations and therefore may have unlimited exposure to any potential operating
losses. Mission will continue to operate its stations under the SSAs and JSAs or
TBAs until the termination of such agreements. The SSAs and JSAs generally have
a term of ten years. Nexstar indemnifies Mission from Nexstar’s activities
pursuant to the local service agreement to which Nexstar is a
party.




Management
Services Agreement




Mission’s
sole shareholder and his spouse are parties to a management services agreement.
Under this agreement, Mission pays the sole shareholder up to $0.4 million per
year for certain management services and pays his spouse by the hour for certain
management services. Pursuant to the management services agreement, Mission paid
compensation to its sole shareholder in the amount of $ 0.4 million, $0.3
million, and $0.4 million for the years ended December 31, 2009, 2008 and 2007,
respectively, which is included in selling, general and administrative expenses
in the Company’s statement of operations.  Effective July 1, 2008, the sole
shareholder's spouse is no longer an employee of the Company.




6.
Property and Equipment




Property
and equipment consisted of the following:




December 31,Estimated
                  useful
      life
                  (years)
              
              
              2009
              
              
              2008(in
      thousands)Buildings
      and building improvements
              
              
              39
              
              
              $
              7,760
              
              
              $
              6,912Land
      and land improvements
              
              
              N/A-39
              
              
              
              1,442
              
              
              
              1,442Leasehold
      improvements
              
              term of lease
              
              
              
              70
              
              
              
              70Studio
      and transmission equipment
              
              
              5-15
              
              
              
              38,633
              
              
              
              37,894Office
      equipment and furniture
              
              
              3-7
              
              
              
              1,294
              
              
              
              1,302Vehicles
              
              
              5
              
              
              
              1,015
              
              
              
              1,149Construction
      in progress
              
              
              N/A
              
              
              
              580
              
              
              
              7,65950,794
              
              
              
              56,428Less:
      accumulated depreciation
              
              
              
              
              
              
              (22,184
              )
              
              
              (27,159
              )Property
      and equipment, net of accumulated depreciation
              
              
              
              
              
              $
              28,610
              
              
              $
              29,269


The
Company recorded depreciation expense in the amounts of $3.7 million, $3.3
million and $3.2 million for the years ended December 31, 2009, 2008 and
2007, respectively.




In
February 2006, President Bush signed into law legislation that established
February 17, 2009 as the deadline for television broadcasters to complete
their transition to digital transmission and return their analog spectrum to the
FCC. In February 2009, President Obama extended this deadline to June 12,
2009. As a result, the Company reassessed the estimated useful lives of its
analog transmission equipment and has accelerated the depreciation of certain
equipment affected by the digital conversion. Equipment having a net book value
of approximately $2.4 million as of February 1, 2006, which was previously
being depreciated over various remaining useful lives which extended from 2013
to 2020, was fully depreciated as of February 2009. During the years ended
December 31, 2009, 2008 and 2007, the accelerated depreciation of analog
transmission equipment increased depreciation expense and net loss by
approximately $0.1 million, $0.6 million and $0.6 million,
respectively.




During
the fourth quarter of 2009, the Company corrected depreciation expense for an
error that increased 2009 net loss by $0.1 million.  The error related
to depreciation of analog equipment that should have been accelerated so the
equipment would have been fully depreciated by June 2009.  We
evaluated this error taking into account both qualitative and quantitative
factors and considered the impact of this error in relation to the current
period, which is when it was corrected, as well as prior periods when the
depreciation should have been recognized.  Management believes this
error is immaterial to both the 2009 financial statements as well as any prior
periods affected.


F-16


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




6.
Property and Equipment—(Continued)




During
the second quarter of 2009, the Company corrected depreciation expense and
certain balance sheet accounts for an error discovered during the quarter which
increased the 2009 net loss by $0.2 million.  The error related to the
estimated fair values and subsequent depreciation of certain fixed assets
associated with the KTVE acquisition in 2008 which had shortened useful lives
due to the conversion from analog to digital equipment as mandated by the
FCC.  The impact of correcting this error in 2008 would have also
increased net loss by $0.2 million for the annual period and lesser amounts for
each quarter during the year.  No periods prior to 2008 would have
been impacted since the assets were acquired in January 2008.  We
evaluated this error taking into account both qualitative and quantitative
factors and considered the impact of this error in relation to the current
period, which is when it was corrected, as well as the period in which it
originated.  Management believes this error is immaterial to both the
2009 annual financial statements as well as to 2008 annual financial
statements.




On
May 11, 2001, the Company sold its telecommunications tower facilities
associated with KCIT, KOLR, KHMT and KAMC for cash and entered into
noncancellable operating leases with the buyer for tower space. In 2001, the
Company recorded a gain on the sale which has been deferred and is being
recognized over the lease term which expires in May 2021. The deferred gain at
December 31, 2009 and 2008 was approximately $1.9 million and $2.1 million,
respectively ($0.2 million was included in current liabilities at
December 31, 2009 and 2008).




7.
Intangible Assets and Goodwill




Intangible
assets subject to amortization consisted of the following:


December 31,
      2009
                
                
                December 31,
      2008Estimated
      useful life (years)
                
                
                Gross
                
                
                Accumulated
      Amortization
                
                
                Net
                
                
                Gross
                
                
                Accumulated
      Amortization
                
                
                Net(in
      thousands)
                
                
                (in
      thousands)Network
      affiliation agreements
                
                
                15
                
                
                $
                66,443
                
                
                $
                (44,348
                )
                
                $
                22,095
                
                
                $
                66,443
                
                
                $
                (40,079
                )
                
                $
                26,364Other
      definite-lived intangible assets
                
                
                1-15
                
                
                
                13,117
                
                
                
                (9,695
                )
                
                
                3,422
                
                
                
                13,117
                
                
                
                (8,816
                )
                
                
                4,301Total
      intangible assets subject to amortization
                
                
                
                
                
                $
                79,560
                
                
                $
                (54,043
                )
                
                $
                25,517
                
                
                $
                79,560
                
                
                $
                (48,895
                )
                
                $
                30,665




We
recorded an impairment charge of $2.3 million during the third quarter of 2009
that included an impairment to the carrying values of FCC licenses of $2.0
million, related to eight of our stations and an impairment to the carrying
values of goodwill of $0.3 million, related to one reporting unit consisting of
one of our television stations.  As required by the authoritative
guidance for goodwill and other intangible assets, we tested our FCC licenses
and goodwill for impairment at September 30, 2009, between the required annual
tests, because we believed events had occurred and circumstances changed that
would more likely than not reduce the fair value of our reporting units below
their carrying amounts and that our FCC licenses might be
impaired.  These events and circumstances include the overall economic
recession and a continued decline in demand for advertising at several of our
stations.




We
completed our annual test for impairment of goodwill and FCC licenses as of
December 31, 2009 which resulted in no additional impairment
charge.




As
required by authoritative guidance for goodwill and other intangible
assets  and authoritative guidance for accounting for the impairment
or disposal of long-lived assets, we tested our network affiliation agreements,
FCC licenses and goodwill for impairment at September 30, 2008, because we
believed events had occurred and circumstances changed that would more likely
than not reduce the fair value of our reporting units below their carrying
amounts and that our FCC licenses and network affiliation agreements might be
impaired. These events included the decline in overall economic conditions and
the resulting decline in advertising revenues at some of our television
stations. We recorded an impairment charge of $5.9 million that included an
impairment to the carrying values of FCC licenses of $4.7 million, related to 6
of our television stations; an impairment to the carrying value of network
affiliation agreements of $1.0 million, related to 2 of our television stations;
and an impairment to the carrying values of goodwill of $0.2 million, related to
2 of our television stations.




We
performed our annual test for impairment at December 31, 2008 and due to
the continued decline in overall economic conditions during the fourth quarter
of 2008 and the further decline in our forecasts for advertising revenues at
some stations, the Company recorded an additional $5.5 million in impairment
charges in the fourth quarter 2008, for an annual total of $11.4 million. Of the
additional $5.5 million impairment charges, $4.0 million was for FCC licenses,
related to 9 of our television stations, $0.4 million was for network
affiliation agreements related to 1 television stations, and $1.1 million was
for goodwill, related to 3 of our television stations.


F-17


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




7.
Intangible Assets and Goodwill—(Continued)




Determining
the fair value of our television stations requires our management to make a
number of judgments about assumptions and estimates that are highly subjective
and that are based on unobservable inputs. The actual results may differ from
these assumptions and estimates; and it is possible that such differences could
have a material impact on our financial statements. In addition to the various
inputs (i.e. market growth, operating profit margins, discount rates) that we
use to calculate the fair value of our FCC licenses and reporting units, we
evaluate the reasonableness of our assumptions by comparing the total fair value
of all our reporting units to our total market capitalization; and by comparing
the fair value of our reporting units or television stations, and FCC licenses
to recent television station sale transactions. The assumptions used in the
valuation testing have certain subjective components including anticipated
future operating results and cash flows based on our own internal business plans
as well as future expectations about general economic and local market
conditions.




As noted
above, we are required under authoritative guidance to test our indefinite-lived
intangible assets on an annual basis or whenever events or changes in
circumstances indicate that these assets might be impaired. As a result, if the
current economic trends continue and the credit and capital markets continue to
be disrupted, it is possible that we may record further impairments in the
future.




The
estimated useful life of network affiliation agreements contemplates renewals of
the underlying agreements based on the Company’s historical ability to renew
such agreements without significant cost or modifications to the conditions from
which the value of the affiliation was derived. These renewals can result in
estimated useful lives of individual affiliations ranging from 12 to 20 years.
Management has determined that 15 years is a reasonable estimate within the
range of such estimated useful lives.




Total
amortization expense from definite-lived intangibles for the years ended
December 31, 2009, 2008 and 2007 was $5.1 million, $5.4 million and $5.4
million, respectively.




The
following table presents the Company’s estimate of amortization expense for each
of the five succeeding fiscal years and thereafter for definite-lived intangible
assets recorded on its books as of December 31, 2009 (in
thousands):





Year
      ending December 31,2010
            
            $
            5,1482011
            
            $
            5,0942012
            
            $
            5,0822013
            
            $
            4,2542014
            
            $
            1,382Thereafter
            
            $
            4,557




The
aggregate carrying value of indefinite-lived intangibles, consisting of FCC
licenses and goodwill, was $39.4 million and $41.3 million at December 31,
2009 and 2008, respectively. Indefinite-lived intangible assets are not subject
to amortization, but are tested for impairment annually or whenever events or
changes in circumstances indicate that such assets might be
impaired.




The
changes in the carrying amount of goodwill for the years ended December 31, 2009
and 2008, respectively, are as follows:





2009
            
            
            2008Goodwill
            
            $
            19,924
            
            
            $
            17,122Accumulated
      impairment losses
            
            
            (1,289
            )
            
            
            —Balance
      as of January 1
            
            $
            18,635
            
            
            $
            17,122





Acquisitions
            
            
            —
            
            
            
            2,802Impairment
            
            
            (261
            )
            
            
            (1,289
            )Reclassification
      of asset
            
            
            355
            
            
            
            —





Goodwill
            
            $
            20,279
            
            
            $
            19,924Accumulated
      impairment losses
            
            
            (1,550
            )
            
            
            (1,289
            )Balance
      as of December 31, 2009 and 2008, respectively
            
            $
            18,729
            
            
            $
            18,635




During
2009, the Company reclassified certain amounts representing goodwill that were
improperly classified as property and equipment when recording the fair value of
KTVE assets, which were acquired in 2008.


F-18


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




7.
Intangible Assets and Goodwill—(Continued)




The
changes in the carrying amount of FCC licenses for the years ended December 31,
2009 and 2008, respectively are as follows:





2009
            
            
            2008FCC
      licenses
            
            $
            31,395
            
            
            $
            28,736Accumulated
      impairment losses
            
            
            (8,700
            )
            
            
            —Balance
      as of January 1
            
            $
            22,695
            
            
            $
            28,736





Acquisitions
            
            
            —
            
            
            
            2,659Impairment
            
            
            (1,997
            )
            
            
            (8,700
            )





FCC
      licenses
            
            $
            31,395
            
            
            $
            31,395Accumulated
      impairment losses
            
            
            (10,697
            )
            
            
            (8,700
            )Balance
      as of December 31, 2009 and 2008, respectively
            
            $
            20,698
            
            
            $
            22,695




The fair
value measurements of our goodwill and FCC licenses are as follows using the
three-level fair value hierarchy established by authoritative accounting
guidance for the year ended December 31, 2009:





Quoted
      prices in active markets (Level 1)
            Significant
      observable inputs
                (Level
      2)
            
            Significant
      unobservable inputs
                (Level
      3)
            
            
            Total
      gains (losses)(in
      thousands)Goodwill
            
            
            
            $
            18,729
            
            
            $
            (261
            )FCC
      licenses
            
            
            
            $
            20,698
            
            
            $
            (1,997
            )




Determining
the fair value of our television stations requires our management to make a
number of judgments about assumptions and estimates that are highly subjective
and that are based on unobservable inputs or assumptions.  The actual
results may differ from these assumptions and estimates; and it is possible that
such differences could have a material impact on our financial
statements.




8.
Debt




Long-term
debt consisted of the following:





December 31,2009
            
            
            2008(in
      thousands)Term
      loans
            
            $
            165,360
            
            
            $
            167,087Revolving
      credit facility
            
            
            7,000
            
            
            
            7,000172,360
            
            
            
            174,087Less:
      current portion
            
            
            (1,727
            )
            
            
            (1,727
            )$
            170,633
            
            
            $
            172,360




On
October 8, 2009, Mission amended its senior secured credit
facility.  The amendment modifies certain terms of Mission Credit
Agreement, including, but not limited to a general tightening of the
exceptions to the negative covenants (principally by means of reducing
the types and amounts of permitted transactions) and an increase to the
interest rates and fees payable with respect to the borrowings under the Amended
Mission Credit Agreement.  The Amended Mission Credit Agreement also
incorporates, by reference to the Amended Nexstar Credit Agreement changes to
the financial covenants and applicable definitions.


F-19


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




8.
Debt—(Continued)




On an
annual basis following the delivery of Mission's year end financial statements,
the Amended Mission Credit Agreement requires mandatory prepayments of
principal, as well as a permanent reduction in revolving credit
commitments, subject to a computation of excess cash flow for the
preceding fiscal year, as more fully set forth in the Amended Mission Credit
Agreement. The Amended Mission Credit Agreement also places additional
restrictions on the use of proceeds from asset sales, equity issuances, or debt
issuances (with the result that such proceeds, subject to certain exceptions, be
used for mandatory prepayments of principal and permanent reductions in
revolving credit commitments), and includes an anti-cash hoarding provision
which requires that Mission utilize unrestricted cash and cash equivalent
balances in excess of $15 million to repay principal amounts outstanding, but
not permanently reduce capacity, under the revolving credit
facility.




The
Amended Mission Credit Agreement also revised the interest rate
provisions.  As amended, borrowings under the Facility may bear
interest at either (i) a Eurodollar Rate, which has been amended to include an
interest rate floor equal to 1% or (ii) a Base Rate, which, as
amended,  is defined as the greater of (1) the sum of 1/2 of 1% plus
the Federal Funds Rate, (2) Bank of America, N.A.'s prime rate and (3) the sum
of (x) 1% plus (y) the Eurodollar Rate.  The definition of applicable
margin was changed to eliminate the pricing grid and replace it with a fixed
rate.  As amended, the applicable margin for Eurodollar loans is a
rate per annum equal to 4% and the applicable margin for Base Rate loans is a
rate per annum equal to 3%.




In
conjunction with the amendment to our credit agreement, $0.1 million related to
professional fees were recognized as administrative expense as
incurred.




Senior
Secured Credit Facility




On
April 1, 2005, Mission entered into an amended and restated senior secured
credit facility agreement (the “Mission Facility”) with a group of commercial
banks which replaced its previous bank credit facility that had provided for a
$152.0 million Term Loan D and a $30.0 million revolving loan. The Mission
Facility consists of a Term Loan B and a $15.0 million revolving loan. Proceeds
obtained under the Term Loan B were used to repay Mission’s existing Term Loan D
in the amount of $150.9 million plus accrued interest and repay outstanding
borrowings under the revolving loan in the amount of $21.5 million plus accrued
interest.




As of
December 31, 2009 and 2008, Mission had $165.4 million and $167.1 million,
respectively, outstanding under its Term Loan B and $7.0 million outstanding
under its revolving loan.




The Term
Loan B matures in October 2012, and is payable in consecutive quarterly
installments amortized at 0.25% quarterly, which commenced on December 30,
2005, with the remaining 93.25% due at maturity. During the year ended
December 31, 2009 repayments of Mission’s Term Loan B totaled $1.7 million.
The revolving loan is not subject to incremental reduction and matures in April
2012. Mission is required to prepay borrowings outstanding under the Mission
Facility with certain net proceeds, recoveries and excess cash flows as defined
in the credit facility agreement.




Interest
rates are selected at Mission’s option and the applicable margin is adjusted
quarterly as defined in the credit facility agreement. The total
weighted-average interest rate of the Mission Facility was 5.0% and 3.2% at
December 31, 2009 and 2008, respectively. Interest is payable periodically
based on the type of interest rate selected. Additionally, Mission is required
to pay quarterly commitment fees on the unused portion of its revolving loan
commitment of 0.75% per annum, based on the consolidated senior leverage
ratio of Nexstar and Mission for that particular quarter.




As of
December 31, 2009, there were approximately $8.0 million of unused
commitments under Mission’s credit facility. The total amount of borrowings
available under the revolving loan commitment of Mission’s senior secured credit
facility is based on covenant calculations contained in Nexstar’s credit
agreement. As of December 31, 2009, all $8.0 million of total unused
commitments under the Mission credit facility were available for
borrowing.




Collateralization
and Guarantees of Debt




Nexstar
Broadcasting Group, Inc. (Nexstar’s ultimate parent) and its subsidiaries
guarantee full payment of all obligations under the Mission Facility in the
event of its default. Similarly, Mission is a guarantor of Nexstar’s bank credit
facility, the 7% PIK senior subordinated notes and the 7% senior subordinated
notes issued by Nexstar. The bank credit facilities are collateralized by a
security interest in substantially all the combined assets, excluding FCC
licenses, of Nexstar and Mission.




Debt
Covenants




Mission’s
bank credit facility agreement does not contain financial covenant ratio
requirements, but does provide for default in the event Nexstar does not comply
with all covenants contained in its credit agreement.


F-20


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




8.
Debt—(Continued)




Fair
Value of Debt




The
aggregate carrying amounts and estimated fair value of Mission’s debt were as
follows:





December 31, 2009
            
            
            December 31,
      2008Carrying
                Amount
            
            
            Fair
      Value
            
            
            Carrying
                Amount
            
            
            Fair
                Value(in
      thousands)Term
      loans(1)
            
            $
            165,360
            
            
            $
            154,850
            
            
            $
            167,087
            
            
            $
            151,059Revolving
      credit facilities(1)
            
            $
            7,000
            
            
            $
            6,624
            
            
            $
            7,000
            
            
            $
            6,284





(1)
            The
      fair value of bank credit facilities is computed based on borrowing rates
      currently available to Mission for bank loans with similar terms and
      average maturities.  These fair value measurements are
      considered Level 3 (significant and
  unobservable).




Debt
Maturities




At
December 31, 2009, scheduled maturities of Mission’s debt (undiscounted)
are summarized as follows (in thousands):




Year
      ended December 31,2010
              
              $
              1,7272011
              
              
              1,7272012
              
              
              168,9062013
              
              
              —2014
              
              
              —Thereafter
              
              
              —$
              172,360
  9.
Common Stock




The
Company is 100% owned by one shareholder, David S. Smith. As of
December 31, 2009 and 2008, the Company had authorized, issued and
outstanding 1,000 shares of common stock with a $1 dollar par value. Each share
of common stock is entitled to one vote.




10.
Gain on Asset Exchange




In 2004,
the FCC approved a spectrum allocation exchange between Sprint Nextel
Corporation (“Nextel”) and public safety entities to eliminate interference
being caused to public safety radio licensees by Nextel’s operations. As part of
this spectrum exchange, the FCC granted Nextel the right to certain spectrum
within the 1.9 GHz band that is currently used by television broadcasters. In
order to utilize this spectrum, Nextel is required to relocate the broadcasters
to new spectrum by replacing all analog equipment currently used by broadcasters
with comparable digital equipment. The Company has agreed to accept the
substitute equipment that Nextel will provide and in turn must relinquish its
existing equipment back to Nextel. This transition began on a market by market
basis beginning in the third quarter of 2007. The equipment the Company receives
under this arrangement is recorded at their estimated fair market value and
depreciated over estimated useful lives ranging from 5 to 15 years. Management’s
determination of fair market value is derived from the most recent prices paid
to manufacturers and vendors for the specific equipment acquired. As equipment
is exchanged, the Company records a gain to the extent that the fair market
value of the equipment received exceeds the carrying amount of the equipment
relinquished. For the years ended December 31, 2009, 2008 and 2007, the
Company recognized gains of $2.4 million, $0.9 million and $0.3 million,
respectively, from the exchange of this equipment.


F-21


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




11.
Income Taxes




The
provision (benefit) for income taxes consisted of the following
components:





Years Ended
      December 31,2009
            
            
            2008
            
            
            2007(in
      thousands)Current
      tax expense:Federal
            
            $
            —
            
            
            $
            —
            
            
            $
            —State
            
            
            60
            
            
            
            77
            
            
            
            7260
            
            
            
            77
            
            
            
            72Deferred
      tax expense (benefit):Federal
            
            
            827
            
            
            
            (744
            )
            
            
            1,215State
            
            
            99
            
            
            
            (70
            )
            
            
            (152
            )926
            
            
            
            (814
            )
            
            
            1,063Income
      tax expense (benefit):
            
            $
            986
            
            
            $
            (737
            )
            
            $
            1,135




The
provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate of 35% to loss from operations before income
taxes. The sources and tax effects of the differences were as
follows:





Years Ended
      December 31,2009
            
            
            2008
            
            
            2007(in
      thousands)Tax
      benefit at 35% statutory federal rate
            
            $
            (574
            )
            
            $
            (2,897
            )
            
            $
            (1,017
            )Change
      in valuation allowance
            
            
            1,562
            
            
            
            2,394
            
            
            
            2,478State
      and local taxes, net of federal benefit
            
            
            (4
            )
            
            
            (235
            )
            
            
            (327
            )Other,
      net
            
            
            2
            
            
            
            1
            
            
            
            1Income
      tax expense (benefit)
            
            $
            986
            
            
            $
            (737
            )
            
            $
            1,135




The
components of the net deferred tax asset and liability were as
follows:





December 31,2009
            
            
            2008(in
      thousands)Deferred
      tax assets:Net
      operating loss carryforwards
            
            $
            31,598
            
            
            $
            28,893Other
      intangible assets
            
            
            4,786
            
            
            
            4,923Deferred
      revenue
            
            
            1,398
            
            
            
            1,654Other
            
            
            1,140
            
            
            
            1,970Total
      deferred tax assets
            
            
            38,922
            
            
            
            37,440Valuation
      allowance
            
            
            (36,787
            )
            
            
            (36,083
            )Net
      deferred tax assets
            
            
            2,135
            
            
            
            1,357Deferred
      tax liabilities:Property
      and equipment
            
            
            (1,791
            )
            
            
            (1,005
            )Goodwill
            
            
            (3,202
            )
            
            
            (2,636
            )FCC
      licenses
            
            
            (3,975
            )
            
            
            (3,626
            )Total
      deferred tax liabilities
            
            
            (8,968
            )
            
            
            (7,267
            )Net
      deferred tax liability
            
            $
            (6,833
            )
            
            $
            (5,910
            )







F-22


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




11.
Income Taxes—(Continued)




The
Company’s income tax expense is primarily comprised of deferred income taxes
created by an increase in the deferred tax liabilities position during the year
resulting from the amortization of goodwill and other indefinite-lived
intangible assets for income tax purposes which are not amortized for financial
reporting purposes. These deferred tax liabilities do not reverse on a scheduled
basis and are not used to support the realization of deferred tax assets. The
Company’s deferred tax assets primarily result from federal and state net
operating loss carryforwards (“NOLs”). The Company’s NOLs are available to
reduce future taxable income if utilized before their expiration. The Company
has provided a valuation allowance for certain deferred tax assets as it
believes they may not be realized through future taxable earnings.




On
May 18, 2006, the State of Texas enacted legislation to change its existing
franchise tax from a tax based on taxable capital or earned surplus to a new tax
based on modified gross revenue (“Margin Tax”). The former Texas franchise tax
structure remained in existence until the end of 2006. Beginning in 2007, the
Margin Tax imposes a 1% tax on revenues, less certain costs, as specified in the
legislation, generated from Texas activities. Additionally, the legislation
provides a temporary credit for Texas business loss carryovers existing through
2006 to be used as an offset to the Margin Tax. On June 15, 2007, the Texas
Governor signed legislation that provided various technical corrections to the
Texas Margin Tax. Based on the changes provided in this newly enacted tax law,
the Company adjusted its temporary credit for Texas business loss carryovers to
be utilized as an offset to the Margin Tax and a related deferred tax asset
during the second quarter of 2007. The effect of the revision made to the
temporary credit increased the Company’s deferred tax assets position resulting
in approximately a $0.3 million reduction in the deferred state income tax
provision for the year ended December 31, 2007.




As
discussed in Note 2, the Company adopted interpretive guidance related to
uncertainty surrounding tax benefits on January 1, 2007. A reconciliation
of the beginning and ending balances of the total amounts of gross unrecognized
tax benefits is as follows (in thousands):




Gross
      unrecognized tax benefits at January 1, 2009
              
              $
              3,677Increases
      in tax positions from prior years
              
              
              —Decreases
      in tax positions from prior years
              
              
              —Increases
      in tax positions for current year
              
              
              —Settlements
              
              
              —Lapse
      in statute of limitations
              
              
              —Gross
      unrecognized tax benefits at December 31, 2009
              
              $
              3,677





Interest
expense and penalties related to the Company’s uncertain tax positions are
reflected as a component of income tax expense in the Company’s Consolidated
Statements of Operations. As of December 31, 2009 and 2008, the Company has
not accrued interest on the unrecognized tax benefits as an unfavorable outcome
upon examination would not result in a cash outlay but would reduce NOLs subject
to a valuation allowance.




As of
December 31, 2009, the total gross unrecognized tax benefits were
approximately $3.7 million. If recognized, this amount would result in a
favorable effect on the Company’s effective tax rate excluding impact on the
Company’s valuation allowance position. The Company does not expect the amount
of unrecognized tax benefits to significantly change in the next twelve
months.


F-23


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




11.
Income Taxes—(Continued)




The
Company files income tax returns in the U.S. federal jurisdiction and various
state jurisdictions. The Company is subject to U.S. federal tax examinations for
years after 2005. Additionally, any NOLs that were generated in prior years and
will be utilized in the future may also be subject to examination by the
Internal Revenue Service. State jurisdictions that remain subject to examination
are not considered significant.




The
valuation allowance increased for the years ended December 31, 2009 and 2008 by
$0.7 million and $3.2 million, respectively primarily related to the generation
of current year net operating losses, the benefit of which may not be
realized.




At
December 31, 2009, the Company has NOLs available of approximately $86.1
million which are available to reduce future taxable income if utilized before
their expiration. The federal NOLs begin to expire in 2016 through 2029 if not
utilized. Utilization of NOLs in the future may be limited if changes in the
Company’s ownership occurs.




12.
FCC Regulatory Matters




Television
broadcasting is subject to the jurisdiction of the FCC under the Communications
Act of 1934, as amended (the “Communications Act”). The Communications Act
prohibits the operation of television broadcasting stations except under a
license issued by the FCC, and empowers the FCC, among other things, to issue,
revoke, and modify broadcasting licenses, determine the location of television
stations, regulate the equipment used by television stations, adopt regulations
to carry out the provisions of the Communications Act and impose penalties for
the violation of such regulations. The FCC’s ongoing rule making proceedings
could have a significant future impact on the television industry and on the
operation of the Company’s stations. In addition, the U.S. Congress may act to
amend the Communications Act in a manner that could impact the Company’s
stations and the television broadcast industry in general.




Some of
the more significant FCC regulatory matters impacting the Company’s operations
are discussed below.




Digital
Television (“DTV”) Conversion




In
February 2009, President Obama signed into law legislation that established
June 12, 2009 as the deadline for television broadcasters to complete their
transition to DTV-only operations and return their analog spectrum to the FCC.
The DTV transmission system delivers video and audio signals of higher quality
(including high definition television) than the existing analog transmission
system. DTV also has substantial capabilities for multiplexing (the broadcast of
several channels of programs concurrently) and data transmission. The
introduction of digital television requires consumers to purchase new television
sets that are capable of receiving and displaying the DTV signals, or adapters
to receive DTV signals and convert them to analog signals for display on their
existing receivers.




On June
12, 2009, all full-power television broadcasters were required to cease
operating in an analog format and operate exclusively in digital (DTV)
format.  All of Mission’s stations have completed the transition from
analog to digital and hold DTV authorizations issued by the FCC.




DTV
conversion expenditures were $1.0 million, $7.3 million and $2.3 million,
respectively, for the years ended December 31, 2009, 2008 and
2007.




Media
Ownership




In 2006,
the FCC initiated a rulemaking proceeding which provides for a comprehensive
review of all of its media ownership rules, as required by the Communications
Act. The Commission considered rules relating to ownership of two or more TV
stations in a market, ownership of local TV and radio stations by daily
newspapers in the same market, cross-ownership of local TV and radio stations,
and changes to how the national TV ownership limits are calculated. In February
2008, the FCC adopted modest changes to its newspaper broadcast cross-ownership
rule while retaining the rest of its ownership rules then currently in
effect.  Multiple challenges to this proceeding were filed with the
U.S. Courts of Appeal.  The court proceedings remain
pending.  The FCC will be making a further review of its media
ownership rules in 2010.




The FCC
is required by statute to review its media ownership rules every four years and
to eliminate those rules it finds no longer serve the “public interest,
convenience and necessity”.  During 2009, the FCC held a series of
hearings designed to evaluate possible changes to its rules.  Sometime
during 2010, the FCC is expected to officially initiate the next
statutorily-mandated review of its media ownership rules and request public
comments thereon.


F-24


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




13.
Commitments and Contingencies




Broadcast
Rights Commitments




Broadcast
rights acquired for cash under license agreements are recorded as an asset and a
corresponding liability at the inception of the license period. Future minimum
payments arising from unavailable future broadcast license commitments
outstanding are as follows at December 31, 2009 (in
thousands):





Year
      ended December 31,2010
            
            $
            2302011
            
            
            6312012
            
            
            3232013
            
            
            862014
            
            
            156Thereafter
            
            
            7Future
      minimum payments for unavailable cash broadcast rights
            
            $
            1,433




Unavailable
broadcast rights commitments represent obligations to acquire cash program
rights for which the license period has not commenced and, accordingly, for
which no asset or liability has been recorded.




Operating
Leases




The
Company leases towers, office space and operating equipment under noncancelable
operating lease arrangements expiring through April 2032.  Charges to
operations for such leases aggregated approximately $1.9 million, $1.8 million
and $1.8 million, respectively for the years ended December 31, 2009, 2008
and 2007. Future minimum lease payments under these operating leases are as
follows at December 31, 2009 (in thousands):





Year
      ended December 31,2010
            
            $
            1,1352011
            
            
            1,1822012
            
            
            1,2382013
            
            
            1,2982014
            
            
            1,360Thereafter
            
            
            17,567Future
      minimum lease payments under operating leases
            
            $
            23,780




Guarantees
of Nexstar Debt




Mission
is a guarantor of and has pledged substantially all its assets, excluding FCC
licenses, to Nexstar’s bank credit facility. Nexstar’s bank credit facility,
which matures in 2012, consists of a Term Loan B and a $82.5 million revolving
loan.




Mission
is also a guarantor of the 7% senior subordinated notes (“7% Notes”) and 7% PIK
senior subordinated notes, both due 2014 issued by Nexstar. Both notes are
general unsecured senior subordinated obligations subordinated to all of
Mission’s senior debt.




Mission
guarantees full payment of all obligations incurred under Nexstar’s bank credit
facility agreement and the 7% Notes. In the event that Nexstar is unable to
repay amounts due under these debt obligations, Mission will be obligated to
repay such amounts. The maximum potential amount of future payments that Mission
would be required to make under these guarantees would be generally limited to
the amount of borrowings outstanding under Nexstar’s bank credit facility, the
7% PIK senior subordinated notes and the 7% Notes. At December 31, 2009, Nexstar
had issued an aggregate principal amount of $47.9 million of the 7% Notes,
$142.9 million of the 7% PIK senior subordinated notes and had $226.3 million
outstanding under its bank credit facility.


F-25


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




13.
Commitments and Contingencies—(Continued)




Purchase
Options Granted to Nexstar




In
consideration of Nexstar Broadcasting Group’s guarantee of Mission’s bank credit
facility, Mission’s sole shareholder has granted Nexstar purchase options to
acquire the assets and assume the liabilities of each Mission station, subject
to FCC consent, for consideration equal to the greater of (1) seven times
the station’s cash flow, as defined in the option agreement, less the amount of
its indebtedness as defined in the option agreement, or (2) the amount of
its indebtedness. Cash flow is defined as income or loss from operations, plus
depreciation and amortization (including amortization of broadcast rights),
interest income, non-cash trade and barter expenses, nonrecurring expenses
(including time brokerage agreement fees), network compensation payments
received or receivable and corporate management fees, less payments for
broadcast rights, non-cash trade and barter revenue and network compensation
revenue. These option agreements (which expire on various dates between 2011 and
2018) are freely exercisable or assignable by Nexstar without consent or
approval by Mission’s sole shareholder. The Company expects these option
agreements to be renewed upon expiration.




Indemnification
Obligations




In
connection with certain agreements that the Company enters into in the normal
course of its business, including local service agreements, business
acquisitions and borrowing arrangements, the Company enters into contractual
arrangements under which the Company agrees to indemnify the third party to such
arrangement from losses, claims and damages incurred by the indemnified party
for certain events as defined within the particular contract. Such
indemnification obligations may not be subject to maximum loss clauses and the
maximum potential amount of future payments the Company could be required to
make under these indemnification arrangements may be unlimited. Historically,
payments made related to these indemnifications have been immaterial and the
Company has not incurred significant costs to defend lawsuits or settle claims
related to these indemnification agreements.




Litigation




From time
to time, the Company is involved in claims that arise out of the normal course
of its business. In the opinion of management, any resulting liability with
respect to these claims would not have a material adverse effect on the
Company’s financial position or results of operations.




14.
Employment Benefits




Retirement
Savings Plan




The
Company has established a retirement savings plan under Section 401(k) of
the Internal Revenue Code (the “Plan”). The Plan covers substantially all
employees of the Company who meet minimum age and service requirements, and
allows participants to defer a portion of their annual compensation on a pre-tax
basis. Contributions to the Plan may be made at the discretion of the Company.
The Company did not make any contributions to the Plan in 2009 and 2008. Mission
recorded contributions of $17 thousand year ended December 31, 2007.




15.
Valuation and Qualifying Accounts




Allowance
for Doubtful Accounts Rollforward





Balance at
                Beginning
                of
      Period
            
            
            Additions
                Charged to Costs
                and Expenses
            
            
            Increase
                Due
      to
                Acquisitions
            
            
            Deductions(1)
            
            
            Balance at
                End
      of
                Period(in
      thousands)Year
      ended December 31, 2007
            
            $
            —
            
            
            $
            —
            
            
            $
            —
            
            
            $
            —
            
            
            $
            —Year
      ended December 31, 2008
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Year
      ended December 31, 2009
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —





(1)
            Uncollectible
      accounts written off, net of
recoveries.


F-26


MISSION
BROADCASTING, INC.




NOTES
TO FINANCIAL STATEMENTS—(Continued)




15.
Valuation and Qualifying Accounts—(Continued)




Valuation
Allowance for Deferred Tax Assets Rollforward





Balance at
                Beginning
                of
      Period
            
            
            Additions
                Charged to Costs
                and
      Expenses(1)
            
            
            Additions
                Charged
      to
                Other Accounts
            
            
            Deductions(2)
            
            
            Balance at
                End
      of
                Period(in
      thousands)Year
      ended December 31, 2007
            
            $
            35,584
            
            
            $
            2,478
            
            
            $
            —
            
            
            $
            (5,181
            )
            
            $
            32,881Year
      ended December 31, 2008
            
            
            32,881
            
            
            
            2,394
            
            
            
            808
            
            
            
            —
            
            
            
            36,083Year
      ended December 31, 2009
            
            
            36,083
            
            
            
            1,562
            
            
            
            —
            
            
            
            (858
            )
            
            
            36,787





(1)
            Increase
      in valuation allowance related to the generation of net operating losses
      and other deferred tax assets.


(2)
            Decrease
      in valuation allowance associated with adjustments to certain deferred tax
      assets and their related
allowance.


F-27








Exhibit No.
            Exhibit
      Index3.1
            Certificate
      of Incorporation of Mission Broadcasting, Inc. (f/k/a Mission Broadcasting
      of Wichita Falls, Inc.) (Incorporated by reference to Exhibit 3.1 to
      Annual Report on Form 10-K for the year ended December 31, 2002 (File No.
      333-62916-02) filed by Mission Broadcasting of Wichita Falls,
      Inc.)3.2
            By-laws
      of Mission Broadcasting, Inc. (f/k/a Mission Broadcasting of Wichita
      Falls, Inc.) (Incorporated by reference to Exhibit 3.2 to Annual Report on
      Form 10-K for the year ended December 31, 2002 (File No. 333-62916-02)
      filed by Mission Broadcasting of Wichita Falls, Inc.)4.1
            Indenture,
      dated as of March 30, 2009, among Nexstar Broadcasting, Inc., Mission
      Broadcasting, Inc., as guarantor, and The Bank of New York Mellon, as
      Trustee.  (Incorporated by reference to Exhibit 4.1 to Current
      Report on Form 8-K (File No. 333-62916-02), filed by Mission Broadcasting,
      Inc. on April 3, 2009)4.2
            First
      Supplemental Indenture, dated as of March 30, 2009, among Nexstar
      Broadcasting, Inc., Mission Broadcasting, Inc., as guarantor, and Nexstar
      Broadcasting Group, Inc., as parent guarantor, and The Bank of New York
      Mellon, as Trustee.  (Incorporated by reference to Exhibit 4.2
      to Current Report on Form 8-K (File No. 333-62916-02), filed by Mission
      Broadcasting, Inc. on April 3, 2009)10.1
            Purchase
      and Sale Agreement, dated as of December 31, 2001, by and among Mission
      Broadcasting of Joplin, Inc., GOCOM Broadcasting of Joplin, LLC and GOCOM
      of Joplin License Sub, LLC. (Incorporated by reference to Exhibit 10.24 to
      Annual Report on Form 10-K for the year ended December 31, 2001 (File No.
      333-68964) filed by Nexstar Finance Holdings, L.L.C. and Nexstar Finance
      Holdings, Inc.)10.2
            Time
      Brokerage Agreement, dated as of December 31, 2001, by and between GOCOM
      of Joplin License Sub, LLC and Mission Broadcasting of Joplin, Inc.
      (Incorporated by reference to Exhibit 10.25 to Annual Report on Form 10-K
      for the year ended December 31, 2001 (File No. 333-68964) filed by Nexstar
      Finance Holdings, L.L.C. and Nexstar Finance Holdings,
    Inc.)10.3
            Option
      Agreement, dated as of January 12, 2001, made by each of the Nexstar
      Broadcasting of Wichita Falls, L.P. (Incorporated by reference to Exhibit
      10.10 to Registration Statement on Form S-4 (File No. 333-62916) filed by
      Nexstar Finance, L.L.C. and Nexstar Finance, Inc.)10.4
            Shared
      Services Agreement, dated as of June 1, 1999, among Mission Broadcasting
      of Joplin, Inc., David Smith and Nexstar Broadcasting of Wichita Falls,
      L.P. (Incorporated by reference to Exhibit 10.24 to Registration Statement
      on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group,
      Inc.)10.5
            Agreement,
      dated as of June 1, 1999, among Mission Broadcasting of Joplin, Inc.
      (Incorporated by reference to Exhibit 10.25 to Registration Statement on
      Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group,
      Inc.)10.6
            Option
      Agreement, dated as of June 5, 2002, among Nexstar Finance, L.P.
      (Incorporated by reference to Exhibit 10.5 to Registration Statement on
      Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group,
      Inc.)10.7
            Shared
      Services Agreement, dated as of June 5, 2002, among Bastet Broadcasting,
      Inc. (Incorporated by reference to Exhibit 10.10 to Registration Statement
      on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group,
      Inc.)10.8
            Option
      Agreement, dated as of November 30, 2002, among Bastet Broadcasting, Inc.,
      David Smith and Nexstar Broadcasting Group, L.L.C. (Incorporated by
      reference to Exhibit 10.37 to Amendment No. 2 to Registration Statement on
      Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group,
      Inc.)10.9
            Time
      Brokerage Agreement, dated as of April 1, 1996, by and between SJL
      Communications, L.P. and NV Acquisitions Co. (Incorporated by reference to
      Exhibit 10.48 to Amendment No. 2 to Registration Statement on Form S-1
      (File No. 333-86994) filed by Nexstar Broadcasting Group,
      Inc.)10.10
            Shared
      Services Agreement, dated as of June 1, 1999, among Mission Broadcasting
      of Wichita Falls, Inc., David Smith and NV Acquisitions Co. (Incorporated
      by reference to Exhibit 10.43 to Amendment No. 2 to Registration Statement
      on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group,
      Inc.)10.11
            Agreement,
      dated as of June 1, 1999, among Mission Broadcasting of Joplin, Inc. and
      Nexstar Broadcasting of Joplin, L.P. (Incorporated by reference to Exhibit
      10.44 to Amendment No. 2 to Registration Statement on Form S-1 (File No.
      333-86994) filed by Nexstar Broadcasting Group, Inc.)10.12
            Shared
      Services Agreement, dated as of April 1, 2002, by and between Mission
      Broadcasting of Joplin, Inc. and Nexstar Broadcasting of Joplin, L.L.C.
      (Incorporated by reference to Exhibit 10.51 to Amendment No. 2 to
      Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar
      Broadcasting Group, Inc.)10.13
            Amendment
      to Option Agreements, dated as of October 18, 2002, among Mission
      Broadcasting, Inc., David Smith, Nexstar Broadcasting of Northeastern
      Pennsylvania, L.L.C., Nexstar Broadcasting Group, L.L.C., Nexstar
      Broadcasting of Wichita Falls, L.L.C., and Nexstar Broadcasting of Joplin,
      L.L.C. (Incorporated by reference to Exhibit 10.54 to Amendment No. 2 to
      Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar
      Broadcasting Group, Inc.)  E-1
  10.14
            Asset
      Purchase Agreement, dated as of December 13, 2002, by and among LIN
      Television Corporation, TVL Broadcasting of Abilene, Inc., Abilene
      Broadcasting, L.L.C. and Mission Broadcasting, Inc. (Incorporated by
      reference to Exhibit 10.47 to Annual Report on Form 10-K for the year
      ended December 31, 2002 (File No. 333-62916) filed by Nexstar Finance,
      L.L.C. and Nexstar Finance, Inc.)10.15
            Local
      Marketing Agreement, dated as of December 13, 2002, by and among LIN
      Television Corporation, TVL Broadcasting of Abilene, Inc., Abilene
      Broadcasting, L.L.C. and Mission Broadcasting, Inc. (Incorporated by
      reference to Exhibit 10.48 to Annual Report on Form 10-K for the year
      ended December 31, 2002 (File No. 333-62916) filed by Nexstar Finance,
      L.L.C. and Nexstar Finance, Inc.)10.16
            Shared
      Services Agreement, dated as of June 13, 2003, by and between Mission
      Broadcasting, Inc. and Nexstar Broadcasting of Abilene, L.L.C.
      (Incorporated by reference to Exhibit 10.63 to Registration Statement on
      Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group,
      Inc.)10.17
            Option
      Agreement, dated as of June 13, 2003, among Mission Broadcasting, Inc.,
      David Smith and Nexstar Broadcasting of Abilene, L.L.C. (Incorporated by
      reference to Exhibit 10.64 to Registration Statement on Form S-1 (File No.
      333-86994) filed by Nexstar Broadcasting Group, Inc.)10.18
            Shared
      Services Agreement, dated as of May 9, 2003, by and between Mission
      Broadcasting, Inc. and Nexstar Broadcasting of the Midwest, Inc.
      (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form
      10-Q for the period ended June 30, 2003 (File No. 333-62916-02) filed by
      Mission Broadcasting, Inc.)10.19
            Agreement
      for the Sale of Commercial Time, dated as of May 9, 2003, by and between
      Mission Broadcasting, Inc. and Nexstar Broadcasting of the Midwest, Inc.
      (Incorporated by reference to Exhibit 10.2 to Quarterly Report on
      Form 10-Q for the period ended June 30, 2003 (File No. 333-62916-02) filed
      by Mission Broadcasting, Inc.)10.20
            Option
      Agreement, dated as of May 9, 2003, among Mission Broadcasting, Inc.,
      David Smith and Nexstar Broadcasting of the Midwest, Inc. (Incorporated by
      reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the period
      ended June 30, 2003 (File No. 333-62916-02) filed by Mission Broadcasting,
      Inc.)10.21
            Indenture,
      among Nexstar Finance Holdings, L.L.C., Nexstar Finance Holdings, Inc.,
      Mission Broadcasting, Inc. and The Bank of New York, dated as of March 27,
      2003. (Incorporated by reference to Exhibit 4.4 to Quarterly Report on
      Form 10-Q for the period ended March 31, 2003 (File No. 333-68964) filed
      by Nexstar Finance Holdings, L.L.C. and Nexstar Finance Holdings,
      Inc.)10.22
            First
      Restated Guaranty Agreement, dated as of December 30, 2003, executed
      by Mission Broadcasting, Inc. in favor of the banks set forth therein.
      (Incorporated by reference to Exhibit 10.37 to Annual Report on Form 10-K
      for the year ended December 31, 2003 (File No. 333-62916-02) filed by
      Mission Broadcasting, Inc.)10.23
            First
      Restated Security Agreement, dated as of December 30, 2003, by Mission
      Broadcasting, Inc. in favor of Bank of America, N.A., as collateral agent.
      (Incorporated by reference to Exhibit 10.38 to Annual Report on Form 10-K
      for the year ended December 31, 2003 (File No. 333-62916-02) filed by
      Mission Broadcasting, Inc.)10.24
            First
      Restated Pledge and Security Agreement, dated as of December 30, 2003, by
      Mission Broadcasting, Inc. in favor of Bank of America, N.A., as
      collateral agent. (Incorporated by reference to Exhibit 10.39 to Annual
      Report on Form 10-K for the year ended December 31, 2003 (File No.
      333-62916-02) filed by Mission Broadcasting, Inc.)10.25
            Indenture,
      among Nexstar Broadcasting, Inc., the guarantors and The Bank of New York,
      dated as of December 30, 2003 (Incorporated by reference to Exhibit 10.91
      to Annual Report on Form 10-K for the year ended December 31, 2003 (File
      No. 000-50478) filed by Nexstar Broadcasting Group,
  Inc.)10.26
            Amendment
      to Agreement for Sale of Commercial Time, dated December 30, 2003, by and
      between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc.
      (KAMC-KLBK). (Incorporated by reference to Exhibit 10.91 to Amendment No.
      1 to Registration Statement on Form S-4 (File No. 333-114963) filed by
      Nexstar Broadcasting, Inc.)10.27
            Amendment
      to Shared Services Agreement, dated December 30, 2003, by and between
      Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KAMC-KLBK).
      (Incorporated by reference to Exhibit 10.92 to Amendment No. 1 to
      Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar
      Broadcasting, Inc.)10.28
            Amendment
      to Agreement for Sale of Commercial Time, dated December 30, 2003, by and
      between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc.
      (KOLR-KSFX (formerly KDEB)). (Incorporated by reference to Exhibit 10.93
      to Amendment No. 1 to Registration Statement on Form S-4 (File No.
      333-114963) filed by Nexstar Broadcasting, Inc.)  E-2
  10.29
            Amendment
      to Shared Services Agreement, dated December 30, 2003, by and between
      Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KOLR-KSFX).
      (Incorporated by reference to Exhibit 10.94 to Amendment No. 1 to
      Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar
      Broadcasting, Inc.)10.30
            Amendment
      to Agreement for Sale of Commercial Time, dated January 1, 2004, by and
      between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc.
      (KCIT-KAMR). (Incorporated by reference to Exhibit 10.95 to Amendment No.
      1 to Registration Statement on Form S-4 (File No. 333-114963) filed by
      Nexstar Broadcasting, Inc.)10.31
            Amendment
      to Shared Services Agreement, dated January 1, 2004, by and between
      Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KCIT-KAMR).
      (Incorporated by reference to Exhibit 10.96 to Amendment No. 1 to
      Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar
      Broadcasting, Inc.)10.32
            Amendment
      to Agreement for Sale of Commercial Time, dated January 13, 2004, by and
      between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc.
      (WFXW-WTWO). (Incorporated by reference to Exhibit 10.97 to Amendment No.
      1 to Registration Statement on Form S-4 (File No. 333-114963) filed by
      Nexstar Broadcasting, Inc.)10.33
            Amendment
      to Shared Services Agreement, dated January 13, 2004, by and between
      Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (WFXW-WTWO).
      (Incorporated by reference to Exhibit 10.98 to Amendment No. 1 to
      Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar
      Broadcasting, Inc.)10.34
            Agreement
      for Sale of Commercial Time, dated April 1, 2004, by and between Nexstar
      Broadcasting, Inc. and Mission Broadcasting, Inc. (WUTR-WFXV).
      (Incorporated by reference to Exhibit 10.99 to Amendment No. 1 to
      Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar
      Broadcasting, Inc.)10.35
            Shared
      Services Agreement, dated April 1, 2004, by and between Nexstar
      Broadcasting, Inc. and Mission Broadcasting, Inc. (WUTR-WFXV).
      (Incorporated by reference to Exhibit 10.100 to Amendment No. 1 to
      Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar
      Broadcasting, Inc.)10.36
            Amendment
      to Agreement for Sale of Commercial Time, dated January 1, 2004, by and
      between Nexstar Broadcasting, Inc. (as successor to Nexstar Broadcasting
      of Wichita Falls, L.P.) and Mission Broadcasting, Inc. (f/k/a Mission
      Broadcasting of Wichita Falls, Inc.) (KJBO-KFDX). (Incorporated by
      reference to Exhibit 10.101 to Amendment No. 1 to Registration Statement
      on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting,
      Inc.)10.37
            Amendment
      to Shared Services Agreement, dated January 1, 2004, by and between
      Nexstar Broadcasting, Inc. (as successor to Nexstar Broadcasting of
      Wichita Falls, L.P.) and Mission Broadcasting, Inc. (f/k/a Mission
      Broadcasting of Wichita Falls, Inc.) (KJBO-KFDX). (Incorporated by
      reference to Exhibit 10.102 to Amendment No. 1 to Registration Statement
      on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting,
      Inc.)10.38
            Asset
      Purchase Agreement, dated October 4, 2004, by and among Mission
      Broadcasting, Inc., Young Broadcasting, Inc. and Winnebago Television
      Corporation. (Incorporated by reference to Exhibit 2.1 to Current Report
      on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on
      October 8, 2004).10.39
            Supplemental
      Indenture, dated as of April 1, 2005, among Nexstar Broadcasting, Inc.,
      Nexstar Broadcasting Group, Inc., Mission Broadcasting, Inc., and The Bank
      of New York, as Trustee. (Incorporated by reference to Exhibit 99.4 to the
      Current Report on Form 8-K (File No. 000-50478) filed by Nexstar
      Broadcasting Group, Inc. on April 6, 2005)10.40
            Guarantee,
      dated as of April 1, 2005, of Nexstar Broadcasting Group, Inc. executed
      pursuant to the Indenture dated as of December 30, 2003, among Nexstar
      Broadcasting, Inc., Mission Broadcasting, Inc. and The Bank of New York,
      as Trustee, as amended and supplemented by the Supplemental Indenture (as
      defined therein). (Incorporated by reference to Exhibit 99.5 to the
      Current Report on Form 8-K (File No. 000-50478) filed by Nexstar
      Broadcasting Group, Inc. on April 6, 2005)10.41
            Third
      Amended and Restated Credit Agreement, dated as of April 1, 2005, among
      Mission Broadcasting, Inc., the several banks and other financial
      institutions or entities from time to time parties thereto, Bank of
      America, N.A., as the Administrative Agent for the Lenders, and UBS
      Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
      as Co-Syndication Agents. (Incorporated by reference to Exhibit 99.1 to
      the Current Report on Form 8-K (File No. 333-62916-02) filed by Mission
      Broadcasting, Inc. on April 7, 2005)10.42
            First
      Amendment and Confirmation Agreement to Mission Guarantee of Nexstar
      Obligations, dated as of April 1, 2005, by and among Mission Broadcasting,
      Inc. as Guarantor and Bank of America, N.A. as Collateral Agent, on behalf
      of the Majority Lenders (as defined therein). (Incorporated by reference
      to Exhibit 99.2 to the Current Report on Form 8-K (File No. 333-62916-02)
      filed by Mission Broadcasting, Inc. on April 7, 2005)  E-3
  10.43
            Confirmation
      Agreement for the Smith Pledge Agreement, dated as of April 1, 2005, by
      David S. Smith and Bank of America, N.A. as Collateral Agent.
      (Incorporated by reference to Exhibit 99.3 to the Current Report on Form
      8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. April 7,
      2005)10.44
            Fourth
      Amended and Restated Credit Agreement, dated as of April 1, 2005, among
      Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., certain of
      its subsidiaries from time to time parties to the Credit Agreement, the
      several banks and other financial institutions or entities from time to
      time parties hereto, Bank of America, N.A., as the Administrative Agent
      for the Lenders, and UBS Securities LLC and Merrill Lynch, Pierce, Fenner
      & Smith Incorporated, as Co-Syndication Agents. (Incorporated by
      reference to Exhibit 99.1 to the Current Report on Form 8-K (File No.
      000-50478) filed by Nexstar Broadcasting, Inc., on April 6,
      2005)10.45
            Asset
      Purchase Agreement, dated as of June 27, 2007 (entered into by Mission
      Broadcasting, Inc. on June 27, 2007), by, between and among Mission
      Broadcasting, Inc. and Piedmont Television Holdings LLC, Piedmont
      Television Communications LLC, Piedmont Television of Monroe/El Dorado LLC
      and Piedmont Television of Monroe/El Dorado License LLC. (Incorporated by
      reference to Exhibit 2.1 to the Quarterly Report on Form 10-Q (File No.
      333-62916-02), filed by Mission Broadcasting, Inc. on August 8,
      2007)10.46
            Agreement
      for the Sale of Commercial Air Time, dated as of January 16, 2008, by and
      between Mission Broadcasting, Inc. and Nexstar Broadcasting, Inc.
      (Incorporated by reference to Exhibit 8.1 to Current Report on Form 8-K
      (File No. 333-62916-02), filed by Mission Broadcasting, Inc. on January
      22, 2008)10.47
            Shared
      Services Agreement, dated as of January 16, 2008, by and between Mission
      Broadcasting, Inc. and Nexstar Broadcasting, Inc. (Incorporated by
      reference to Exhibit 8.2 to Current Report on Form 8-K (File No.
      333-62916-02), filed by Mission Broadcasting, Inc. on January 22,
      2008)10.48
            Option
      Agreement, dated as of January 16, 2008, by and between Mission
      Broadcasting, Inc., David Smith and Nexstar Broadcasting, Inc.
      (Incorporated by reference to Exhibit 8.3 to Current Report on Form 8-K
      (File No. 333-62916-02), filed by Mission Broadcasting, Inc. on January
      22, 2008)10.49
            Second
      Amendment, dated August 12, 2008, to Agreement between Mission
      Broadcasting, Inc. and David S. Smith and Nancie J. Smith (originally
      dated January 1, 2001) (Incorporated by reference to Exhibit 99.1 to
      Quarterly Report on Form 10-Q (File No. 333-62916-02), filed by Mission
      Broadcasting, Inc. on August 18, 2008)10.50
            Guarantee,
      dated as of March 30, 2009, of Nexstar Broadcasting Group, Inc. executed
      pursuant to the Indenture, dated as of March 30, 2009, among Nexstar
      Broadcasting, Inc., Mission Broadcasting, Inc., as guarantor, and The Bank
      of New York Mellon, as Trustee, as amended and supplemented by the First
      Supplemental Indenture referenced above (included as part of Exhibit
      4.2).  (Incorporated by reference to Exhibit 4.3 to Current
      Report on Form 8-K (File No. 333-62916-02), filed by Mission Broadcasting,
      Inc. on April 3, 2009)10.51
            Registration
      Rights Agreement, dated March 30, 2009, by and among Nexstar Broadcasting,
      Inc., Mission Broadcasting, Inc. and Nexstar Broadcasting Group, Inc. and
      UBS Securities LLC for the benefit of holders of PIK
      Notes.  (Incorporated by reference to Exhibit 10.1 to Current
      Report on Form 8-K (File No. 333-62916-02), filed by Mission Broadcasting,
      Inc. on April 3, 2009)10.52
            First
      Amendment to Third Amended and Restated Credit Agreement dated October 8,
      2009, among Mission Broadcasting, Inc., Bank of America, N.A., Banc of
      America Securities, UBS Securities LLC, Merrill Lynch, Pierce, Fenner
      & Smith Incorporated and the several banks parties
      thereto.  (Incorporated by reference to Exhibit 10.1 to
      Quarterly Report on Form 10-Q (File No. 333-62916-02), filed by Mission
      Broadcasting, Inc. on November 12, 2009)14.1
            Mission
      Broadcasting, Inc. Code of Ethics. (Incorporated by reference to Exhibit
      14.1 to Annual Report on Form 10-K for the year ended December 31, 2003
      (File No. 333-62916-02) filed by Mission Broadcasting,
    Inc.)23.1
            Consent
      of PricewaterhouseCoopers LLP on March 15, 2010.*31.1
            Certification
      of David S. Smith pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.*32.1
            Certification
      of David S. Smith pursuant to 18 U.S.C. ss.
  1350.*





*
            Filed
      herewith







E-4