FIRST AMENDMENT TO PURCHASE AGREEMENT
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This FIRST AMENDMENT TO PURCHASE AGREEMENT (this "AMENDMENT"), is
dated January 30, 1997, by and between XXXXX COMMUNICATIONS OF MARYLAND, INC.
("BUYER"), and MARYLAND CABLE PARTNERS, L.P. ("SELLER").
R E C I T A L S:
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A. Buyer and Seller are parties to that certain Asset Purchase
Agreement dated July 30, 1996 (the "PURCHASE AGREEMENT"), which provides for the
sale and transfer by Seller to Buyer of certain cable television systems (as
more fully described in the schedules to the Purchase Agreement) serving areas
of Prince George's County, Maryland (the ("COUNTY").
B. The parties wish to amend the Purchase Agreement to set forth
their understandings with respect to (i) the payment of certain costs being
incurred in connection with the consummation of the transaction contemplated by
the Purchase Agreement, and (ii) certain other matters as set forth herein.
A G R E E M E N T S:
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In consideration of the above recitals and the covenants and
agreements contained herein, the parties hereto agree as follows:
1. Capitalized Terms. Any capitalized term not defined herein
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shall have the meaning given to such term in the Purchase Agreement, as amended
hereby.
2. Closing Date. With reference to Sections 8.1 and 8.2 of the
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Purchase Agreement, Buyer and Seller confirm that the Closing is occurring on
January 31, 1997, subject to the fulfillment by Buyer and Seller on such date of
their respective obligations set forth in Section 7 of the Purchase Agreement.
3. Transfer Agreements. In connection with obtaining the consent to
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the transfer of the Franchises issued by the franchise authorities listed on
Schedule 1 hereto (the "COALITION FRANCHISING AUTHORITIES"), Buyer and Seller
have agreed to a form of Transfer Agreement in which Buyer and/or Seller shall
incur certain obligations or liabilities in connection with the transfer of the
Franchises (the "TRANSFER AGREEMENTS").
(a) The Fund. In accordance with Section 2.3 of the Transfer
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Agreements, the amount of $500,000 (the "FUND") will be deposited with the
Executive Director of Prince George's County Cable Television Commission (the
"EXECUTIVE DIRECTOR") as part of the Closing, which amount shall be held by the
Executive Director on behalf of all of the Coalition Franchising Authorities in
accordance with the terms of the Transfer Agreement. Buyer and Seller confirm
their agreement to the arrangement implemented by Section 2.3 of the Transfer
Agreements.
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(1) To the extent that Buyer's Damages shall be payable from
the Fund, the Threshold Amount set forth in Section 10.6(a) shall not apply with
respect to any Buyer's Damages incurred by Buyer to cure any "Noncompliance
Matters" (as defined in the Transfer Agreements) which it is required to cure as
a result of any notices of default which it receives from the Executive
Director. The Threshold Amount shall continue to apply to any indemnity claims
made by Buyer against Seller which are not payable from the Fund.
(2) Buyer shall promptly provide to Seller a copy of any
notices of default which Buyer receives from the Executive Director or from any
of the Coalition Franchising Authorities, and Buyer and Seller shall coordinate
a response to such notices in accordance with the procedures of Section 10 of
the Purchase Agreement.
(b) Renewal Costs. In accordance with Section 4.2 of the
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Transfer Agreements, Buyer has agreed to be liable for up to $325,000 of costs
and expenses with respect to the upcoming renewals of the current Franchises
issued by the Coalition Franchising Authorities (including the franchise for the
southern portion of the County). Buyer shall deduct from the Purchase Price the
amount of $125,000, which is the sum of $75,000 in "Accrued Renewal Costs" (as
defined in Section 4.2 of the Transfer Agreements) and $50,000 in additional
renewal costs and expenses which Buyer and Seller anticipate that Buyer will
have the obligation to pay under Section 4.2 of the Transfer Agreements in
connection with the renewal of the Franchises issued by the Coalition
Franchising Authorities (the "COALITION FRANCHISES"). If upon the renewal of all
of the Coalition Franchises and the payment by Buyer of all renewal
reimbursement amounts under Section 4.2 of the Transfer Agreements which Buyer
shall be obligated to pay, such aggregate renewal reimbursement amounts shall be
less than $325,000 (including the $75,000 in Accrued Renewal Costs), Buyer shall
promptly reimburse Seller an amount equal to 50% of the amount by which $325,000
exceeds the amount of such renewal reimbursement amounts, up to a maximum
reimbursement amount of $50,000.
4. Non-Coalition Noncompliance Matters. Similar to the arrangement
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in Section 2.3 of the Transfer Agreements, Buyer and Seller are putting in
place, with respect to the communities of Bladensburg, Cheverly, Riverdale and
Takoma Park (the "NON-COALITION AUTHORITIES"), arrangements whereby $26,696 (in
the aggregate) shall be held back by Buyer from the Purchase Price which shall
be used for the remedy of any noncompliance matters which Buyer shall be
required to cure as a result of any notices of default which it receives from
the Non-Coalition Authorities. Buyer and Seller confirm that their agreements
set forth in subsections 3(a)(1) and (b) shall also apply to Buyer's cure of
any Franchise noncompliance matters which it is required to cure in accordance
with the respective Franchise agreements with the Non-Coalition Authorities, as
a result of any notices of default which it receives from the Non-Coalition
Authorities, with the term "Fund" referring to the holdback amount.
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5. Consents, Waivers and Special Understandings.
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(a) Preliminary Settlement Statement (re (S)2.4(d)(1)). The
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preliminary settlement statement to be prepared by Seller pursuant to Section
2.4(d)(1) shall have been delivered to Buyer no later than 12:00 noon, MST,
Monday, January 27, 1997.
(b) National Sales Revenues (re (S)2.4(e)). Xxxxx Xxxxx,
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Seller's employee, is currently producing national and regional advertising
sales revenue for both Buyer and Seller pursuant to any arrangement approved by
Buyer and Seller. Buyer and Seller confirm that in accordance with that
arrangement, Annualized Gross Revenues under Section 2.4(e) of the Purchase
Agreement shall include national and regional advertising sales revenue for
January 1997 in the amount of the greater of (i) Xx. Xxxxx'x budgeted sales
revenue of $44,672, or (ii) her actual net, national and regional advertising
sales revenue for Seller for January 1997.
(c) Consent to Employee Promotions (re (S)5.1(a)(1)). Buyer
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confirms its consent to the merit increases, which were in excess of 5%, awarded
by Seller to certain of its employees under its "wage-criteria program." Those
employees were listed on an attachment to each of the letters dated October 8,
1996, and December 17, 1996, from Xxxx X. Xxxxxxx to Xxxxxxxxx X. XxXxx.
(d) Waiver of "WARN" Act Notice (re (S)6.12(b)). Buyer confirms
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that fewer than twenty of Seller's employees will not be offered employment by
Buyer at Closing. Buyer waives any obligation of Seller under Section 6.12(b) of
the Purchase Agreement to provide notice to its employees under the Worker
Adjustment and Retaining Notification Act, as amended, 29 U.S.C. (S)2101,
et seq.
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(e) Performance of Financial Audit (re (S)6.14). After the
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Closing Seller shall make its books and records available to KPMG Peat Marwick
as necessary to prepare audited financial statements of the Systems for calendar
year 1996. The results of such audit (i) may be used by Buyer as necessary to
comply with the requirements of the Securities and Exchange Commission, and (ii)
may be used by Seller for tax, financial and other related purposes. Seller
shall pay $8,000 of the expense of the audit, and Buyer shall pay the remaining
expense.
(f) Bulk Sales and Use Tax Returns (re (S)6.19). Buyer agrees
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that Seller's inquiry with the Compliance Division of the Maryland Comptroller
of the Treasury regarding the amount of sales and use taxes due with respect to
the taxable personal property included in the Assets shall have occurred fewer
than thirty (30) days prior to Closing.
(g) Post-Closing Use of Office by Seller's Controller. Ms.
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Xxxxx Xxxxx, Seller's Controller, may continue to occupy and use her current
office and office equipment located in Seller's office/headend building at 0000
Xxxxxxxxx Xxxx, Xxxxxx, Xxxxxxxx, for up to six months following the Closing.
Such office shall be used by Xx. Xxxxx to perform her duties regarding the
accounting of Seller's operations for financial and tax purposes. Such office
use shall be rent-free.
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(h) Asbestos Abatement. On January 28, 1997, Contaminated Soil
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Consultants, Inc. performed asbestos testing at, among other sites, the real
property owned by Seller at 0000 Xxxxxxxx Xxxxxx (the "FARRAGUT SITE"), which
revealed the presence of asbestos in the upstairs bathroom floor and the
basement floor tile at the Farragut Site (the "ASBESTOS"). Seller hereby agrees
to reimburse Buyer for its out-of-pocket costs and expenses reasonably incurred
by Buyer for the abatement of the Asbestos within 30 days after Seller's receipt
from Buyer of an invoice or invoices detailing such expenses, up to a maximum
reimbursement amount of $25,000. Seller agrees that the Threshold Amount set
forth in Section 10.6(a) shall not apply to any claim by Buyer for Buyer's
Damages incurred by Buyer if Seller shall not remit the foregoing reimbursement.
(i) Capital Expenditure Obligations (re (S)7.1(k)). At Closing,
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Seller shall deliver to Buyer an Officer's Certificate in a form agreed upon by
counsel for Buyer and Seller in satisfaction of the closing requirement set
forth in Section 7.1(k) of the Purchase Agreement, to which shall be attached
(i) the form of semi-annual progress report to be submitted to the Franchising
Authorities on or prior to January 31, 1997, to summarize Seller's activity and
progress in the completion of "upgrade projects" proposed for calendar year 1996
(the "1996 PROGRESS REPORT"), (ii) a detailed listing of capital expenditures
incurred by Seller through December 31, 1996, in the completion of upgrade
projects; (iii) the form of description, including estimated cost, of upgrade
projects proposed for the month of January 1997, to be submitted to the
Franchising Authorities on or prior to January 31, 1997 (the "1997 PROPOSAL"),
and (iv) the form of Seller's final semi-annual progress report to be submitted
to the Franchising Authorities in March 1997, to summarize Seller's activity and
progress in the completion of the upgrade projects proposed for January 1997
(the "FINAL REPORT"). Seller shall deliver the 1996 Report and the 1997 Proposal
to the Franchising Authorities no later than January 31, 1997. Pursuant to
Section 4 of the Transfer Agreements entered into in September 1994 by Seller,
among others, with the Franchising Authorities, the Franchising Authorities have
50 days after submission of the 1997 Proposal to object to any Upgrade Projects
(as defined therein). If any Franchising Authority makes such an objection,
Seller shall be solely responsible for resolving the objection within 90 days
after such an objection has been made. Seller shall deliver the Final Report to
the Franchising Authorities no later than March 31, 1997, provided, however,
that if any Franchising Authorities object to any Upgrade Projects, Seller shall
deliver the Final Report to such Franchising Authorities no later than ten days
after such objection is resolved. Such resolution shall not require the payment
of any money or the fulfillment of any obligation on the part of Buyer without
the prior written consent of Buyer, which may be given or withheld in Buyer's
sole discretion.
(j) Queenstown Apartments. Seller has received a letter dated
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November 18, 1996 from Edgewood Management Corporation ("EDGEWOOD") terminating
that certain Multiple Dwelling Unit Cable Television Access Agreement dated
August 18, 1989 (the "QUEENSTOWN AGREEMENT"), between Queenstown Apartments
Limited Partnership ("QUEENSTOWN") and Maryland Cable Corp. covering the
Queenstown Apartments, with such termination to be effective as of March 31,
1997. Seller is seeking a five-year extension of the Queenstown Agreement (the
"EXTENSION") from Edgewood, but has not yet received the
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Extension. As a result, any customer who resides in the Queenstown Apartments
will be deemed at Closing to be a customer who has given Seller notice of
termination. Buyer agrees to cooperate with Seller in obtaining the Extension
and to notify Seller of any contacts by Buyer with Edgewood or Queenstown, but
Buyer will not be required to make any payment to Edgewood or Queenstown to
obtain the Extension or to accept any material adverse change in the Queenstown
Agreement as a condition to obtaining the Extension. If an Extension is
delivered to Buyer within sixty (60) days after the Closing Date, any customer
who resided in the Queenstown Apartments at Closing will be counted for purposes
of the Post-Closing Adjustment as a Basic Customer, if such customer otherwise
met at Closing the criteria set forth in the definition of Basic Customers in
the Purchase Agreement.
(k) Current Rate Proceedings (re (S)6.15). Section 6.15 of the
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Purchase Agreement is hereby amended to add the following three sentences at the
end thereof:
Without Buyer's prior consent, Seller shall not settle any such
proceeding which would require Buyer to lower the rates it is then
charging to customers. If in any such proceeding (i) an order or
decision is adopted based upon rates charged prior to the Closing
which would require Buyer to lower the rates it is then charging to
customers (an "ADVERSE DECISION") and (ii) Seller shall have standing
to appeal such Adverse Decision and Buyer shall not have standing,
Seller shall appeal such order or decision unless (a) Buyer shall give
its consent that such appeal shall not be filed, which consent shall
not be unreasonably withheld, or (b) Seller's counsel shall determine
in good faith that such appeal shall not present an issue of law or
fact that is a fair ground for litigation or that the appeal would be
interposed for an improper purpose. If Buyer shall have standing to
appeal and does appeal any such Adverse Decision, the reasonable legal
fees and expenses incurred by Buyer in connection with such appeal
shall comprise Buyer's Damages, subject to the terms of Section
10.4(c) of this Agreement, and the Threshold Amount set forth in
Section 10.6(a) shall not apply to any claim by Buyer for Buyer's
Damages to recover such legal fees and expenses.
6. Miscellaneous. Except as expressly provided in this Amendment,
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all of the terms and conditions of the Purchase Agreement shall remain unchanged
and in full force and effect. This Amendment and the provisions hereof shall be
binding on the successors and assigns of the parties hereto. This Amendment may
be executed in counterpart, and both so executed shall constitute one agreement,
binding on the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
BUYER: SELLER:
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XXXXX COMMUNICATIONS OF MARYLAND CABLE PARTNERS, L.P.
MARYLAND, INC.
By: Maryland Cable General Partner,
Inc., its general partner
By: /s/ Xxxxxxxxx Xxxxxx By: /s/ Xxxxxx X. XxXxxxxx
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Name: Xxxxxxxxx Xxxxxx Name: Xxxxxx X. XxXxxxxx
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Title: VP Title: Vice President
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Schedule 1
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List of Coalition Communities
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Prince George's County Greenbelt
Berwyn Heights Hyattsville
Bowie Landover Hills
Brentwood Laurel
College Park Mount Rainier
Colmar Manor New Carrollton
Cottage City North Brentwood
Edmonston University Park
Glenarden
