<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
---------------
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
------------------------
Date of Report (Date of Earliest Event Reported): September 23, 1994
------------------------
IDB COMMUNICATIONS GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
<TABLE>
<S> <C>
0-14972 93-0933098
(Commission File No.) (I.R.S. Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
10525 WEST WASHINGTON BOULEVARD, CULVER CITY, CALIFORNIA 90232-1922
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(213) 870-9000
(Registrant's Telephone Number, Including Area Code)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
ITEM 5. OTHER EVENTS
On November 11, 1994, Registrant and Keystone Communications Corporation
("Keystone"), a privately-held provider of broadcast distribution services,
entered into non-binding letters of intent regarding a series of transactions
which, if consummated, will allow Keystone to operate and manage the broadcast
business of Registrant (excluding the simulcast and audio portions of the
business) (the "Broadcast Business"). The letters of intent provide that
Keystone will lease substantially all of the tangible assets of the Broadcast
Business pursuant to an operating lease and will manage the contracts and other
intangible assets of the Broadcast Business through a management agreement. In
connection with these transactions, it is contemplated that Registrant will also
acquire for $6.0 million a 25% equity interest in Keystone to be held through a
new partnership formed with other Keystone investors. The following is a summary
of the material provisions of the letters of intent.
The letters of intent provide that the lease agreement will be for an
initial term of 36 months, subject to renewal, at Keystone's discretion, for an
additional 24 months. Keystone will pay Registrant $6.0 million on the closing
date and, during the initial lease term, quarterly lease payments in the
aggregate amount of $12.2 million. If the lease is renewed, lease payments in
the aggregate amount of $15.8 million will be paid by Keystone during the two
year renewal period.
In addition, Keystone will be granted an option to acquire the tangible
assets of the Broadcast Business which will be exercisable at the end of the
initial 36-month lease term for $31 million, if the lease is renewed, at any
time during the renewal period for the sum of (i) $19.3 million and (ii) the
aggregate amount of any remaining lease payments through the end of the renewal
period, with such aggregate sum discounted at the rate of 8% per annum. The
purchase price for the assets would be payable, at the election of Keystone, in
cash or by a subordinated promissory note of Keystone which would accrue
interest at the rate of 8% per annum. The promissory note would be payable over
a four-year period commencing on the date of its issuance and would be secured
by the leased assets. If the option is not exercised, Keystone would be
obligated to pay Registrant an additional $2.1 million on the lease termination
date, subject to certain exceptions.
The terms of the letters of intent also provide that Keystone will manage
the contracts and other intangible assets used in the Broadcast Business for a
period of up to 60 months pursuant to a management agreement. If Keystone
exercises its option to purchase the tangible assets under the lease, Registrant
will also transfer the intangible assets to Keystone. Keystone will receive no
fixed fee as manager. Instead, each year Registrant and Keystone will share in
any net profits of the Broadcast Business in the following manner: (i)
Registrant will receive 80% of the first $4.0 million of net profits, with
Keystone retaining the remaining 20% and (ii) Registrant and Keystone will each
receive one-half of any net profits in excess of $4.0 million. Registrant will
be liable for any net losses of the Broadcast Business and will have the right
to terminate the management agreement, as well as the lease, if the Broadcast
Business reports net losses for any two consecutive quarters or reports a net
loss for any year.
On September 23, 1994, the Registrant entered into a letter agreement with
Autotote Corporation ("Autotote"), a publicly-held provider of computerized
wagering systems, providing for the sale by the Registrant of the simulcast
assets of its broadcast business to Autotote for $13.5 million and the sublease
by the Registrant of certain satellite transmission capacity to Autotote on an
ongoing basis. The simulcast assets consist primarily of transportable broadcast
equipment used for the live transmission of sporting events via satellite in
connection with wagering.
Consummation of these proposed transactions will be subject to the
negotiation of definitive agreements and receipt of board and various third
party approvals. There can be no assurance that any of these transactions will
be consummated or, if consummated, that they will be on the terms described
above. The description contained herein of the proposed transactions does not
purport to be complete and is qualified in its entirety by the various letters
of intent filed as Exhibits hereto.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- - --------- ------------------------------------------------------------------------------------------ -------------
<C> <S> <C>
99.1(a) Restated Letter of Intent; Proposed Equity Acquisition in Keystone Communications
Corporation effective as of November 11, 1994............................................
99.1(b) Restated Letter of Intent; Proposed Management Agreement effective as of November 11,
1994.....................................................................................
99.1(c) Restated Letter of Intent; Proposed Operating Lease Agreement effective as of November 11,
1994.....................................................................................
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Culver City, State of
California, on November 21, 1994.
IDB COMMUNICATIONS GROUP, INC.
By /s/ RUDY WANN
-----------------------------------
RUDY WANN
VICE PRESIDENT, FINANCE AND
CHIEF FINANCIAL OFFICER
<PAGE>
EXHIBIT 99.1(a)
November 11, 1994
Jeffrey P. Sudikoff, C.E.O.
IDB Communications Group, Inc.
10525 West Washington Boulevard
Culver City, California 90232-1922
RE: RESTATED LETTER OF INTENT; PROPOSED EQUITY ACQUISITION IN
KEYSTONE COMMUNICATIONS CORPORATION
Dear Jeffrey:
This restated letter ("Letter of Intent") constitutes a proposal on the
basis of which Keystone Communications Corporation ("KCC") would enter into
negotiations with IDB Communications Group, Inc. ("IDB") for the sale by KCC to
IDB of a twenty-five percent (25%) indirect interest in KCC subject to the terms
and conditions to be set forth in an equity purchase agreement to be entered
into by KCC and IDB ("Equity Agreement").
The terms and transactions proposed in this Letter of Intent are based upon
the information made available to KCC during its recent preliminary due
diligence analysis. Events occurring after the date of KCC's preliminary
analysis have not been considered. It is contemplated by the parties that KCC
may continue reasonable due inquiries and analysis under this Letter of Intent
and that IDB will cooperate in providing the information requested.
1. NEW PARTNERSHIP. Simmons Family, Inc. ("SFI"), Simmons Satellite,
Ltd. ("SSL"), The Robert Wold Company ("Wold"), and Welsh, Carson, Anderson &
Stowe, IV ("WCAS"), are presently holders of warrants and common stock of KCC
(SFI, SSL, Wold and WCAS are herein collectively referred to as the "SW
Investors"). Subject to the terms and conditions set forth in this Letter of
Intent, KCC would cause the SW Investors to form a new partnership
("Partnership").
2. ISSUANCE OF KCC STOCK. KCC would issue to the Partnership for the
benefit of the partnership account of IDB a sufficient number of shares of
common stock of KCC so as to constitute a twenty-five percent (25%) equity
interest of KCC on a fully-diluted basis ("IDB Equity Interest"). The
Partnership in turn would issue to IDB such
<PAGE>
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
November 11, 1994
Page 2
- - ------------------------------
evidence of partnership interest attributable to such account. For so long as
IDB holds the IDB Equity Interest, IDB, by virtue of the indirect equity
interest holder of KCC, would share in the economic benefits of the management
of the broadcast division of IDB by KCC.
3. CONSIDERATION. As consideration for the IDB Equity Interest, IDB
shall (i) pay to KCC the sum of $6,000,000, (ii) execute a Management Agreement
between IDB and KCC on terms to be agreed upon, and (iii) execute an Operating
Lease Agreement between IDB and KCC in terms to be agreed upon.
4. CERTAIN CONDITIONS. In addition to the above, and any other
conditions described elsewhere in this Letter of Intent, the Equity Purchase
Agreement would provide for the following conditions (which conditions may
require agreements or other action separate from the Equity Purchase Agreement):
(a) The necessary corporate authorizations have been obtained by both
IDB and KCC.
(b) The senior lender of KCC shall have approved the transaction.
(c) A Management Agreement and Operating Lease Agreement shall have
been agreed upon and executed by the parties contemporaneously with the Equity
Purchase Agreement.
(d) All other issues revealed by the parties' due diligence
investigation into IDB and KCC shall have been satisfactorily resolved.
5. ASSIGNABILITY. This Letter of Intent is not assignable by KCC or IDB
without the prior written consent of the other.
6. BROKERAGE COSTS AND FEES. IDB and KCC each represent that there has
been no broker or finder involved in the transactions contemplated by this
Letter of Intent, except as has otherwise been disclosed, and would hold each
other harmless for any broker's or finder's fee. Each of IDB and KCC would pay
and be responsible for its own costs in connection with the negotiation and
finalization of the Equity Purchase Agreement.
7. PUBLICITY. All press releases and other public announcements of the
transactions contemplated by this Letter of Intent would be jointly approved by
IDB and KCC.
<PAGE>
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
November 11, 1994
Page 3
- - ------------------------------
8. EXPIRATION OF OFFER. Unless accepted by IDB or unless otherwise
extended, this offer expires as of November 11, 1994 at 5:00 p.m. MST. Upon
execution, this Letter of Intent shall continue in effect until the earlier of
the full and complete execution of the Equity Purchase Agreement or December 15,
1994, unless otherwise mutually extended by the parties.
9. LETTER OF INTENT NON-BINDING. This Letter of Intent is a statement of
my present intentions only and, except as provided in Paragraphs 5, 6, 7 and 8,
does not constitute a binding contract but is subject to the execution and
delivery of the definitive Equity Purchase Agreement.
KCC hopes that this Letter of Intent will provide a satisfactory basis to
proceed to the negotiation and execution of the Equity Purchase Agreement
contemplated hereby. This Letter of Intent supersedes and replaces in full that
certain Letter of Intent dated September 16, 1994 as extended, executed by both
parties hereto and regarding the subject matter set forth herein.
If the foregoing accurately reflects your understanding of the basis upon
which IDB and KCC would proceed to negotiate a definitive Equity Purchase
Agreement with respect to the transactions described in this Letter of Intent,
please so indicate by signing and returning to KCC the enclosed counterpart of
this Letter.
Very truly yours,
KEYSTONE COMMUNICATIONS CORPORATION
-----------------------------------
David E. Simmons, CEO
Agreed to and accepted:
IDB COMMUNICATIONS GROUP, INC.
By
--------------------------
Jeffrey P. Sudikoff, CEO
This ____ day of November, 1994
Effective as of November 11, 1994
<PAGE>
EXHIBIT 99.1(b)
November 11, 1994
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
10525 West Washington Boulevard
Culver City, California 90232-1922
RE: RESTATED LETTER OF INTENT; PROPOSED MANAGEMENT AGREEMENT
Dear Jeffrey:
This restated letter ("Letter of Intent") constitutes a proposal on the
basis of which Keystone Communications Corporation ("KCC") would enter into
negotiations with IDB Communications Group, Inc. ("IDB") for the management and
administration by KCC of substantially all assets and liabilities (except for
the tangible assets and related liabilities) of the Broadcast Division of IDB
and its broadcast subsidiaries, including IDB Media Group, Inc. (collectively
"Principals"), subject to the terms and conditions to be set forth in a
Management Agreement to be entered into by KCC and Principals ("Management
Agreement").
The terms and transactions proposed in this Letter of Intent are based upon
the business and financial data and projections of IDB and other information
made available to KCC during its recent preliminary due diligence analysis.
Events occurring after the date of the preliminary analysis have not been
considered. It is contemplated by the parties that KCC may continue reasonable
due inquiries and analysis under this Letter of Intent and that Principals will
cooperate in providing the information and financial data requested.
1. MANAGEMENT AGREEMENT. Subject to the terms and conditions set forth
in this Letter of Intent, Principals would authorize KCC, as agent for
Principals, to manage and administer the assets and liabilities of the Broadcast
Division of Principals (other than the tangible assets and the liabilities
related thereto), including the customer contracts, vendor contracts, the
obligations related to such customer contracts, vendor contracts and the
performance thereof, and certain intangible rights of Principals, all as to be
identified by IDB and agreed to by the parties (the "Broadcast Business"). As
agent for Principals, KCC would be authorized to perform the services related to
the Broadcast Business, as more particularly hereafter described, for and on
behalf of IDB pursuant to the Management Agreement.
<PAGE>
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
November 11, 1994
Page 2
- - ------------------------------
a. KCC OBLIGATIONS. Pursuant to the Management Agreement, KCC would
be responsible for the following services (all collectively referred to as
"Services"):
(1) Employment (as employees of KCC) of such employees of Principals
as are determined necessary or appropriate by KCC on such terms and with
such salaries and benefits as are offered by KCC.
(2) Performance of all services and obligations of the Broadcast
Business for and on behalf of Principals for customers of Principals under
customer contracts existing as of the date of the Management Agreement
("Customer Contracts"), including distribution services, securing satellite
time for such distributions, interfacing with the customer, securing such
facilities, supplies, materials and personnel necessary or desirable for
the performance of the Customer Contracts.
(3) Performance of all obligations of the Broadcast Business for and
on behalf of Principals related to vendors of Principals under vendor
contracts existing as of the date of the Management Agreement ("Vendor
Contracts"), including arrangements for distribution services, interfacing
with the vendors, securing such facilities, supplies, materials and
personnel necessary or desirable for the performance of the Vendor
Contracts.
(4) Performance for the Broadcast Business of all accounting
functions related thereto, including collections, payments, payment of
income and other taxes related to the Customer Contracts and Vendor
Contracts, and such other accounting functions necessary or desirable
related to the Broadcast Business.
(5) Maintenance of books, records, reports, filings and all other
corporate and regulatory functions related to the performance of the
Customer Contracts and Vendor Contracts and the Broadcast Business.
(6) Allocation of revenues and expenses to the operation and
management of the Broadcast Business and maintenance of such account for
the benefit of IDB ("Allocated Account"). Reports relative to this account
shall be made as agreed to by the parties. Any distribution of profit from
such account to IDB or reimbursement for losses by IDB to the account shall
be made on an annual basis.
<PAGE>
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
November 11, 1994
Page 3
- - ------------------------------
(7) Performance of such other customer and vendor relations functions
and related business relations on behalf of Principals as may be necessary
or desirable relative to the Broadcast Business.
b. PRINCIPALS' OBLIGATIONS. Pursuant to the Management Agreement,
Principals shall:
(1) Authorize KCC to act as the agent of Principals in
performing such Services and other functions under all existing Customer
Contracts and Vendor Contracts of Principals for the terms thereof as KCC
may deem appropriate in its discretion.
(2) Establish a positive balance working capital account to be
managed by KCC related to the satisfaction of current obligations of
Principal's Broadcast Business existing as of the date of the Management
Agreement and all current liabilities related to the benefits and contract
obligations attributable to employees hired by KCC.
(3) Grant to KCC the right to use IDB trademarks, service marks,
logos, and other IDB name recognition marks in the performance of the
Services related to the Broadcast Business.
(4) Permit KCC to compete with the Broadcast Business being
managed by KCC for the benefit of Principals, including providing similar
services to customers and vendors as are to be provided by KCC for the
benefit of Principals under the Management Agreement.
In addition, the Management Agreement would be in such customary form
for similar transactions between parties similarly situated, containing standard
and adequate representations and warranties and conditions related to Principals
and the Broadcast Business.
2. TERMS OF MANAGEMENT AGREEMENT. The Management Agreement shall be
entered into on or before December 15, 1994; provided, however, the parties may
agree that the effective date of such agreement is November 30, 1994. The
Management Agreement shall be for a term of sixty (60) months.
<PAGE>
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
November 11, 1994
Page 4
- - ------------------------------
3. CONSIDERATION. As consideration, KCC shall be entitled to an annual
management incentive fee equal to (i) twenty percent (20%) of the first
$4,000,000 of net profit in the Allocated Account and (ii) fifty percent (50%)
of the net profit in the Allocated Account in excess of $4,000,000. KCC shall
not be responsible for any losses in the Allocated Account.
4. TERMINATION OF MANAGEMENT AGREEMENT. Upon the termination of the
Management Agreement, KCC shall be required to (i) surrender the Broadcast
Business to IDB, (ii) transfer to IDB the Allocated Account, subject to the
agreed upon limitations, and (iii) establish a closing working capital account
to provide for the satisfaction of the then current obligations of the Broadcast
Business.
The Management Agreement shall provide that in the event of the
exercise by KCC of the option to purchase tangible assets of Principals granted
in an Operating Lease Agreement between Principals and KCC, then Principals
shall execute a Bill of Sale and Assignment to KCC, transferring to KCC all of
the rights and obligations of Principals in and to the Broadcast Business.
5. CERTAIN CONDITIONS. In addition to the above, and any other
conditions described elsewhere in this Letter of Intent, the Management
Agreement would provide for the following conditions (which conditions may
require agreements or other action separate from the Management Agreement):
a. The necessary corporate authorizations shall have been obtained
by Principals and KCC.
b. The auditors of KCC shall have had the opportunity and shall have
completed a review of the business of Principals to be managed, the contracts
and obligations related thereto, which shall be acceptable to KCC.
c. Such approvals or consents of any United States or state
governmental or regulatory authorities that are necessary or appropriate for
management services to be provided shall have been obtained.
d. Except to the extent approved by KCC and as related to
liabilities expressly assumed by KCC under the Management Agreement, all rights
transferred shall be free and clear of any lien, encumbrances, claims or rights
of any third party.
<PAGE>
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
November 11, 1994
Page 5
- - ------------------------------
e. All other issues revealed by KCC's due diligence investigation
into the Broadcast Business and relevant to the Management Agreement shall have
been satisfactorily resolved.
f. The senior lender of KCC shall have approved the transaction.
g. KCC and Southwest Communications, Inc. ("SCI") shall have entered
into an agreement for the use of the licenses and authorizations granted to SCI
by the Federal Communications Commission ("FCC") as may be necessary for KCC to
perform the services relative to the Broadcast Business.
h. Jeffrey Sudikoff shall enter into a consulting and non-compete
agreement, subject to such terms and conditions to be agreed upon by Sudikoff
and KCC, whereby Sudikoff shall agree to provide certain services to KCC and
shall agree not to compete with KCC in the broadcast and similar services
subject to the Management Agreement for a term of sixty months from the Closing
Date of the Management Agreement.
6. OTHER NEGOTIATIONS. None of the Principals will, for so long as the
offer contained in this Letter of Intent is valid, directly or indirectly
solicit, entertain or continue discussions, disclosures or negotiations with any
other potential manager or service provider of the Broadcast Business, and none
of the Principals will enter into any transaction outside of the ordinary course
of business relative to the Broadcast Business without the prior written consent
of KCC.
7. ACCESS. From and after the date of this Letter of Intent until the
execution of a Management Agreement, Principals will afford and cause to be
afforded full access to the books, records, premises and employees and customers
of Principals during normal business hours to representatives and agents of KCC
in order to accomplish a thorough review of the Broadcast Business, contracts,
liabilities and commitments of Principals. Such information shall include full
disclosure of the Broadcast Business, liabilities, legal issues, regulatory
reports, internal reports, and all business statistics, business codes and
secrets and any other information necessary or appropriate for KCC to evaluate
relative to the Broadcast Business or its operation ("Confidential
Information"). All Confidential Information is to be held in confidence unless
such information is publicly disclosed by others, or KCC and its representatives
or agents are compelled by legal process to disclose it, or as disclosure may be
necessary to agents, representatives or parties related to KCC so as to effect
the contemplated transaction.
<PAGE>
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
November 11, 1994
Page 6
- - ------------------------------
8. MUTUAL COOPERATION. Principals and KCC agree to endeavor jointly to
obtain all consents or approvals from all entities or persons that are necessary
or appropriate for the completion of the Management Agreement.
9. ASSIGNABILITY. This Letter of Intent is not assignable by KCC or
Principals without the prior written consent of the other.
10. BROKERAGE COSTS AND FEES. Principals and KCC each represent that
there has been no broker or finder involved in the transactions contemplated by
this Letter of Intent, except as has otherwise been disclosed, and would hold
each other harmless for any broker's or finder's fee. Each of Principals and
KCC would pay and be responsible for its own costs in connection with the
negotiation and finalization of the Management Agreement.
11. PUBLICITY. All press releases and other public announcements of the
transactions contemplated by this Letter of Intent would be jointly approved by
Principals and KCC.
12. EXPIRATION OF OFFER. Unless accepted by IDB (for itself and all of
the Principals) or unless extended by written agreement of the parties, this
offer expires as of November 11, 1994 at 5:00 p.m. MST. Upon acceptance, this
Letter of Intent shall be effective until the full and complete execution of the
Management Agreement or December 15, 1994, unless otherwise mutually extended by
the parties.
13. LETTER OF INTENT NON-BINDING. This Letter of Intent is a statement of
our present intentions only and, except as provided in Paragraphs 6, 7, 8, 9,
10, 11 and 12, does not constitute a binding contract but is subject to the
execution and delivery of the definitive Management Agreement.
KCC hopes that this Letter of Intent will provide a satisfactory basis to
proceed to the negotiation and execution of the Management Agreement
contemplated hereby. This Letter of Intent supersedes and replaces in full that
certain Letter of Intent dated September 16, 1994 as extended, executed by both
parties hereto and regarding the subject matter set forth herein.
If the foregoing accurately reflects your understanding of the basis upon
which Principals and KCC would proceed to negotiate a definitive Management
Agreement with respect to the transactions
<PAGE>
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
November 11, 1994
Page 7
- - ------------------------------
described in this Letter of Intent, please so indicate by signing and returning
to KCC the enclosed counterpart of this Letter.
Very truly yours,
KEYSTONE COMMUNICATIONS CORPORATION
----------------------------------
David E. Simmons, CEO
AGREED TO AND ACCEPTED:
IDB COMMUNICATIONS GROUP, INC.
By
--------------------------
Jeffrey P. Sudikoff, CEO
This _____ day of November, 1994
Effective as of November 11, 1994
<PAGE>
EXHIBIT 99.1(c)
November 11, 1994
Jeffrey P. Sudikoff, C.E.O.
IDB Communications Group, Inc.
10525 West Washington Boulevard
Culver City, California 90232-1922
RE: RESTATED LETTER OF INTENT; PROPOSED OPERATING LEASE AGREEMENT
Dear Jeffrey:
This restated letter ("Letter of Intent") constitutes a proposal on the
basis of which Keystone Communications Corporation ("KCC"), would enter into
negotiations with IDB Communications Group, Inc. ("IDB") for the lease and
operation by KCC of substantially all tangible assets of the broadcast division
of IDB and IDB Media Group, Inc. (collectively, the "Lessors") (inclusive of
real property owned by IDB but exclusive of simulcasting and audio related
assets) (the "Leased Assets") subject to the terms and conditions to be set
forth in an Operating Lease Agreement to be entered into by KCC and the Lessors
("Operating Lease").
The terms and transactions proposed in this Letter of Intent are based upon
the information made available to KCC during its recent preliminary due
diligence analysis. Events occurring after the date of KCC's preliminary
analysis have not been considered. It is contemplated by the parties that KCC
may continue reasonable due inquiries and analysis under this Letter of Intent
and that IDB will cooperate in providing the information requested.
1. OPERATING LEASE. Subject to the terms and conditions set forth in
this Letter of Intent, KCC would lease all Leased Assets of the Lessors as of
the activation date of such lease in such locations and in such condition as
they presently exist. Pursuant to the Operating Lease Agreement, KCC would be
responsible for the operation, maintenance, insurance, property taxes and
service agreements relating to the Leased Assets. KCC would also be responsible
for the disposition and replacement of Leased Assets under the Operating Lease,
subject to approval of the Lessors and so long as the fair market value of the
Leased Assets is maintained at a value no less than the Option Price as
described below plus the then remaining lease payments after such replacements
and dispositions, except as otherwise agreed by the parties. In addition, the
Operating Lease Agreement would be in such customary form
<PAGE>
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
November 11, 1994
Page 2
- - ------------------------------
for similar transactions between parties similarly situated, containing standard
and adequate representations and warranties and conditions related to the Leased
Assets.
2. TERMS OF OPERATING LEASE. The Operating Lease would commence upon the
execution of the Operating Lease (unless a different effective date is mutually
agreed to by the parties), which shall be on or before December 15, 1994. The
Operating Lease shall be for an initial term of thirty-six (36) months ("Initial
Term") and shall automatically renew for an additional twenty-four (24) months
(the "Renewal Term") unless KCC otherwise notifies the Lessors of (i) its intent
not to renew or (ii) its election to exercise its option to purchase the Leased
Assets.
3. CONSIDERATION.
(a) Upon execution of the Operating Lease, KCC shall pay to IDB the
sum of $6,000,000.00 as a lease activation fee.
(b) During the Initial Term, KCC shall pay to the Lessors quarterly
lease payments as provided in Part I of Exhibit "A" hereto.
(c) During the Renewal Term, KCC shall pay to IDB quarterly lease
payments as provided in Part II of Exhibit "A" hereto.
4. PURCHASE OPTION UNDER THE OPERATING LEASE.
(a) Under the terms of the Operating Lease, KCC shall have the
exclusive option to purchase all of the Leased Assets subject to the Operating
Lease ("Option").
(b) The Option may be exercised by KCC as of the termination of the
Initial Term or at any time during the Renewal Term, upon such notice terms as
are agreed to by the parties.
(c) In the event of the exercise of the Option, the purchase price
(the "Option Price") of the Leased Assets shall be (i) an amount equal to
$31,001,181 upon termination of the Initial Term, or (ii) an amount equal to the
then remaining lease payments PLUS $19,299,999, discounted to present value from
the end of the Renewal Term to the date of exercise of the Option at a rate of
eight percent (8%) per annum, in the event the Option is exercised during the
Renewal Term.
(d) The Option Price for the Leased Assets shall be paid by KCC to
the Lessors by a promissory note ("Note") in the principal sum of the Option
Price, with interest accruing at a rate of eight percent (8%) per annum,
amortized over a period of not less than four years and
<PAGE>
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
November 11, 1994
Page 3
- - ------------------------------
payable quarterly over the term of the Note. The Note shall be secured by the
Leased Assets, but shall be subordinate to all other indebtedness of KCC. The
Note shall include such additional terms and conditions as are agreed upon by
the parties.
5. TERMINATION OF LEASE. Upon the expiration of the Operating Lease and
in the event that the Option is not then exercised, KCC shall be required to (i)
surrender the Leased Assets to the Lessors and (ii) pay to the Lessors the sum
of $2,140,000 payable upon the effective date of termination ("Termination
Fee").
6. CERTAIN CONDITIONS. In addition to the above, and any other
conditions described elsewhere in this Letter of Intent, the Operating Lease
would provide for the following conditions (which conditions may require
agreements or other action separate from the Operating Lease):
(a) The necessary corporate authorizations have been obtained by the
Lessors and KCC.
(b) All approvals or consents of any United States or state
governmental or regulatory authorities shall have been obtained that are
necessary or appropriate for lease of the Leased Assets.
(c) Except to the extent approved by KCC and as related to
liabilities expressly assumed by KCC under the Operating Lease, all Leased
Assets shall be free and clear of any lien, encumbrances, claims or rights of
any third party, and the title to such Assets shall be good and marketable, free
of any defects of title of any kind.
(d) The senior lender of KCC shall have approved the transaction.
(e) All other issues revealed by KCC's due diligence investigation
into the Leased Assets and relevant to the Operating Lease shall have been
satisfactorily resolved.
7. OTHER NEGOTIATIONS. The Lessors will not, for so long as the offer
contained in this Letter of Intent is valid, directly or indirectly solicit,
entertain or continue discussions, disclosures or negotiations with any other
potential purchaser or lessor of the Leased Assets, and the Lessors will not
enter into any transaction outside of the ordinary course of business relative
to the acquisition or disposition of any of the Leased Assets without the prior
written consent of KCC.
<PAGE>
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
November 11, 1994
Page 4
- - ------------------------------
8. ACCESS. From and after the date of this Letter of Intent until the
execution of an Operating Lease, the Lessors will afford and cause to be
afforded full access to the books, records, premises and employees and customers
of the Lessors during normal business hours to representatives and agents of KCC
in order to accomplish a thorough review of the Leased Assets, properties,
business, liabilities and commitments of the Lessors. Such information shall
include full disclosure of Leased Assets, liabilities, legal issues, regulatory
reports, internal reports, and all business statistics, business codes and
secrets and any other information necessary or appropriate for KCC to evaluate
relative to the Leased Assets or the operation of the Leased Assets
("Confidential Information"). All Confidential Information is to be held in
confidence unless such information is publicly disclosed by others, or KCC and
its representatives or agents are compelled by legal process to disclose it, or
as disclosure may be necessary to agents, representatives or parties related to
KCC so as to effect the contemplated transaction.
9. MUTUAL COOPERATION. The Lessors and KCC agree to endeavor jointly to
obtain all consents or approvals from all entities or persons, that are
necessary or appropriate for the completion of the Operating Lease.
10. ASSIGNABILITY. This Letter of Intent is not assignable by KCC or the
Lessors without the prior written consent of the other.
11. BROKERAGE COSTS AND FEES. The Lessors and KCC each represent that
there has been no broker or finder involved in the transactions contemplated by
this Letter of Intent, except as has otherwise been disclosed, and would hold
each other harmless for any broker's or finder's fee. Each of the Lessors and
KCC would pay and be responsible for its own costs in connection with the
negotiation and finalization of the Operating Lease.
12. PUBLICITY. All press releases and other public announcements of the
transactions contemplated by this Letter of Intent would be jointly approved by
the Lessors and KCC.
13. EXPIRATION OF OFFER. Unless accepted by IDB (for itself and its
broadcast subsidiaries) or unless otherwise extended, this offer expires as of
November 11, 1994, 5:00 p.m. MST. Upon execution, this Letter of Intent shall
continue in effect until the earlier of the full and complete execution of the
Operating Lease or December 15, 1994, unless otherwise mutually extended by the
parties.
<PAGE>
Jeffrey P. Sudikoff
IDB Communications Group, Inc.
November 11, 1994
Page 5
- - ------------------------------
14. LETTER OF INTENT NON-BINDING. This Letter of Intent is a statement of
present intentions only and, except as provided in Paragraphs 7, 8, 9, 10, 11,
12, and 13, does not constitute a binding contract but is subject to the
execution and delivery of the definitive Operating Lease.
KCC hopes that this Letter of Intent will provide a satisfactory basis to
proceed to the negotiation and execution of the Operating Lease contemplated
hereby. This Letter of Intent supersedes and replaces in full that certain
Letter of Intent dated September 16, 1994 as extended, executed by both parties
hereto and regarding the subject matter set forth herein.
If the foregoing accurately reflects your understanding of the basis upon
which the Lessors and KCC would proceed to negotiate a definitive Operating
Lease with respect to the transactions described in this Letter of Intent,
please so indicate by signing and returning to KCC the enclosed counterpart of
this Letter.
Very truly yours,
KEYSTONE COMMUNICATIONS CORPORATION
----------------------------------
David E. Simmons, CEO
AGREED TO AND ACCEPTED:
IDB COMMUNICATIONS GROUP, INC.
By
--------------------------
Jeffrey P. Sudikoff, CEO
This _____ day of November, 1994
Effective as of November 11, 1994
