-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, XSNCI79MWrwC3Mf16BHd3KOcXgVTl8OMU5QrYJokwrTUJGp96XjmaB8QaR3V0GFa 6yxhoibhDZODWfgnaxjKvA== 0000912057-94-003978.txt : 19941201 0000912057-94-003978.hdr.sgml : 19941201 ACCESSION NUMBER: 0000912057-94-003978 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940923 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19941121 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDB COMMUNICATIONS GROUP INC CENTRAL INDEX KEY: 0000799319 STANDARD INDUSTRIAL CLASSIFICATION: 4899 IRS NUMBER: 930933098 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14972 FILM NUMBER: 94561290 BUSINESS ADDRESS: STREET 1: 10525 W WASHINGTON BLVD CITY: CULVER CITY STATE: CA ZIP: 90232 BUSINESS PHONE: 2138709000 8-K 1 FORM 8/K - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- 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) 0-14972 93-0933098 (Commission File No.) (I.R.S. Employer Identification No.)
10525 WEST WASHINGTON BOULEVARD, CULVER CITY, CALIFORNIA 90232-1922 (Address of Principal Executive Offices) (Zip Code)
(213) 870-9000 (Registrant's Telephone Number, Including Area Code) - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- 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. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits.
SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGE - - --------- ------------------------------------------------------------------------------------------ ------------- 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.....................................................................................
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 EX-99.1(A) 2 EXHIBIT 99.1(A) 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 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. 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 EX-99.1(B) 3 EXHIBIT 99.1(B) 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. 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. 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. 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. 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. 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 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 EX-99.1(C) 4 EXHIBIT 99.1(C) 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 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 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. 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. 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 -----END PRIVACY-ENHANCED MESSAGE-----