<PAGE>




                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549
                                                          
                                      Form 10-K
                   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                         THE SECURITIES EXCHANGE ACT OF 1934

                                     --------------
                                                          
For the fiscal year ended December 31, 1996     Commission file number 0-19728

                           GRANITE BROADCASTING CORPORATION
                (Exact name of registrant as specified in its charter)

    Delaware                                                  13-3458782
  (State of Incorporation)                                  (I.R.S. Employer
                                                           Identification No.)

                             767 Third Avenue, 34th Floor
                               New York, New York 10017
                                    (212) 826-2530
                 (Address, including zip code, and telephone number,
          including area code, of registrant's principal executive offices)

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

             Securities Registered Pursuant to Section 12(b) of the Act:

                                         None

             Securities Registered Pursuant to Section 12(g) of the Act:

                  Common Stock (Nonvoting), $.01 par value per share
  Cumulative Convertible Exchangeable Preferred Stock, $.01 par value per share
                                                          

    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 the 
registrant 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 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 registrant's knowledge, in any definitive proxy or 
information statements incorporated by reference in Part III of this Form 
10-K or any amendment to this Form 10-K.   / /

    As of March 10, 1997, 8,582,091 shares of Granite Broadcasting 
Corporation Common Stock (Nonvoting) and 1,819,500 shares of Granite 
Broadcasting Corporation Cumulative Convertible Exchangeable Preferred Stock 
were outstanding.  The aggregate market value (based upon the last reported 
sale price on the Nasdaq National Market on March 10, 1997) of the shares of 
Common Stock (Nonvoting) held by non-affiliates was approximately 
$82,148,005.  The aggregate market value (based upon the last reported sale 
price on the Nasdaq National Market on March 10, 1997) of shares of 
Cumulative Convertible Exchangeable Preferred Stock held by non-affiliates 
was approximately $97,337,287.  (For purposes of calculating the preceding 
amounts only, all directors and executive officers of the registrant are 
assumed to be affiliates.)  As of March 10, 1997, 178,500 shares of Granite 
Broadcasting Corporation Class A Voting Common Stock were outstanding, all of 
which were held by affiliates.

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

                         DOCUMENTS INCORPORATED BY REFERENCE

    Portions of Item 14 of Part IV are incorporated by reference to: Granite 
Broadcasting Corporation's Registration Statement No. 33-43770, filed on 
November 5, 1991; Granite Broadcasting Corporation's Registration Statement 
No. 33-52988, filed on October 6, 1992; Granite Broadcasting Corporation's 
Current Report on Form 8-K, filed on June 25, 1993; Granite Broadcasting 
Corporation's Quarterly Report on Form 10-Q for the quarter ended September 
30, 1993, filed on November 15, 1993; Amendment No. 2 to Granite Broadcasting 
Corporation's Registration Statement No. 33-71172, filed on December 16, 
1993; Granite Broadcasting Corporation's Quarterly Report on Form 10-Q for 
the quarter ended September 30, 1994, filed on November 14, 1994; Granite 
Broadcasting Corporation's Annual Report on Form 10-K for the year ended 
December 31, 1994, filed on March 29, 1995; Granite Broadcasting 
Corporation's Current Report on Form 8-K, filed on May 19, 1995; Granite 
Broadcasting Corporation's Current Report on Form 8-K, filed on July 14, 
1995; Granite Broadcasting Corporation's Registration Statement No. 33-94862, 
filed on July 21, 1995; Amendment No. 2 to Granite Broadcasting Corporation's 
Registration Statement No. 33-94862, filed on October 6, 1995; Granite 
Broadcasting Corporation's Annual Report on Form 10-K for the year ended 
December 31, 1995, filed on March 28, 1996; Granite Broadcasting 
Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 
1996, filed on August 13, 1996; Granite Broadcasting Corporation's Quarterly 
Report on Form 10-Q for the quarter ended September 30, 1996, filed on 
November 14, 1996; and Granite Broadcasting Corporation's Current Report on 
Form 8-K, filed on December 17, 1996.

<PAGE>

                                        PART I

Item 1.  Business

    Granite Broadcasting Corporation ("Granite" or the "Company"), a Delaware 
corporation, is a group broadcasting company founded in 1988 to acquire and 
manage network-affiliated television stations and other media and 
communications-related properties.  The Company's goal is to identify and 
acquire properties that management believes have the potential for 
substantial long-term appreciation and to aggressively manage such properties 
to improve their operating results.  The Company currently owns and operates 
ten network-affiliated television stations: KNTV(TV), the ABC affiliate 
serving San Jose, California and the Salinas-Monterey, California television 
market ("KNTV"); WTVH-TV, the CBS affiliate serving Syracuse, New York 
("WTVH"); KSEE-TV, the NBC affiliate serving Fresno-Visalia, California 
("KSEE"); WPTA-TV, the ABC affiliate serving Fort Wayne, Indiana ("WPTA"); 
WEEK-TV, the NBC affiliate serving Peoria-Bloomington, Illinois ("WEEK-TV"); 
KBJR-TV, the NBC affiliate serving Duluth, Minnesota and Superior, Wisconsin 
("KBJR"); KEYE-TV, the CBS affiliate serving Austin, Texas ("KEYE"); WWMT-TV, 
the CBS affiliate serving Grand Rapids-Kalamazoo-Battle Creek, Michigan 
("WWMT"); WKBW-TV, the ABC affiliate serving Buffalo, New York ("WKBW"); and 
WXON-TV, the WB affiliate serving Detroit, Michigan ("WXON").  KBJR and WEEK 
were acquired in separate transactions in October 1988, WPTA was acquired in 
December 1989, KNTV was acquired in February 1990, WTVH and KSEE were 
acquired in December 1993, KEYE was acquired in February 1995, WWMT and WKBW 
were acquired in separate transactions in June 1995 and WXON was acquired in 
January 1997.  WLAJ-TV, the ABC affiliate serving Lansing, Michigan ("WLAJ") 
is currently being operated by the Company pursuant to a time brokerage 
agreement that was entered into in October 1996.  The Company owns each of 
KNTV, WTVH, KSEE, WPTA, KBJR, KEYE, WWMT, WKBW and WXON through separate 
wholly owned subsidiaries (collectively, the "Subsidiaries"; references 
herein to the "Company" or to "Granite" include Granite Broadcasting 
Corporation and its subsidiaries).  The Company's long-term objective is to 
acquire additional television stations and to pursue acquisitions of other 
media and communications-related properties in the future.

Recent Developments

   Acquisitions

    On January 31, 1997, the Company acquired substantially all the assets 
used in the operation of WXON, the WB affiliate serving Detroit, Michigan 
(the "WXON Acquisition"), for approximately $175,000,000 in cash and the 
assumption of certain liabilities.  On January 8, 1997, the Company completed 
the acquisition of WIVR-FM in Eureka, Illinois for $1,000,000 in cash.  The 
Company also changed the station's call letters to WEEK-FM.  The radio 
station will be run in combination with Granite-owned WEEK-TV, the leading 
television station in the Peoria- Bloomington, Illinois television market.

   Time Brokerage Agreement and Acquisition Agreement

    In October 1996, the Company entered into agreements (the "WLAJ 
Agreements") with the owner of WLAJ, the ABC affiliate serving Lansing, 
Michigan, including a time brokerage agreement pursuant to which the Company 
operates WLAJ.  The Company has an agreement to acquire substantially all the 
assets used in the operation of WLAJ for approximately $19.4 million in cash 
(subject to certain adjustments) and the assumption of certain liabilities.

<PAGE>

   Other Developments

    In April 1996, the Company joined Datacast LLC, a company formed to 
establish and operate a national data center and network for the broadcast of 
digital data through television station broadcast signals.  The other equity 
investors in Datacast LLC include Chris-Craft Industries, Inc., Lin 
Television Corporation and Schurz Communications Inc.  The Company has 
committed to invest up to $2,500,000 in Datacast LLC, of which $1,750,000 has 
been invested to date.

    In June 1996, the Company began an alliance with Yahoo! Inc. which is 
intended to extend the news franchise of each Granite station by providing 
additional information about local and national news stories on Granite 
Station web sites at www.granitetv.com.  Both companies are working together 
to develop local Yahoo! directories in all markets for which Granite stations 
will serve as local advertising representative.  The Company believes the 
alliance with Yahoo! will enhance its efforts to develop the Internet into a 
complementary advertising medium and additional revenue source.

    In September 1996, the Company named Robert E. Selwyn, Jr. to the 
newly-created position of Chief Operating Officer.   Mr. Selwyn has over 20 
years of experience in television broadcasting.  Most recently, he was 
Chairman and Chief Executive Officer of the New World Television Station 
Group, where he had oversight responsibility for stations in a wide variety 
of markets including Dallas, Detroit, Atlanta, Cleveland, San Diego and 
Milwaukee.

                                    -2-

<PAGE>

    Company and Industry Overview

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

<TABLE>

<CAPTION>

                                                                                         Other
                                                                                       Commercial
                  Market            Date of        Channel/    Network      Market      Stations         Date of
Station            Area            Acquisition    Frequency   Affiliation   Rank(1)      in DMA       FCC License
-------           ------           -----------    ---------   -----------   ------     ----------     -----------
<S>               <C>              <C>            <C>         <C>           <C>        <C>            <C>

WXON-TV           Detroit, MI        01/31/97       20/UHF         WB          9            5           10/01/97

WWMT-TV           Grand Rapids -
                  Kalamazoo -
                  Battle Creek, MI   06/01/95        3/VHF         CBS        37             6          10/01/97

WKBW-TV           Buffalo, NY        06/29/95        7/VHF         ABC        39             4          06/01/99

KNTV(TV)          San Jose,
                  Salinas -
                  Monterey, CA       02/05/90       11/VHF         ABC        52            5(2)          12/01/98

KSEE-TV           Fresno-
                  Visalia, CA        12/23/93       24/UHF         NBC        55            9(3)          12/01/98

KEYE-TV           Austin, TX         02/01/95       42/UHF         CBS        63             6          08/01/98

WTVH-TV           Syracuse, NY       12/23/93        5/VHF         CBS        68             4          06/01/99

WPTA-TV           Fort Wayne, IN     12/11/89       21/UHF         ABC       103             4          08/01/97

WLAJ-TV           Lansing, MI        Pending(4)       53/UHF         ABC       106             3          10/01/97

WEEK-TV           Peoria -
                  Bloomington, IL    10/31/88       25/UHF         NBC       110            3           12/01/97

KBJR-TV           Duluth, MN -
                  Superior, WI       10/31/88       6/VHF          NBC       134            2           12/01/97

</TABLE>

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


1   "Market rank" refers to the size of the television market or Designated
    Market Area ("DMA") as defined by the A.C. Nielsen Company ("Nielsen"),
    except for San Jose.  KNTV, whose DMA is the Salinas-Monterey television
    market, primarily serves San Jose and Santa Clara County (which are part of
    the San Francisco-Oakland-San Jose DMA).  If Santa Clara County were a
    separate DMA, it would rank as the 52nd largest DMA in the United States.
    All market rank data is derived from an average of the Nielsen Station
    Index for November 1996, May 1996, February 1996 and November 1995, unless
    otherwise noted.

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

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

4   WLAJ is currently being operated by the Company pursuant to a time
    brokerage agreement.  The Company intends to acquire WLAJ.  Before the
    Company acquires WLAJ, the station's licensed facilities will be modified
    to eliminate certain signal coverage overlap with WWMT so that the Company
    can obtain an FCC waiver of the restriction on the number of television
    stations that may be under common ownership within the same geographic
    market.  Although there can be no assurance that the waiver will be
    obtained, the Company believes that it will be able to obtain such a
    waiver.

                                         -3-

<PAGE>

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

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

   The Company's Stations

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

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

<TABLE>

<CAPTION>


                                                                  Years Ended December 31,
                      --------------------------------------------------------------------------------------------------------
                             1992                  1993               1994                    1995                  1996
                      -----------------     ----------------    ----------------       -----------------     -----------------
                      Amount        %       Amount       %      Amount       %         Amount        %       Amount        %
                      ------       ----     ------      ----    ------      ----       ------       ----     ------       ----
<S>                   <C>          <C>      <C>         <C>     <C>         <C>        <C>          <C>      <C>          <C>

Local/Regional(1). .    $23,088      53.5%    $25,416     56.3%    $38,802    50.9%      $60,969      51.0%    $73,491      47.5%
National(2) . .          15,367      35.6      16,290     36.1      28,548    37.5        48,995      41.0      61,945      40.0
Network Compensation(3) . 1,427       3.3       1,286      2.8       2,244     2.9         4,154       3.5       7,289       4.7
Political(4). .           1,246       2.9         133      0.3       4,060     5.3         1,498       1.3       7,265       4.7
Other Revenue(5) . .      2,023       4.7       2,041      4.5       2,559     3.4         3,849       3.2       4,851       3.1
                      -------     -----     -------    -----     -------   -----       -------     -----     -------     -----
Total. .              $43,151     100.0%    $45,166    100.0%    $76,213   100.0%     $119,465     100.0%   $154,841     100.0%
                      -------     -----     -------    -----     -------   -----      --------     -----    --------     -----
                      -------     -----     -------    -----     -------   -----      --------     -----    --------     -----

</TABLE>

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

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

2   Represents sale of advertising time to agencies representing national
    advertisers.

3   Represents payment by networks for broadcasting network programming.

4   Represents sale of advertising time to political advertisers.

5   Represents miscellaneous revenue, including payment for production of
    commercials.

    Automobile advertising constitutes the Company's single largest source of 
gross revenues, accounting for approximately 20% of the Company's total gross 
revenues in 1996.  Gross revenues from restaurants and entertainment-related 
businesses accounted for approximately 12% of the Company's total gross 
revenues in 1996.  Each other category of advertising revenue represents less 
than 5% of the Company's total gross revenues.

                                 -4-

<PAGE>

    The following is a description of each of the Company's television 
stations:

   WXON: Detroit, Michigan

    WXON began operating in 1962 and began operating as a WB affiliate in 
1995.

    Detroit is the 9th largest DMA in the United States with a total of 
1,770,000 television households and a population of 4,730,000 according to 
Nielsen.  Detroit's economy is based on manufacturing, retail and health 
services.  The largest employers are General Motors, Ford Motor Company, 
Chrysler, Detroit Medical Center, Henry Ford Health System and Blue Cross 
Blue Shield of Michigan.  The median household income in the DMA is $51,392 
according to estimates provided in the BIA Investing in Television 1996 
Report (the "BIA Report").

   WWMT: Grand Rapids - Kalamazoo - Battle Creek, Michigan

    WWMT began operations in 1950 and is affiliated with CBS.

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

   WKBW: Buffalo, New York

    WKBW began operations in 1958 and is affiliated with ABC.

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

   KNTV: San Jose, California

    KNTV began operations in 1955 and is affiliated with ABC.

    KNTV is the only network-affiliated station and only VHF station licensed 
to serve San Jose, California, the largest city in Northern California and 
the eleventh largest city in the United States.  Its VHF signal is broadcast 
on Channel 11 and covers all of Santa Clara County, which includes an area 
that has come to be known as "Silicon Valley."  Although the Nielsen rating 
service designates KNTV as the ABC affiliate for the Salinas-Monterey market 
(which is southwest of and adjacent to San Jose), according to the February 
1996 Nielsen Monterey/Salinas Viewers In Profile Report more than 62% of the 
station's audience resides in the San Francisco-Oakland-San Jose television 
market (the fifth largest DMA in the country).  The Company believes that 
substantially all of such audience resides in Santa Clara County.  If Santa 
Clara County were a separate DMA with its 522,980 television households, it 
would rank as the 52nd largest DMA in the United States.

    Santa Clara County has a diverse and affluent economy.  The average 
effective buying income by household was $57,028, according to the 1995 
Demographics USA Report.  The area is home to over 2,800 technological 
companies as well as numerous institutions and companies of national 
reputation.  Prominent corporations located in Santa Clara County include 
Hewlett-Packard, Lockheed/Martin, IBM, Apple, Intel, Sun Microsystems, 
Amdahl, Tandem Computers, National Semiconductor, Syntex, Conner Peripherals, 
Varian Associates and Chips & Technologies.

                                    -5-

<PAGE>

Santa Clara County is also the home of several universities including 
Stanford University, San Jose State University and Santa Clara University 
with enrollments aggregating approximately 51,000 students.

   KSEE: Fresno-Visalia, California

    KSEE began operations in 1953 and is affiliated with NBC.

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

   KEYE: Austin, Texas

    KEYE began operations in 1983.  The station, formerly a Fox affiliate, 
became a CBS affiliate on July 2, 1995.

    The Austin economy benefits from having large private sector employers 
such as IBM, Motorola, HEB Stores, Advanced Micro Devices, Abbott 
Laboratories, Texas Instruments, Dell Computers, 3M Corporation, Applied 
Materials and SEMATECH. Approximately 825 high tech firms employ nearly 
85,000 people in the area.  This fact, plus the terrain of the region's Hill 
Country, has resulted in the Austin area being nicknamed "Silicon Hills."  
Since Austin, the nation's 27th largest city, is the state capital, as well 
as home to the University of Texas, it also provides a substantial amount of 
public sector employment opportunities.  The median income per household in 
the DMA was $45,741, according to estimates provided in the BIA Report.  In 
addition to the University of Texas, Southwestern University, Saint Edwards 
University and Southwest Texas University are located in the DMA.  Total 
university enrollment in the DMA is approximately 100,000 students.

   WTVH: Syracuse, New York

    WTVH began operations in 1948 and is affiliated with CBS.

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

   WPTA: Fort Wayne, Indiana

    WPTA began operations in 1957 and is affiliated with ABC.

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

                                  -6-

<PAGE>

   WLAJ: Lansing, Michigan

    WLAJ began operations in 1990 and is an ABC affiliate.

    Lansing is the 106th largest DMA in the United States with a total of 
229,000 television households and a population of 639,000.  Lansing is the 
state capital and its economy is centered around government employment, 
education and manufacturing.  The largest employers are General Motors, the 
State of Michigan, Michigan State University, Meijer Inc., Michigan Capital 
Healthcare, Sparrow Hospital and Lansing Community College.  The median 
household income in the DMA is $46,143 according to estimates provided in the 
BIA Report.

   WEEK-TV and WEEK-FM: Peoria-Bloomington, Illinois

    WEEK began operations in 1953 and is affiliated with NBC.  WEEK-FM, 
acquired in January 1997, will be run in combination with WEEK-TV.

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

   KBJR: Duluth, Minnesota and Superior, Wisconsin

    KBJR began operations in 1954 and is affiliated with NBC.

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

   Network Affiliation

    Whether or not a station is affiliated with one of the four major 
networks, NBC, ABC, CBS or Fox (collectively, the "Networks"), has a 
significant impact on the composition of the station's revenues, expenses and 
operations.  A typical Network affiliate receives the significant portion of 
its programming each day from the Network.  This programming, along with cash 
payments, is provided to the affiliate by the Network in exchange 

                                -7-

<PAGE>

for a substantial majority of the advertising inventory during Network 
programs.  The Network then sells this advertising time and retains the 
revenues so generated.

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

    Each of the Company's stations other than WXON is affiliated with a 
Network pursuant to an affiliation agreement.  KSEE, WEEK and KBJR are 
affiliated with NBC; KNTV, WPTA, WKBW and WLAJ are affiliated with ABC; and 
KEYE, WTVH and WWMT are affiliated with CBS.  The Network affiliation 
agreements provide for contract terms of ten years (other than the NBC 
agreements for which the terms are seven years).  WXON has an affiliation 
arrangement with the WB Network, which is terminable by either party at will.

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

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

   Competition

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

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

    In addition to management experience, factors that are material to a 
television station's competitive position include signal coverage, local 
program acceptance, Network affiliation, audience characteristics, assigned 
frequency and strength of local competition.  The broadcasting industry is 
continuously faced with technological change and innovation, the possible 
rise in popularity of competing entertainment and communications media, 
changes in labor conditions and governmental restrictions or actions of 
federal regulatory bodies, including the FCC and the Federal Trade 
Commission, any of which could possibly have a material adverse effect on the 
Company's operations and results.

    Conventional commercial television broadcasters also face competition 
from other programming, entertainment and video distribution systems, the 
most common of which is cable television.  These other 

                                     -8-

<PAGE>

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

    The broadcasting industry is continuously faced with technological change 
and innovation, which could possibly have a material adverse effect on the 
Company's operations and results.  Commercial television broadcasting may 
face future competition from interactive video and data services that provide 
two-way interaction with commercial video programming, along with information 
and data services that may be delivered by commercial television stations, 
cable television, direct broadcast satellites, multi-point distribution 
systems, multichannel multi-point distribution systems or other video 
delivery systems. In addition, recent actions by the FCC, Congress and the 
courts all presage significant future involvement in the provision of video 
services by telephone companies.  The Telecommunications Act of 1996 lifts 
the prohibition on the provision of cable television services by telephone 
companies in their own telephone areas subject to regulatory safeguards and 
permits telephone companies to own cable systems under certain circumstances. 
 It is not possible to predict the impact on the Company's television 
stations of any future relaxation or elimination of the existing limitations 
on the ownership of cable systems by telephone companies.  The elimination or 
further relaxation of the restriction, however, could increase the 
competition the Company's television stations face from other distributors of 
video programming. 

   FCC Licenses

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

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

                                   -9-

<PAGE>

    Television broadcasting licenses are generally granted and renewed for a 
period of five years, but may be renewed for a shorter period upon a finding 
by the FCC that the "public interest, convenience and necessity" would be 
served thereby.  The Telecommunications Act of 1996 extends the license 
period for television stations to eight years.  At the time application is 
made for renewal of a television license, parties in interest as well as 
members of the public may apprise the FCC of the service the station has 
provided during the preceding license term and urge the grant or denial of 
the application.  Under the Telecommunications Act of 1996 as implemented in 
the FCC's rules, a competing application for authority to operate a station 
and replace the incumbent licensee may not be filed against a renewal 
application and considered by the FCC in deciding whether to grant a renewal 
application.  The statute modified the license renewal process to provide for 
the grant of a renewal application upon a finding by the FCC that the 
licensee (1) has served the public interest, convenience, and necessity; (2) 
has committed no serious violations of the Communications Act or the FCC's 
rules; and (3) has committed no other violations of the Communications Act or 
the FCC's rules which would constitute a pattern of abuse.  If the FCC cannot 
make such a finding, it may deny a renewal application, and only then may the 
FCC accept other applications to operate the station of the former licensee.  
In the vast majority of cases, broadcast licenses are renewed by the FCC even 
when petitions to deny are filed against broadcast license renewal 
applications.  All of the Company's existing licenses that have come up for 
renewal have been renewed and are in effect.  Such licenses are subject to 
renewal at various times during 1997, 1998 and 1999. Although there can be no 
assurance that the Company's licenses will be renewed, the Company is not 
aware of any facts or circumstances that would prevent the Company from 
having its licenses renewed.

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

    Pursuant to the Telecommunications Act of 1996, the FCC has eliminated 
the limit on the number of radio broadcast stations that an individual or 
entity may own or control nationally.  The FCC also has relaxed its local 
radio multiple ownership rules governing the common ownership of radio 
broadcast stations in the same geographic market.  In accordance with the 
Telecommunications Act of 1996, the FCC's rules permit the common ownership 
of up to eight commercial radio stations, not more than five of which are in 
the same service (i.e., AM or FM), in markets with 45 or more commercial 
radio stations.  In markets with 30 to 44 commercial radio stations, an 
individual or entity may own up to seven commercial radio stations, not more 
than four of which are in the same service. In markets with 15 to 29 
commercial radio stations, an individual or entity may own up to six 
commercial radio stations, not more than four of which are in the same 
service.  In markets with 14 or fewer commercial radio stations, an 
individual or entity may own up to five commercial radio stations, not more 
than three of which are in the same service, provided that the commonly owned 
stations represent no more than 50% of the stations in the market.
    
    The Telecommunications Act of 1996 does not eliminate the FCC's rules 
restricting the common ownership of a radio station and a television station 
in the same geographic market ("one-to-a-market rule") and the common 
ownership of a daily newspaper and a broadcast station located in the same 
geographic market. The statute, however, does relax the FCC's one-to-a-market 
rule by authorizing the FCC to extend its waiver policy to stations located 
in the 50 largest television markets.  As directed by the Telecommunications 
Act of 1996, the FCC has eliminated its prior restriction on the common 
ownership of a cable system and a television network.  Although the statute 
lifts the prior statutory restriction on the common ownership of a cable 
television system and a television station located in the same geographic 
market, the FCC is not statutorily required to eliminate its regulatory 
restriction on such common ownership.  The FCC has initiated a proceeding to 
solicit comments on retaining, 

                                     -10-

<PAGE>

modifying, or eliminating this regulatory restriction.  The 
Telecommunications Act of 1996 authorizes the FCC to permit the common 
ownership of multiple television networks under certain circumstances.  
Furthermore, in accordance with the statute, the FCC has initiated a review 
of all of its ownership rules to determine whether they continue to serve the 
public interest.

    Ownership of television licensees generally is attributed to officers, 
directors and shareholders who own 5% or more of the outstanding voting stock 
of a licensee, except that certain institutional investors who exert no 
control or influence over a licensee may own up to 10% of such outstanding 
voting stock before attribution results.  Under FCC regulations, debt 
instruments, non-voting stock and certain limited partnership interests 
(provided the licensee certifies that the limited partners are not 
"materially involved" in the media-related activities of the partnership) and 
voting stock held by minority shareholders where there is a single majority 
shareholder generally will not result in attribution.  Under the FCC's 
multiple and cross-ownership rules, which have been or will be revised in 
accordance with the Telecommunications Act of 1996, an officer or director of 
the Company or a holder of the Company's voting common stock who has an 
attributable interest in other broadcast stations, a cable television system 
or a daily newspaper may violate the FCC regulations depending on the number 
and location of the other broadcasting stations, cable television systems or 
daily newspapers attributable to such person.  In addition, the FCC's 
cross-interest policy, which precludes an individual or entity from having an 
attributable interest in one media property and a "meaningful" (but not 
attributable) interest in another media property in the same area, may be 
invoked in certain circumstances to reach interests not expressly covered by 
the multiple ownership rules.  None of the Company's officers, directors or 
holders of voting common stock have attributable or non-attributable 
interests in broadcasting stations, cable television systems or daily 
newspapers that violate the FCC's multiple and cross-ownership rules or the 
cross-interest policy.

    Irrespective of the FCC rules, the Justice Department and the Federal 
Trade Commission (together the "Antitrust Agencies") have the authority to 
determine that a particular transaction presents antitrust concerns.  The 
Antitrust Agencies have recently increased their scrutiny of the television 
and radio industries, and have indicated their intention to review matters 
related to the concentration of ownership within markets (including local 
marketing agreements ("LMAs")) even when the ownership or LMA in question is 
permitted under the regulations of the FCC.  There can be no assurance that 
future policy and rulemaking activities of the Antitrust Agencies will not 
impact the Company's operations. 

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

   The Cable Television Consumer Protection and Competition Act

    The Cable Television Consumer Protection and Competition Act of 1992 (the 
"Cable Act") and the FCC's implementing regulations give television stations 
the right to control the use of their signals on cable television systems.  
Under the Cable Act, at three year intervals beginning in June 1993, each 
television station is required to elect whether it wants to avail itself of 
must-carry rights or, alternatively, to grant retransmission consent.  If a 
television station elects to exercise its authority to grant retransmission 
consent, cable systems are required to obtain the consent of that television 
station for the use of its signal and could be required to pay the television 
station 

                                 -11-
<PAGE>
for such use.  The Cable Act further requires mandatory cable carriage of all 
qualified local television stations electing their must-carry rights or not 
exercising their retransmission rights.  Under the FCC's rules, television 
stations were required to make their election between must-carry and 
retransmission consent status by October 1, 1996, for the period from January 
1, 1997 through December 31, 1999.  Television stations that failed to make 
an election by the specified deadline were deemed to have elected must-carry 
status for the relevant three year period.  Each of the Company's stations 
has either elected its must-carry rights or entered into retransmission 
consent agreements with substantially all cable systems in its DMA.  KNTV has 
elected to exercise its must-carry rights in both the Salinas-Monterey DMA 
and Santa Clara County.  The Company's other stations have elected to require 
retransmission consent in substantially all cases.  Approximately 60% of the 
households in the geographic areas with respect to which the Company's 
stations have elected to exercise their retransmission rights subscribe to 
cable television.

    In April 1993 the U.S. District Court for the District of Columbia upheld 
the constitutionality of the must-carry provisions of the Cable Act.  
However, on June 27, 1994, the U.S. Supreme Court vacated the lower court's 
judgment and remanded the case to the District Court for further proceedings. 
 Although the Supreme Court found the must-carry rules to be content-neutral, 
it also found that genuine issues of material fact still remained that must 
be resolved on a more detailed evidentiary record.  On remand, on December 
13, 1995, the District Court upheld the constitutionality of the must-carry 
rules.  An appeal of the District Court's decision is pending before the 
Supreme Court.  In the meantime, however, the FCC's must-carry regulations 
implementing the Cable Act remain in effect.  The Company cannot predict the 
outcome of such challenges.  If the Supreme Court finds the must-carry rules 
to be unconstitutional, some cable systems may delete carriage of signals of 
some of the Company's stations and it is likely that either Congress or the 
FCC will attempt to enact new must-carry requirements intended to withstand 
constitutional scrutiny.

   Proposed Legislation and Regulations

    The FCC currently has under consideration and the Congress and the FCC 
may in the future consider and adopt new or modify existing laws, regulations 
and policies regarding a wide variety of matters that could, directly or 
indirectly, affect the operation, ownership, and profitability of the 
Company's broadcast properties, result in the loss of audience share and 
advertising revenues for the Company's stations, and affect the ability of 
the Company to acquire additional stations or finance such acquisitions.  
Such matters include: (i) spectrum use or other fees on FCC licensees; (ii) 
the FCC's equal employment opportunity rules and other matters relating to 
minority and female involvement in the broadcasting industry; (iii) rules 
relating to political broadcasting; (iv) technical and frequency allocation 
matters; (v) changes in the FCC's cross-interest, multiple ownership and 
cross-ownership rules and policies; (vi) changes to broadcast technical 
requirements; (vii) limiting the tax deductibility of advertising expenses by 
advertisers; and (viii) changes to the standards governing the evaluation and 
regulation of television programming directed towards children, and violent 
and indecent programming.  The Company cannot predict whether such changes 
will be adopted or, if adopted, the effect that such changes would have on 
the business of the Company.

    As an example of the above proposed changes, the FCC has initiated 
rulemaking proceedings to solicit comments on its multiple ownership, 
attribution and minority ownership rules.  More particularly, the FCC has 
initiated proceedings requesting comment on: (i) narrowing the geographic 
area where common ownership restrictions would be triggered by limiting it to 
overlapping "Grade A" contours rather than "Grade B" contours and by 
permitting (or granting waivers or exceptions for) certain UHF or UHF/VHF 
station combinations; (ii) relaxing the rules prohibiting cross-ownership of 
radio and television stations in the same market to allow certain 
combinations where there remain alternative outlets and suppliers to ensure 
diversity; (iii) treating television LMAs the same as radio LMAs, which would 
currently preclude certain television LMAs where the programmer owns or has 
an attributable interest in another television station in the same market; 
(iv) establishing a grandfathering policy for certain television LMAs in the 
event the FCC decides to treat interests in such LMAs as attributable; and 
(v) treating a company's interest in a joint sales agreement for a television 
station as an attributable interest for purposes of the FCC's ownership 
rules.  The FCC also has a rulemaking proceeding pending where it seeks 
comment on whether it should relax attribution and other rules to facilitate 
greater minority and female ownership. This 

                                  -12-
<PAGE>
proceeding currently is being held in abeyance due to uncertainty created by 
a 1995 Supreme Court decision which narrowed the legal basis for affirmative 
action programs.  The Company cannot predict the outcome of the FCC's 
rulemaking proceedings or how FCC changes in its multiple and cross-ownership 
rules, made in accordance with the Telecommunications Act of 1996, will 
affect the Company's business.

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

    The FCC has begun adopting rules and proposing others to implement 
advanced television service ("ATV") which includes high definition television 
systems. ATV is a technology that will improve television audio and video 
quality.  The FCC has "set aside" channels within the existing television 
system for ATV and has limited initial ATV eligibility to existing television 
stations and certain applicants for new television stations ("Existing 
Broadcasters").  The FCC has determined that ATV will be a digital system 
which is incompatible with current television transmitters and receivers.  
The rules for phasing in ATV service permit each television station to 
provide conventional television service on its regular channel until some 
point after ATV service has commenced.  The FCC is seeking comments on a 
timetable for requiring broadcasters to convert to ATV. Broadcasters will 
have to convert to ATV by the conversion deadline and surrender then one 
channel back to the FCC.  The FCC issued for public comment a proposed ATV 
Table of Allotments intended to provide an ATV channel for each Existing 
Broadcaster, in a manner that attempts to replicate each station's existing 
coverage area while taking into account interference to existing television 
stations and between ATV stations.  On December 26, 1996, the FCC adopted a 
standard for the transmission of digital television in the United States, 
which is consistent with a consensus agreement voluntarily developed by a 
broad cross-section of parties, including the broadcasting, equipment 
manufacturing and computer industries.  Implementation of ATV service will 
impose substantial additional costs on television stations to provide the new 
service, due to increased equipment costs.  It is also possible that advances 
in technology may permit Existing Broadcasters to enhance the picture quality 
of existing systems without the need to implement ATV service.  Although the 
Company believes the FCC will authorize ATV service, the Company cannot 
predict when such authorization might be given or the effect such 
authorization might have on the Company's business or capital expenditure 
requirements.

   Seasonality

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

   Employees

    The Company and its subsidiaries currently employ approximately 1,170 
persons, of whom approximately 277 are represented by two unions (including 
11 bargaining units) pursuant to contracts expiring in 1997, 1998, 1999 and 
2000 at the Company's stations.  The Company believes its relations with its 
employees are good.
                                     -13-
<PAGE>

Item 2.  Properties

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

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




                                     -14-


<PAGE>

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


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

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

WTVH     Syracuse, New York
          Office and Studio              Owned     41,500 sq. feet      --

         Onondaga, New York
          Tower Site                     Owned      2,300 sq. feet      --

KSEE     Fresno, California
          Office and Studio              Owned     32,000 sq. feet      --

         Bear Mountain, Fresno
         County, California
          Tower Site                    Leased      9,300 sq. feet  3/22/2034

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

WEEK     Peoria, Illinois
          Office, Studio and
          Tower Site                     Owned     20,000 sq. feet      --

         Bloomington, Illinois
          Studio and Sales Office       Leased        617 sq. feet   12/31/97

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

KEYE     Austin, Texas
          Office and Studio              Owned     14,000 sq. feet      --
          Tower Site                    Leased      1,600 sq. feet     5/1/98

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

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

WXON     Southfield, Michigan
          Office                        Leased      8,850 sq. feet     5/31/99
         Southfield, Michigan
          Studio and Tower Site         Leased(2)    30,000 sq. feet   9/30/06

---------
1   Assuming exercise of all of the Company's renewal options under such lease.
2   The Company owns a 3,400 square foot building on the property. 


                                     -15-


<PAGE>


Item 3.  Legal Proceedings

    Not Applicable


Item 4.  Submission of Matters to a Vote of Security Holders

    Not Applicable






                                     -16-


<PAGE>


                                      PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

    The Company's Common Stock (Nonvoting) is traded over-the-counter on the
Nasdaq National Market under the symbol GBTVK.  As of March 10, 1997, the
approximate number of record holders of Common Stock (Nonvoting) was 126.

    The range of high and low prices for the Common Stock (Nonvoting) for each
full quarterly period during 1995 and 1996 is set forth in Note 13 to the
Consolidated Financial Statements in Item 8 hereof.  At March 10, 1997, the
closing price of the Common Stock (Nonvoting) was $10.50 per share.

    The Company's publicly traded Cumulative Convertible Exchangeable Preferred
Stock, par value $.01 per share (the "Cumulative Convertible Exchangeable
Preferred Stock") is traded over-the-counter on the Nasdaq National Market under
the symbol GBTVP.  The range of high and low prices for each full quarterly
period during 1995 and 1996, is set forth in Note 13 to the Consolidated
Financial Statements in Item 8 hereof.  As of March 10, 1997, the closing price
for the Cumulative Convertible Exchangeable Preferred Stock was $54.75 per
share.

    There is no established public trading market for the Company's Class A
Voting Common Stock, par value $.01 per share (the "Voting Common Stock;" the
Voting Common Stock and the Common Stock (Nonvoting) are referred to herein
collectively as the "Common Stock").  As of March 10, 1997, the number of record
holders of Voting Common Stock was 2.

    The Company has declared and paid quarterly cash dividends at a quarterly
rate of $.4844 per share on the Cumulative Convertible Exchangeable Preferred
Stock each quarter since its issuance and anticipates continuing to pay such
dividends.  The Company has, however, never declared or paid a cash dividend on
its Common Stock and does not anticipate paying a dividend on its Common Stock
in the foreseeable future.  The payment of cash dividends on Common Stock is
subject to certain limitations under the Indentures governing the Company's
12.75% Senior Subordinated Debentures due September 1, 2002, 10 3/8% Senior
Subordinated Notes due May 15, 2005 and 9 3/8% Senior Subordinated Notes due
December 1, 2005, respectively, and is restricted under the Company's credit
agreement (the "credit agreement").  The Company is also prohibited from paying
dividends on any Common Stock: (i) until all accrued but unpaid dividends on the
Cumulative Convertible Exchangeable Preferred Stock and the Company's Series A
Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred
Stock"), are paid in full.  All outstanding shares of Series A Preferred Stock
were converted into Common Stock (Nonvoting) in August 1995.  Accrued dividends
on the Series A Preferred Stock, which totaled $262,844 at December 31, 1996,
are payable on the later of December 31, 1999 or the date on which such
dividends may be paid under the Company's existing debt instruments.  If unpaid,
dividends on outstanding shares of Cumulative Convertible Exchangeable Preferred
Stock will accrue at an annual rate of $1.9375 per share.




                                     -17-


<PAGE>


Item 6.  Selected Financial Data

    The information set forth below should be read in conjunction with the
consolidated financial statements and notes thereto included at Item 8 herein. 
The selected consolidated financial data for the years ended December 31, 1992,
1993, 1994, 1995 and 1996 are derived from the Company's audited Consolidated
Financial Statements.

    The acquisitions by the Company of its operating properties during the
periods reflected in the following selected financial data materially affect 
the comparability of such data from one period to another.


<TABLE>
<CAPTION>
                                         Years Ended December 31,
                           ----------------------------------------------------
                             1992       1993       1994       1995       1996
                           --------   --------   --------   --------   --------
<S>                        <C>        <C>        <C>        <C>        <C>

Statement of Operations
 Data:                         (Dollars in thousands except per share data)

Net revenue                $ 35,957   $ 37,499   $ 62,856   $ 99,895   $129,164
Station operating expenses   21,638     22,790     37,764     55,399     72,089
Depreciation                  2,279      2,398      3,420      4,514      6,144
Amortization                  3,983      3,865      4,715      9,330     11,824
Corporate expense             1,192      1,374      2,162      3,132      4,800
Non-cash compensation             -        123        282        363        496
                           --------   --------   --------   --------   --------
Operating income              6,865      6,949     14,513     27,157     33,811

Other expenses                  487        479        309        798      1,034
Equity in net loss (income)
 of investee                      -          -          -       (439)       995
Interest expense, net        11,675     10,977     10,707     27,026     36,915
                           --------   --------   --------   --------   --------
Income (loss) before
 income taxes and
 extraordinary item          (5,297)    (4,507)     3,497       (228)    (5,133)
(Provision) benefit for
 income tax                     471        472       (450)      (555)      (761)
                           --------   --------   --------   --------   --------
Income (loss) before
 extraordinary item          (4,826)    (4,035)     3,047       (783)    (5,894)
Extraordinary loss on
 extinguishment of debt      (5,709)    (1,007)         -          -     (2,891)
                           --------   --------   --------   --------   --------

Net income (loss)          $(10,535)  $ (5,042)  $  3,047   $   (783)  $ (8,785)
                           --------   --------   --------   --------   --------
                           --------   --------   --------   --------   --------
Net loss attributable to
 common shareholders       $(10,628)  $ (5,278)  $   (688)  $ (4,333)  $(12,310)
                           --------   --------   --------   --------   --------
                           --------   --------   --------   --------   --------

Loss before extraordinary
 item per common share     $  (1.22)  $  (0.98)  $  (0.15)  $  (0.73)  $  (1.09)
                           --------   --------   --------   --------   --------
                           --------   --------   --------   --------   --------
Net loss per common share  $  (2.63)  $  (1.21)  $  (0.15)  $  (0.73)  $  (1.43)
                           --------   --------   --------   --------   --------
                           --------   --------   --------   --------   --------
Weighted average common
 shares outstanding           4,041      4,365      4,498      5,920      8,612

</TABLE>


<TABLE>
<CAPTION>
                                         Years Ended December 31,
                           ----------------------------------------------------
                             1992       1993       1994       1995       1996
                           --------   --------   --------   --------   --------
<S>                        <C>        <C>        <C>        <C>        <C>

Selected Balance Sheet
 Data:

Total assets               $140,948   $191,517   $189,881   $452,221   $452,563
Total debt                  101,611     99,000     99,250    341,000    351,561
Redeemable preferred
 stock                        1,574     49,139     49,171     45,488     45,488
Stockholders' (deficit)
 equity                      17,211     12,075     11,729      8,868     (3,135)

</TABLE>


                                     -18-


<PAGE>


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

   Introduction

    The consolidated financial statements of the Company reflect significant
increases between the years ended December 31, 1994, 1995 and 1996 in
substantially all line items.  The principal reasons for such increases are the
acquisition of KEYE on February 1, 1995, the acquisition of WWMT on June 1, 1995
and the acquisition of WKBW on June 29, 1995 and the improvements in the
Company's operations.

    The Company's revenues are derived principally from local and national
advertising and, to a lesser extent, from network compensation for the broadcast
of programming and revenues from studio rental and commercial production
activities.  The primary operating expenses involved in owning and operating
television stations are employee salaries, depreciation and amortization,
programming and advertising and promotion expenses.  Numbers referred to in the
following discussion have been rounded to the nearest thousand.

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

<TABLE>
<CAPTION>

                                        Year ended December 31,
                                -------------------------------------
                                     1994         1995         1996
                                -----------  -----------  -----------
<S>                             <C>          <C>          <C>

Operating income                $14,513,000  $27,157,000  $33,811,000
Add:
 Depreciation and amortization    8,135,000   13,843,000   17,968,000
 Corporate expense                2,162,000    3,132,000    4,800,000
 Non-cash compensation              282,000      363,000      496,000
                                -----------  -----------  -----------

Broadcast cash flow             $25,092,000  $44,495,000  $57,075,000
                                -----------  -----------  -----------
                                -----------  -----------  -----------

</TABLE>

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

    The Company has elected as provided under Statement of Financial Accounting
Standards No. 123 (Accounting for Stock-Based Compensation) to continue to
account for stock-based employee compensation under Accounting Principles Board
Opinion No. 25.

   Years ended December 31, 1996 and 1995

    Net revenue for the year ended December 31, 1996 totaled $129,164,000, an
increase of $29,269,000, or 29.3% compared to net revenue of $99,895,000 for the
year ended December 31, 1995.  Of this increase, $21,262,000 resulted from the
inclusion of one additional month of operations of KEYE, five additional months
of operations of WWMT and six additional months of operations of WKBW in 1996. 
The remaining increase was primarily a result of increased local and national
advertising, political spending and increased network compensation.


                                     -19-


<PAGE>


    Station operating expenses for the year ended December 31, 1996 totaled
$72,089,000, an increase of $16,690,000, or 30.1% compared to station operating
expenses of $55,399,000 in the prior year.  Of this increase, $10,648,000 was
due to the inclusion of one additional month of operating expenses of KEYE, five
additional months of operating expenses of WWMT and six additional months of
operating expenses of WKBW.  The remaining increase was primarily due to higher
programming expenses and increased news expenses associated with the launch of a
news operation at KEYE.

    Broadcast cash flow totaled $57,075,000 during the year ended December 31,
1996 compared to $44,495,000 during 1995, an increase of $12,580,000, or 28.3%. 
Of the increase, $10,614,000 was due to the inclusion of one additional month of
operations of KEYE, five additional months of operations of WWMT and six
additional months of operations of WKBW.

    Depreciation and amortization increased by $4,125,000, or 29.8% during the
year ended December 31, 1996 compared to 1995 primarily due to the inclusion of
one additional month of operations of KEYE, five additional months of operations
of WWMT and six additional months of operations of WKBW.  Corporate expense
increased $1,668,000, or 53.3% during the year ended December 31, 1996 compared
to 1995, primarily due to higher administrative costs associated with the
expansion of the Company's corporate office to manage its expanded station
group.  Non-cash compensation expense increased $133,000 during the year ended
December 31, 1996 compared to 1995 due to the granting of additional awards
payable in Common Stock (Nonvoting) to certain executive employees under the
Company's Management Stock Plan.

    As a result of the factors discussed above, operating income increased
$6,654,000 or 24.5% during the year ended December 31, 1996 compared to 1995.

    The equity in net loss of investee of $995,000 for the year ended December
31, 1996 resulted from the Company recognizing its pro rata share of the losses
of Datacast LLC accounted for under the equity method of accounting.  The equity
in net income of investee of $439,000 for the year ended December 31, 1995
resulted from the Company recognizing its pro rata share of the earnings of
Queen City III Limited Partnership, the ultimate parent of WKBW, under the
equity method of accounting.  On June 29, 1995, the Company acquired the
remaining interest in Queen City III Limited Partnership.

    Net interest expense totaled $36,915,000 during the year ended December 31,
1996, an increase of $9,889,000, or 36.6% compared to net interest expense of
$27,026,000 during the year ended December 31, 1995, primarily due to higher
levels of outstanding indebtedness as a result of the acquisitions of WWMT and
WKBW in June of 1995.

    During 1996, the Company incurred an extraordinary loss of $2,891,000 on
the early extinguishment of debt.  See "--Liquidity and Capital Resources."

    Net loss totaled $8,785,000 during the year ended December 31, 1996
compared to net loss of $783,000 during 1995, an increase of $8,002,000.  This
change was primarily due to the changes in the line items discussed above.

   Years ended December 31, 1995 and 1994

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


                                     -20-


<PAGE>


derived by KEYE, WWMT and WKBW prior to their acquisition by the Company) 
increased $2,316,000, or 2.0% during the year ended December 31, 1995 as 
compared to the same period in 1994.

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

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

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

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

    Net interest expense totaled $27,026,000 during the year ended December 31,
1995, an increase of $16,319,000, or 152.4% compared to net interest expense of
$10,707,000 during the same period a year earlier, primarily due to higher
levels of outstanding indebtedness as a result of the acquisitions of KEYE, WWMT
and WKBW.

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

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

   Liquidity and Capital Resources

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


                                     -21-


<PAGE>


purchased $2,000,000 face amount of its 10 3/8% Senior Subordinated Notes due 
May 2005 and $13,500,000 face amount of its 9 3/8% Notes at a discount.  As a 
result of these transactions, the Company recognized a net extraordinary loss 
for the year ended December 31, 1996 of $2,891,000.

    In September 1996, the Company amended and restated its existing credit
agreement to increase the total amount of committed revolving credit borrowings
available thereunder from $60,000,000 to $200,000,000 and to permit borrowings
of up to $300,000,000 in the aggregate.  The revolving credit facility can be
used to fund future acquisitions of broadcast stations and for general corporate
purposes.  As of February 28, 1997, subject to compliance with financial
covenants, the Company had $149,000,000 of the revolving credit facility
borrowings available under the credit agreement available for acquisitions and
working capital purposes.

    In October 1996, the Company entered into agreements with the owner of
WLAJ, the ABC affiliate serving Lansing, Michigan, including a time brokerage
agreement pursuant to which the Company operates WLAJ and an agreement to
acquire substantially all the assets used in the operation of WLAJ for
approximately $19.4 million in cash and the assumption of certain liabilities. 
The Company anticipates financing the acquisition of WLAJ with borrowings under
the credit agreement.  In connection with these agreements, the Company agreed
to provide a loan guarantee of up to $12,000,000 in favor of the owner of WLAJ.

    On January 31, 1997, the Company acquired substantially all of the assets 
of WXON, the WB affiliate serving Detroit, Michigan for $175,000,000 and the 
assumption of certain liabilities.  The Company financed the WXON Acquisition 
using the proceeds from the sale of its 12 3/4% Cumulative Exchangeable 
Preferred Stock (See Note 8 to the Company's Consolidated Financial 
Statements) and borrowings of approximately $27,500,000 under the credit 
agreement.

    Cash flows provided by operating activities were $13,291,000 during the
year ended December 31, 1996 compared to $8,806,000  during the year ended
December 31, 1995 and $5,808,000 during the year ended December 31, 1994.  The
increases from year to year resulted primarily from higher broadcast cash flow
offset, in part, by higher cash interest expense.

    Cash flows used in investing activities were $14,435,000 during the year 
ended December 31, 1996, compared to $236,343,000 during the year ended 
December 31, 1995 and $2,628,000 during the year ended December 31, 1994.  
Cash flows used in investing activities during the year ended December 31, 
1996 related to capital expenditures, the deposit relating to the WXON 
Acquisition and other capitalized acquisition costs and an investment in 
Datacast LLC.  Cash flows used in investing activities during the year ended 
December 31, 1995 related primarily to the acquisitions of KEYE, WWMT and 
WKBW while cash flows used in investing activities during the year ended 
December 31, 1994 were related entirely to capital expenditures.

    Cash flows provided by financing activities were $1,565,000 during the 
year ended December 31, 1996 compared to cash flows provided by financing 
activities of $225,685,000 during the year ended December 31, 1995 and cash 
flows used in financing activities of $2,780,000 in 1994.  The decrease from 
1995 to 1996 resulted primarily from a decrease in net borrowings offset in 
part by a decrease in payments for deferred financing fees.  The increase 
from 1994 to 1995 resulted primarily from a net increase in bank borrowings 
and the proceeds from the sale of the 10 3/8% Notes, partially offset by 
higher deferred financing fees and the redemption of the Company's adjustable 
rate preferred stock.

    The Company may recognize significant taxable income as a result of the 
acquisition in 1995 of WKBW.  Such taxable income would reduce the Company's 
net operating losses for federal income tax purposes.  For financial 
reporting purposes, in accordance with Statement of Financial Accounting 
Standards No. 109, any taxable income arising from the consummation of the 
acquisition of WKBW is considered additional purchase price, which will be 
amortized in future periods.  See Note 10 to the Company's Consolidated 
Financial Statements.

                                     -22-


<PAGE>


    The Company believes that internally generated funds from operations and
borrowings under the credit agreement's revolving credit facility will be
sufficient to satisfy the Company's cash requirements for its operations for the
next twelve months and for the foreseeable future thereafter.  The Company
expects that any additional acquisitions of television stations would be
financed through funds generated from operations, borrowings under the credit
agreement's revolving credit facility and additional debt and equity financings.









                                     -23-



<PAGE>

Item 8.  Financial Statements and Supplementary Data


Report of Independent Auditors


The Board of Directors and Stockholders
  Granite Broadcasting Corporation


    We have audited the accompanying consolidated balance sheets of Granite
Broadcasting Corporation as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1996.  Our
audits also included the financial statement schedule listed in the Index at
Item 14(a).  These financial statements and the schedule are the responsibility
of the Company's management.  Our responsibility is to express an opinion on
these financial statements and the schedule based on our audits.

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

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Granite
Broadcasting Corporation at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.  Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

                                  ERNST & YOUNG LLP

New York, New York
January 24, 1997




                                    -24-
<PAGE>

                           GRANITE BROADCASTING CORPORATION
                        CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                            For the Years Ended December 31,
                                           1994          1995           1996
                                       ------------   -----------   ------------
<S>                                    <C>            <C>           <C>

Net revenue                            $ 62,856,425   $99,894,627   $129,164,353
Station operating expenses               37,763,732    55,398,930     72,089,368
Depreciation                              3,420,850     4,513,919      6,144,193
Amortization                              4,714,721     9,329,444     11,823,775
Corporate expense                         2,162,621     3,131,943      4,799,984
Non-cash compensation expense               281,896       363,384        495,819
                                       ------------   -----------   ------------

  Operating income                       14,512,605    27,157,007     33,811,214

Other (income) expenses:
  Equity in net (income) loss
   of investee                                    -      (439,033)       995,019
  Interest expense, net                  10,707,147    27,026,680     36,915,306
  Other                                     307,929       797,576      1,034,351
                                       ------------   -----------   ------------
  Income (loss) before income
    taxes and extraordinary item          3,497,529      (228,216)    (5,133,462)
  Provision for income taxes                450,125       554,884        761,000
                                       ------------   -----------   ------------

Income (loss) before 
  extraordinary item                      3,047,404      (783,100)    (5,894,462)
Extraordinary loss                                -             -     (2,891,250)
                                       ------------   -----------   ------------

    Net income (loss)                  $  3,047,404   $  (783,100)  $ (8,785,712)
                                       ------------   -----------   ------------
                                       ------------   -----------   ------------

Net loss attributable to
  common shareholders                  $   (687,730)  $(4,333,381)  $(12,310,993)
                                       ------------   -----------   ------------
                                       ------------   -----------   ------------

  Per common share:
   Loss before extraordinary
    item                               $      (0.15)  $     (0.73)  $      (1.09)
    Extraordinary loss                            -             -          (0.34)
                                       ------------   -----------   ------------

     Net loss                          $      (0.15)  $     (0.73)  $      (1.43)
                                       ------------   -----------   ------------
                                       ------------   -----------   ------------

Weighted average common 
  shares outstanding                      4,497,758     5,920,294      8,611,606

</TABLE>



                               See accompanying notes.


                                    -25-

<PAGE>

                           GRANITE BROADCASTING CORPORATION
                             CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                         December 31,
                                                 -----------------------------
                                                     1995             1996
                                                 ------------     ------------
<S>                                              <C>              <C>

    ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                      $     95,123     $    555,753
  Accounts receivable, less allowance for
   doubtful accounts ($505,759 in 1995 and
   $391,910 in 1996)                               26,186,579       27,057,451
  Film contract rights                              5,813,366        6,276,660
  Other current assets                              3,854,774        9,784,966
                                                 ------------     ------------
          TOTAL CURRENT ASSETS                     35,949,842       43,674,830

PROPERTY AND EQUIPMENT, NET                        32,132,126       33,562,019
FILM CONTRACT RIGHTS AND OTHER NONCURRENT ASSETS    3,725,612        4,284,578
DEFERRED FINANCING FEES, less accumulated
  amortization ($2,947,833 in 1995 and
  $4,049,724 in 1996)                              14,849,529       14,181,662
INTANGIBLE ASSETS, NET                            365,564,029      356,860,115
                                                 ------------     ------------
                                                 $452,221,138     $452,563,204
                                                 ------------     ------------
                                                 ------------     ------------

    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Accounts payable                               $   5,285,619    $  4,016,964
  Accrued interest                                   5,595,610       6,071,378
  Other accrued liabilities.                         3,500,066       4,497,534
  Film contract rights payable and other
    current liabilities                              6,946,068       9,578,365
                                                 ------------     ------------
    TOTAL CURRENT LIABILITIES                       21,327,363      24,164,241

LONG-TERM DEBT                                     341,000,000     351,560,900
FILM CONTRACT RIGHTS PAYABLE                         3,669,534       3,383,428
DEFERRED TAX LIABILITY AND OTHER
  NONCURRENT LIABILITIES                            31,869,240      31,102,272

COMMITMENTS

REDEEMABLE PREFERRED STOCK                          45,487,500      45,487,500

STOCKHOLDERS' EQUITY (DEFICIT):
  Common stock: 41,000,000 shares authorized
    consisting of 1,000,000 shares of Class A
    Common Stock, $.01 par value, and 40,000,000
    shares of Common Stock (Nonvoting), $.01 par
    value; 178,500 shares of Voting Common Stock
    and 8,499,716 shares of Common Stock
    (Nonvoting) (8,218,240 shares at December 31,
    1995) issued and outstanding                         83,967         86,782
  Additional paid-in capital                         46,864,202     45,547,145
  Accumulated deficit                               (36,590,198)   (45,375,910)
  Less:  Unearned compensation                       (1,490,470)    (2,506,279)
    Note receivable from officer                              -       (886,875)
                                                   ------------    ------------
         TOTAL STOCKHOLDERS' EQUITY (DEFICIT)         8,867,501     (3,135,137)
                                                   ------------    ------------
                                                   $452,221,138   $452,563,204
                                                   ------------   ------------
                                                   ------------   ------------
</TABLE>

                               See accompanying notes.

                                    -26-
<PAGE>

                            GRANITE BROADCASTING CORPORATION
                      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                        For the Years Ended December 31, 1994, 1995 and 1996


<TABLE>
<CAPTION>

                 Class A     Common     Series B   Series C   Additional                                 Note           Total
                 Common      Stock     Preferred  Preferred    Paid-in    (Accumulated    Unearned     Receivable    Stockholders'
                  Stock   (Nonvoting)    Stock      Stock      Capital       Deficit)   Compensation  From Officer  Equity (Deficit)
                 -------  -----------  ---------  ---------  -----------  ------------  ------------  ------------  ----------------
<S>              <C>      <C>          <C>        <C>        <C>          <C>           <C>           <C>           <C>

Balance at
 December 31,
 1993             $1,785      $42,546   $ 5,006   $ 10,181   $51,362,550  $(38,854,502)  $ (493,000)    $       -      $12,074,566

Accretion of and
 dividends on
 Series A
 Redeemable
 Preferred Stock                                                 (91,895)                                                  (91,895)
Conversion of
 Redeemable
 Preferred
 Stock and
 Series B and
 Series C 
 Preferred
 Stock into
 Common Stock
 (Nonvoting)                    1,080      (373)      (102)       59,359                                                    59,964
Dividend on
 Cumulative
 Convertible
 Exchangeable
 Preferred Stock
 and Adjustable
 Rate Preferred
 Stock                                                        (3,643,239)                                               (3,643,239)
Issuance of 34,000
 shares of Common
 Stock (Nonvoting)                340                               (340)                                                       --
Grant of Stock Award
 under Management
 Stock Plan                                                    1,002,000                 (1,002,000)
Stock expense
 related to
 Management
 Stock Plan                                                                                 281,896                        281,896
Net income                                                                   3,047,404                                   3,047,404
                 -------  -----------  --------   --------   -----------  ------------  -----------     ---------      -----------

Balance at
 December 31,
 1994              1,785       43,966     4,633     10,079    48,688,435   (35,807,098)  (1,213,104)           --       11,728,696
Accretion of
 and dividends
 on Series A
 Redeemable
 Preferred Stock                                                 (35,116)                                                  (35,116)
Conversion of
 Series A
 Redeemable
 Preferred
 Stock and
 Series B and
 C Preferred
 Stock into
 Common Stock
 (Nonvoting)                   36,069    (4,633)   (10,079)    1,200,518                                                 1,221,875
Dividend on
 Cumulative
 Convertible
 Exchangeable
 Preferred Stock
 and Adjustable
 Rate Preferred
 Stock                                                        (3,550,281)                                               (3,550,281)
Exercise of
 Stock Options                  1,574                             31,376                                                    32,950
Issuance of
 Common Stock
 (Nonvoting)                      573                               (573)                                                       --
Grant of Stock
 Award under
 Management
 Stock Plan                                                      640,750                  (640,750)                             --
Stock expense
 related to
 Management
 Stock Plan                                                     (110,907)                   363,384                        252,477
Net loss                                                                      (783,100)                                   (783,100)
                 -------  -----------  ---------  --------   -----------  ------------  -----------   -----------      -----------
Balance at
 December 31,
 1995              1,785       82,182         --        --    46,864,202   (36,590,198)  (1,490,470)           --        8,867,501

Dividend on
 Cumulative
 Convertible
 Exchangeable
 Preferred Stock                                              (3,525,281)                                               (3,525,281)
Exercise of
 Stock Options                  2,008                            888,805                                 (886,875)           3,938
Issuance of
 Common Stock
 (Nonvoting)                      807                               (807)                                                       --
Grant of Stock
 Award under
 Management
 Stock Plan                                                    1,511,628                  (1,511,628)                           --
Stock Expense
 Related to
 Management
 Stock Plan                                                     (191,402)                    495,819                       304,417
Net loss                                                                    (8,785,712)                                 (8,785,712)
                 -------  -----------  --------   --------   -----------  ------------  -----------     ---------      -----------
Balance at
 December 31,
 1996             $1,785      $84,997   $    --   $     --   $45,547,145  $(45,375,910)  $(2,506,279)   $(886,875)     $(3,135,137)
                 -------  -----------  --------   --------   -----------  ------------  -----------     ---------      -----------
                 -------  -----------  --------   --------   -----------  ------------  -----------     ---------      -----------

</TABLE>
                               See accompanying notes.

                                             -27-

<PAGE>
                           GRANITE BROADCASTING CORPORATION
                        CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                         For the Years Ended December 31,
                                   --------------------------------------------
                                        1994            1995           1996
                                   ------------   -------------   -------------
                                   <C>            <C>             <C>

Cash flows from operating
 activities:
 Net income (loss)                 $ 3,047,404    $    (783,100)  $  (8,785,712)
 Adjustments to reconcile net
  income (loss) to net cash
  provided by operating activities:
   Amortization of intangible
    assets and deferred financing
    fees                             4,714,721        9,329,444      11,823,775
   Extraordinary loss                        -                -       2,891,250
   Depreciation                      3,420,850        4,513,919       6,144,193
   Non-cash compensation expense       281,896          363,384         495,819
   Non-cash deferred income taxes            -        1,115,000         975,000
   Deferred income taxes                     -         (824,116)       (589,000)
   Equity in net (income) loss 
    of investee                              -         (439,033)        995,019
Change in assets and liabilities
 net of effects from
 acquisitions of stations:
   Increase in accounts receivable  (1,499,860)      (7,528,139)       (870,872)
   Increase in accrued liabilities   1,496,559        2,307,778       1,473,236
   (Decrease) increase in accounts
    payable                           (420,205)       2,689,051      (1,268,655)
   Decrease (increase) in film
    contract rights and
    other noncurrent assets            640,968       (3,448,429)       (517,279)
   (Decrease) increase in film
    contract rights payable
    and other liabilities           (3,390,646)       3,222,796       1,193,223
   Increase in other assets         (2,484,068)      (1,712,859)       (668,776)
                                   ------------   -------------   -------------
Net cash provided by operating
 activities                          5,807,619        8,805,696       13,291,221
                                   ------------   -------------   -------------
Cash flows from investing
 activities:
  Deposit for station
   acquisition and other
   related costs                             -                -      (5,957,000)
  Investment in Datacast, LLC                -                -      (1,500,000)
  Payment for acquisitions of
   stations, net of cash acquired            -     (228,660,507)              -
  Capital expenditures              (2,627,793)      (7,682,188)     (6,938,477)
                                   ------------   -------------   -------------
    Net cash used in investing
     activities                     (2,627,793)    (236,342,695)    (14,395,477)
                                   ------------   -------------   -------------
Cash flows from financing
 activities:
  Proceeds from bank loan            1,500,000      174,250,000      34,000,000
  Retirement of senior
   subordinated notes                        -                -     (15,500,000)
  Proceeds from exercise
   of stock options                          -           32,950           3,938
  Repayment of bank borrowings      (1,250,000)    (107,500,000)   (117,500,000)
  Redemption of Adjustable Rate
   Preferred Stock                           -       (2,000,000)              -
  Payment of deferred financing
   fees                               (129,771)     (10,537,110)     (5,363,771)
  Proceeds from senior
   subordinated notes                        -      175,000,000     109,450,000
  Dividends paid                    (3,564,120)      (3,561,280)     (3,525,281)
  Other financing activities           663,894                -               -
                                   ------------   -------------   -------------
    Net cash provided by (used in)
     financing activities           (2,779,997)     225,684,560       1,564,886
                                   ------------   -------------   -------------
Net increase (decrease) in cash
 and cash equivalents                  399,829       (1,852,439)        460,630
Cash and cash equivalents,
 beginning of year                   1,547,733        1,947,562          95,123
                                   ------------   -------------   -------------
Cash and cash equivalents,
 end of year                       $ 1,947,562    $      95,123   $     555,753
                                   ------------   -------------   -------------
                                   ------------   -------------   -------------
Supplemental information:
  Cash paid for interest           $10,176,398    $  24,699,248   $  36,451,009
  Cash paid for income taxes           251,512          149,751         112,532
  Non-cash investing and
   financing activities:
  Non-cash capital expenditures        350,409          459,786         635,609

</TABLE>

                               See accompanying notes.


                                     -28-
<PAGE>
                           GRANITE BROADCASTING CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 -- Summary of Significant Accounting Policies

   Financial statement presentation

    The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries.  All significant intercompany accounts and
transactions have been eliminated.  Certain amounts in the prior years have been
reclassified to conform to the 1996 presentation.  The Company accounts for its
investment in Datacast, LLC under the equity method of accounting.

   Revenue recognition

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

   Intangibles

    Intangible assets at December 31 are summarized as follows:

                                          1995               1996    
                                         -----              -----    
    Goodwill                          $ 75,192,619      $ 76,202,853 
    Network affiliations               247,941,641       247,941,641 
    Broadcast licenses                  67,896,861        67,896,861 
                                      ------------      ------------ 
                                       391,031,121       392,041,355 
    Accumulated amortization           (25,467,092)      (35,181,240)
                                      ------------      ------------ 
                                      $365,564,029      $356,860,115 
                                      ------------      ------------ 
                                      ------------      ------------ 
    The intangible assets are characterized as scarce assets with long and
productive lives and are being amortized on a straight line basis over forty
years.

    The Company continually reevaluates the propriety of the carrying amount of
intangible assets as well as the related amortization period to determine
whether current events and circumstances warrant adjustments to the carrying
value and/or revised estimates of useful lives.  This evaluation is based on the
Company's projections of the undiscounted cash flows over the remaining lives of
the amortization period of the related intangible asset.  To the extent such
projections indicate that the undiscounted cash flows are not expected to be
adequate to recover the carrying amounts of intangible assets, such carrying
amounts will be written down to their fair market value.  At this time, the
Company believes that no significant impairment of intangible assets has
occurred and that no reduction of the estimated useful lives is warranted.

   Deferred financing fees

    The Company has incurred certain fees in connection with entering into a 
bank credit agreement, the sale of 12.75% Debentures (as defined), the sale 
of Cumulative Convertible Exchangeable Preferred Stock (as defined) the sale 
of 10 3/8% Notes (as defined) and the sale of 9 3/8% Notes (as defined).  The 
deferred financing fees related to the bank credit agreement are being 
amortized over seven years, ten years for the 12.75% Debentures, the 10 3/8% 
Notes and the 9 3/8% Notes and twelve years for the Cumulative Convertible 
Exchangeable Preferred Stock. 

                                    -29-

<PAGE>
                    GRANITE BROADCASTING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 1 -- Summary of Significant Accounting Policies -- (Continued)

   Property and equipment

    Property and equipment are recorded at cost and depreciated on a
straight-line basis over their estimated useful lives ranging from three to 32
years.

   Film contract rights

    Film contract rights are recorded as assets at gross value when the license
period begins and the films are available for broadcasting, are amortized on an
accelerated basis over the estimated usage of the films, and are classified as
current or noncurrent on that basis.  Film contract rights payable are
classified as current or noncurrent in accordance with the payment terms of the
various license agreements.  Film contract rights are reflected in the
consolidated balance sheet at the lower of unamortized cost or estimated net
realizable value.

    At December 31, 1996, the obligation for programming that had not been
recorded because the program rights were not available for broadcasting
aggregated $16,965,469.

   Barter transactions

    Revenue from barter transactions is recognized when advertisements are
broadcast and merchandise or services received are charged to expense when
received or used.

   Use of estimates

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes.  Actual results could differ from those estimates.

   Cash and cash equivalents

    Cash and cash equivalents include funds invested overnight in Eurodollar
deposits.

   Net loss per common share

    Net loss per common share for each of the three years in the period ended
December 31, 1996 is calculated by dividing net loss attributable to common
stockholders by the weighted average number of common shares outstanding.  The
inclusion of additional shares assuming the exercise of outstanding stock
options and the conversion of convertible preferred stock would have been
antidilutive in all three years.

                                     -30-
 
<PAGE>

                  GRANITE BROADCASTING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Note 2 -- Acquisitions

    On February 1, 1995, the Company acquired substantially all of the assets
of KEYE-TV (formerly known as KBVO-TV), the CBS affiliate serving Austin, Texas
from Austin Television for $54,000,000 in cash and the assumption of certain
liabilities of KEYE-TV.

    On June 1, 1995, the Company acquired substantially all of the assets and
certain liabilities of WWMT-TV, the CBS affiliate serving Grand Rapids, Michigan
from Busse Broadcasting Corporation for $98,942,000 in cash (including
$3,942,000 of working capital and other adjustments) and the assumption of
certain liabilities of WWMT-TV.

    On June 29, 1995, the Company completed its acquisition of WKBW-TV, the ABC
affiliate serving Buffalo, New York.  The Company paid approximately $16,000,000
(including certain related expenses) for the equity interests it did not already
own, assumed approximately $59,000,000 of debt and received working capital of
approximately $6,760,000, of which $3,491,000 was cash.

    On January 31, 1997 the Company acquired substantially all the assets used
in the operation of WXON-TV, the WB affiliate serving Detroit, Michigan for
$175,000,000 in cash and the assumption of certain liabilities.

    The following table summarizes the unaudited consolidated pro forma results
of operations for the years ended December 31, 1995 and 1996 assuming the
acquisition of WXON-TV, KEYE-TV, WWMT-TV and WKBW-TV had occurred as of January
1, 1995:

                                                 1995           1996
                                                ------         ------
    Net revenue                             $145,532,000   $147,231,000 
    Station operating expenses                74,398,000     78,577,000 
    Income (loss) before extraordinary item
      in 1996                                  5,187,000     (1,544,000)
    Loss before extraordinary item per
      common share                          $      (2.95)  $      (2.81)

   Time brokerage agreement

    The Company operates WLAJ-TV, the ABC affiliate serving Lansing, 
Michigan, pursuant to a time brokerage agreement.  The terms of the agreement 
require the Company to pay a monthly fee in exchange for the right to provide 
station programming and sell related advertising time.  The fee is expensed 
as incurred. The agreement terminates if the Company exercises its option to 
acquire WLAJ-TV. The agreement to acquire substantially all of the assets 
used in the operation of WLAJ-TV is for $19,400,000 in cash and the 
assumption of certain liabilities. The Company classifies the fee as interest 
expense to the extent interest is imputed based on the purchase price of the 
station.  In connection with this agreement, the Company agreed to provide a 
loan guarantee of up to $12,000,000 in favor of the owner of WLAJ-TV.  The 
guarantee is collateralized by all of the assets of WLAJ-TV.

                                    -31-

<PAGE>

                  GRANITE BROADCASTING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 3-- Property and Equipment

    The major classifications of property and equipment are as follows:

                                                              December 31,     
                                                             -------------
                                                         1995           1996   
                                                        ------         -----
    Land                                            $  2,527,708   $  2,527,708
    Buildings and improvements. .                     14,729,378     16,607,496
    Furniture and fixtures .                           4,380,475      5,691,019
    Technical equipment and other                     27,711,903     31,924,360
                                                    ------------   ------------
                                                      49,349,464     56,750,583
    Less:  Accumulated depreciation. .                17,217,338     23,188,564
                                                    ------------   ------------
    Net property and equipment. .                   $ 32,132,126   $ 33,562,019
                                                    ------------   ------------
                                                    ------------   ------------
Note 4 -- Other Accrued Liabilities

    Other accrued liabilities are summarized below:

                                                              December 31,     
                                                             -------------
                                                         1995           1996  
                                                        ------         -----
    Compensation and benefits . .                    $ 2,001,193    $ 2,367,808
    Other . .                                          1,498,873      2,129,726
                                                    ------------   ------------
    Total . .                                        $ 3,500,066    $ 4,497,534
                                                    ------------   ------------
                                                    ------------   ------------


Note 5 -- Other Current Assets

    Other current assets are summarized below:

                                                              December 31,     
                                                             -------------
                                                         1995           1996   
                                                        -----          ------  
    Barter and other receivables                     $ 2,542,824    $ 2,400,386
    Escrow deposit related to station
      acquisition and other related costs                 --          5,957,000
    Other . .                                          1,311,950      1,427,580
                                                    ------------   ------------
    Total . .                                        $ 3,854,774    $ 9,784,966
                                                    ------------   ------------
                                                    ------------   ------------


 
                                     -32-

<PAGE>
                  GRANITE BROADCASTING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Note 6 -- Long-term Debt

    The carrying amounts and fair values of the Company's long-term debt at
December 31, are as follows:

<TABLE>
<CAPTION>

                                        December 31, 1995                December 31, 1996          
                                        -----------------                -----------------
                                 Carrying Amount    Fair Value   Carrying Amount     Fair Value  
                                 ---------------   ------------   ---------------   ------------
<S>                              <C>                <C>          <C>                 <C>             
  
    Senior Bank Debt                $106,000,000   $106,000,000    $22,500,000       $22,500,000
    9 3/8% Senior Subordinated Notes,
      net of unamortized discount              -              -     96,060,900        94,087,500
    10 3/8% Senior Subordinated
      Notes                          175,000,000    180,278,000    173,000,000       178,622,500
    12.75% Senior Subordinated
      Notes                           60,000,000     65,559,600     60,000,000        65,625,000
                                 ---------------   ------------   ---------------   -------------
                           
    Total                           $341,000,000   $351,837,600   $351,560,900      $360,835,000
                                 ---------------   ------------   ---------------   -------------
                                 ---------------   ------------   ---------------   -------------

</TABLE>

    The fair value of the Company's Senior Subordinated Notes is estimated 
based on quoted market prices.  The carrying amount of the Company's 
borrowings under its credit facility approximates fair value.

   Senior bank debt

    The Company's existing bank credit agreement was amended and restated on 
February 1, 1995 (as amended and restated the "Amended and Restated Credit 
Agreement") to permit term borrowings of up to $100,000,000 plus a revolving 
working capital facility permitting borrowings of up to $15,000,000.  The 
Amended and Restated Credit Agreement was amended and restated on May 19, 
1995 (as amended and restated the "Second Amended and Restated Credit 
Agreement") to permit term borrowings of up to $102,000,000 plus a revolving 
working capital facility permitting borrowings of up to $60,000,000.  
Proceeds from the incremental borrowings under the Second Amended and 
Restated Credit Agreement along with the proceeds from the sale of 
$175,000,000 principal amount of the Company's 10 3/8% Senior Subordinated 
Notes due May 15, 2005 (the "10 3/8% Notes") were used to fund the acquisition 
of WWMT-TV and WKBW-TV and to pay fees and expenses incurred in connection 
with the offering of the 10 3/8% Notes and the Second Amended and Restated 
Credit Agreement.

    The Second Amended and Restated Credit Agreement was further amended and 
restated on September 4, 1996 (as amended and restated the "Third Amended and 
Restated Credit Agreement") to create a reducing revolving credit facility of 
up to $200,000,000 and permits borrowings of up to $300,000,000 in the 
aggregate. The proceeds from this facility are available for acquisitions and 
for general working capital purposes as defined in the agreement.

    Outstanding principal balances under the Third Amended and Restated 
Credit Agreement bear interest at floating rates equal to LIBOR (the "LIBOR 
Rate") plus marginal rates between 1.125% and 2.375% or the prime rate plus 
marginal rates between 0.0% and 1.125%.  The LIBOR Rate was 5.6875% plus a 
marginal rate of 2.375% at December 31, 1996.  The LIBOR Rate was 5.75% - 
5.938% plus a marginal rate of 2.50% at December 31, 1995.  The marginal rate 
is subject to change based upon changes in the ratio of outstanding principal 
balances to operating cash flow.  The principal amount of the revolving loans 
are subject to reduction in installments commencing December 31, 1998 through 
December 31, 2003, when the final payment is due.

                                    -33-
<PAGE>
 
                  GRANITE BROADCASTING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Note 6 -- Long-term Debt -- (Continued)

    The Third Amended and Restated Credit Agreement is secured by 
substantially all of the assets of the Company, as well as a pledge of all 
issued and outstanding shares of capital stock of the Company's present and 
future subsidiaries and guaranteed by all present and future subsidiaries of 
the Company.  The Third Amended and Restated Credit Agreement requires the 
Company to maintain compliance with certain financial ratios.  Other 
provisions place limitations on the incurrence of additional debt, payments 
for capital expenditures, prepayment of subordinated debt, merger or 
consolidation with or acquisition of another entity, the declaration or 
payment of cash dividends other than on the Cumulative Convertible 
Exchangeable Preferred Stock and other transactions by the Company.

   Senior Subordinated Debentures

    The Company has outstanding $60,000,000 aggregate principal amount of its 
12.75% Senior Subordinated Debentures (the "12.75% Debentures") due September 
1, 2002.

    The 12.75% Debentures are redeemable after September 1, 1997, at the option
of the Company, in whole or in part from time to time, at certain prices
declining annually to 100% of the principal amount on or after September 1,
1999, plus accrued interest.  The Company is required to offer to repurchase all
outstanding 12.75% Debentures at 101% of the principal amount plus accrued
interest in the event of a Change of Control (as defined in the Indenture
governing the 12.75% Debentures).

    The 12.75% Debentures are subordinated in right of payment to the Third
Amended and Restated Credit Agreement and to future Senior Debt (as defined in
the Indenture governing the 12.75% Debentures) and rank pari passu with all
senior subordinated debt and senior to all subordinated debt of the Company. 
The Indenture governing the 12.75% Debentures contains certain covenants that,
among other things, limit the ability of the Company and its subsidiaries to
incur debt, pay cash dividends on or repurchase capital stock, enter into
agreements prohibiting the creation of liens or restricting the ability of a
subsidiary to pay money or transfer assets to the Company, enter into certain
transactions with their affiliates, dispose of certain assets and engage in
mergers and consolidations.

   Senior Subordinated Notes

    The Company issued $175,000,000 aggregate principal amount of its 10 3/8% 
Senior Subordinated Notes (the "10 3/8% Notes") due May 15, 2005.  On May 6, 
1996, the Company purchased $2,000,000 face amount of its 10 3/8% Notes at a 
discount and recognized an extraordinary loss, after the write-off of a 
portion of related deferred financing fees, of $44,150.

    The 10 3/8% Notes will be redeemable in the event that on or before May 
15, 1998 the Company receives net proceeds from the sale of its Capital Stock 
(other than Disqualified Stock (each as defined in the Indenture governing 
the 10 3/8% Notes)), in which case the Company may, at its option and from 
time to time, use all or a portion of any such net proceeds to redeem certain 
amounts of the 10 3/8% Notes with certain limitations.  In addition, the 
10 3/8% Notes are redeemable at any time on or after May 15, 2000, at the 
option of the Company, in whole or in part from time to time, at certain 
prices declining annually to 100% of the principal amount on or after May 15, 
2002, plus accrued interest. The Company is required to offer to purchase all 
outstanding 10 3/8% Notes 

                                    -34-

<PAGE>
                  GRANITE BROADCASTING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Note 6 -- Long-term Debt -- (Continued)

at 101% of the principal amount plus accrued interest in the event of a 
Change of Control (as defined in the Indenture governing the 10 3/8% Notes).

    The 10 3/8% Notes are subordinated in right of payment to the Third 
Amended and Restated Credit Agreement and to future Senior Debt (as defined 
in the Indenture governing the 10 3/8% Notes) and rank pari passu with all 
senior subordinated debt and senior to all subordinated debt of the Company.  
The Indenture governing the 10 3/8% Notes contains certain covenants that, 
among other things, limit the ability of the Company and its subsidiaries to 
incur debt, pay cash dividends on or repurchase capital stock, enter into 
agreements prohibiting the creation of liens or restricting the ability of a 
subsidiary to pay money or transfer assets to the Company, enter into certain 
transactions with their affiliates, dispose of certain assets and engage in 
mergers and consolidations.

    On February 22, 1996, the Company completed an offering of $110,000,000 
principal amount of its 9 3/8% Senior Subordinated Notes (the "9 3/8% Notes") 
due December 1, 2005.  Proceeds from the sale of the 9 3/8% Notes were used to 
repay all outstanding term loan and revolving credit borrowings under the 
Company's then existing bank credit agreement and for general working capital 
purposes. In connection with the repayment of the term loan, the Company 
incurred an extraordinary loss on the early extinguishment of debt of 
$3,510,152 related to the write-off of deferred financing fees.

    The 9 3/8% Notes will be redeemable in the event that on or before 
February 22, 1999 the Company receives proceeds from any sale of its Capital 
Stock (other than Disqualified Stock) in one or more offerings, in which case 
the Company may, at its option and from time to time, use all or a portion of 
any such net proceeds within 75 days of receipt to redeem certain amounts of 
the 9 3/8% Notes with certain limitations.  In addition, the 9 3/8% Notes are 
redeemable at any time on or after December 1, 2000, at the option of the 
Company, in whole or in part, at certain prices declining annually to 100% of 
the principal amount on or after December 1, 2002, plus accrued interest.  
The Company is required to offer to purchase all outstanding 9 3/8% Notes at 
101% of the principal amount plus accrued interest in the event of a Change 
of Control (as defined in the Indenture governing the 9 3/8% Notes).

    The 9 3/8% Notes are subordinate in right of payment to all existing and 
future Senior Debt (as defined in the Indenture) and rank pari passu with all 
senior subordinated debt and senior to all subordinated debt.  The provisions 
of the Indenture contains certain covenants that, among other things, limit 
the ability of the Company and its subsidiaries to incur debt, make certain 
restricted payments, enter into certain transactions with their affiliates, 
dispose of certain assets, incur liens securing subordinated debt of the 
Company, engage in mergers and consolidations and restrict the ability of the 
subsidiaries of the Company to make distributions and transfers to the 
Company.

    On June 19, 1996, the Company purchased $13,500,000 face amount of its 
9 3/8% Notes at a discount and recognized an extraordinary gain, after the 
write-off of a portion of related deferred financing fees, of $663,052.

    There are no scheduled principal maturities on all long-term debt for the 
five years subsequent to December 31, 1996.

                                    -35-
<PAGE>

                         GRANITE BROADCASTING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


Note 7 -- Commitments

    Future minimum lease payments under long-term operating leases as of 
December 31, 1996 are as follows:

    1997                                             $  839,000
    1998                                                699,000
    1999                                                598,000
    2000                                                411,000
    2001                                                295,000
    2002 and thereafter                               2,402,000
                                                     ----------
                                                     $5,244,000
                                                     ----------
                                                     ----------

    Rent expense, including escalation charges, was $116,000, $559,000 and 
$929,000 for the years ended December 31, 1994, 1995 and 1996, respectively.


Note 8 -- Redeemable Preferred Stock

   Series A Preferred Stock

    The Company authorized 100,000 shares of its Series A Convertible 
Preferred Stock ("Series A Stock"), par value $.01 per share, which were 
issued at an aggregate price of $1,210,000.  All outstanding shares of the 
Series A Stock were converted into shares of the Company's Common Stock 
(Nonvoting), par value $.01 per share (the "Common Stock (Nonvoting)") in 
August 1995.  Prior to conversion, dividends accrued on the Series A Stock at 
an annual rate of $.40 per share which accumulated, without interest, if 
unpaid.  Accrued but unpaid dividends on the Series A Stock totaled $262,844 
at December 31, 1995 and 1996. Accrued dividends are due and payable on the 
later of December 31, 1999 or the date on which such dividends may be paid 
under the Company's debt instruments.

   Cumulative Convertible Exchangeable Preferred Stock

    The Company has authorized 3,000,000 shares of its Cumulative Convertible 
Exchangeable Preferred Stock (the "Cumulative Convertible Exchangeable 
Preferred Stock"), par value $.01 per share, of which 1,520,000 shares were 
issued on December 23, 1993 at a price of $25.00 per share.  The Company also 
issued on December 23, 1993 300,000 shares of its Cumulative Convertible 
Exchangeable Preferred Stock valued at $7,500,000 as consideration for 
acquiring certain outstanding securities of Queen City III Limited 
Partnership, the ultimate parent of WKBW-TV.  Holders of the Cumulative 
Convertible Exchangeable Preferred Stock are entitled to receive cash 
dividends at an annual rate of $1.9375 per share, payable quarterly on each 
March 15, June 15, September 15 and December 15 in each year, when, as and if 
declared by the Company's Board of Directors. Dividends on the Cumulative 
Convertible Exchangeable Preferred Stock are cumulative and accrue without 
interest, if unpaid.

    Each share of Cumulative Convertible Exchangeable Preferred Stock is 
convertible, at the option of the holder, into shares of Common Stock 
(Nonvoting).  The Cumulative Convertible Exchangeable Preferred Stock is 
convertible into Common Stock (Nonvoting) on a 5 for 1 share basis.  The 
current conversion price of the Cumulative Convertible Exchangeable Preferred 
Stock is $5.00 per share, subject to adjustment upon the occurrence of 
certain events. The Cumulative Convertible Exchangeable Preferred Stock is 
entitled to a preference of $25.00 

                                  -36-

<PAGE>

                         GRANITE BROADCASTING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 8 -- Redeemable Preferred Stock -- (Continued)

per share plus accrued and unpaid dividends in the event of liquidation, 
dissolution or winding up of the Company ($45,487,500 liquidation value at 
December 31, 1996).  The Company is required, to the extent permitted by loan 
agreements or indentures to which the Company is then a party, the 
obligations of which are senior in priority to the Cumulative Convertible 
Exchangeable Preferred Stock, to redeem the Cumulative Convertible 
Exchangeable Preferred Stock at a price of $25.00 per share plus accrued and 
unpaid dividends on December 15, 2005.

    The Cumulative Convertible Exchangeable Preferred Stock is exchangeable 
in whole, but not in part, at the option of the Company, for the Company's 
7.75% Junior Subordinated Convertible Exchange Debentures (the "Exchange 
Debentures") on any dividend payment date beginning on December 15, 1995 at 
the rate of $25.00 principal amount of Exchange Debentures for each share of 
Cumulative Convertible Exchangeable Preferred Stock outstanding at the time 
of the exchange.  The Company may only effect such exchange if accrued and 
unpaid dividends on the Cumulative Convertible Exchangeable Preferred Stock 
have been paid in full.

    In January 1997, the Company authorized 400,000 shares of its 12-3/4% 
Cumulative Exchangeable Preferred Stock (the "New Preferred Stock"), par 
value $.01 per share.  In connection with the Company's acquisition of 
WXON-TV, 150,000 shares of the New Preferred Stock were issued in January 
1997 at a price of $1,000 per share.  Holders of the New Preferred Stock are 
entitled to receive dividends at an annual rate of 12-3/4% per share payable 
semi-annually on April 1 and October 1 of each year.  The Company may elect 
to pay dividends prior to April 1, 2002 in additional shares of New Preferred 
Stock.  Dividends on the New Preferred Stock are cumulative and accrue 
without interest, if unpaid.

    The New Preferred Stock is entitled to a preference of $1,000 per share 
initially, plus accumulated and unpaid dividends in the event of liquidation 
or winding up of the Company.  The Company is required, subject to certain 
conditions, to redeem all of the New Preferred Stock outstanding on April 1, 
2009, at a redemption price equal to 100% of the then effective liquidation 
preference thereof, plus, without duplication, accumulated and unpaid 
dividends to the date of redemption.

    Subject to certain conditions, each share of the New Preferred Stock is 
exchangeable, in whole or in part, at the option of the Company, for the 
Company's 12-3/4% Exchange Debentures (the "New Exchange Debentures") on any 
scheduled dividend payment date at the rate of $1,000 principal amount of New 
Exchange Debentures for each share of New Preferred Stock outstanding at the 
time of the exchange.


Note 9 -- Stockholders' Equity

   Stock option plans

    The Company has a stock option plan (the "Stock Option Plan") for 
officers, directors and certain key employees.  On July 25, 1995, the Stock 
Option Plan was amended to increase the shares of Common Stock (Nonvoting) 
subject to options available for grant to 2,000,000 from 800,000.  Options 
may be granted under the Stock Option Plan at an exercise price (for 
tax-qualified incentive stock options) of not less than 100% of the fair 
market value of the Common Stock (Nonvoting) on the date the option is 
granted, or 110% of such fair market value for option recipients who hold 10% 
or more of the Company's voting stock. The exercise price for non- 

                                  -37-

<PAGE>

                         GRANITE BROADCASTING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 9 -- Stockholders' Equity -- (Continued)

qualified stock options may be less than, equal to or greater than the fair 
market value of the Common Stock (Nonvoting) on the date the option is 
granted. Options are normally exercisable at a rate of 20% per year beginning 
on the date of grant (or the next preceding January 1) and expire ten years 
after the date of grant, except for incentive stock options granted to 
recipients who also own 10% or more of the Company's voting stock.  At 
December 31, 1994, 1995 and 1996, 204,700, 467,850 and 521,000, respectively, 
options were exercisable.

    On March 1, 1994, the Company adopted a Director Stock Option Plan (the 
"Director Option Plan") providing for the grant, from time to time, of 
non-qualified stock options to non-employee directors of the Company to 
purchase an aggregate of 300,000 shares of Common Stock (Nonvoting).  As of 
December 31, 1995 and 1996, options granted under the Director Option Plan 
were outstanding for the purchase of 101,700 and 97,200 shares of Common 
Stock (Nonvoting), respectively.  Under the Director Option Plan as amended 
in 1995, at the end of the current triennial option period and each third 
anniversary thereafter all directors will automatically receive an option to 
purchase 18,000 shares of Common Stock (Nonvoting) ("Automatic Director 
Service Awards") as compensation for attendance at each regular quarterly 
meeting ("Regular Quarterly Meeting") during the triennial option period 
subsequent to the grant in lieu of cash compensation.  In addition, under the 
Director Option Plan, directors receive options ("Automatic Committee 
Awards") for service on certain of the committees of the Board of Directors 
(each a "Committee").  Options become exercisable one year (or immediately in 
the case of Automatic Director Service Awards, or Automatic Committee Awards 
granted after February 27, 1997) from the date of attendance by a director at 
a Regular Quarterly Meeting or a Committee meeting, as applicable.

    The Company has adopted the disclosure-only provisions of Statement of 
Financial Accounting Standards No. 123 "Accounting for Stock-Based 
Compensation" ("FAS 123").  Accordingly, no compensation expense has been 
recognized for the stock option plans.  For purposes of FAS 123 pro forma 
disclosures, the estimated fair value of the options is amortized to expense 
over the options' vesting period, therefore, the impact on pro forma net loss 
in 1995 and 1996 may not be representative of the impact in future years.  
The Company's pro forma information for years ended December 31, follows:

                                            1995           1996   
                                          --------      ----------

    Pro forma net loss                    $969,498      $9,473,649
    Pro forma loss per share:
      Primary                               $(0.76)         $(1.51)
      Fully diluted                         $(0.76)         $(1.51)

    The fair value for each option grant was estimated at the date of grant 
using a binomial option pricing model with the following weighted-average 
assumptions for the various grants made during 1995 and 1996: risk-free 
interest rate of 5.77% and 5.92%; no dividend yield; expected volatility of 
25%; and expected lives of two to three years.

    The binomial option valuation model was developed for use in estimating 
the fair value of traded options which have no vesting restrictions and are 
fully transferable.  In addition, option valuation models require the input 
of highly subjective assumptions including the expected stock price 
volatility.   The Company's employee stock options have characteristics 
significantly different from those of traded options and changes in the 
subjective input assumptions can materially affect the fair value estimate. 

                                  -38-

<PAGE>

                         GRANITE BROADCASTING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 9 -- Stockholders' Equity -- (Continued)

<TABLE>
<CAPTION>
                                                        1995                               1996      
                                          -------------------------------     ------------------------------
                                                         Weighted-Average                   Weighted-Average
                                            Options       Exercise Price       Options       Exercise Price 
                                          ---------      ----------------     ---------     ----------------
<S>                                       <C>            <C>                  <C>           <C>   

Outstanding at beginning of year            714,850          $4.05            1,048,950          $5.22
Granted                                     348,400           7.57            1,029,000          14.19
Exercised                                    (7,400)          4.25             (200,750)          4.44
Forfeited                                    (6,900)          4.87               (4,500)          7.10
                                          ---------                           ---------
Outstanding at end of year                1,048,950           5.22            1,872,700          10.22
                                          ---------                           ---------
                                          ---------                           ---------
Exercisable at end of year                  480,350           4.24              573,200           5.27
Weighted-average fair value of
  options granted during the year             $1.86                               $5.23

</TABLE>

    Exercise prices for options outstanding as of December 31, 1996 ranged 
from $3 to $16.

    Management Stock Plan

    In April 1993, the Company adopted a Management Stock Plan providing for 
the grant from time to time of awards denominated in shares of Common Stock 
(Nonvoting) (the "Bonus Shares") to salaried executive employees of the 
Company. The Company has set aside a reserve of 750,000 shares of Common 
Stock (Nonvoting) for grant under the Management Stock Plan.  As of December 
31, 1996, a total of 610,875 Bonus Shares have been allocated pursuant to the 
Management Stock Plan.

    The total number of common shares outstanding at December 31, 1996 
assuming conversion of all outstanding convertible preferred stock and 
exercise of all outstanding stock options is as follows:

    Class A Common Stock                            178,500
    Common Stock (Nonvoting)                      8,499,716
    Conversion of Cumulative Convertible
      Exchangeable Preferred Stock                9,097,500
    Stock option plans.                           1,872,700
                                                 ----------
                                                 19,648,416
                                                 ----------
                                                 ----------

Note 10 -- Income Taxes

    The Company files a consolidated federal income tax return for its 
entities with the exception of the subsidiary that holds the investment in 
WKBW-TV.  For all periods presented, the Company provides for income taxes as 
required under Statement of Financial Accounting Standards No. 109, 
"Accounting for Income Taxes" ("SFAS No. 109").  Under SFAS No. 109, the 
Company records income taxes using a liability approach for financial 
accounting and reporting which results in the recognition and measurement of 
deferred tax assets based on the likelihood of realization of tax benefits in 
future years.

                                  -39-

<PAGE>

                         GRANITE BROADCASTING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 10 -- Income Taxes -- (Continued)

    The provision for income taxes for the years ended December 31 consists 
of the following:

                                       1994          1995        1996  
                                     ---------     --------    --------
    Current taxes:
       Federal                       $ 100,000     $   -       $   -   
       State                           416,125      264,000     375,000
                                     ---------     --------    --------
                                       516,125      264,000     375,000 

    Deferred taxes:
       Federal                        (101,000)     154,400     285,700 
       State                            35,000      136,484     100,300 
                                     ---------     --------    --------
                                       (66,000)     290,884     386,000 
                                     ---------     --------    --------
    Provision for income taxes       $ 450,125     $554,884    $761,000 
                                     ---------     --------    --------
                                     ---------     --------    --------

    The provision for income taxes for the years ended December 31, 1995 and 
1996 is comprised of a non-cash provision for income taxes, relating to 
WKBW-TV of $1,100,000 and $975,000, respectively, partially offset by the 
deferred tax benefit recorded on companies included in the Granite 
Broadcasting Corporation U.S. consolidated income tax return.  Also included 
are the provisions for state and local taxes.

    During 1995, the Company utilized approximately $2,800,000 of net 
operating loss carryforwards relating to WKBW-TV to eliminate its income tax 
liability. This tax benefit of approximately $1,100,000 reduced goodwill.  
The Company has remaining net operating loss carryforwards relating to 
WKBW-TV of approximately $19,000,000, which expire no sooner than December 
31, 2004.  The net operating loss carryforwards are restricted to offsetting 
future years' U.S. federal income tax liabilities of that subsidiary.  If 
realized, the benefit will be used to further reduce goodwill.

    The provision for income taxes for the year ended December 31, 1994 
includes a provision for federal alternative minimum tax and state and local 
taxes.

                                  -40-

<PAGE>

                         GRANITE BROADCASTING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 10 -- Income Taxes -- (Continued)

    Deferred income taxes reflect the tax effects of temporary differences 
between the carrying amounts of assets and liabilities for financial 
reporting purposes and the amounts used for income tax purposes.  Components 
of the Company's deferred tax asset and liability as of December 31 are as 
follows:

<TABLE>
<CAPTION>
                                                                       December 31,          
                                                                ------------------------------
                                                                   1995              1996 
                                                                -----------       -----------

    <S>                                                         <C>               <C>
    Deferred tax liability from excess carrying value
      of non-goodwill intangible assets over tax basis          $31,245,043       $39,648,565 
    Deferred tax assets:
      Net operating loss carryforward                            15,168,786        24,293,786 
      Other                                                         400,134           304,862 
                                                                -----------       ----------- 
    Total deferred tax assets                                    15,568,920        24,598,648 
    Valuation allowance                                          (6,542,673)       (7,554,878)
                                                                -----------       ----------- 
    Net deferred tax assets                                       9,026,247        17,043,770 
                                                                -----------       ----------- 
    Net deferred tax liability                                  $22,218,796        $22,604,795
                                                                -----------       ----------- 
                                                                -----------       ----------- 
</TABLE>

    The difference between the U.S. federal statutory tax rate and the 
Company's effective tax rate for the years ended December 31 is as follows:

                                                  1994      1995      1996  
                                                 ------    ------    ------ 

    U.S. statutory rate                           35.0%     (35.0%)   (35.0%)
    Nondeductible amortization                     7.4      201.4      22.2  
    State and local taxes                         10.0      160.8      9.3   
    Alternative minimum tax                        2.9        -          -   
    Increase (decrease) in valuation allowance    (42.4)    (84.1)     18.3  
                                                  -----     -----     -----
    Effective tax rate                             12.9%    243.1%     14.8% 
                                                  -----     -----     -----
                                                  -----     -----     -----
    At December 31, 1996, the Company had a net operating loss carryforward 
for federal tax purposes of approximately $49,000,000 which will expire no 
sooner than December 31, 2004.  The future utilization of the net operating 
losses may be subject to limitation under Section 382 of the Internal Revenue 
Code.  This possible limitation has been reflected in the valuation 
allowance.  The Company has provided a valuation allowance against a portion 
of the net deferred tax asset as the past history of the Company makes 
realization of taxable income uncertain.  During 1994, 1995 and 1996, the 
change in valuation allowance relates to the utilization of or increase in 
net operating loss carryforwards.

                                  -41-

<PAGE>

                         GRANITE BROADCASTING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 11 -- Defined Contribution Plan

    The Company has a trusteed profit sharing and savings plan (the "Plan") 
covering substantially all of its employees.  Contributions by the Company to 
the Plan are based on a percentage of the amount of employee contributions to 
the Plan and are made at the discretion of the Board of Directors.  Company 
contributions, which are funded quarterly, amounted to $237,000, $499,000 and 
$642,000 for the years ended December 31, 1994, 1995 and 1996, respectively.

Note 12 -- Related Party

    The Company paid a company, as to which a director of Granite was the 
Chairman and Chief Executive Officer until August 19, 1994, $518,257 for the 
year ended December 31, 1994, relating to services rendered as the exclusive 
representative and sales agent for three of the stations' national 
broadcasting revenue.

    In 1995, the Company lent two of its officers an aggregate of $570,000 to 
pay certain personal taxes.  The terms of the loans provide for an annual 
interest rate of 9% payable semi-annually on December 29 and June 29 of each 
year, with all principal and remaining interest due on December 29, 2004.

    In 1996, the Company lent one of its officers $886,875 to pay the 
exercise price incurred in connection with exercising options and $409,000 to 
pay related personal income taxes.  The loans are term loans which provide 
for an annual interest rate of 8%, payable annually on April 23 and December 
31, respectively, of each year, with all principal and remaining interest due 
on April 23 and December 31, 2001, respectively.  The amount of the loan made 
in connection with exercising options is shown in the balance sheet at 
December 31, 1996 as a reduction to stockholders' equity.

Note 13 -- Price Range of Common Stock (Nonvoting) and
           Cumulative Convertible Exchangeable Preferred Stock (unaudited)

    The Company's Common Stock (Nonvoting) is traded in the over-the-counter 
market and is quoted on the Nasdaq National Market under the symbol "GBTVK". 
The following table sets forth the market price ranges per share of Common 
Stock (Nonvoting) during 1995 and 1996, as reported by Nasdaq:

    1995                          High          Low
    ----                         ------        ------
    First Quarter                $7-3/8        $6-1/8
    Second Quarter                8-3/8         6-3/4
    Third Quarter                13-1/4         7-1/2
    Fourth Quarter               11-3/4         8-5/8

    1996
    ----
    First Quarter                $12-1/8       $9-1/4
    Second Quarter                13-1/2       11-1/4
    Third Quarter                 15           11-1/2
    Fourth Quarter                14            9-7/8

                                  -42-

<PAGE>

                         GRANITE BROADCASTING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 13 -- Price Range of Common Stock (Nonvoting) and 
           Cumulative Convertible Exchangeable Preferred 
           Stock (unaudited) -- (Continued)

    As of March 3, 1997, the closing price per share for the Company's Common 
Stock (Nonvoting), as reported by Nasdaq was $9-5/8 per share.

    The Cumulative Convertible Exchangeable Preferred Stock is traded 
over-the-counter and is quoted on the Nasdaq National Market under the symbol 
"GBTVP".  The following table sets forth the market price ranges per share of 
Cumulative Convertible Exchangeable Preferred Stock during 1995 and 1996, as 
reported by Nasdaq:

    1995                         High           Low 
    ----                        -------       -------
    First Quarter               $40-3/8       $34     
    Second Quarter               45            38-1/4
    Third Quarter                67-1/2        43-1/2
    Fourth Quarter               58-3/8        48 

    1996
    ----
    First Quarter               $61-7/8        $48-1/8
    Second Quarter               68-5/8         60 
    Third Quarter                75-1/2         60 
    Fourth Quarter               75-1/2         50 

    As of March 3, 1997, the closing price for the Company's Cumulative 
Convertible Exchangeable Preferred Stock, as reported by Nasdaq, was $50-5/8 
per share.

                                  -43-

<PAGE>

                                                        SCHEDULE II
                                              GRANITE BROADCASTING CORPORATION
                                             VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
                                               Balance at       Acquired          Amount charged                    Balance  
       Allowance for                            beginning      allowance for         to costs         Amount        at end   
     Doubtful Accounts                           of year     doubtful accounts     and expenses    written off(1)   of year
     -----------------                         ----------    -----------------    --------------    ------------    -------- 
<S>                                            <C>           <C>                  <C>               <C>             <C>       
For the year ended December 31, 1994 . . .     $ 227,365        $     --            $ 347,382        $  318,920     $ 255,827 

For the year ended December 31, 1995 . . .       255,827           229,171            402,619           381,858       505,759 

For the year ended December 31, 1996 . . .       505,759              --              212,665           326,514       391,910 

</TABLE>

-------------
1   Net of recoveries.

                                                               -44-
<PAGE>

Item 9.  Changes and Disagreements With Accountants on Accounting
       and Financial Disclosure

         None.


                                     -45-

<PAGE>
                                   PART III


Item 10.  Directors and Executive Officers of the Registrant

    The following table sets forth information concerning the executive
officers and directors of the Company as of February 1, 1997:

<TABLE>
<CAPTION>

    Name                                 Age               Position
    ----                                 ---               --------
<S>                                      <C>       <C>
W. Don Cornwell(1) . . . . . . . . . .   49        Chairman of the Board, Chief Executive Officer
                                                    and Director
Stuart J. Beck(1). . . . . . . . . . .   50        President, Treasurer, Secretary and Director
Robert E. Selwyn, Jr.  . . . . . . . .   54        Chief Operating Officer
Lawrence I. Wills. . . . . . . . . . .   36        Vice President-Finance and Controller
Ellen McClain. . . . . . . . . . . . .   32        Vice President-Corporate Development and Treasurer
James L. Greenwald(2). . . . . . . . .   69        Director
Vickee Jordan Adams. . . . . . . . . .   37        Director
Martin F. Beck(2). . . . . . . . . . .   79        Director
Edward Dugger, III(2). . . . . . . . .   47        Director
Thomas R. Settle(1)(3) . . . . . . . .   55        Director
Charles J. Hamilton, Jr.(3). . . . . .   49        Director
Mikael Salovaara . . . . . . . . . . .   43        Director

</TABLE>

------------
(1) Member of the Stock Option Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee and Management Stock Plan Committee.


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

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

    Mr. Selwyn has been Chief Operating Officer of the Company since September
19, 1996.  Prior to joining the Company, Mr. Selwyn was employed by New World
Communications, Inc. from May 1993 to June 1996 

                                     -46-

<PAGE>
serving as Chairman and Chief Executive Officer of the New World Television 
Station Group.  Mr. Selwyn received a bachelor of science degree from the 
University of Tennessee in 1968. From 1990 until 1993, Mr. Selwyn was the 
President of Broadcasting for SCI Television, Inc.  Mr. Selwyn was an officer 
of SCI Television, Inc. at the time that company filed a petition under 
Federal bankruptcy laws.

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

    Ms. McClain has been Vice President - Corporate Development and Treasurer
of the Company since January 1994.  Prior to joining Granite, Ms. McClain
attended Harvard Business School, where she received a Masters degree in
Business Administration in June 1993.  From 1990 to 1991, Ms. McClain was an
Assistant Vice President with Canadian Imperial Bank of Commerce, where she
served as a lender in the Bank's Media Group and from 1986 to 1990 was employed
by Bank of New England, N.A. in various capacities including a lender in the
Communications Group.  Ms. McClain is a director of the National Association 
of Black Broadcasters. Ms. McClain received a Bachelor of Arts Degree in
Economics from Brown University in 1986.

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

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

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

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

                                     -47-

<PAGE>

securities of the Company.  This event occurred on January 13, 1992 when the 
Company's registration statement for the initial public offering of the Common 
Stock (Nonvoting) was declared effective by the Securities and Exchange 
Commission.

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

    Mr. Settle has been a member of the Board of Directors of the Company since
July 1992.  Mr. Settle founded and has been the President of The Winchester
Group, Inc., an investment advisory firm, since 1990.  Mr. Settle was the chief
investment officer at Bernhard Management Corporation from 1985 to 1989.  He 
was a Managing Director of Furman Selz Capital Management from 1979 until 1985.
Mr. Settle received a Bachelor of Arts Degree from Muskingum College in 1963 
and a Masters degree in Business Administration from Wharton Graduate School in
1965.

    Mr. Salovaara has been a member of the Board of Directors since March 1994.
Mr. Salovaara had been a General Partner of Greycliff Partners, an investment
advisory firm, from 1991 until 1994 and a Limited Partner of the Blackstone
Group from 1994 until 1996.  Mr. Salovaara worked at Goldman, Sachs & Co. from
1980 to 1991 where he was a General Partner from 1988 to 1991.  Mr. Salovaara 
is a trustee of Playwrights Horizons in New York City and Wooster College and a
visitor and governor of St. John's College.  Mr. Salovaara is a director of
Hadco Corporation and a director of Circuit City Stores, Inc.  Mr. Salovaara
received a Bachelor of Arts degree from Dartmouth College in 1974, a Juris
Doctor degree and Masters degree in Business Administration from the University
of Virginia in 1980 and a Masters of Arts degree from Cambridge University in
1986.

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

    Members of the Board of Directors were entitled to receive a fee of $2,500
for each Board of Directors meeting attended in person that was held prior to
February 25, 1997.  Pursuant to and in accordance with the terms and conditions
of the Company's Director Stock Option Plan (the "Director Option Plan"),
however, once every three years, each director was permitted to elect (a
"Triennial Election") to receive options to purchase shares of the Company's
Common Stock (Nonvoting) ("Options"), in lieu of cash compensation, for
attendance at regularly scheduled quarterly meetings of the Board ("Regular
Quarterly Meetings") during the three years subsequent to the Triennial 
Election or until their earlier termination (the "Triennial Option Period").  
At the end of the last Triennial Option Period, February 25, 1997, however, all
directors automatically received (and will receive on each third year 
anniversary thereafter), an option to purchase 18,000 shares of Common Stock 
(Nonvoting) ("Automatic Director Service Awards") as compensation for 
attendance at Regular Quarterly Meetings during the Triennial Option Period 
subsequent to the grant, in lieu of cash compensation.  Directors elected or 
appointed during the Triennial Option Period receive Options, in lieu of cash 
compensation, for the remaining portion of the Triennial Option Period.

    During the Triennial Option Period, Options to purchase shares of Common
Stock (Nonvoting) become exercisable one year (or immediately in the case of
Automatic Director Service Awards) from the date of attendance by a director at
a Regular Quarterly Meeting in the following amounts: (i) 1,500 shares for
attendance in person; or (ii) 500 shares for attendance by telephonic means. 
The exercise price of all Options is the fair market value of the Common Stock
(Nonvoting) on the date of grant.  The following directors elected to receive
Options, in lieu of cash compensation, for the recently completed, Triennial
Option Period: James L. Greenwald, Vickee Jordan 

                                     -48-

<PAGE>

Adams, Martin F. Beck, Thomas R. Settle, Charles J. Hamilton, Jr. and Mikael 
Salovaara.  See "Executive Compensation -- Director Stock Option Plan."

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

    Directors are separately reimbursed by the Company for their travel
expenses incurred in attending Board or committee meetings.

    Section 16(a) Beneficial Ownership Reporting Compliance

    Each director and officer of the Company who is subject to Section 16 of
the Securities Exchange Act of 1934, as amended, is required to report to the
Securities and Exchange Commission, by a specified date, his or her beneficial
ownership of, or certain transactions in, the Company's securities.  Except as
noted below, based solely upon a review of such reports, the Company believes
that all filing requirements under Section 16 were complied with on a timely
basis.

    In August 1996, new rules under Section 16, among other things,
necessitated the reporting of settlement of units such as those under the
Company's Management Stock Plan in the next month, rather than on a deferred
basis as previously permitted.  In January, 1997 Messrs. Cornwell, Stuart Beck
and Wills and Ms. McClain did not report one such settlement each on a Form 4. 
Mr. Dugger III did not report, on a timely basis, five transactions on four 
Form 4s, and Mr. Martin Beck did not report, on a timely basis, one transaction
on one Form 4.  In addition, Mr. Selwyn did not file a Form 3 on a timely 
basis, and did not report, on a timely basis, one and five transactions on a 
Form 4 and 5, respectively.  All of the reports referred to above have been 
filed.

                                     -49-

<PAGE>

Item 11.  Executive Compensation

    The following table sets forth the cash compensation paid by the Company to
its Chief Executive Officer and each of its most highly compensated executive
officers whose total cash compensation exceeded $100,000 during the fiscal year
ended December 31, 1996, for each of the three years in the period ended
December 31, 1996:

<TABLE>
<CAPTION>

                                                    Summary Compensation Table

                                                                         Long-Term Compensation
                                     Annual Compensation                        Awards
                               ------------------------------------      ----------------------
                                                                          Restricted                      All Other  
   Name and                                                                  Stock        Options/      Compensation 
  Principal Position           Year      Salary ($)       Bonus ($)         Awards        SARs (#)          ($)(1)   
--------------------           ----     -----------      ----------       ----------      --------      -------------
<S>                            <C>      <C>              <C>              <C>             <C>           <C>
W. Don Cornwell                1996      $483,000        $  -             $       -        484,000         $  4,750  
Chief Executive                1995       460,000         46,000                  -        165,000            4,620  
 Officer                       1994       270,000           -                     -              -            3,000  

Stuart J. Beck                 1996       483,000           -                     -        395,000            4,750  
President                      1995       460,000         46,000                  -        135,000            4,620  
                               1994       267,000           -                     -              -            2,000  

Robert E. Selwyn, Jr.          1996       102,083(2)        -               373,140(3)     150,000                -  
Chief Operating                1995          -              -                     -           -                   -  
 Officer                       1994           -             -                     -           -                   -  

Lawrence I. Wills              1996       125,000           -               150,438(4)        -               3,125  
Vice President -               1995       115,000         28,000                  -           -               2,875  
 Finance and                   1994       105,000         25,000             70,000(5)        -               2,100  
 Controller

Ellen McClain                  1996       125,000           -               155,625(6)        -               3,125  
Vice President - Corporate     1995        85,000         45,000             41,438(7)        -               2,125  
 Development and Treasurer     1994        68,000         17,000             30,000(8)        -                   -  

</TABLE>

-----------

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

(2) Represents salary received from September 19, 1996, Mr. Selwyn's date of
    hire.  Mr Selwyn's annual salary under his employment contract with the
    Company is $350,000.

(3) Represents the market value on the date of award of 30,000 Bonus Shares (as
    defined) awarded under the Company's Management Stock Plan on October 22,
    1996.  10,000 shares vest on December 31, 1997 and each anniversary thereof
    through December 31, 1999.  Shares of Common Stock (Nonvoting) subject to
    an Award of Bonus Shares are not deemed issued and outstanding until such
    Bonus Shares vest, and no shareholder rights, including the right to
    receive dividends, if any, will arise with respect thereto until the Bonus
    Shares vest.

(4) Represents the market value on the date of award of 14,500 Bonus Shares
    awarded under the Company's Management Stock Plan on July 25, 1996.  On
    December 31, 1996, 1,500 Bonus Shares vested.  An additional 1,500 Bonus
    Shares will vest on December 31, 1997 and 1998 and 5,000 Bonus Shares will
    vest 

                                     -50

<PAGE>

    on each of December 31, 1999 and 2000.  Shares of Common Stock (Nonvoting) 
    subject to an Award of Bonus Shares are not deemed issued and 
    outstanding until such Bonus Shares vest, and no shareholder rights,
    including the right to receive dividends, if any, will arise with respect
    thereto until such Bonus Shares vest.

(5) Represents the market value on the date of award of 17,500 Bonus Shares
    awarded under the Company's Management Stock Plan on March 15, 1994.  On
    each of December 31, 1994, 1995 and 1996, 3,500 Bonus Shares vested.  An
    additional 3,500 Bonus Shares will vest on December 31, 1997 and December
    31, 1998.  Shares of Common Stock (Nonvoting) subject to an Award of Bonus
    Shares are not deemed issued and outstanding until such Bonus Shares vest,
    and no shareholder rights, including the right to receive dividends, if
    any, will arise with respect thereto until such Bonus Shares vest.

(6) Represents the market value on the date of award of 15,000 Bonus Shares
    awarded under the Company's Management Stock Plan on July 25, 1996.  On
    December 31, 1996, 2,500 Bonus Shares vested.  An additional 2,500 Bonus
    Shares will vest on December 31, 1997 and each anniversary thereof through
    December 31, 1999 and 5,000 Bonus Shares will vest on December 31, 2000. 
    Shares of Common Stock (Nonvoting) subject to an Award of Bonus Shares are
    not deemed issued and outstanding until such Bonus Shares vest, and no
    shareholder rights, including the right to receive dividends, if any, will
    arise with respect thereto until such Bonus Shares vest.

(7) Represents the market value on the date of award of 6,500 Bonus Shares
    awarded under the Company's Management Stock Plan on July 1, 1995.  On each
    of December 31, 1995 and 1996, 1,500 Bonus Shares vested.  An additional
    1,500 Bonus Shares will vest on December 31, 1997 and December 31, 1998 and
    2,500 Bonus Shares will vest on December 31, 1999.  Shares of Common Stock
    (Nonvoting) subject to an Award of Bonus Shares are not deemed issued and
    outstanding until such Bonus Shares vest, and no shareholder rights,
    including the right to receive dividends, if any, will arise with respect
    thereto until such Bonus Shares vest.

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

   Employment Agreements and Compensation Arrangements

    Mr. Cornwell and Mr. Stuart Beck each have an employment agreement with the
Company.  The agreements provide for a two year employment term which is
automatically renewed for subsequent two year terms unless advance notice of
nonrenewal is given (the current term under such agreements, which were renewed
in 1995, expires September 19, 1997).  The base salary determined by the
Compensation Committee of the Board of Directors was $460,000 for 1995 and
$483,000 for 1996.  The agreements stipulate that Mr. Cornwell and Mr. Beck will
devote their full time and efforts to the Company and will not engage in any
business activities outside the scope of their employment with the Company
unless approved by a majority of the Company's independent directors. Under the
agreements, Mr. Cornwell and Mr. Beck are permitted to exchange any or all of
their shares of Voting Common Stock for shares of Common Stock (Nonvoting),
provided that such exchange does not jeopardize the Company's status as a
minority-controlled entity under FCC regulations and that, after such exchange
is effected, there will continue to be shares of voting stock of the Company
outstanding.  In addition to the compensation set forth in the employment
agreements, Mr. Cornwell and Mr. Beck are eligible to receive incentive bonus
payments under the Company's incentive bonus plan and stock options under
certain of the Company's stock option plans.  See "--Stock Option Plan,"
"--Management Stock Plan" and "--Target Cash Flow Stock Option Plan."

                                     -51-

<PAGE>

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

    Mr. Selwyn has an employment agreement with the Company.  The current
employment term expires January 31, 2000, which term may be extended by mutual
written agreement of the parties.  The annual base salary determined by the
Compensation Committee of the Board of Directors is $350,000 for 1996 and 1997.
The agreement stipulates that Mr. Selwyn will devote his full time and effort 
to the Company and will not engage in any business activities outside of the 
scope of his employment with the Company other than permitted thereunder.  In 
addition to his base salary, Mr. Selwyn is eligible to receive shares of the 
Company's Common Stock (Nonvoting) under the Management Stock Plan, has been 
granted options to purchase shares of Common Stock (Nonvoting) under the Stock 
Option Plan and is eligible to participate in the Company's Employee Stock 
Purchase Plan.  See"--Employee Stock Purchase Plan," "--Stock Option Plan" and 
"--Management Stock Plan."

    Under an employment arrangement with the Company, Mr. Wills is eligible to
receive an annual cash bonus based upon the Company's financial performance
during that year, such bonus to be determined by Messrs. Cornwell and Beck.  
Mr. Wills's 1996 base salary was fixed at $125,000.

    Under an employment arrangement with the Company, Ms. McClain is eligible
to receive an annual cash bonus based upon the Company's financial performance
during that year, such bonus to be determined by Messrs. Cornwell and Beck.  
Ms. McClain's 1996 base salary was fixed at $125,000.

   401(k) Profit Sharing and Savings Plan

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

    A contribution to the Plan of $642,000 was charged to expense for 1996.

   Employee Stock Purchase Plan

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

   Stock Option Plan

                                     -52-


<PAGE>

    In April 1990, the Company adopted a Stock Option Plan (the "Stock Option 
Plan") providing for the grant, from time to time, of Options to key 
employees, officers and directors of the Company or its affiliates 
(collectively, the "Participating Persons") to purchase shares of Common 
Stock (Nonvoting).  On April 25, 1995, 165,000 Options were granted to Mr. 
Cornwell and 135,000 Options were granted to Mr. Stuart Beck.  On July 25, 
1995, the Plan was amended to increase the shares of Common Stock (Nonvoting) 
subject to Options available for grant under the Plan to 2,000,000 from 
800,000.  On April 23, 1996, 166,000 Options were granted to Mr. Cornwell and 
135,000 Options were granted to Mr. Stuart Beck.  On April 25, 1996, 318,000 
Options were granted to Mr. Cornwell and 260,000 Options were granted to Mr. 
Stuart Beck.  On September 19, 1996, 150,000 Options were granted to Mr. 
Selwyn.  As of December 31, 1996, Options granted under the Plan were 
outstanding for the purchase of 1,775,500 shares of Common Stock (Nonvoting).

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

    The Stock Option Plan is administered by a committee consisting of not 
less than three members of the Board of Directors appointed by the Board.  
Subject to the provisions of the Stock Option Plan, the committee is 
empowered to, among other things, grant Options under the Stock Option Plan; 
determine which employees may be granted Options under the Stock Option Plan, 
the type of Option granted (ISO or NQSO), the number of shares subject to 
each Option, the time or times at which Options may be granted and exercised 
and the exercise price thereof; construe and interpret the Stock Option Plan; 
determine the terms of any option agreement pursuant to which Options are 
granted (an "Option Agreement"), and amend any Option Agreement with the 
consent of the recipient of Options (the "Optionee").  Notwithstanding the 
foregoing, grants under the Stock Option Plan to officers of the Company and 
holders of 10% or more of the Voting Common Stock are made by the 
disinterested members of the Board of Directors of the Company.  The Board of 
Directors may amend or terminate the Stock Option Plan at any time, except 
that approval of the holders of a majority of the outstanding Voting Common 
Stock of the Company is required for amendments which decrease the minimum 
option price for ISOs, extend the term of the Stock Option Plan beyond 10 
years or the maximum term of the Options granted beyond 10 years, withdraw 
the administration of the Stock Option Plan from the committee, change the 
class of eligible employees, officers or directors or increase the aggregate 
number of shares which may be issued pursuant to the provisions of the Stock 
Option Plan.  Notwithstanding the foregoing, the Board of Directors may, 
without the need for shareholder approval, amend the Stock Option Plan in any 
respect to qualify ISOs as Incentive Stock Options under Section 422 of the 
Code.

    Options granted to each of Mr. Cornwell and Mr. Stuart Beck in 1996 vest 
as follows:  (i) approximately 6% of the Options granted on April 23, 1996 
became exercisable on December 1, 1996 and the remainder become exercisable 
in varying percentages on various dates from April 23, 1997 through April 23, 
2001; (ii) 50% of the Options granted on April 25, 1996 become exercisable on 
October 23, 1997 and the remaining 50% of such Options become exercisable on 
April 23, 1998. Approximately 5% of the Options granted to Mr. Selwyn in 1996 
became exercisable on December 30, 1996, and the remaining options become 
exercisable in varying percentages from December 31, 1997 through January 1, 
2000.

    The exercise price per share for all ISOs may not be less than 100% of 
the fair market value of a share of Common Stock (Nonvoting) on the date on 
which the Option is granted (or 110% of the fair market value on the date of 
grant of an ISO if the Optionee owns more than 10% of the total combined 
voting power of all classes 

                                     53

<PAGE>

of voting stock of the Company or any of its affiliates (a "10% Holder")).  
The exercise price per share for NQSOs may be less than, equal to or greater 
than the fair market value of a share of Common Stock (Nonvoting) on the date 
such NQSO is granted.  Options are not assignable or transferable other than 
by will or the laws of descent and distribution.

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

   Management Stock Plan

    In April 1993, the Company adopted a Management Stock Plan (the 
"Management Stock Plan") providing for the grant from time to time of awards 
denominated in shares of Common Stock (Nonvoting) (the "Bonus Shares") to all 
salaried executive employees of the Company.  The purpose of the Management 
Stock Plan is to keep senior executives in the employ of the Company and to 
compensate such executives for their contributions to the growth and profits 
of the Company and its subsidiaries.  The Company has set aside a reserve of 
750,000 shares of Common Stock (Nonvoting) for grant under the Management 
Stock Plan (which reserve may be adjusted from time to time).  All salaried 
executive employees (including officers and directors, except for persons 
serving as directors only) are eligible to receive a grant under the 
Management Stock Plan.  The Management Stock Plan is administered by a 
committee appointed by the Board of Directors which consists of not less than 
two members of the Board of Directors (the "Management Stock Plan 
Committee").  Pursuant to Board resolution, the members of the Compensation 
Committee constitute the members of the Management Stock Plan Committee.  The 
Management Stock Plan Committee, from time to time, selects eligible 
employees to receive a discretionary bonus of Bonus Shares based upon such 
employee's position, responsibilities, contributions and value to the Company 
and such other factors as the Management Stock Plan Committee deems 
appropriate.  The Management Stock Plan Committee has discretion to determine 
the date on which the Bonus Shares allocated to an employee will be issued to 
such employee.  The Management Stock Plan Committee may, in its sole 
discretion, determine what part of an award of Bonus Shares is paid in cash 
and what part of an award is paid in the form of Common Stock (Nonvoting).  
Any cash payment will be made to such employee as of the date the 
corresponding Bonus Shares would otherwise be issued to such employee and 
shall be in an amount equal to the fair market value of such Bonus Shares on 
that date.

    As of December 31, 1996, the Company has allocated a total of 610,870 
Bonus Shares pursuant to the Management Stock Plan, 310,175 of which had 
vested through December 31, 1996.  Each allocation provides for the vesting 
of a percentage of the award on each December 31 after the date of the 
allocation.

   Target Cash Flow Option Plan

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

 Director Stock Option Plan

                                     54

<PAGE>

    On March 1, 1994, the Company adopted a Director Stock Option Plan (the 
"Director Option Plan") providing for the grant, from time to time, of 
Options to non-employee directors of the Company ("Director Participants") to 
purchase Common Stock (Nonvoting).  The number of shares of Common Stock 
(Nonvoting) allocated for grant under the Director Option Plan is 300,000.  
As of December 31, 1996, Options granted under the Director Option Plan were 
outstanding for the purchase of 97,200 shares of Common Stock (Nonvoting).

    The Director Option Plan provides for the grant of NQSOs to Director 
Participants.  Under the Plan, once every three years, each director was 
permitted to make an irrevocable Triennial Election to receive Options, in 
lieu of cash compensation, for attendance in person at each Regular Quarterly 
Meeting during the Triennial Option Period covered by such election.  On 
February 25, 1995, the end of the last Triennial Option Period however, all 
directors automatically received (and each third year anniversary thereafter 
will receive) an option to purchase 18,000 shares of Common Stock (Nonvoting) 
as compensation for attendance at Regular Quarterly Meetings during the 
Triennial Option Period subsequent to the grant in lieu of cash compensation. 
 Directors elected or appointed during the course of a Triennial Option 
Period receive Options, in lieu of a cash compensation, for the remaining 
portion of such Triennial Option Period.  In addition, under the Director 
Option Plan, directors receive Automatic Committee Awards for each Committee 
of the Board of Directors on which they serve.

    During the Triennial Option Period, Options to purchase shares of Common 
Stock (Nonvoting) become exercisable one year (or immediately in the case of 
Automatic Director Service Awards) from the date of attendance by director at 
a Regular Quarterly Meeting in the following amounts: (i) 1,500 shares for 
attendance in person; or (ii) 500 shares for attendance by telephonic means. 
Automatic Awards to purchase 1,500 shares of Common Stock (Nonvoting) become 
exercisable one year (or immediately for Automatic Awards granted on or after 
February 25, 1997) from the date of attendance in person at each regularly 
scheduled Committee meeting.  The exercise price per share of all Options is 
the fair market value on the date of grant.

    The following table sets forth information with respect to Options granted
to the executive officers of the Company during 1996.

<TABLE>
                        Option/SAR Grants in Last Fiscal Year

                                                                                           Potential Realizable Value
                                                                                           at assumed Annual Rates of
                                                                                            Stock Price Appreciation
                              Individual Grants                                                for Option Term
                     -------------------------------------------------------------------    -------------------------
                                          % of Total  
                                          Options/SARs
                                           Granted to         Exercise or 
                     Options/SARs         Employees in        Base Price       Expiration    
   Name              Granted (#)          Fiscal Year        ($ Per Share)        Date         5% ($)     10% ($)   
--------------       -----------         -------------       --------------    ----------   ----------    ---------
<S>                  <C>                 <C>                 <C>               <C>          <C>           <C>
W. Don Cornwell        122,000               57.3%              $11.250         4/25/2005   $2,129,198   $3,236,283
                        44,000               50.0%               12.375         4/23/2001      694,935      876,923
                       318,000               55.0%               16.000        10/23/1998    5,748,048    6,456,971

Stuart J. Beck          91,000               42.7%               11.250         4/25/2005    1,588,172    2,413,949
                        44,000               50.0%               12.375         4/23/2001      694,935      876,923
                       260,000               45.0%               16.000        10/23/1998    4,699,661    5,279,284

Robert E. Selwyn, Jr.  150,000              100.0%               12.438         9/19/2001    2,381,159    3,004,729

</TABLE>


                                     55

<PAGE>

    The following table sets forth, as of December 31, 1996, the number of 
options and the value of unexercised options held by the Company's executive 
officers who held options as of that date, and the options exercised and the 
consideration received therefor by such persons during fiscal 1996.

                       Aggregated Option/SAR Exercises
                           In Last Fiscal Year And
                          FY-End Option/SAR Values
<TABLE>
                                                            Number of              Value of Unexercised  
                                                       Unexercised Options         in-the-Money Options  
                                                       at December 31, 1996        at December 31, 1996  
                                                     -------------------------    -------------------------
                   Shares Acquired       Value  
    Name             on Exercise        Realized     Exercisable/Unexercisable    Exercisable/Unexercisable
-------------      ---------------      --------     -------------------------    -------------------------
<S>                <C>                  <C>          <C>                          <C>
  
W. Don Cornwell        200,000         $1,363,125         156,300/612,700              $860,688/$652,438

Stuart J. Beck            -                -              293,800/498,700              1,720,875/533,813 

Robert E. Selwyn, Jr.     -                -               8,000/142,000                       -/-      

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

Ellen McClain             -                -                    -/-                            -/-    

</TABLE>

   Compensation Committee Interlocks and Insider Participation

    During 1996, Thomas R. Settle and Charles J. Hamilton, Jr. served as 
members of the Compensation Committee of the Board of Directors of the 
Company.

                                     56

<PAGE>

Item 12.  Security Ownership of Certain Beneficial Owners and Management

    The following table sets forth certain information, as of February 1, 
1997, regarding beneficial ownership of the Company's Voting Common Stock by 
each shareholder who is known by the Company to own beneficially more than 5% 
of the outstanding Voting Common Stock, each director, each executive officer 
and all directors and officers as a group, and beneficial ownership of: (i) 
the Company's Common Stock (Nonvoting) (assuming conversion of all preferred 
stock and exercise of all options for the purchase of Common Stock 
(Nonvoting), which conversion or exercise is at the option of the holder 
within sixty (60) days); and (ii) the Company's Cumulative Convertible 
Exchangeable Preferred Stock, by each director, each executive officer and 
all directors and officers as a group. The Company also has 150,000 shares of 
its 12 3/4% Cumulative Exchangeable Preferred Stock outstanding, none of 
which are owned by any officers or directors of the Company. Except as set 
forth in the footnotes to the table, each shareholder listed below has 
informed the Company that such shareholder has (i) sole voting and investment 
power with respect to such shareholder's shares of stock, except to the 
extent that authority is shared by spouses under applicable law and (ii) 
record and beneficial ownership with respect to such shareholder's shares of 
stock.

<TABLE>
                                                                                                Cumulative Convertible
                                                                                                      Exchangeable    
                         Voting Common Stock        Common Stock (Nonvoting)                        Preferred Stock   
                         ------------------- ------------------------------------------------   --------------------------
                                Shares                                                                   Shares     
                         Beneficially Owned                            Percent of Shares           Beneficially Owned   
                         ------------------    Number of Shares        Beneficially Owned       --------------------------
                         Number     Percent   Beneficially Owned  Actual(1)   Fully Diluted(2)   Number       Percent 
                         ------     -------   ------------------- ---------   ----------------   ------       -------
<S>                     <C>        <C>        <C>                <C>            <C>               <C>
 
W. Don Cornwell          98,250      55.0%      589,950 (3)         6.7%          3.2%             9,750       *

Stuart J. Beck           80,250      45.0%      495,962 (4)         5.6%          2.7%            10,000       *

Robert E. Selwyn, Jr.                            19,047 (5)          *             *                --         *

Lawrence I. Wills                                11,035 (6)          *             *                --         *

Ellen McClain                                     6,087              *             *                --         *

Martin F. Beck                                   87,314 (7)         1.0%           *               3,950       *

James L. Greenwald                               92,927 (8)         1.1%           *               1,000       *

Vickee Jordan Adams                                6,537(9)          *             *                 --        *

Edward Dugger III                                    -               *             *                 --        *

Thomas R. Settle                                 64,312(10)          *             *               3,000       *

Charles J. 
  Hamilton, Jr.                                   9,950(11)          *             *                 --        *

Mikael Salovaara                                107,150(12)         1.2%           *              13,950       *

All directors and 
 officers as a
 group(12)              178,500     100.0%    1,489,571            16.0%          8.1%            41,650      2.3

</TABLE>
               
------------
*   Less than 1%.

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

                                     57

<PAGE>

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

(3)   Includes 156,300 shares issuable upon exercise of options granted to
      Mr. Cornwell under the Stock Option Plan which are exercisable at the
      option of the holder within sixty (60) days, 48,750 shares issuable upon
      the conversion of 9,750 shares of Cumulative Convertible Exchangeable
      Preferred Stock which are convertible at the option of the holder within
      sixty (60) days, and a total of 3,900 shares held by Mr. Cornwell's
      immediate family.  Mr. Cornwell disclaims beneficial ownership with 
      respect to such 3,900 shares.  The business address of Mr. Cornwell is 
      Granite Broadcasting Corporation, 767 Third Avenue, 34th Floor, New York,
      New York, 10017.

(4)   Includes 293,800 shares issuable upon exercise of options granted to 
      Stuart J. Beck under the Stock Option Plan which are exercisable at the 
      option of the holder within sixty (60) days, and 50,000 shares issuable 
      upon the conversion of 10,000 shares of Cumulative Convertible 
      Exchangeable Preferred Stock which are convertible at the option of the 
      holder wihin sixty (60) days.  The business address of Mr. Stuart Beck is
      Granite Broadcasting Corporation, 767 Third Avenue, 34th Floor, New York, 
      New York, 10017.

(5)   Includes 8,000 shares issuable upon exercise of options to Mr. Selwyn 
      under the Stock Option Plan which are exercisable at the option of the 
      holder within sixty (60) days.

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

(7)   Includes 19,750 shares issuable upon the conversion of 3,950 shares
      (including 450 shares of such stock held by Mr. Beck's wife) of Cumulative
      Convertible Exchangeable Preferred Stock which are convertible at the
      option of the holder within sixty (60) days, 6,000 shares held by
      Mr. Beck's wife, and 9,700 shares issuable upon exercise of options 
      granted under the Directors' Stock Option Plan which are exercisable at 
      the option of the holder within sixty (60) days.  Mr. Beck disclaims 
      beneficial ownership with respect to shares held by his spouse.

(8)   Includes 5,000 shares issuable upon the conversion of 1,000 shares of
      Cumulative Convertible Exchangeable Preferred Stock which are convertible
      at the option of the holder within sixty (60) days and 12,400 shares
      issuable upon exercise of options granted under the Directors' Stock 
      Option Plan which are exercisable at the option of the holder within 
      sixty (60) days.

(9)   Includes 4,200 shares issuable upon the exercise of Options granted under
      the Directors' Stock Option Plan which are exercisable at the option of 
      the holder within sixty (60) days.

(10)  Includes 15,000 shares issuable upon the conversion of 3,000 shares of
      Cumulative Convertible Exchangeable Preferred Stock which are
      convertible at the option of the holder within sixty (60) days, 4,500
      shares held by Mr. Settle's wife as custodian for his children, and
      10,800 shares issuable upon exercise of options granted under the
      Directors' Stock Option Plan which are exercisable at the option of
      the holder within sixty (60) days.  Mr. Settle disclaims beneficial
      ownership with respect to the shares held by his spouse as custodian
      for his children.

(11)  Includes 9,700 shares issuable upon exercise of options granted under
      the Directors' Stock Option Plan, which are exercisable at the option
      of the holder within sixty (60) days.

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

                                     58

<PAGE>

      Trustee; (ii) 3,500 shares, and 5,000 shares issuable upon the conversion 
      of 1,000 shares of Cumulative Convertible Exchangeable Preferred Stock,
      which are convertible at the option of the holder within sixty (60)
      days, held in Trust for the benefit of one of Mr. Salovaara's children
      for which Mr. Salovaara's wife is the Trustee; (iii) 59,750 shares
      issuable upon the conversion of 11,950 shares of Cumulative
      Convertible Exchangeable Preferred Stock, which are convertible at the
      option of the holder within sixty (60) days; (iv) 9,900 shares
      issuable upon exercise of options granted under the Directors' Stock
      Option Plan which are exercisable at the option of the holder within
      sixty (60) days; and (v) 5,000 shares issuable upon conversion of
      1,000 shares of Cumulative Convertible Exchangeable Preferred Stock,
      which are convertible at the option of the holder, held in Trust for
      the benefit of nonaffiliates of Mr. Salovaara, for which Mr. Salovaara
      and Mr. Salovaara's wife are among the Trustees and as to which Mr.
      Salovaara disclaims beneficial ownership.

Item 13.  Certain Relationships and Related Transactions

    In 1995, the Company made a loan to Mr. Cornwell, Chief Executive Officer 
and Chairman of the Board of Directors, in the amount of $348,660 and a loan 
to Mr. Stuart Beck, President and a member of the Board of Directors, in the 
amount of $221,200 to pay for certain personal taxes.  Both loans are term 
loans providing for an annual interest rate of 9%, payable semi-annually on 
December 29 and June 29 of each year, with all principal and remaining 
interest due on December 29, 2004.  As of December 31, 1996, the amount 
outstanding on such loans, including accrued interest, to Messrs. Cornwell 
and Beck was $380,213 and $241,218, respectively, which amount represented 
the largest amount outstanding thereunder up to that date.

    In April 1996, the Company made a loan to Mr. Cornwell in the amount of 
$886,875 to pay the exercise price incurred in connection with exercising 
options.  In December 1996, the Company made a loan to Mr. Cornwell in the 
amount of $409,000 to pay certain personal taxes in connection with the 
exercise of such options.  Each loan is a term loan which provides for an 
annual interest rate of 8%, payable annually, with all principal and 
remaining interest due in 2001.  As of December 31, 1996 (i) the amount 
outstanding under the April 1996 loan, including accrued interest, was 
$934,157, which amount represented the largest amount outstanding thereunder 
up to that date; and (ii) the amount outstanding under the December 1996 loan 
was $409,000, which amount represented the largest amount outstanding 
thereunder up to that date. 

                                     59
<PAGE>

                                   PART IV


Item 14.  Exhibits, Financial Statements, Schedules and Reports on Form 8-K

    (a)1  Financial Statements

 
         GRANITE BROADCASTING CORPORATION
          Report of Independent Auditors
          Consolidated Statements of Operations for the Years
           Ended December 31, 1994, 1995 and 1996
          Consolidated Balance Sheets as of December 31, 1995 and 1996
          Consolidated Statements of Stockholders' Equity (Deficit)
           for the Years Ended December 31, 1994, 1995 and 1996
         Consolidated Statements of Cash Flows for the Years
           Ended December 31, 1994, 1995 and 1996
         Notes to Consolidated Financial Statements
 
 
    (a)2  Financial Statement Schedule

 
          Schedule II -- Granite Broadcasting Corporation:
           Valuation and Qualifying Accounts 
 


    (a)3  Exhibits

    1.1       Purchase Agreement, dated January 27, 1997, among Granite 
              Broadcasting Corporation and the Purchasers named therein.

    3.1(g)    Third Amended and Restated Certificate of Incorporation of the
              Company, as amended.

    3.2(g)    Amended and Restated Bylaws of the Company, as amended.

    3.3       Certificate of Designations of the Powers, Preferences and 
              Relative, Participating, Optional and Other Special Rights of
              the Company's 12 3/4%, Cumulative Exchangeable Preferred Stock 
              and Qualifications, Limitations and Restrictions Thereof.

    4.27(2)   Indenture dated as of September 1, 1992 between Granite
              Broadcasting Corporation and The United States Trust Company of
              New York, as Trustee, relating to the Company's $60,000,000
              Principal Amount 12.75% Senior Subordinated Debentures due
              September 1, 2002.

    4.28(2)   Form of 12.75% Senior Subordinated Debenture due September 1,
              2002.

    4.30(3)   Form of Indenture relating to the Company's Junior Subordinated
              Convertible Debentures issuable upon the exchange of the
              Company's Cumulative Convertible Exchangeable Preferred Stock.

    4.31(3)   Form of Junior Subordinated Convertible Debenture.

                                     60

<PAGE>

    4.35(i)   Third Amended and Restated Credit Agreement, dated as of
              September 4, 1996, among Granite Broadcasting Corporation, the
              Lenders named therein, Bankers Trust Company, as Agent, and The
              Bank of New York, First Union National Bank of North Carolina,
              Goldman Sachs Credit Partners L.P. and Union Bank of California,
              as Co-Agents.

    4.37(4)   Indenture, dated as of May 19, 1995, between Granite Broadcasting
              Corporation and United States Trust Company of New York for the
              Company's $175,000,000 Principal Amount 10 3/8% Senior
              Subordinated Notes due May 15, 2005.

    4.38(5)   Form of 10 3/8% Senior Subordinated Note due May 15, 2005.

    4.39(g)   Exchange and Registration Rights Agreement, dated as of February
              22, 1996, by and between Granite Broadcasting Corporation and
              Goldman Sachs & Co., BT Securities Corporation and Lazard Freres
              & Co. LLC.

    4.41(g)   Indenture, dated as of February 22, 1996, between Granite
              Broadcasting Corporation and The Bank of New York relating to the
              Company's $110,000,000 Principal Amount 9 3/8% Series A Senior
              Subordinated Notes due December 1, 2005.

    4.42(g)   Form of 9 3/8% Series A Senior Subordinated Note due December 1,
              2005.

    4.43      Exchange and Registration Rights Agreement, dated as of January 
              31, 1997, by and between Granite Broadcasting Corporation and 
              Goldman, Sachs & Co., BT Securities Corporation, Lazard Freres &
              Co. LLC and Salomon Brothers Inc.

    4.44      Indenture, dated as of January 31, 1997, between Granite 
              Broadcasting Corporation and The Bank of New York for the 
              Company's 12 3/4% Series A Exchange Debentures and 12 3/4 Exchange
              Debentures due April 1, 2009.

    4.45      Form of 12 3/4% Exchange Debenture due April 1, 2009 (included in 
              the Exhibit 4.4 Indenture filed herewith).

    10.1(h)   Granite Broadcasting Corporation Stock Option Plan, as amended on
              July 24, 1996.

    10.2(1)   Target Cash Flow Option Plan and Agreement dated as of October
              31, 1988 among Granite Broadcasting Corporation, W. Don Cornwell
              and Stuart J. Beck.

    10.9(5)   Network Affiliation Agreement (KBJR-TV).

    10.10(5)  Network Affiliation Agreement (WEEK-TV).

    10.11(g)  Network Affiliation Agreement (KNTV(TV)).

    10.12(g)  Network Affiliation Agreement (WPTA-TV).

    10.13(1)  Employment Agreement dated as of September 20, 1991 between
              Granite Broadcasting Corporation and W. Don Cornwell.

    10.14(1)  Employment Agreement dated as of September 20, 1991 between
              Granite Broadcasting Corporation and Stuart J. Beck.

    10.15(h)  Granite Broadcasting Corporation Management Stock Plan, as
              amended July 24, 1996.

                                     61

<PAGE>

    10.16(a)  Purchase and Sale Agreement between the Company and Meredith
              Corporation, dated June 15, 1993.

    10.17(b)  Letter Agreement between the Company and the Sellers (as defined
              therein) to acquire certain securities of Queen City III Limited
              Partnership dated as of October 20, 1993.

    10.18(3)  Letter Agreement, dated December 7, 1993, between Granite and
              Meredith Corporation, amending the Purchase and Sale Agreement
              dated June 15, 1993.

    10.19     Granite Broadcasting Corporation Director Stock Option Plan, as
              amended on February 25, 1997.

    10.20(4)  Network Affiliation Agreement (WTVH-TV).

    10.21(5)  Network Affiliation Agreement (KSEE-TV).

    10.22(c)  Purchase and Sale Agreement among Granite Broadcasting
              Corporation, Austin Television, a Texas general partnership,
              Cannan Communications, Inc. and Beard Management, Inc. dated as
              of October 2, 1994.

    10.23(d)  Purchase and Sale Agreement, dated as of February 20, 1995, among
              Granite Broadcasting Corporation, Busse Broadcasting Corporation
              and WWMT, Inc.

    10.24(4)  Network Affiliation Agreement (KEYE-TV).

    10.25(d)  Granite Broadcasting Corporation Employee Stock Purchase Plan,
              dated February 28, 1995.

    10.26(4)  Network Affiliation Agreement (WWMT).

    10.27(e)  Purchase Agreement, dated May 15, 1995, among Granite
              Broadcasting Corporation, Queen City III Limited Partnership,
              Queen City Broadcasting of New York, Inc. and the General
              Partners of Queen City III Limited Partnership.

    10.28(f)  Network Affiliation Agreement (WKBW).

    10.29(j)  Purchase and Sale Agreement, dated as of December 2, 1996, by and
              between Granite Broadcasting Corporation and WXON-TV, Inc.

    10.30     Employment Agreement dated as of September 19, 1996 between
              Granite Broadcasting Corporation and Robert E. Selwyn, Jr.

    11.       Statement of Computation of Per Share Earnings.

    21.       Subsidiaries of the Company.

    23.       Consent of Independent Auditors (Ernst & Young LLP).

    27.       Financial Data Schedule.

                                     62 

<PAGE>

(1)  Incorporated by reference to the similarly numbered exhibits to the
     Company's Registration Statement No. 33-43770 filed on November 5, 1991.

(2)  Incorporated by reference to the similarly numbered exhibits to the
     Company's Registration Statement No. 33-52988 filed on October 6, 1992.

(3)  Incorporated by reference to the similarly numbered exhibits to Amendment
     No. 2 to Registration Statement No. 33-71172 filed December 16, 1993.

(4)  Incorporated by reference to the similarly numbered exhibits to the
     Company's Registration Statement No. 33-94862 filed on July 21, 1995.

(5)  Incorporated by reference to the similarly numbered exhibits to Amendment
     No. 2 to Registration Statement No. 33-94862 filed on October 6, 1995.

(a)  Incorporated by reference to Exhibit 10.1 to the Company's Current Report
     on Form 8-K, filed on June 25, 1993.

(b)  Incorporated by reference to the similarly numbered exhibit to the
     Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
     1993, Commission File No. 0-19728, filed on November 15, 1993.

(c)  Incorporated by reference to the similarly numbered exhibit to the
     Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
     1994, Commission File No. 0-19728, filed on November 14, 1994.

(d)  Incorporated by reference to the similarly numbered exhibit to the
     Company's Annual Report on Form 10-K for the fiscal year ended December 31,
     1994, filed on March 29, 1995.

(e)  Incorporated by reference to Exhibit Number 3 to the Company's Report on
     Form 8-K, filed on May 19, 1995.

(f)  Incorporated by reference to the similarly numbered exhibit to the
     Company's Report on Form 8-K filed on July 14, 1995.

(g)  Incorporated by reference to the similarly numbered exhibit to the
     Company's Annual Report on Form 10-K for the fiscal year ended December 31,
     1995, filed on March 28, 1996.

(h)  Incorporated by reference to the similarly numbered exhibit to the
     Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
     1996, as filed on August 13, 1996.

(i)  Incorporated by reference to the similarly numbered exhibit to the
     Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
     1996, filed on November 14, 1996.

(j)  Incorporated by reference to Exhibit Number 1 to the Company's Current
     Report on Form 8-K, filed on December 17, 1996.

                                     63

<PAGE>
 
    (b)  Reports on Form 8-K.

         1.   Current Report on Form 8-K filed December 17, 1996, reporting a
              definitive agreement entered into by and between Granite
              Broadcasting Corporation and WXON-TV, Inc., a Michigan
              corporation, whereby Granite Broadcasting Corporation would
              acquire WXON-TV, the WB Network affiliated station serving
              Detroit, Michigan, for approximately $175 million in cash.  No
              financial statements were filed at such time.

         2.   Current Report on Form 8-K filed January 15, 1997, reporting the
              announcement by Granite Broadcasting Corporation of its intention
              to commence a private offering of securities to raise funds to
              consummate the acquisition of WXON-TV.  No financial statements
              were filed at such time.

         3.   Current Report on Form 8-K filed February 7, 1997, announcing the
              completion of the acquisition by Granite Broadcasting Corporation
              of substantially all of the assets used in the operation of
              WXON-TV.  Pro Forma Condensed Consolidated Financial Statements
              (unaudited) were filed on such date.

                                     64

<PAGE>
 
                                      SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, as amended, the Registrant has duly caused this report 
to be signed on its behalf by the undersigned, thereunto duly authorized, in 
the City of New York, State of New York, on the 21st day of March, 1997.

                                  GRANITE BROADCASTING CORPORATION



                                  By: /s/ W. DON CORNWELL                       

                                      W. Don Cornwell
                                      Chief Executive Officer and Chairman
                                      of the Board of Directors

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated:

    Signature                      Title                             Date
    ---------                      -----                             ----


/s/ W. DON CORNWELL       Chief Executive Officer               March 21, 1997
--------------------      (Principal Executive Officer)
(W. Don Cornwell)         and Chairman of the
                          Board of Directors


/s/ STUART J. BECK        President, Secretary                  March 21, 1997
----------------------    (Principal Financial Officer)
(Stuart J. Beck)          and Director


/s/ LAWRENCE I. WILLS     Vice President-Finance and Controller March 21, 1997
----------------------    (Principal Accounting Officer)
(Lawrence I. Wills) 

/s/ MARTIN F. BECK        Director                              March 21, 1997
----------------------
(Martin F. Beck) 

/s/ JAMES L. GREENWALD    Director                              March 21, 1997
-----------------------
(James L. Greenwald)

/s/ VICKEE JORDAN ADAMS   Director                              March 21, 1997
-----------------------
(Vickee Jordan Adams)

/s/ EDWARD DUGGER III     Director                              March 21, 1997
-----------------------
(Edward Dugger III)

/s/ THOMAS R. SETTLE      Director                              March 21, 1997
-----------------------
Thomas R. Settle

/s/ CHARLES J. HAMILTON,
      JR.                 Director                              March 21, 1997
-----------------------
Charles J. Hamilton, Jr.

/s/ MIKAEL SALOVAARA      Director                              March 21, 1997
------------------------
(Mikael Salovaara)