<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-K
__X__ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
Commission File Number 0-15287
PHOENIX LEASING CASH DISTRIBUTION FUND II
------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 68-0032426
-------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2401 Kerner Boulevard, San Rafael, California 94901-5527
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 485-4500
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interest
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
--------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
--------- ---------
As of December 31, 1994, 379,583 Units of Limited Partnership interest were
outstanding. No market exists for the Units of Partnership interest and
therefore there exists no aggregate market value at December 31, 1994.
DOCUMENTS INCORPORATED BY REFERENCE: NONE<PAGE>
<PAGE>
Page 2 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II
1994 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . 6
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . 7
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . 7
PART II
Item 5. Market for the Registrant's Securities and
Related Security Holder Matters . . . . . . . . . . . 7
Item 6. Selected Financial Data . . . . . . . . . . . . . . . 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 9
Item 8. Financial Statements and Supplementary Data . . . . . 13
Item 9. Disagreements on Accounting and Financial
Disclosure Matters . . . . . . . . . . . . . . . . . 34
PART III
Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . . . . 35
Item 11. Executive Compensation . . . . . . . . . . . . . . . 37
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . 37
Item 13. Certain Relationships and Related Transactions . . . 37
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . 38
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 40<PAGE>
<PAGE>
Page 3 of 41
PART I
Item 1. Business.
General Development of Business.
Phoenix Leasing Cash Distribution Fund II, a California limited
partnership (the "Partnership"), was organized on June 28, 1984. The
Partnership was registered with the Securities and Exchange Commission with an
effective date of November 20, 1986 and shall continue to operate until its
termination date unless dissolved sooner due to the sale of substantially all
of the assets of the Partnership or a vote of the Limited Partners. The
Partnership will terminate on December 31, 1997. The General Partner is
Phoenix Leasing Incorporated, a California corporation. The General Partner or
its affiliates also is or has been a general partner in several other limited
partnerships formed to invest in capital equipment and other assets.
The initial registration was for 300,000 units of limited partnership
interest at a price of $250 per unit with an option of increasing the public
offering up to a maximum of 400,000 units. The Partnership sold 386,308 units
for a total capitalization of $96,577,000. Of the proceeds received through
the offering, the Partnership has incurred $11,540,000 in organizational and
offering expenses. The Partnership concluded its public offering on February
4, 1988.
Phoenix Concept Cablevision Inc. (the "Subsidiary") is a majority owned
subsidiary of the Partnership (hereinafter, both entities are collectively
referred to as the "Consolidated Partnership"). The Subsidiary was formed
under the laws of Nevada on December 22, 1992. The Partnership owns
approximately 58% of the outstanding shares of Phoenix Concept Cablevision Inc.
Phoenix Concept Cablevision Inc. owns 100% of the outstanding shares of Concept
Cablevision of South Carolina, Inc., a Delaware corporation. Concept
Cablevision of South Carolina, Inc. owns and operates a cable television system
located in the state of South Carolina.
Narrative Description of Business.
The Consolidated Partnership conducts its business in two business
segments: Equipment Leasing and Financing Operations, and Cable Television
System Operations. A discussion of these two segments follows:
Equipment Leasing and Financing Operations.
From the initial formation of the Partnership through December 31, 1994,
the total investments in equipment leases and financing transactions (loans),
including the Partnership's pro rata interest in investments made by joint
ventures, approximate $175,558,000. The average initial firm term of
contractual payments from equipment subject to lease was 32.19 months, and the
average initial net monthly payment rate as a percentage of the original
purchase price was 2.24%. The average initial firm term of contractual
payments from loans was 82.01 months.
The Partnership's principal objective is to produce cash flow to the
investors on a continuing basis over the life of the Partnership. To achieve
this objective, the Partnership has invested in various types of capital
equipment and other assets to provide leasing or financing of the same to third
parties, including Fortune 1000 companies and their subsidiaries, middle-market
companies, emerging growth companies, cable television operators and others, on
either a long-term or short-term basis. The types of equipment that the
Partnership has invested in includes computer peripherals, terminal <PAGE>
<PAGE>
Page 4 of 41
Item 1. Business (continued):
Narrative Description of Business (continued).
systems, small computer systems, communications equipment, IBM mainframes, IBM-
software compatible mainframes, office systems, CAE/CAD/CAM equipment,
telecommunications equipment, cable television equipment, medical equipment,
production and manufacturing equipment and software products.
The Partnership has made secured loans to cable television systems,
emerging growth companies, security monitoring companies and other businesses.
These loans are asset-based and the Partnership receives a security interest in
the assets financed.
The Partnership's financing activities have been concentrated in the cable
television industry. The Partnership has made secured loans (notes receivable)
to operators of cable television systems for the acquisition, refinancing,
construction, upgrade and extension of such systems located throughout the
United States. The loans to cable television system operators are secured by a
senior or subordinated interest in the assets of the cable television system,
its franchise agreements, subscriber lists, material contracts and other
related assets. In some cases the Partnership has also received personal
guarantees from the owners of the systems. At December 31, 1994, the
Partnership's investments in notes receivable primarily consist of notes
receivable from three cable television system operators. The Partnership's net
investment in notes receivable before consideration of the allowance for losses
on notes receivable (including notes receivable reclassified to in-substance
foreclosed cable systems) of $2,366,000 approximate 37% of the total assets of
the Partnership at December 31, 1994.
Several of the cable television system operators the Partnership provided
financing to have experienced financial difficulties. These difficulties are
believed to have been caused by several factors such as: a significant
reduction in the availability of debt from banks and other financial
institutions to finance acquisitions and operations, uncertainties related to
future government regulation in the cable television industry and the economic
recession in the United States. These factors have resulted in a significant
decline in the demand for the acquisition of cable systems and have further
caused an overall decrease in the value of many cable television systems.
The Partnership has acquired equipment pursuant to either "Operating"
leases or "Full Payout" leases. The Partnership has also provided and intends
to provide financing secured by assets in the form of notes receivable.
Operating leases are generally short-term leases under which the lessor will
receive aggregate rental payments in an amount that is less than the purchase
price of the equipment. Full Payout leases are generally for a longer term
under which the non-cancelable rental payments due during the initial term of
the lease are at least sufficient to recover the purchase price of the
equipment.
Competition. The General Partner has concentrated the Partnership's
activities in the equipment leasing and financing industry, an area in which
the General Partner has developed an expertise. The computer equipment leasing
industry is extremely competitive. The Partnership competes with many well
established companies having substantially greater financial resources.
Competitive factors include pricing, technological innovation and methods of
financing (including use of various short-term and long-term financing plans,
as well as the outright purchase of equipment).<PAGE>
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Page 5 of 41
Item 1. Business (continued):
Narrative Description of Business (continued):
Although IBM is still a dominant factor in the computer equipment
marketplace, even IBM has been adversely affected by wide-spread competition in
this industry. Given the high degree of competition and rapid pace of
technological development in the computer equipment industry, revolutionary
changes with respect to pricing, marketing practices, technological
innovation and the availability of new and attractive financing plans could
occur at almost any time. Significant action in any of these areas might
materially and adversely affect the remarketability of equipment owned by the
Partnership. Any such adverse effect on remarketability could also be
reflected in the overall return realized by the Partnership. The General
Partner believes that IBM and its competitors will continue to make significant
advances in the computer equipment industry, some of which may result in
revolutionary changes with respect to small, medium and large computer systems.
The Partnership will maintain working capital reserves in an amount which
will fluctuate from time to time depending upon the needs of the Partnership,
but which will be at least one percent of the gross offering proceeds.
Cable Television System Operations.
Phoenix Concept Cablevision, Inc. (the "Subsidiary") is a majority owned
subsidiary of the Partnership. The Subsidiary was acquired through foreclosure
of a defaulted note receivable to the Partnership on September 15, 1994. The
Partnership owns approximately 58% of the outstanding shares of Phoenix Concept
Cablevision, Inc. Phoenix Concept Cablevision, Inc. owns 100% of the
outstanding shares of Concept Cablevision of South Carolina, Inc., which owns
and operates a cable television system. Phoenix Cable Management Inc. (PCMI),
an affiliate of the General Partner, provides day to day management services in
connection with the operation of the system.
Concept Cablevision of South Carolina, Inc. owns and operates a cable
television system located in the state of South Carolina, which currently
consists of two headend locations and 81 miles of plant passing approximately
3,710 homes and has approximately 2,058 cable subscribers at December 31, 1994.
The cable television system serves the communities of Holly Hill, St. George,
Reevesville, Eutawville, certain unincorporated areas in Dorchester County and
other communities in Orangeburg County. The cable system operates under six
non-exclusive franchise agreements with each of the stated municipalities.
These cable franchise agreements expire between the years 1996 and 2003.
Cable television systems receive signals transmitted by nearby radio and
television broadcast stations, microwave relay systems and communications
satellites and distribute the signals to subscribers via coaxial cable. The
subscribers pay a monthly fee to the cable television system for such services.
Cable television companies operate under a non-exclusive franchise agreement
granted by each local government authority. As part of the franchise
agreement, the franchisee typically pays a portion of the gross revenues of the
system to the local government.
The Partnership intends to own and operate the cable system until such
time it can be sold. Any excess cash generated from operations of the cable
system will be used for upgrades and improvements to the system in order to
maximize the value of the system.<PAGE>
<PAGE>
Page 6 of 41
Item 1. Business (continued):
Narrative Description of Business (continued):
Competition. The Partnership's cable operations competes with numerous
other companies with far greater financial resources. In addition, cable
television franchises are typically non-exclusive and the Partnership could be
directly competing with other cable television systems. Cable television also
competes with conventional over-the-air broadcast television and direct
broadcast satellite transmission. Future technological developments may also
provide additional competitive factors.
Please see Note 17 in the Partnership's financial statements for financial
information about the Partnership's business segments.
Other.
A brief description of the type of assets in which the Partnership has
invested as of December 31, 1994, together with information concerning the uses
of assets is set forth in Item 2.
Item 2. Properties.
The Partnership is engaged in the equipment leasing and financing
industry. The primary assets held by the Partnership are its investments in
leases and loans either directly or through its investment in joint ventures.
As of December 31, 1994, the Partnership owns equipment and has
outstanding loans to borrowers with an aggregate original cost of $22,325,000.
The equipment and loans have been made to customers located throughout the
United States. The following table summarizes the type of equipment owned or
financed by the Partnership, including its pro rata interest in joint ventures,
at December 31, 1994.
Percentage of
Asset Types Purchase Price(1) Total Assets
----------------------------------- ------------------- -------------
(Amounts in Thousands)
Computer Peripherals $ 6,851 31%
Mainframes 4,975 22
Reproduction Equipment 4,475 20
Financing Related to Cable Television
Systems 3,516 16
Telecommunications 1,153 5
Capital Equipment Leased to Emerging
Growth Companies 1,142 5
Small Computer Systems 157 1
Financing of Security Monitoring System
Companies 56 -
-------- ----
TOTAL $ 22,325 100%
======== ====
(1) These amounts include the Partnership's pro rata interest in equipment
joint ventures of $2,113,000, cost of equipment on financing leases of
$1,576,000 and original cost of outstanding loans of $3,573,000 at December
31, 1994.<PAGE>
<PAGE>
Page 7 of 41
Item 2. Properties (continued).
Cable Television System Operations.
The Subsidiary's principal plants and real property consist of electronic
headend equipment, its plant (cable) and two parcels of land. The Subsidiary's
headends are located on the two parcels of land.
Item 3. Legal Proceedings.
The Registrant is not a party to any pending legal proceedings which would
have a material adverse impact on its financial position.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of Limited Partners, through the
solicitation of proxies or otherwise, during the year covered by this report.
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters.
(a) The Registrant's limited partnership interests are not publicly
traded. There is no market for the Registrant's limited partnership
interests and it is unlikely that any will develop.
(b) Approximate number of equity security investments:
Number of Unit Holders
Title of Class as of December 31, 1994
---------------------------------- -----------------------
Limited Partners 9,345<PAGE>
<PAGE>
Page 8 of 41
PART II
Item 6. Selected Financial Data.
Amounts in Thousands Except for Per Unit Amounts
------------------------------------------------
1994(1) 1993 1992 1991 1990
---- ---- ---- ---- ----
Total Income $5,095 $5,613 $10,706 $14,290 $27,016
Net Income (Loss) 2,925 1,570 (1,540) (5,429) (2,969)
Total Assets 6,338 6,922 10,168 24,728 45,925
Distributions to Partners 3,796 3,794 14,269 14,623 14,119
Net Income (Loss) per Limited
Partnership Unit 7.63 4.09 (4.01) (14.09) (7.67)
Distributions per Limited
Partnership Unit 10.00 9.99 37.54 36.89 35.02
(1) The 1994 amounts reflect the consolidated activity of the Partnership and
its subsidiary.
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this report.<PAGE>
<PAGE>
Page 9 of 41
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Phoenix Leasing Cash Distribution Fund II and Subsidiary (the Partnership)
reported net income of $2,925,000 during the year ended December 31, 1994, as
compared to net income of $1,570,000 during 1993 and a net loss of $1,540,000
during 1992. The improvement in earnings during 1994 is primarily due to a
settlement of $1,180,000 received by the Partnership during 1994. The
improvement in earnings during 1993 was attributable to a substantial decrease
in depreciation expense.
Total revenues declined by $518,000 during 1994, as compared to a decline
of $5,093,000 during 1993. The decline in revenues during 1994 and 1993 was
primarily attributable to the decrease in rental income, a result of the
decrease in the amount of equipment owned by the Partnership. At December 31,
1994, the Partnership owned equipment, including its pro rata interest in
equipment joint ventures, with an aggregate original cost of $19 million as
compared to $40 million and $58 million at December 31, 1993 and 1992,
respectively. As the Partnership continues to sell equipment upon expiration
of the lease terms, it is anticipated that the equipment portfolio and rental
income will continue to decrease. Additionally, the Partnership reported a
decreased gain on the sale of equipment of $629,000 during 1994 due to a
decrease in the market value of equipment sold. Partially offsetting these
decreases was a settlement received by the Partnership during 1994 (see Note
11).
Another factor contributing to the decrease in total revenues during 1993
was the absence of an equipment insurance settlement that existed during 1992.
During 1992, the Partnership received an equipment insurance settlement of
$1,235,000 for the full replacement value of certain capital equipment owned by
the Partnership and was not a normal recurring event.
Total expenses decreased by $1,897,000 and $8,203,000 during 1994 and
1993, respectively, due primarily to the decrease in depreciation and
amortization of $1,536,000 and $6,906,000 during 1994 and 1993, respectively.
The decrease in depreciation and amortization expense is attributable to the
decrease in the size of the equipment portfolio due to the sale of equipment
and a large portion of the equipment having been fully depreciated. The
Partnership sold equipment with an aggregate original cost of $22,547,000,
$18,149,000 and $20,744,000 during the years ended December 31, 1994, 1993 and
1992, respectively.
During 1994 and 1993, the Partnership also experienced a decrease in lease
related operating expenses of $279,000 and $1,035,000, respectively, due to a
decrease in maintenance, remarketing and refurbishing expenses incurred on a
portion of the Partnership's reproduction equipment purchased pursuant to a
vendor lease and remarketing agreement. In accordance with the agreement,
these expenses are deducted from the rents and sales proceeds received from
such leases.
The Partnership has been impacted by the recession in recent years through
an increase in the number of lessee and borrower defaults. This has caused an
increase in delinquent lease and loan payments from customers, and the
Partnership has seen an increase in lessees and borrowers filing for protection
under the bankruptcy laws. This has resulted in a loss of revenues from such
delinquent or defaulted leases and has also forced the Partnership to
renegotiate its leases on far less favorable terms. These defaults and<PAGE>
<PAGE>
Page 10 of 41
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Results of Operations (continued)
delinquencies have also resulted in an increase in legal and collection related
expenses. The recession has also caused manufacturers of newer computer
equipment to engage in highly aggressive sales practices by discounting new
products by as much as 50-60%. The effects of this practice have been lower
re-leasing and resale revenues on the equipment owned by the Partnership,
thereby earning lower returns than originally anticipated as reflected by the
decrease in rental income.
Inflation affects the Partnership in relation to the current cost of
equipment placed on lease and the residual values realized when the equipment
comes off lease and is sold. During the last several years inflation has been
low, thereby having very little impact upon the Partnership.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from equipment leasing
and financing activities. The Partnership has contractual obligations with a
diversified group of lessees for fixed lease terms at fixed rental amounts and
will also receive payments on its outstanding notes receivable. The
Partnership's future liquidity is dependent upon its receiving payment of such
contractual obligations. As the initial lease terms expire, the Partnership
will continue to renew, remarket or sell the equipment. The future liquidity
in excess of the remaining contractual obligations will depend upon the General
Partner's success in re-leasing and selling the Partnership's equipment as it
comes off lease.
The net cash generated by equipment leasing and financing activities was
$2,052,000, $2,647,000 and $4,998,000 during 1994, 1993 and 1992, respectively.
The net cash generated by equipment leasing and financing activities continues
to decline for the same reasons as the decrease in rental income as previously
discussed.
In addition, the Partnership owns a majority interest in a cable
television system it received through the foreclosure on a defaulted note
receivable on September 15, 1994. Only the results of operations since
September 15, 1994 are included in the consolidated results of operations of
the Partnership. As a result, this cable television system did not generate
significant revenues during 1994.
Proceeds from sale of equipment decreased due to a decrease in the market
value of equipment sold. The Partnership received proceeds of $968,000,
$1,857,000 and $3,520,000 during 1994, 1993 and 1992, respectively.
During the fourth quarter of 1992, the Partnership borrowed an additional
$465,000 from a bank. This loan was paid off in full during 1994. The
Partnership repaid $174,000 and $291,000 of its outstanding debt during 1994
and 1993, respectively.<PAGE>
<PAGE>
Page 11 of 41
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Liquidity and Capital Resources (continued)
In addition to acquiring equipment for lease to third parties, the
Partnership has provided financing to cable television system operators,
emerging growth companies, security monitoring system companies, and other
businesses. The Partnership maintains a security interest in the equipment
financed. Such security interest will give the Partnership the right, upon
default to obtain possession of the assets. The aggregate original amount of
outstanding financing provided by the Partnership approximates $3.6 million at
December 31, 1994, as compared to $4.2 million at December 31, 1993 and 1992.
The $3.6 million of financing as of December 31, 1994 is classified as follows:
98% financing to cable television systems and 2% financing to security
monitoring companies. The $4.2 million of financing as of December 31, 1993
and 1992 was classified as follows: 99% financing to cable television systems
and 1% financing to security monitoring companies.
The Partnership owns equipment being held for lease with an aggregate
original cost of $3,650,000, $13,484,000 and $16,645,000, and a net book value
of $36,000, $40,000 and $549,000 at December 31, 1994, 1993 and 1992,
respectively. The General Partner is actively engaged, on behalf of the
Partnership, in remarketing and selling the Partnership's off-lease equipment
portfolio.
The cash distributed to partners for the years ended December 31, 1994,
1993 and 1992 were $3,796,000, $3,794,000 and $14,269,000, respectively. In
accordance with the Limited Partnership Agreement, the limited partners are
entitled to 95% of the cash available for distribution and the General Partner
is entitled to 5%. The limited partners received distributions of $3,796,000,
$3,794,000 and $14,269,000 for the years ended December 31, 1994, 1993 and
1992, respectively. The cumulative distributions to Limited Partners are
$79,015,000, $75,219,000 and $71,425,000 at December 31, 1994, 1993 and 1992,
respectively.
The General Partner did not receive payment for its share of cash
distributions for the years ended December 31, 1994, 1993 and 1992. In
accordance with the partnership agreement, upon termination of the Partnership,
the General Partner is required to restore any deficit balance in its capital
account. During 1992, the General Partner elected to make an early
contribution for such deficit capital balance and is no longer receiving
payment for its share of the cash available for distribution.
The Partnership's asset portfolio continues to decline as a result of the
ongoing liquidation of assets, and therefore it is expected that the cash
generated from operations will also decline. As the cash generated by
Partnership operations continues to decline, the rate of cash distributions
made to limited partners will also decline. During 1993, the Partnership
reduced the cash distributions to partners due to such decline in the cash
available for distribution. It is anticipated that the Partnership will make
quarterly distributions to partners during 1995 at a lower rate than those made
during 1994.<PAGE>
<PAGE>
Page 12 of 41
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Liquidity and Capital Resources (continued)
The Partnership has been adversely impacted by several factors that have
resulted in returns and recovery of investment in lower than anticipated
amounts. The factors impacting the Partnership have been, the economic
recession in the United States, the rate of obsolescence of computer equipment,
the market demand and remarketability for equipment owned by the Partnership,
aggressive manufacturer sales practices and a general unavailability of debt to
companies. All of these factors have resulted in the decline in revenues and
the reduced distributions to partners.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's ongoing
operational expenses and debt service.<PAGE>
<PAGE>
Page 13 of 41
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------------------------------------------------------
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
--------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
----------------------------
<PAGE>
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Page 14 of 41
REPORT OF INDEPENDENT AUDITORS
The Partners
Phoenix Leasing Cash Distribution Fund II
We have audited the consolidated financial statements of Phoenix Leasing Cash
Distribution Fund II (a California limited partnership) and Subsidiary listed
in the accompanying index to financial statements (Item 14(a)). Our audits
also included the financial statement schedule listed in the Index at Item
14(a). These financial statements and the schedule are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements listed in the
accompanying index to financial statements (Item 14(a)) present fairly, in all
material respects the consolidated financial position of Phoenix Leasing Cash
Distribution Fund II and Subsidiary at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
San Francisco, California
January 20, 1995<PAGE>
<PAGE>
<TABLE>
Page 15 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
<CAPTION>
December 31,
1994 1993
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 200 $ 2,032
Accounts receivable (net of allowance for losses on
accounts receivable of $83 and $453 at December 31,
1994 and 1993, respectively) 209 262
Notes receivable (net of allowance for losses on
notes receivable of $362 at December 31, 1994
and 1993) 1,978 1,966
Equipment on operating leases and held for lease
(net of accumulated depreciation of $13,441 and
$34,365 at December 31, 1994 and 1993, respectively) 292 641
Net investment in financing leases 564 998
Investment in joint ventures 1,488 19
Cable systems, property and equipment (net of
accumulated depreciation of $469 at
December 31, 1994) 1,085 -
Deferred income tax asset 142 -
In-substance foreclosed cable systems 61 774
Other assets 319 230
----------- ----------
Total Assets $ 6,338 $ 6,922
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 985 $ 1,093
Notes payable - 174
Minority interest in subsidiary 569 -
----------- ----------
Total Liabilities 1,554 1,267
----------- ----------
Partners' Capital:
General Partner 92 63
Limited Partners, 400,000 units authorized,
386,308 units issued and 379,583 units
outstanding at December 31, 1994 and 1993 4,692 5,592
----------- ----------
Total Partners' Capital 4,784 5,655
----------- ----------
Total Liabilities and Partners' Capital $ 6,338 $ 6,922
=========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
Page 16 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
<CAPTION>
For the Years Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
INCOME
Rental income $ 2,333 $ 3,779 $ 7,072
Gain on sale of equipment 821 1,450 1,804
Interest income, notes receivable 300 294 451
Gain on sale of securities 203 - 2
Equipment insurance settlement - - 1,235
Settlement 1,180 - -
Other income 258 90 142
---------- ----------- ----------
Total Income 5,095 5,613 10,706
---------- ----------- ----------
EXPENSES
Depreciation and amortization 474 2,010 8,916
Lease related operating expenses 802 1,081 2,116
Management fees to General Partner 161 230 459
Provision for losses on receivables 2 111 111
Legal expense 284 161 109
Reimbursed administrative costs to
General Partner 141 133 174
General and administrative expenses 282 317 361
---------- ----------- ----------
Total Expenses 2,146 4,043 12,246
---------- ----------- ----------
NET INCOME (LOSS) BEFORE MINORITY INTEREST
AND INCOME TAXES $ 2,949 $ 1,570 $ (1,540)
---------- ----------- ----------
Minority interest in earnings of
subsidiary (5) - -
Income tax expense (19) - -
NET INCOME (LOSS) $ 2,925 $ 1,570 $ (1,540)
=========== =========== ==========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 7.63 $ 4.09 $ (4.01)
=========== =========== ==========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 29 $ 16 $ (15)
Limited Partners 2,896 1,554 (1,525)
---------- ----------- ----------
$ 2,925 $ 1,570 $ (1,540)
=========== =========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
Page 17 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(Amounts in Thousands Except for Unit Amounts)
<CAPTION>
General
Partner's Limited Partners' Total
Amount Units Amount Amount
-------- ----- ------ ------
<S> <C> <C> <C> <C>
Balance, December 31, 1991 $ (1,531) 380,374 $ 23,652 $ 22,121
Partners' contributions 1,404 - - 1,404
Distributions to partners ($37.54 per
limited partnership unit) - - (14,269) (14,269)
Redemptions of capital - (791) (26) (26)
Reversal of 1991 General Partner
distributions accrued but not
paid 189 - - 189
------------ ----------- ------------ -------------
Net loss (15) - (1,525) (1,540)
Balance, December 31, 1992 47 379,583 7,832 7,879
Distributions to partners ($9.99 per
limited partnership unit) - - (3,794) (3,794)
Net income 16 - 1,554 1,570
------------ ----------- ------------ -------------
Balance, December 31, 1993 63 379,583 5,592 5,655
Distributions to partners ($10.00 per
limited partnership unit) - - (3,796) (3,796)
Net income 29 - 2,896 2,925
------------ ----------- ------------ -------------
Balance, December 31, 1994 $ 92 379,583 $ 4,692 $ 4,784
============ =========== ============ =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
Page 18 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<CAPTION>
For the Years Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating Activities:
--------------------
Net income (loss) $ 2,925 $ 1,570 $ (1,540)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 474 2,010 8,916
Gain on sale of equipment (821) (1,450) (1,804)
Equity in losses (earnings) from joint ventures (6) 100 (54)
Minority interest in earnings of subsidiary 5 - -
Gain on equipment insurance settlement - - (1,235)
Provision for early termination,
financing leases - (4) 1
Provision for losses on notes receivable - 115 110
Provision for losses on accounts receivable 2 - -
Gain on sale of securities (203) - (2)
Decrease in accounts receivable 90 321 271
Decrease in accounts payable, accrued expenses (157) (729) (590)
Decrease in other assets - 38 96
Settlement (711) - -
Decrease in deferred income tax asset 18 - -
Other 12 - -
Interest income added to principal
on notes receivable - - (97)
------------- -------------- --------------
Net cash provided by operating activities 1,628 1,971 4,072
------------- -------------- --------------
Investing Activities:
--------------------
Principal payments, financing leases 385 519 875
Principal payments, notes receivable 39 157 51
Proceeds from sale of equipment 968 1,857 3,520
Proceeds from equipment insurance settlement - - 1,273
Proceeds from sale of securities 245 - 44
Distributions from joint ventures - 356 272
Purchase of equipment (813) (7) -
Investment in financing leases - (185) (221)
Investment in notes receivable (106) - -
Investment in joint ventures (34) - -
Investment in securities (42) - (42)
Cable systems, property and equipment (128) - -
Payment of acquisition fees (4) (10) (12)
------------- -------------- --------------
Net cash provided by investing activities 510 2,687 5,760
------------- -------------- --------------
Financing Activities:
--------------------
Partners' contributions - - 1,404
Payments of principal, notes payable (174) (291) -
Proceeds from notes payable - - 465
Redemptions of capital - - (26)
Distributions to partners (3,796) (3,794) (14,269)
------------- -------------- --------------
Net cash used by financing activities (3,970) (4,085) (12,426)
------------- -------------- --------------
Increase (decrease) in cash and cash equivalents (1,832) 573 (2,594)
Cash and cash equivalents, beginning of period 2,032 1,459 4,053
------------- -------------- --------------
Cash and cash equivalents, end of period $ 200 $ 2,032 $ 1,459
============= ============== ==============
Supplemental Cash Flow Information:
----------------------------------
Cash paid for interest expense $ 3 $ 18 $ -
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<PAGE>
Page 19 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
Note 1. Organization and Partnership Matters.
Phoenix Leasing Cash Distribution Fund II, a California limited
partnership (the "Partnership"), was formed on June 28, 1984, to invest in
capital equipment of various types and to lease such equipment to third parties
on either a long-term or short-term basis, and to provide financing to emerging
growth companies and cable television system operators. The Partnership's
minimum investment requirements were met November 24, 1986. The Partnership's
termination date is December 31, 1997.
On September 15, 1994, the Partnership, along with three other affiliated
partnerships (collectively "the Partnerships"), entered into a settlement
agreement with a borrower to transfer ownership of all of the outstanding stock
in a cable television system company to a corporation owned by the partnerships
in full satisfaction of a defaulted note receivable to the partnerships. As a
result of this settlement agreement, Concept Cablevision of South Carolina,
Inc. transferred 100% of the outstanding stock to Phoenix Concept Cablevision,
Inc., a majority owned subsidiary of the Partnership. The net carrying value
of the defaulted note, including other capitalized costs, to the Partnership at
the settlement date was approximately $769,000 and was carried over (from in-
substance foreclosed cable systems) to the basis in the cable system. Phoenix
Concept Cablevision, Inc. (the Subsidiary) was formed under the laws of Nevada
on December 22, 1992 (hereinafter, the Partnership and the Subsidiary are
collectively referred to as the Consolidated Partnership). The acquisition of
Concept Cablevision of South Carolina Inc. by the Subsidiary through
foreclosure was accounted for using the "purchase method" of accounting in
which the transfer price was allocated in accordance with the relative fair
market value of the assets and liabilities acquired.
For financial reporting purposes, Partnership income shall be allocated as
follows: (a) first, to the General Partner until the cumulative income so
allocated is equal to the cumulative distributions to the General Partner, (b)
second, before redemption fees, 1% to the General Partner and 99% to the
Limited Partners until the cumulative income so allocated is equal to any
cumulative Partnership loss and syndication expenses for the current and all
prior accounting periods, and (c) the balance, if any, to the Unit Holders.
All Partnership losses shall be allocated, before redemption fees, 1% to the
General Partner and 99% to the Unit Holders.
The General Partner is entitled to receive 5% of all cash distributions
until the Limited Partners have recovered their initial capital contributions
plus a cumulative return of 12% per annum. Thereafter, the General Partner
will receive 15% of all cash distributions. In the event the General Partner
has a deficit balance in its capital account at the time of partnership
liquidation, it will be required to contribute the amount of such deficit to
the Partnership. During the year ended December 31, 1992, the General Partner
elected to make an early contribution of $1,404,000, and the $189,000 in
accrued distributions to the General Partner at December 31, 1991 was reversed.
In addition, the General Partner did not draw its share of the 1994, 1993 and
1992 cash available for distribution.<PAGE>
<PAGE>
Page 20 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 1. Organization and Partnership Matters (continued).
As compensation for management services, the General Partner receives a
fee payable quarterly, in an amount equal to 3.5%, subject to certain
limitations, of the Partnership's gross revenues for the quarter from which
such payment is being made, which revenues shall include, but are not limited
to, rental receipts, maintenance fees, proceeds from the sale of equipment and
interest income.
Phoenix Cable Management Inc. (PCMI), an affiliate of the General
Partner, provides day to day management services in connection with the
operation of the Subsidiary. The Subsidiary will pay a management fee equal to
four and one-half percent of the System's monthly gross revenue for these
services. Management fees paid or due PCMI totalled $9,000 for the year ended
December 31, 1994.
The General Partner will be compensated for services performed in
connection with the analysis of assets available to the Partnership, the
selection of such assets and the acquisition thereof, including obtaining
lessees for the equipment and negotiating and concluding master lease
agreements with certain lessees. As compensation for such acquisition
services, the General Partner will receive a fee equal to 4%, subject to
certain limitations, of (a) the purchase price of equipment acquired by the
Partnership, or equipment leased to customers by manufacturers, the financing
for which is provided by the Partnership, or (b) financing provided to
businesses such as cable operators, emerging growth companies, or security
monitoring system companies, payable upon such acquisition or financing, as the
case may be. As of December 31, 1994, $6,875,000 had been paid or accrued to
the General Partner for its acquisition fee. Acquisition fees are amortized
over the life of the assets principally on a straight-line basis.
Phoenix Securities, Inc., an affiliate of the General Partner, has
contracted with or employs certain persons who have performed wholesaling
activities in connection with the offering of the units through broker-dealers.
As of December 31, 1994, $1,336,000 has been paid or accrued to Phoenix
Securities, Inc.
Note 2. Summary of Significant Accounting Policies.
Principles of Consolidation. The consolidated financial statements
include all of the accounts of the Partnership, and its majority owned
subsidiary, Phoenix Concept Cablevision Inc., a Nevada corporation since the
date of acquisition, September 15, 1994. The Partnership owns approximately
58% of the outstanding shares of Phoenix Concept Cablevision Inc. Phoenix
Concept Cablevision Inc. owns 100% of the outstanding shares of Concept
Cablevision of South Carolina, Inc., a Delaware corporation. All significant
intercompany accounts and transactions have been eliminated in the
consolidation.<PAGE>
<PAGE>
Page 21 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 2. Summary of Significant Accounting Policies (continued).
Leasing Operations. The Partnership's leasing operations consist of
both financing and operating leases. The financing method of accounting for
leases records as unearned income at the inception of the lease, the excess of
net rentals receivable and estimated residual value at the end of the lease
term, over the cost of equipment leased. Unearned income is credited to income
monthly over the term of the lease on a declining basis to provide an
approximate level rate of return on the unrecovered cost of the investment.
Initial direct costs of consummating new leases are capitalized and included in
the cost of equipment.
Under the operating method of accounting for leases, the leased
equipment is recorded as an asset at cost and depreciated. The Partnership's
leased equipment is depreciated primarily on an accelerated depreciation method
over the estimated useful life of six years, except for equipment leased under
vendor agreements, which is depreciated on a straight-line basis over the
estimated useful life, ranging up to six years.
The Partnership's policy is to review periodically the expected
economic life of its rental equipment in order to determine the probability of
recovering its undepreciated cost. Such reviews address, among other things,
recent and anticipated technological developments affecting computer equipment
and competitive factors within the computer marketplace. Although remarketing
rental rates are expected to decline in the future with respect to some of the
Partnership's rental equipment, such rentals are expected to exceed projected
expenses and depreciation. Where reviews of the equipment portfolio indicate
that rentals plus anticipated sales proceeds will not exceed expenses in any
future period, the Partnership revises its depreciation policy and accelerates
depreciation as appropriate.
Rental income for the year is determined on the basis of rental
payments due for the period under the terms of the lease. Maintenance, repairs
and minor renewals of the leased equipment are charged to expense.
Cable Television System Operations. The consolidated statement of
operations includes the operating activity of the Subsidiary for the period
from the date of acquisition (September 15, 1994) to December 31, 1994. The
Subsidiary's cable operations consist of a cable system located in the state of
South Carolina, which currently provides cable television services to
approximately 2,058 subscribers out of two headend locations.
Property, cable systems and equipment are depreciated using the
straight-line method over the estimated service lives ranging from five to ten
years. Replacements, renewals and improvements are capitalized and maintenance
and repairs are charged to expense as incurred.
Costs assigned to intangible assets are amortized using the straight-
line method over estimated lives of eight years.<PAGE>
<PAGE>
Page 22 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 2. Summary of Significant Accounting Policies (continued).
Cable television services are billed monthly in advance. Revenue is
deferred and recognized as the services are provided.
Investments in Joint Ventures. Minority investments in net assets of
the equipment joint ventures reflect the Consolidated Partnership's equity
basis in the ventures. Under the equity method of accounting, the original
investment is recorded at cost and is adjusted periodically to recognize the
Consolidated Partnership's share of earnings, losses, cash contributions and
cash distributions after the date of acquisition.
Non Cash Investing Activities. During the year ended December 31, 1994,
the Partnership contributed equipment and other investments received through a
settlement to a joint venture. The amount of such contribution was $1,430,000.
The Partnership also foreclosed upon a cable television company in 1994 as
discussed in Note 1 to the consolidated financial statements.
During the year ended December 31, 1993, the Partnership reclassified
two foreclosed notes receivable from Notes Receivable to In-Substance
Foreclosed Cable Systems on the balance sheet. The amount of such
reclassification was $774,000.
Financial Accounting Pronouncements. In May 1993, the Financial
Accounting Standards Board (the FASB) issued Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan," which
requires that certain impaired loans be measured based on the present value of
expected cash flows discounted at the loan's effective interest rate; or,
alternatively, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. In October 1994, the FASB
issued Statement of Financial Accounting Standards No. 118 "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosure," which
amended Statement No. 114 by eliminating the provisions regarding how a
creditor should report income on an impaired loan. Statement No. 114, as
amended by Statement No. 118, must be applied no later than January 1, 1995.
The Partnership has determined that the adoption of these statements will not
have a material impact on its financial position and results of operations.
In December 1991, the FASB issued Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"
which requires disclosure of the fair value of financial instruments for which
it is practicable to estimate fair value. For entities with less than $150
million in total assets, this statement must be applied to financial statements
issued for fiscal years ending after December 15, 1995.
Reclassification. Certain 1993 and 1992 amounts have been reclassified
to conform to the 1994 presentation.
Cash and Cash Equivalents. This includes deposits at banks, investments
in money market funds and other highly liquid short-term investments with
original maturities of less than 90 days.
Credit and Collateral. The Partnership's activities have been
concentrated in the equipment leasing and financing industry. A credit
evaluation is performed by the General Partner for all leases and loans made, <PAGE>
<PAGE>
Page 23 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 2. Summary of Significant Accounting Policies (continued).
with the collateral requirements determined on a case-by-case basis. The
Partnership's loans are generally secured by the equipment or assets financed
and, in some cases, other collateral of the borrower. In the event of default,
the Partnership has the right to foreclose upon the collateral used to secure
such loans.
Note 3. Accounts Receivable.
Accounts receivable consist of the following at December 31:
1994 1993
---- ----
(Amounts in Thousands)
Lease payments $ 182 $ 636
Cable system service 64 -
Property taxes 35 68
Other 11 11
292 715
----- ------
Less: allowance for losses on
accounts receivable (83) (453)
----- ------
Total $ 209 $ 262
===== ======
Note 4. Notes Receivable.
Notes receivable consist of the following at December 31:
1994 1993
---- ----
(Amounts in Thousands)
Notes receivable from cable television system
operators with stated interest ranging from
17% to 19% per annum, receivable in installments
ranging from 60 to 108 months, collateralized
by a security interest in the cable system
assets. These notes have a graduated
repayment schedule followed by a balloon
payment. $2,298 $ 2,282
Notes receivable from security monitoring
companies with stated interest at 16% per
annum, with payments to be taken out of the
monthly payments received from assigned
contracts, collateralized by all assets of
the borrower. At the end of 48 months, the
remaining balance, if any, is due and payable. 42 46
------ -------
2,340 2,328
Less: allowance for losses on notes receivable (362) (362)
------ -------
Total $1,978 $ 1,966
====== =======
<PAGE>
<PAGE>
Page 24 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 4. Notes Receivable (continued).
The Partnership currently has an outstanding note receivable from a
security monitoring company that is not in compliance with certain debt
covenants. As a result, the Partnership has suspended the recognition of
interest income on this note. The outstanding balance of this note receivable
at December 31, 1994 was approximately $42,000. The General Partner is
currently pursuing remedies that will maximize recovery of the Partnership's
investment, which management believes is realizable.
The Partnership's notes receivable to cable television system operators
provide a payment rate in an amount that is usually less than the contractual
interest rate. The difference between the payment rate and the contractual
interest rate is added to the principal and therefore deferred until the
maturity date of the note. Upon maturity of the note, the original principal
and deferred interest is due and payable in full. Although the contractual
interest rates may be higher, effective January 1, 1993, the amount of interest
being recognized on the Partnership's outstanding notes receivable to cable
television system operators is being limited to the amount of the payments
received, thereby deferring the recognition of a portion of the deferred
interest until the loan is paid off. During 1992, the Partnership had been
limiting the amount of interest income to 16% on these notes receivable.
The Partnership provides for estimated losses from any permanent
impairment in the recovery of notes receivable, including accrued interest.
Note 5. Equipment on Operating Leases and Investment in Financing Leases.
Equipment on lease consists primarily of computer peripheral equipment,
computer mainframes and reproduction equipment.
The Partnership's operating leases are for initial lease terms of
approximately 12 to 48 months. During the remaining terms of existing
operating leases, the Partnership will not recover all of the undepreciated
cost and related expenses of its rental equipment, and therefore must remarket
a portion of its equipment in future years.
The Partnership has agreements with some of the manufacturers of its
equipment, whereby such manufacturers will undertake to remarket off-lease
equipment on a best-efforts basis. This agreement permits the Partnership to
assume the remarketing function directly if certain conditions contained in the
agreements are not met. For their remarketing services, the manufacturers are
paid a percentage of net monthly rentals.
The Partnership has entered into direct lease arrangements with lessees
consisting of Fortune 1000 companies and other businesses in different
industries located throughout the United States. Generally, it is the
responsibility of the lessee to provide maintenance on leased equipment. The
General Partner administers the equipment portfolio of leases acquired through
the direct leasing program. Administration includes the collection of rents
from the lessees and remarketing of the equipment.<PAGE>
<PAGE>
Page 25 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 5. Equipment on Operating Leases and Investment in Financing Leases
(continued).
The net investment in financing leases consists of the following at
December 31:
1994 1993
---- ----
(Amounts in Thousands)
Minimum lease payments to be received $ 507 $ 959
Estimated residual value of leased
equipment (unguaranteed) 95 140
Less: unearned income (38) (101)
------ -------
Net investment in financing leases $ 564 $ 998
====== =======
Minimum rentals to be received on noncancellable operating and financing
leases for the years ended December 31 are as follows:
Operating Financing
---------------------
(Amounts in Thousands)
1995 . . . . . . . . . . . . . . . . . . $377 $348
1996 . . . . . . . . . . . . . . . . . 179 159
1997 . . . . . . . . . . . . . . . . . . 45 -
1998 . . . . . . . . . . . . . . . . . . 23 -
1999 and future . . . . . . . . . . . . - -
---- ----
Total $624 $507
==== ====
The Partnership receives contingent monthly rental payments on its
reproduction equipment that is not included in the minimum rentals to be
received. The contingent monthly rentals consist of a monthly rental payment
that is based upon actual machine usage. The monthly usage charge included in
income for the years ended December 31, 1994, 1993 and 1992 was $376,000,
$640,000 and $978,000, respectively.
The net book value of equipment held for lease at December 31, 1994 and
1993 amounted to $36,000 and $40,000, respectively.
Note 6. In-Substance Foreclosed Cable Systems.
As of December 31, 1994, the Partnership has a nonperforming outstanding
note receivable from a cable television system operator where in-substance
foreclosure has occurred. Upon reclassification from notes receivable, this
note is recorded at the lower of its carrying value or estimated fair market
value of the cable system. The Partnership, along with other affiliated
partnerships managed by the General Partner, has a total carrying value in this
cable system of $151,000. The net carrying value of the Partnership's
investment is $61,000 which represents a 41% pro rata interest in the total
investment.<PAGE>
<PAGE>
Page 26 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 6. In-Substance Foreclosed Cable Systems (continued).
In order to maximize the recovery of the Partnership's investment, the
General Partner anticipates that upon foreclosure, it will hold and manage the
operations of the foreclosed cable system, on behalf of the partnerships, until
such time that the General Partner can sell the cable television system.
Note 7. Cable Systems, Property and Equipment.
The cost of cable systems, property and equipment and the related
accumulated depreciation consist of the following at December 31, 1994 (amounts
in thousands):
Distribution systems $ 933
Headend equipment 330
Building 251
Land 21
Automobiles 19
------
1,554
Less: accumulated depreciation (469)
------
Net property, cable systems and equipment $1,085
======
Depreciation expense totaled approximately $43,000 for the period from
September 15, 1994 to December 31, 1994.
Note 8. Investment in Joint Ventures.
Equipment Joint Ventures.
The Partnership owns a limited or general partnership interest in
equipment joint ventures. These investments are accounted for using the equity
method of accounting. The other partners of the ventures are entities
organized and managed by the General Partner.
The purpose of the joint ventures is the acquisition and leasing of
various types of equipment. During the term of the Partnership, Phoenix
Leasing Cash Distribution Fund II has participated in the following equipment
joint ventures:
Weighted
Joint Venture Percentage Interest
------------- -------------------
Phoenix Leasing Joint Venture 1990-1 13.23%
Phoenix Joint Venture 1994-1 31.25<PAGE>
<PAGE>
Page 27 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 8. Investment in Joint Ventures (continued).
Equipment Joint Ventures (continued).
An analysis of the Partnership's investment in equipment joint ventures
is as follows:
Net Investment Equity in Net Investment
at Beginning Earnings at End
Date of Period Contributions (Losses) Distributions of Period
---- -------------- ------------- --------- ------------- --------------
(Amounts in Thousands)
Year Ended
December 31,
1992 $693 $ 0 $ 54 $ 272 $ 475
==== ====== ===== ===== ======
Year Ended
December 31,
1993 $475 $ 0 $(100) $ 356 $ 19
==== ====== ===== ===== ======
Year Ended
December 31,
1994 $ 19 $1,463 $ 6 $ 0 $1,488
==== ====== ===== ===== ======
The aggregate combined financial information of the equipment joint
ventures as of December 31 and for the years then ended is presented as
follows:
COMBINED BALANCE SHEETS
ASSETS
December 31,
1994 1993
---- ----
(Amounts in Thousands)
Cash and cash equivalents $ 122 $ 2
Accounts receivable 2,155 486
Operating lease equipment 2,527 1,842
Other assets 890 -
------ ------
Total Assets $5,694 $2,330
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 904 $2,168
Partners' capital 4,790 162
------ ------
Total Liabilities and Partners' Capital $5,694 $2,330
====== ======
<PAGE>
<PAGE>
Page 28 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 8. Investment in Joint Ventures (continued).
Equipment Joint Ventures (continued).
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1994 1993 1992
---- ---- ----
(Amounts in Thousands)
Rental income $2,583 $3,791 $5,620
Gain on sale of equipment 1,096 1,177 859
Other income 38 8 12
------ ------ ------
Total Income 3,717 4,976 6,491
------ ------ ------
EXPENSES
Depreciation 1,248 1,677 2,165
Lease related operating expenses 2,314 3,582 3,402
Management fee to the General
Partner 197 291 392
Interest expense - - 70
Other expenses 125 160 188
------ ------ ------
Total Expenses 3,884 5,710 6,217
------ ------ ------
Net Income (Loss) $ (167) $ (734) $ 274
====== ====== ======
As of December 31, 1994 and 1993, the Partnership's pro rata interest in
the equipment joint ventures' net book value of off-lease equipment was $13,000
and $68,000, respectively.
The General Partner earns a management fee of 3.5% of the Partnership's
respective interest in the gross receipts of the joint venture. Revenues
subject to a management fee at the joint venture level are not subject to
management fees at the Partnership level.<PAGE>
<PAGE>
Page 29 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 9. Accounts Payable and Accrued Expenses.
Accounts payable and accrued expenses consist of the following at December
31:
1994 1993
---- ----
(Amounts in Thousands)
Equipment lease operations $ 383 $ 732
Sales and property taxes 364 263
General Partner and affiliates 43 38
Other 195 60
------- ------
Total $ 985 $1,093
======= ======
Note 10. Notes Payable.
Notes payable consist of the following at December 31:
1994 1993
---- ----
(Amounts in Thousands)
Note payable to a bank, collateralized by
leased equipment, non-recourse to the other
assets of the Partnership, with interest of
4.75% per annum, payable in 22 monthly
installments through August 1, 1994 $- $174
==== ====
Principal payments of $174,000 were due and paid in 1994.
Note 11. Settlement.
On July 1, 1991, Phoenix Leasing Incorporated, as General Partner to the
Partnership and sixteen other affiliated partnerships, filed suit in the
Superior Court for the County of Marin, Case No. 150016, against Xerox
Corporation, a corporation with which the General Partner had entered into
contractual agreements for the acquisition and administration of leased
equipment. The lawsuit was settled out of court effective as of October 28,
1994 pursuant to the terms of a Confidential Settlement Agreement and Mutual
Release. The settlement agreement generally provides for compensation payable
to the Partnership and its affiliates in cash and kind, including the
assignment by Xerox of certain goods and services. The agreement further
provides for the sale by Xerox to the Partnership and its affiliates of
equipment subject to lease. The suit that was filed in the Superior Court for
the County of Marin, Case No. 150016, has been dismissed with prejudice on the
merits.<PAGE>
<PAGE>
Page 30 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 11. Settlement (continued).
The Partnership's pro rata share of the Xerox settlement was $1,180,000,
which consists of cash of $469,000, and assigned monthly rentals and credits
for goods and services valued at $711,000. In addition, the Partnership
purchased additional leased equipment at an aggregate cost of $718,000. The
Partnership, along with sixteen other affiliated partnerships managed by the
General Partner, contributed its share of the assigned monthly rentals, credits
for goods and services and purchased equipment leases to a joint venture, in
exchange for an interest in the joint venture.
Note 12. Income Taxes.
Federal and state income tax regulations provide that taxes on the income
or loss of the Partnership are reportable by the partners in their individual
income tax returns. Accordingly, no provision for such taxes has been made in
the accompanying financial statements.
The net differences between the tax basis and the reported amounts of the
Partnership's assets and liabilities is as follows at December 31:
Reported Amounts Tax Basis Net Difference
---------------- --------- --------------
(Amounts in Thousands)
1994
----
Assets $4,774 $6,120 $(1,346)
Liabilities 777 773 4
1993
----
Assets $6,922 $7,966 $(1,044)
Liabilities 1,267 1,267 0
The Subsidiary is a corporation subject to state and federal tax
regulations. The Subsidiary reports to the taxing authority on the accrual
basis. When income and expenses are recognized in different periods for
financial reporting purposes than for income tax purposes, deferred taxes are
provided for such differences using the liability method.
For the year ended December 31, 1994, the Subsidiary's income tax
provision includes the following components (amounts in thousands):
Current tax expense $ 19
Deferred tax benefit (8)
----
Income tax provision, net $ 11
====
<PAGE>
<PAGE>
Page 31 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 12. Income Taxes.
The income tax provision differed from the statutory federal rate
because of the following (amounts in thousands):
Federal income tax benefit, based on statutory
federal and state income tax rate of 37.3% $ 11
Depreciation and amortization 7
Bad debt expense 1
-----
Total income tax provision $ 19
=====
The Subsidiary's net deferred tax benefit of $142 as of December 31,
1994 resulted from the following temporary differences (amounts in thousands):
Depreciation and amortization $(141)
Bad debt expense (1)
-----
Total $(142)
=====
Note 13. Related Entities.
The General Partner and its affiliates serve in the capacity of general
partner in other partnerships, all of which are engaged in the equipment
leasing and financing business.
Note 14. Reimbursed Costs to the General Partner.
The General Partner incurs certain administrative costs, such as data
processing, investor and lessee communications, lease administration,
accounting, equipment storage and equipment remarketing, for which it is
reimbursed by the Partnership. These expenses incurred by the General Partner
are to be reimbursed at the lower of the actual costs or an amount equal to 90%
of the fair market value for such services. The reimbursed costs to the
General Partner for the years ended December 31 are as follows:
1994 1993 1992
---- ---- ----
(Amounts in Thousands)
General administration $147 $139 $ 179
Equipment remarketing and
administrative 28 81 168
Data processing 4 14 20
---- ---- -----
Totals $179 $234 $ 367
==== ==== =====
In addition, the General Partner receives a management fee and an
acquisition fee (see Note 1).<PAGE>
<PAGE>
Page 32 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 15. Net Income (Loss) and Distributions per Limited Partnership
Unit.
Net income (loss) and distributions per limited partnership unit were
based on the Limited Partners' share of consolidated net income (loss) and
distributions, and the weighted average number of units outstanding of 379,583,
379,583 and 380,133 for the years ended December 31, 1994, 1993 and 1992,
respectively. For the purposes of allocating consolidated income (loss) and
distributions to each individual Limited Partner, the Partnership allocates
consolidated net income (loss) and distributions based upon each respective
Limited Partner's ending capital account balance.
Note 16. Subsequent Events.
In January 1995, cash distributions of $239,000 were made to the Limited
Partners.
Note 17. Business Segments.
The Partnership currently operates in two business segments: the
equipment leasing and financing industry and the cable TV industry. The
operations in the cable TV industry are for the period from the date of
acquisition (September 15, 1994) to December 31, 1994. Information about the
Partnership's operations in these two segments are as follows:
1994 1993 1992
---- ---- ----
(Amounts in Thousands)
Total Revenues
Equipment leasing and financing $ 4,896 $5,613 $10,706
Cable TV operations 199 0 0
------- ------ -------
Total $ 5,095 $5,613 $10,706
======= ====== =======
Net Income (Loss)
Equipment leasing and financing $ 2,914 $1,570 $(1,540)
Cable TV operations 11 0 0
------- ------ -------
Total $ 2,925 $1,570 $(1,540)
======= ====== =======
Identifiable Assets
Equipment leasing and financing $ 4,774 $6,922 $10,168
Cable TV operations 1,564 0 0
------- ------ -------
Total $ 6,338 $6,922 $10,168
======= ====== =======
Depreciation and Amortization Expense
Equipment leasing and financing $ 424 $2,010 $ 8,916
Cable TV operations 50 0 0
------- ------ -------
Total $ 474 $2,010 $ 8,916
======= ====== =======
Capital Expenditures
Equipment leasing and financing $ 813 $ 192 $ 221
Cable TV operations 128 0 0
------- ------ -------
Total $ 941 $ 192 $ 221
======= ====== =======
<PAGE>
<PAGE>
Page 33 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 18. Pro Forma Information (Unaudited).
On September 15, 1994, the Partnership, along with three other
affiliated partnerships (collectively "the Partnerships"), entered into a
settlement agreement with a borrower to transfer ownership of all of the
outstanding stock in a cable television system company in full satisfaction of
a defaulted note receivable to the Partnerships. As a result of this
settlement agreement, Concept Cablevision of South Carolina, Inc. transferred
100% of the outstanding stock to Phoenix Concept Cablevision, Inc., a majority
owned subsidiary of the Partnership (see Note 1).
The following table summarizes the unaudited pro forma consolidated
results of operations of the Partnership for the years ended December 31, 1994
and 1993, as if this cable television system had been acquired at the beginning
of each year.
For the Years Ended December 31,
1994 1993
---- ----
(Amounts in Thousands except
for Per Unit Amounts)
Total income $ 5,521 $6,244
Net income before minority interest 3,067 1,707
Minority interest in earnings of
Subsidiary 63 58
Net income 3,004 1,649
Net income per limited partnership unit 7.91 4.34
These pro forma results reflect certain adjustments which, among other
things, include an increase in operating revenues from cable subscribers,
increases in operating expenses of cable system, depreciation and amortization
of tangible and intangible assets and adjustments of interest expense on
outstanding debt.
The above pro forma consolidated statement should not necessarily be
considered as indicative of the results that would have occurred had the
acquisition been made at the beginning of each year and their operations
consolidated for each twelve month period.<PAGE>
<PAGE>
Page 34 of 41
Item 9. Disagreements on Accounting and Financial Disclosure
Matters.
None.<PAGE>
<PAGE>
Page 35 of 41
PART III
Item 10. Directors and Executive Officers of the Registrant.
The registrant is a limited partnership and, therefore, has no executive
officers or directors. The general partner of the registrant is Phoenix
Leasing Incorporated, a California corporation. The directors and executive
officers of Phoenix Leasing Incorporated (PLI) are as follows:
GUS CONSTANTIN, age 57, is President, Chief Executive Officer and a
Director of PLI. Mr. Constantin received a B.S. degree in Engineering from the
University of Michigan and a Master's Degree in Management Science from
Columbia University. From 1969 to 1972, he served as Director, Computer and
Technical Equipment of DCL Incorporated (formerly Diebold Computer Leasing
Incorporated), a corporation formerly listed on the American Stock Exchange,
and as Vice President and General Manager of DCL Capital Corporation, a
wholly-owned subsidiary of DCL Incorporated. Mr. Constantin was actively
engaged in marketing manufacturer leasing programs to computer and medical
equipment manufacturers and in directing DCL Incorporated's IBM System/370
marketing activities. Prior to 1969, Mr. Constantin was employed by IBM as a
data processing systems engineer for four years. Mr. Constantin is an
individual general partner in four active partnerships and is an NASD
registered principal. Mr. Constantin is the founder of PLI and the beneficial
owner of all of the common stock of Phoenix American Incorporated.
PARITOSH K. CHOKSI, age 41, is Senior Vice President, Chief Financial
Officer and Treasurer of PLI. He has been associated with PLI since 1977.
Mr. Choksi oversees the finance, accounting, information services and systems
development departments of the General Partner and its Affiliates and oversees
the structuring, planning and monitoring of the partnerships sponsored by the
General Partner and its Affiliates. Mr. Choksi graduated from the Indian
Institute of Technology, Bombay, India with a degree in Engineering. He holds
an M.B.A. degree from the University of California, Berkeley.
GARY W. MARTINEZ, age 44, is Senior Vice President of PLI. He has been
associated with PLI since 1976. He manages the Asset Management Department,
which is responsible for lease and loan portfolio management. This includes
credit analysis, contract terms, documentation and funding; remittance
application, change processing and maintenance of customer accounts; customer
service, invoicing, collection, settlements and litigation; negotiating lease
renewals, extensions, sales and buyouts; and management information reporting.
From 1973 to 1976, Mr. Martinez was a Loan Officer with Crocker National Bank,
San Francisco. Prior to 1973, he was an Area Manager with Pennsylvania Life
Insurance Company. Mr. Martinez is a graduate of California State University,
Chico.
BRYANT J. TONG, age 40, is Senior Vice President, Financial Operations and
a Director of PLI. He has been with PLI since 1982. Mr. Tong is responsible
for investor services and overall company financial operations. He is
also responsible for the technical and administrative operations of the cash
management, corporate accounting, partnership accounting, accounting systems,
internal controls and tax departments, in addition to Securities and Exchange
Commission and other regulatory agency reporting. Prior to his association
with PLI, Mr. Tong was Controller-Partnership Accounting with the Robert A.
McNeil Corporation for two years and was an auditor with Ernst & Whinney
(succeeded by Ernst & Young) from 1977 through 1980. Mr. Tong holds a B.S. in
Accounting from the University of California, Berkeley, and is a Certified
Public Accountant.<PAGE>
<PAGE>
Page 36 of 41
Item 10. Directors and Executive Officers of the Registrant
(continued).
SUSAN D. ACKERMAN, age 53, is Vice President, Secretary and a Director of
PLI. She joined PLI in 1978. She oversees the personnel, corporate
secretarial and corporate communications functions of the General Partner and
its affiliates. Her duties include responsibility for recruitment and
placement of personnel, and development and administration of employee
benefits, salary and bonus policies. Prior to her association with PLI, Ms.
Ackerman served as Educational and Administrative Assistant to the Business,
Economics and Foreign Language Departments at the College of Marin and as legal
assistant to an appellate attorney. She attended St. Olaf College and the
University of Oslo.
Neither the General Partner nor any Executive Officer of the General
Partner has any family relationship with the others.
Phoenix Leasing Incorporated or its affiliates and the executive officers
of the General Partner serve in a similar capacity to the following affiliated
limited partnerships:
Phoenix Leasing American Business Fund, L.P.
Phoenix Leasing Cash Distribution Fund V, L.P.
Phoenix Income Fund, L.P.
Phoenix High Tech/High Yield Fund
Phoenix Leasing Cash Distribution Fund IV
Phoenix Leasing Cash Distribution Fund III
Phoenix Leasing Cash Distribution Fund
Phoenix Leasing Capital Assurance Fund
Phoenix Leasing Income Fund VII
Phoenix Leasing Income Fund VI
Phoenix Leasing Growth Fund 1982
Phoenix Leasing Income Fund 1982-2
Phoenix Leasing Income Fund 1981
Phoenix Leasing Income Fund 1980
Phoenix Leasing Income Fund 1977 and
Phoenix Leasing Income Fund 1975<PAGE>
<PAGE>
Page 37 of 41
Item 11. Executive Compensation.
Set forth is the information relating to all direct remuneration paid or
accrued by the Registrant during the last year to the General Partner.
(A) (B) (C) (D)
Aggregate of
Name of Capacities Cash and cash- contingent
Individual or in which equivalent forms forms of
persons in group served of remuneration remuneration
(C1) (C2)
Securities or
Salaries, fees, property insurance
directors' fees, benefits or reim-
commissions and bursement, personal
bonuses benefits
---------------- -------------------
(Amounts in Thousands)
Phoenix Leasing
Incorporated General Partner $156(1) $0 $0
===== == ==
(1) consists of management and acquisition fees.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
(a) No person owns of record, or is known by the Registrant to own
beneficially, more than five percent of any class of voting
securities of the Registrant.
(b) The General Partner of the Registrant owns the equity securities of
the Registrant set forth in the following table:
(1) (2) (3)
Title of Class Amount Beneficially Owned Percent of Class
-------------- ------------------------- ----------------
General Partner Represents a 5% interest in the 100%
Interest Registrant's profits and distributions,
until the Limited Partners have
recovered their capital contributions
plus a cumulative return of 12% per
annum, compounded quarterly, on the
unrecovered portion thereof. Thereafter,
the General Partner will receive 15%
interest in the Registrant's profits
and distributions.
Limited Partner
Interest 336 units .09%
Item 13. Certain Relationships and Related Transactions.
None.<PAGE>
<PAGE>
Page 38 of 41
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
Page No.
--------
(a) 1. Financial Statements for the year ended
December 31, 1994:
Consolidated Balance Sheets as of December
31, 1994 and 1993 15
Consolidated Statements of Operations
for the Years Ended December 31, 1994,
1993 and 1992 16
Consolidated Statements of Partners' Capital
for the Years Ended December 31, 1994,
1993 and 1992 17
Consolidated Statements of Cash Flows for
the Years ended December 31, 1994, 1993
and 1992 18
Notes to Consolidated Financial Statements 19-33
2. Financial Statement Schedule:
Schedule II - Valuation and Qualifying
Accounts and Reserves 41
All other schedules are omitted because they are not
applicable, or not required, or because the required
information is included in the financial statements or
notes thereto.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the year ended December 31,
1994.
(c) Exhibits
2. Plan of acquisition, reorganization, arrangement, liquidation or
succession:
a) Balance Sheet as of August 31, 1994
(unaudited). E2 1-9
Profit and Loss Statement for the eight
months ended August 31, 1994 (unaudited).
Balance Sheet as of December 31, 1993
(unaudited).
Profit and Loss Statement for the year
ended December 31, 1993 (unaudited).
b) Settlement Agreement and Releases dated
September 15, 1994. E2 10-36
21. Additional Exhibits
a) Listing of all subsidiaries of the Registrant:<PAGE>
<PAGE>
Page 39 of 41
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K (continued).
Phoenix Concept Cablevision, Inc., a Nevada corporation
Majority owned (58%) subsidiary of Phoenix Leasing Cash
Distribution Fund II
b) Financial Statements for Significant Subsidiaries:
Phoenix Joint Venture 1994-1 E21 1-11
27. Financial Data Schedule<PAGE>
<PAGE>
Page 40 of 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PHOENIX LEASING CASH DISTRIBUTION FUND II
(Registrant)
BY: PHOENIX LEASING INCORPORATED,
A CALIFORNIA CORPORATION
GENERAL PARTNER
Date: March 28, 1995 By: /S/ GUS CONSTANTIN
-------------- ------------------------------------
Gus Constantin, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/S/ GUS CONSTANTIN President, Chief Executive March 28, 1995
------------------ Officer and a Director of --------------
(Gus constantin) Phoenix Leasing Incorporated,
General Partner
/S/ PARITOSH K. CHOKSI Chief Financial Officer, March 28, 1995
---------------------- Senior Vice President --------------
(Paritosh K. Choksi) and Treasurer of
Phoenix Leasing Incorporated
General Partner
/S/ BRYANT J. TONG Senior Vice President, March 28, 1995
------------------ Financial Operations --------------
(Bryant J. Tong) (Principal Accounting Officer)
and a Director of
Phoenix Leasing Incorporated
General Partner
/S/ GARY W. MARTINEZ Senior Vice President of March 28, 1995
-------------------- Phoenix Leasing Incorporated --------------
(Gary W. Martinez) General Partner
/S/ MICHAEL K. ULYATT Partnership Controller March 28, 1995
--------------------- Phoenix Leasing Incorporated --------------
(Michael K. Ulyatt) General Partner
<PAGE>
<PAGE>
<TABLE>
Page 41 of 41
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
SCHEDULE II
(Amounts in Thousands)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
----------------------------------------------------------------------------------------------------
Classification Balance at Charged to Charged to Deductions Balance at
Beginning of Expense Revenue End of
Period Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1992
Allowance for losses on accounts
receivable $ 528 $ 0 $ 0 $ 60 $ 468
Allowance for early termination
of financing leases 1 1 0 (2)(1) 4
Allowance for losses on notes
receivable 143 110 0 0 253
----- ---- ----- ----- -----
Totals $ 672 $111 $ 0 $ 58 $ 725
===== ==== ===== ===== =====
Year ended December 31, 1993
Allowance for losses on accounts
receivable $ 468 $ 0 $ 0 $ 15 $ 453
Allowance for early termination
of financing leases 4 0 4 0 0
Allowance for losses on notes
receivable 253 115 0 0 368
----- ---- ----- ----- -----
Totals $ 725 $115 $ 4 $ 15 $ 821
===== ==== ===== ===== =====
Year ended December 31, 1994
Allowance for losses on accounts
receivable $ 453 $ 2 $ 334 $ 38 $ 83
Allowance for losses on notes
receivable 368 0 0 0 368
----- ---- ----- ----- -----
Totals $ 821 $ 2 $ 334 $ 38 $ 451
===== ==== ===== ===== =====
(1) This amount represents the application (reversal) of the allowance for loss from early termination
of financing leases.
</TABLE>
<PAGE>
E2 1 of 36
Exhibit 2a.
The accompanying balance sheets and profit and loss statements for Concept
Cablevision of South Carolina, Inc. (the Cable Company) are unaudited. The
issued and outstanding shares of the Cable Company were acquired by Phoenix
Concept Cablevision, Inc. on September 15, 1994 through foreclosure on a
defaulted note receivable to the Registrant and affiliates. The Registrant
owns approximately 58% of the outstanding shares of Phoenix Concept
Cablevision, Inc.
Audited financial statements of the Cable Company satisfying the requirements
of Rule 3-05 of Regulation S-X are not available. In addition, an unaudited
balance sheet as of June 30, 1993, an unaudited statement of cash flows for the
six months ended June 30, 1994 and 1993, and an unaudited statement of
operations for the six months ended June 30, 1994 and 1993 are not available.
In lieu of the one year audited financial statement required under of Rule 3-05
of Regulation S-X, Registrant has included an unaudited balance sheet and
statement of operations for such period. In lieu of the interim financial
statements required under Rules 3-01 and 3-02 of Regulation S-X, Registrant has
included an unaudited balance sheet as of August 31, 1994 and an unaudited
profit and loss statement for the eight months ended August 31, 1994.<PAGE>
<PAGE>
E2 2 of 36
August 31, 1994
Concept Cablevision of South Carolina, Inc.
Balance Sheet
As of August 31, 1994
CURRENT ASSETS
Cash - Integra Bank $ 731.26
Cash - Farmers and Merchants 1,439.14
Cash - The Farmers Bank 25,589.62
Petty Cash 100.00
-------------
Total Cash $ 27,860.02
Accounts Receivable 39,433.77
Amount Due From Affiliates (4,690.15)
-------------
Total Receivables $ 34,743.62
Prepaid Expenses 16,237.13
Deposits 1,188.00
-------------
Total Other Assets $ 17,425.13
-------------
TOTAL CURRENT ASSETS $80,028.77
FIXED ASSETS
Land $ 20,460.00
Earth Stations 40,603.25
Head End - Tower 84,835.94
Head End - Building 8,300.00
Head End - Electronics 196,232.56
Distribution Plant - Aerial 700,935.42
Distribution Plant - Underground 14,506.03
Connections 237,380.02
Other Equipment 12,356.72
Vehicles 7,772.60
Accumulated Depreciation (426,203.94)
Purchased Franchises 230,181.11
Accumulated Amortization (77,852.76)
-------------
TOTAL FIXED ASSETS $1,049,506.95
-------------
TOTAL ASSETS $1,129,535.72
============<PAGE>
<PAGE>
E2 3 of 36
August 31, 1994
Concept Cablevision of South Carolina, Inc.
Balance Sheet
As of August 31, 1994
CURRENT LIABILITIES
Accounts Payable $ 13,373.61
Insurance Premium Payable 3,439.07
Sales Tax Payable 2,398.62
Franchise Fees Payable 8,367.49
Pre-Paid Sub Accounts 5,264.49
Amounts Due BCI (103,463.09)
-------------
Gross Accounts Payable $ (70,619.81)
SBA Loan 16,368.54
Amounts Due Affiliate; HUGO Loans 8,307.51
Helen P. Belisle's Loan - HUGO 26,900.00
Management Fee Payable 87,947.34
Customer Deposits 3,730.00
-------------
TOTAL CURRENT LIABILITIES $ 72,633.58
LONG TERM LIABILITIES
Long Term Debt $ 1,150,000.00
Accrued Interest 1,488,070.20
-------------
TOTAL LONG TERM LIABILITIES $2,638,070.20
-------------
TOTAL LIABILITIES $2,710,703.78
-------------
STOCKHOLDER'S EQUITY:
Common Stock $1.00
Additional Paid-in Capital 346,181.90
Stockholder's Equity (1,812,291.98)
Net Profit / (Loss) (115,058.98)
-------------
TOTAL STOCKHOLDER'S EQUITY $(1,581,168.06)
-------------
TOTAL LIABILITIES AND EQUITY $1,129,535.72
=============<PAGE>
<PAGE>
E2 4 of 36
Date: Concept Cablevision of South Carolina, Inc.
August 31, 1994
Profit and Loss Statement
For the period August 1, 1994 to August 31, 1994
Current Period RATIO Year to Date
Amount Amount
SALES INCOME
Basic $ 34,788.54 65.45 $ 275,772.79
Premium 10,559.40 19.87 86,280.25
Commercial 2,662.00 5.01 21,296.00
Additional Outlets 736.75 1.39 5,845.54
Converters 1,504.32 2.83 9,553.83
Installations 1,099.99 2.07 9,715.58
Delinquent Fee 974.00 1.83 7,074.00
Other 814.32 1.53 8,850.97
------------- ------- ------------
Gross Sales $ 53,139.32 99.98 $ 424,388.96
Sales Returns (10.29) (.02) 729.20
------------- ------- ------------
TOTAL INCOME FROM
OPERATIONS $ 53,149.61 100.00 $ 423,659.76
OPERATING EXPENSES
Write Offs $ 1,353.68 2.55 $ 8,133.98
Pole Attachments 1,312.81 2.47 10,502.48
Utilities 1,102.22 2.07 7,219.86
Vehicle Exp-Fuel 790.89 1.49 2,895.33
Vehicle Exp-Lease .00 .00 1,750.00
Vehicle Exp-Maint 3.00 .01 1,522.69
Head End Electronics
Repair 408.76 .77 1,446.35
Distrib. Plant Aerial
Repair .00 .00 98.28
Small Tools Expense 4.94 .01 690.68
Program Fees 12,006.04 22.59 90,681.62
Personnel Fees 8,009.30 15.07 53,145.82
Telephone 457.00 .86 4,867.19
Postage 783.50 1.47 5,288.37
Office Rent 350.00 .66 2,800.00
Equipment Rental 45.16 .08 361.28
Office Supplies 292.36 .55 4,150.18
Travel .00 .00 2,558.78
Meals and Entertainment 1,115.61 2.10 1,526.27
Licenses and Taxes 96.00 .18 569.99
Legal and Professional 14,478.11 27.24 27,536.16
Memberships & Dues 117.50 .22 698.12
Employee Insurance 437.04 .82 3,496.32
Franchise Fees 495.21 .93 4,371.25
Copyrights 92.94 .17 787.68
Collection Expense 2.65 .00 642.90<PAGE>
<PAGE>
E2 5 of 36
Date: Concept Cablevision of South Carolina, Inc.
August 31, 1994
Profit and Loss Statement
For the period August 1, 1994 to August 31, 1994
Current Period RATIO Year to Date
Amount Amount
Miscellaneous Exp 120.37 .23 347.84
Guides 152.18 .29 1,217.44
Advertising .00 .00 79.73
Insurance 1,241.65 2.34 9,447.35
Bank Charges .00 .00 75.80
--------------- ------- ------------
TOTAL OPERATING EXP $ 45,268.92 85.17 $ 248,909.74
--------------- ------- ------------
NET INCOME FROM OPERATIONS 7,880.69 14.83 $ 174,750.02
OTHER INCOME
Other Income $ 192.49 .36 $ 1,937.26
--------------- ------ ------------
TOTAL OTHER INCOME $ 192.49 .36 $ 1,937.26
OTHER EXPENSES
Management Fee $ 2,608.27 4.91 $ 20,865.74
Interest 88.93 .17 75,872.98
Financing .00 .00 676.38
Deferred Interest 32,568.77 61.28 177,298.02
South Carolina Sale .00 .00 12,805.76
System Clean-up (Hugo) .00 .00 4,227.38
--------------- ------ -----------
TOTAL OTHER EXPENSES $ 35,265.97 66.35 $ 291,746.26
--------------- ------ -----------
NET INCOME (LOSS) $ (27,192.79) (51.16) $(115,058.98)
=============== ====== ===========<PAGE>
<PAGE>
E2 6 of 36
December 31, 1993
Concept Cablevision of South Carolina, Inc.
Balance Sheet
For All Locations
For All Departments
As of December 31, 1993
Assets
CURRENT ASSETS
Cash - Integra Bank $ 2,037.77
Cash - Farmers and Merchants 2,096.92
Cash - The Farmers Bank 14,576.82
Petty Cash 100.00
-------------
Total Cash $ 18,811.51
Accounts Receivable 28,209.82
Amount Due From Affiliates (4,690.15)
-------------
Total Receivables $ 23,519.67
Prepaid Expenses 6,402.95
Deposits 1,188.00
-------------
Total Other Assets $ 7,590.95
-------------
TOTAL CURRENT ASSETS $ 49,922.13
FIXED ASSETS
Land $ 20,460.00
Earth Stations 40,603.25
Head End - Tower 84,835.94
Head End - Building 8,300.00
Head End - Electronics 196,024.76
Distribution Plant - Aerial 700,935.42
Distribution Plant - Underground 14,506.03
Connections 227,170.58
Other Equipment 12,156.38
Vehicles 7,772.60
Purchased Franchises 230,181.11
Depreciation & Amortization (504,056.70)
-------------
TOTAL FIXED ASSETS $1,038,889.37
-------------
TOTAL ASSETS $1,088,811.50
============= <PAGE>
<PAGE>
E2 7 of 36
December 31, 1993
Concept Cablevision of South Carolina, Inc.
Balance Sheet
For All Locations
For All Departments
As of December 31, 1993
Liabilities And Equity
CURRENT LIABILITIES
Accounts Payable $ 23,152.64
Insurance Premium Payable .00
Sales Tax Payable 2,050.69
Franchise Fees Payable 14,470.51
Pre-Paid Sub Accounts 5,740.35
Amounts Due BCI (19,414.31)
------------
Gross Accounts Payable $ 25,999.88
Loan - Helen P. Belisle .00
HBO Loan (Belisle) .00
SBA Loan 30,600.57
Amts Due Affiliate; HUGO Loan 8,307.51
Helen P. Belisle's Loan - HUGO 26,900.00
Management Fee Payable 87,947.34
Customer Deposits 3,775.00
-------------
TOTAL CURRENT LIABILITIES $ 183,530.30
LONG TERM LIABILITIES
Long Term Debt $1,150,000.00
Accrued Interest 1,310,772.18
-------------
TOTAL LONG TERM LIABILITIES $2,460,772.18
-------------
TOTAL LIABILITIES $ 2,644,302.48
STOCKHOLDER'S EQUITY:
Common Stock $1.00
Additional Paid-in Capital 256,800.00
Stockholder's Equity (1,593,303.25)
Net Profit / (Loss) (218,988.73)
-------------
TOTAL STOCKHOLDER'S EQUITY $(1,555,490.98)
--------------
TOTAL LIABILITIES AND EQUITY $1,088,811.50
=============<PAGE>
<PAGE>
E2 8 of 36
Concept Cablevision of South Carolina, Inc.
Profit and Loss Statement
For All Locations
For All Departments
For the period January 1, 1993 to December 31, 1993
Current Period Year to Date
Amount Ratio Amount
SALES INCOME
Basic $ 396,742.81 62.84 $ 396,742.81
Premium 136,026.58 21.55 136,026.58
Commercial 27,183.26 4.31 27,183.26
Additional Outlets 18,926.11 3.00 18,926.11
Converters 16,928.04 2.68 16,928.04
Installations 14,326.75 2.27 14,326.75
Delinquent Fee 10,723.32 1.70 10,723.32
Other 10,499.81 1.66 10,499.81
------------- ------- ------------
Gross Sales $ 631,356.68 100.00 $ 631,356.68
Sales Returns 1,258.07 .20 1,258.07
------------- ------- ------------
TOTAL INCOME FROM
OPERATIONS $ 630,098.61 99.80 $ 630,098.61
OPERATING EXPENSES
South Carolina Sale $ .00 .00 $ .00
Write Offs 25,729.98 4.08 25,729.98
Pole Attachments 19,533.37 3.09 19,533.37
Utilities 10,539.81 1.67 10,539.81
Vehicle Exp-Fuel 2,465.98 .39 2,465.98
Vehicle Exp-Lease 3,227.15 .51 3,227.15
Vehicle Exp-Maint 1,867.24 .30 1,867.24
Head End Electronics
Repair 2,708.78 .43 2,708.78
Distrib. Plant Aerial
Repair 447.16 .07 447.16
Small Tools Expense 533.15 .08 533.15
Program Fees 133,340.01 21.12 133,340.01
Personnel Fees 91,354.70 14.47 91,354.70
Telephone 8,446.84 1.34 8,446.84
Postage 7,893.90 1.25 7,893.90
Office Rent 4,200.00 .67 4,200.00
Equipment Repairs 1,271.25 .20 1,271.25
Equipment Rental 568.35 .09 568.35
Office Supplies 4,803.25 .76 4,803.25
Travel 8,396.33 1.33 8,396.33
Meals and Entertainment 1,445.92 .23 1,445.92
Licenses and Taxes 535.56 .08 535.56
Legal and Professional 14,136.34 2.24 14,136.34
Memberships & Dues 713.02 .11 713.02<PAGE>
<PAGE>
E2 9 of 36
Concept Cablevision of South Carolina, Inc.
Profit and Loss Statement
For All Locations
For All Departments
For the period January 1, 1993 to December 31, 1993
Current Period Year to Date
Amount Ratio Amount
Employee Insurance 5,454.05 .86 5,454.05
Franchise Fees 8,224.45 1.30 8,224.45
Copyrights 888.61 .14 888.61
Collection Expense 1,099.00 .17 1,099.00
Miscellaneous Exp 407.16 .06 407.16
Management Fee 31,953.12 5.06 31,953.12
Guides 1,760.16 .28 1,760.16
Advertising 28.53 .00 28.53
Marketing 394.00 .06 394.00
Gifts 282.75 .04 282.75
Insurance 6,569.34 1.04 6,569.34
Bank Charges 99.98 .02 99.98
--------------- ------- ------------
TOTAL OPERATING EXP $ 401,319.24 63.56 $ 401,319.24
--------------- ------- ------------
NET INCOME FROM
OPERATIONS $ 228,779.37 36.24 $ 228,779.37
OTHER INCOME
Other Income $ 1,319.86 .21 $ 1,319.86
--------------- ------ ------------
TOTAL OTHER INCOME $ 1,319.86 .21 $ 1,319.86
OTHER EXPENSES
Interest $ 181,952.19 28.82 $ 181,952.19
Financing 901.84 .14 901.84
Depreciation 78,766.39 12.48 78,766.39
Amortization 12,861.44 2.04 12,861.44
Deferred Interest 174,606.10 27.66 174,606.10
--------------- ------ ------------
TOTAL OTHER EXPENSES$ 449,087.96 71.13 $ 449,087.96
--------------- ------ -----------
NET INCOME (LOSS) $ (218,988.73) (34.69) $(218,988.73)
=============== ====== ===========<PAGE>
<PAGE>
E2 10 of 36
Exhibit 2b.
SETTLEMENT AGREEMENT AND RELEASES
This Settlement Agreement and Releases ("Agreement") is
entered into as of this 15th day of September 1994, by and among Concept
Cablevision of South Carolina, Inc., formerly Belisle Communications, Inc., a
Delaware corporation ("Borrower"), Belisle Communications, Inc., a Delaware
Corporation ("BCI"), Phoenix Leasing Incorporated, a California corporation,
Phoenix Leasing Cash Distribution Fund III, a California limited partnership,
Phoenix Concept Cablevision, Inc., a Nevada Corporation ("Phoenix Concept"),
Helen P. Belisle ("H. Belisle") and B. Richer Belisle ("B. Belisle"), with
reference to the following facts which shall conclusively be presumed to be
true between the parties.
RECITALS
A. Borrower owns cable television systems serving the
communities of Holly Hill, St. George, Reevesville, Eutawville, the County of
Orangeburg, certain unincorporated areas in the County of Dorchester located in
South Carolina and other communities serviced by Borrower (individually and
collectively referred to as the "Systems").
B. Borrower is indebted to Phoenix Leasing Incorporated
to that certain senior loan agreement executed by Borrower in favor of Phoenix
Leasing Incorporated dated September 30, 1987 ("Senior Loan Agreement"),
pursuant to which Borrower made, executed and delivered to Phoenix Leasing
Incorporated that certain promissory note in the original principal amount of
$1,150,000 dated September 30, 1987 ("Note").
C. Subsequent to the execution of the Senior Loan
Agreement and Note, on or about January 27, 1992, Borrower made, executed and
delivered to Phoenix Leasing Incorporated that certain first amendment to
senior loan agreement ("Amendment"). Pursuant to the terms of the Amendment,
Borrower also made, executed and delivered to Phoenix Leasing Incorporated its
amended and restated promissory note in the original principal amount of
$1,150,000 dated effective January 1, 1992 ("Amended Note").
D. The loan made pursuant to the Senior Loan Agreement,
Note, Amendment and Amended Note is hereinafter referred to as the "Loan."
E. The proceeds of the Loan evidenced by the Senior Loan
Agreement, Amendment, Note and Amended Note were used to finance the
acquisition and improvement of the Systems.
F. The Loan is secured by a first priority and valid and
enforceable security interest in all of the Borrower's assets ("Collateral"),
including, but not limited to (i) the Systems; (ii) the Real Properties (as
defined below); (iii) those certain franchises more particularly described in
Exhibit "A" attached hereto and incorporated herein ("Franchises"); and
(iv) those certain leases more particularly described in Exhibit "B" attached
hereto and incorporated herein ("Leases"), as evidenced by that certain
security agreement, dated September 30, 1987, made, executed and delivered to
Phoenix Leasing Incorporated by Borrower, and by certain UCC financing
statements (individually and collectively referred to as the "Security
Agreement").
G. The Loan is further secured by a first priority and
valid and enforceable security interest in 100 shares of previously issued
stock of Borrower, denominated Certificate No. 1, ("Stock"), which Stock is
owned by H. Belisle, as evidenced by that certain stock pledge agreement dated
September 30, 1987, made, executed and delivered by Belisle to Phoenix Leasing<PAGE>
<PAGE>
E2 11 of 36
Incorporated ("Stock Pledge Agreement"). The Stock represents 100% of the
previously issued and outstanding stock of Borrower. On or about September 30,
1987, B. Richer Belisle made, executed and delivered to Phoenix Leasing
Incorporated his spousal consent ("Spousal Consent") pursuant to which
B. Belisle consented to H. Belisle's pledge of stock pursuant to the Stock
Pledge Agreement.
H. The Loan is further secured by those certain mortgages
and security agreements made, executed and delivered to Phoenix Leasing
Incorporated by Borrower on certain real property located in the counties of
Orangeburg and Dorchester, South Carolina, and recorded on October 29, 1987
("Mortgages") covering that certain real property described in Exhibit "C"
attached hereto and incorporated herein ("Real Properties").
I. On or about September 30, 1987, H. Belisle and
B. Belisle made, executed and delivered to Phoenix Leasing Incorporated their
guarantees ("Guarantees") pursuant to which they agreed to guarantee and pay to
Phoenix Leasing Incorporated all amounts owed by Borrower to Phoenix Leasing
Incorporated under the Loan.
J. On or about September 30, 1987, Borrower, as owner of
the Systems, and H. Belisle, as manager, entered into that certain management
agreement ("Management Agreement"). In connection with the Loan, H. Belisle,
Borrower and Phoenix Leasing Incorporated entered into that certain
subordination agreement re management fees dated September 30, 1987
("Subordination Agreement"), which Subordination Agreement provided, in part,
that H. Belisle subordinate all monies owing from Borrower to H. Belisle in
respect to management fees to all indebtedness owing from Borrower to Phoenix
Leasing Incorporated.
K. That subsequent to the execution of the Note, Senior
Loan Agreement, Amendment, Amended Note, Security Agreement, Stock Pledge
Agreement, Spousal Consent, Mortgages, Guarantees, Subordination Agreement and
any documents and instruments executed in connection therewith, all rights,
obligations and duties thereunder were assigned by Phoenix Leasing Incorporated
to Phoenix Leasing Cash Distribution Fund III. Phoenix Leasing Incorporated
and Phoenix Leasing Cash Distribution Fund III are hereinafter collectively
referred to as "Phoenix." Borrower, H. Belisle and B. Belisle are currently in
default of the performance of their obligations to Phoenix. By virtue of said
defaults, Phoenix has terminated making advances to Borrower under the Senior
Loan Agreement, Amendment, Note and Amended Note, accelerated the unpaid
balance of all indebtedness owed by Borrower to Phoenix, and declared all
obligations and indebtedness of Borrower to Phoenix to be immediately due,
owing and payable.
L. As of August 1, 1994, the unpaid principal balance
owed under the Loan is $1,150,000.00, plus accrued and unpaid interest of
$1,437,034.73, and other unpaid costs and expenses, including attorneys' fees
and costs, all of which continue to accrue (which are individually and
collectively referred to as the "Phoenix Obligations").
M. On June 9, 1994, Phoenix filed an action in the
Superior Court of California, County of Marin against Borrower, H. Belisle and
B. Belisle entitled Phoenix Leasing, Incorporated, etc. v. Concept Cablevision
of South Carolina, Inc., etc., et al., Marin County Superior Court Case
No. 160591 (the "Action") seeking to, inter alia, collect the outstanding
amounts owed on the Loan.
N. After a review of the options and alternatives,
Borrower, H. Belisle and B. Belisle hereby request Phoenix Concept to accept
transfer of the Stock in full satisfaction of the Phoenix Obligations.
O. Phoenix is willing to agree to the transfer of the
Stock to Phoenix Concept in full satisfaction of the Phoenix Obligations,<PAGE>
<PAGE>
E2 12 of 36
provided that Borrower, BCI, H. Belisle and B. Belisle, and each of them, enter
into this Agreement and specifically acknowledge the defaults of Borrower to
Phoenix, and make certain representations, warranties, waivers and agreements,
and satisfy all conditions precedent to the effectiveness of this Agreement as
provided for below. In connection with the transfer of the Stock, H. Belisle
and BCI are willing to release all outstanding obligations owed to them by
Borrower.
NOW, THEREFORE, in consideration of the above Recitals and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
AGREEMENT
1. Recitals and Loan Documents. The Recitals are
incorporated herein by this reference, as are all exhibits and schedules, and
the parties agree that the information recited above is true and correct. The
Note, Senior Loan Agreement, Amendment, Amended Note, Security Agreement, Stock
Pledge Agreement, Spousal Consent, Mortgages, Guarantees, Subordination
Agreement, and any documents and instruments executed in connection therewith
shall be individually and collectively referred to as "Loan Documents." The
"Effective Date" of this Agreement shall be the date all conditions precedent
of this Agreement have been satisfied or waived as the case may be. All terms
not defined herein shall have the meanings given them in the Loan Documents.
2. Acknowledgment. Borrower, H. Belisle and B. Belisle,
and each of them, acknowledge that they are in default under the Loan Documents
according to their terms and that all said amounts have been accelerated and
are immediately due and payable in full. Borrower, H. Belisle and B. Belisle,
and each of them, specifically acknowledge and confirm that they have no valid
offset or defense to the obligations evidenced by the Loan Documents, nor do
Borrower or H. Belisle or B. Belisle, or any of them, have any valid claim or
claims against Phoenix, and therefore Borrower, H. Belisle and B. Belisle, and
each of them, acknowledge, admit and confirm that they do not have any legal
right or theory on which to invoke or obtain legal or equitable relief, whether
injunctive relief or otherwise, in order to abate, postpone or terminate
enforcement by Phoenix of the obligations under the Loan Documents and
specifically waive and relinquish any such right to legal or equitable relief
to cause any such abatement, postponement or termination of enforcement
proceedings.
3. Conditions Precedent. The parties understand and
agree that satisfaction of all of the conditions precedent set forth below are
essential to render this Agreement effective and that the failure to satisfy by
September 30, 1994 all the conditions precedent of this Agreement set forth
below shall render this Agreement null and void, unless Phoenix agrees in
writing and in its sole and absolute discretion, opinion and judgment, to waive
any such conditions precedent. The effectiveness of all terms and performances
of this Agreement shall be subject to Phoenix and/or Phoenix Concept having
received all of the following documents, agreements, certificates and other
instruments, in a form satisfactory to Phoenix and Phoenix Concept in their
sole and absolute discretion, opinion and judgment, or the following having
occurred:
A. The original Resignation of Officers and
Directors (as defined in Section 4 below) in the form attached hereto as
Exhibit "D" and incorporated herein, fully executed and acknowledged;
B. The Litigation List (as defined in Section 8
below) in the form attached hereto as Exhibit "E" and incorporated herein,
fully executed and acknowledged;<PAGE>
<PAGE>
E2 13 of 36
C. The original Environmental Agreement and
Indemnification, in the form attached hereto as Exhibit "F" and incorporated
herein, fully executed and acknowledged;
D. The original Covenant Not to Compete (as defined
in Section 4 below) in the form attached hereto as Exhibit "G" and incorporated
herein, fully executed and acknowledged;
E. The original Subscriber Report and Receivables
Certificate (as defined in Section 6 below) in the form attached hereto as
Exhibit "H" and incorporated herein, fully executed and acknowledged;
F. A resolution of Borrower evidencing approval and
authorization of the transactions contemplated hereunder and of the execution,
delivery and performance of this Agreement, and each of the documents and
instruments to be executed and/or delivered by Borrower, as the case may be;
G. Evidence of the completion of all recordings and
filings as may be necessary or, in the opinion of Phoenix, necessary to
complete the transfer of all right, title and interest in the Stock to Phoenix
Concept;
H. Certificate(s) of good standing showing that
Borrower is in good standing under the laws of the state of incorporation
and/or formation and certificates indicating that Borrower has qualified to
transact business; and
I. The favorable opinion of Buchanan Ingersoll,
counsel to Borrower, H. Belisle and B. Belisle, in form and substance
satisfactory to Phoenix and Phoenix Concept, which opines, in part, that the
transactions which are the subject of this Agreement do not violate any federal
or state securities laws which are applicable to the transactions hereunder.
4. Transfer of Stock in Full Satisfaction of Phoenix
Obligations.
A. Subject to the terms and conditions of this
Agreement and in partial consideration of the satisfaction of the Phoenix
Obligations, H. Belisle hereby forthwith transfers to Phoenix Concept all
right, title and interest in the Stock in full satisfaction of the Phoenix
Obligations. Borrower, H. Belisle and B. Belisle, and each of them,
specifically acknowledge and agree that such transfer of the Stock in full
satisfaction of the Phoenix Obligations is a benefit to Borrower, H. Belisle
and B. Belisle, and each of them, and that Phoenix and Phoenix Concept are
acting in good faith.
B. Borrower, H. Belisle and B. Belisle, and each of
them, hereby waive and renounce any right that they may have to notice of any
proposals to transfer the Stock in full satisfaction of the Phoenix
Obligations, including, but not limited to, any notice required under Uniform
Commercial Code section 9505 and/or any notice requirement under California,
South Carolina, Pennsylvania, Delaware or any other state law, and any notice
requirement contained in the Loan Documents and/or Stock Pledge Agreement, and
agree that any notice requirement shall be deemed to have occurred and been
satisfied, fulfilled, terminated and waived by Borrower, H. Belisle and
B. Belisle, and each of them. Borrower, H. Belisle and B. Belisle, and each of
them, further waive and renounce any right they may have to object to such
transfer of the Stock to Phoenix Concept. Borrower, H. Belisle and B. Belisle,
and each of them, further waive and renounce any and all rights they may have
to redeem the Stock. Borrower, H. Belisle and B. Belisle, and each of them,
hereby specifically agree and acknowledge that all such waivers are made after
default.<PAGE>
<PAGE>
E2 14 of 36
C. Borrower, H. Belisle and B. Belisle, and each of
them, hereby acknowledge and agree that H. Belisle has, without duress,
voluntarily and freely relinquished possession and control of, and has
previously delivered the Stock to Phoenix prior to the Execution Date of this
Agreement. Borrower, H. Belisle and B. Belisle, and each of them, hereby
consent and authorize Phoenix to turn over possession of the Stock to Phoenix
Concept upon their execution of this Agreement (the "Execution Date").
Phoenix, Phoenix Concept and their agents and representatives shall be
entitled, at all times and upon notice to Borrower before the Execution Date,
to visit and inspect the Collateral and to conduct such tests and examinations
as Phoenix and Phoenix Concept may wish, including, but not limited to, an
audit, at Phoenix's expense, of the books and records of Borrower.
D. Borrower, H. Belisle and B. Belisle, and each of
them, acknowledge and agree that Phoenix Concept has a legal right to accept
transfer of the Stock and that such transfer shall remain, validly perfected,
proper in all respects and in full force and effect. Borrower, H. Belisle and
B. Belisle, and each of them, acknowledge and agree that the transfer of the
Stock to Phoenix Concept pursuant to the terms of this Agreement is not subject
to and does not violate any provisions of any state and/or federal securities
laws which currently are in effect, and that Phoenix has no obligation to
comply with any such state and/or federal securities laws in order to
consummate the transactions set forth in this Agreement.
E. Borrower, H. Belisle and B. Belisle, and each of
them, agree not to object to the transfer of the Stock to Phoenix Concept nor
to invoke or obtain legal or equitable relief, whether injunctive relief or
otherwise, in order to abate, postpone or terminate such transfer. Borrower,
H. Belisle and B. Belisle, and each of them, hereby relinquish any right they
may have to prevent the transfer of the Stock to Phoenix Concept, and
acknowledge Phoenix Concept shall have an absolute right to accept transfer of
the Stock in consideration of the forgiveness of the Phoenix Obligations.
F. Borrower, H. Belisle and B. Belisle, and each of
them, specifically acknowledge and agree that the transfer of the Stock to
Phoenix Concept in full satisfaction of the Phoenix Obligations constitutes a
full and complete transfer of all right, title and interest in and to the Stock
for fair and adequate consideration, in exchange for reasonably equivalent
value and made in good faith, by and between Borrower, H. Belisle, B. Belisle,
on the one hand, and Phoenix and Phoenix Concept, on the other hand.
G. The transfer of the Stock to Phoenix Concept
shall be immediate and absolute, and after the Effective Date neither Borrower
nor H. Belisle nor B. Belisle, or any of them, shall have (and none of them
reserves) any right, title or interest of any kind whatsoever in or to the
Stock, including, without limitation, any legal, beneficial or equitable
interest, all of which are negated on the Effective Date. Borrower,
H. Belisle and B. Belisle, and each of them, represent and warrant that the
transfer of the Stock is absolute and that Borrower, H. Belisle and B. Belisle
do not have equitable or other liens on the Stock. Borrower, H. Belisle and
B. Belisle, and each of them, hereby waive and release (to the maximum extent
permitted by law) any and all equitable, legal, beneficial or other rights,
titles or interests, if any, which Borrower, H. Belisle, or B. Belisle or any
of them, might have or otherwise have had after the Effective Date in
connection with the Stock.
H. Borrower, H. Belisle and B. Belisle, and each of
them, hereby represent and warrant that the value of the Stock is substantially
less than the total outstanding balance of the Phoenix Obligations. Borrower,
H. Belisle, B. Belisle and Phoenix further specifically and individually agree
that the valuation of the Stock has been fairly, justly and impartially
established by appraisal and in open negotiations between the parties, without
duress of any kind, and as a result of H. Belisle's voluntary offer to permit
Phoenix to strictly foreclose upon the Stock in exchange for the forgiveness of
<PAGE>
<PAGE>
E2 15 of 36
the Phoenix Obligations, following the inability of Borrower, H. Belisle and
B. Belisle and their agents and representatives to locate a willing and able
buyer in the open market for the Collateral and/or the Stock at a purchase
price greater than or equal to the sum of the Phoenix Obligations.
I. Borrower, H. Belisle and B. Belisle, and each of
them, hereby represent and warrant to Phoenix and Phoenix Concept, and Phoenix
and Phoenix Concept are relying thereon, that all of Borrower's debts,
obligations and liabilities, including, but not limited to, all wages,
salaries, bonuses, overtime pay, vacation pay, holiday pay, payroll taxes,
employment fees, employment contracts, pension plan benefits, deferred
compensation plan benefits, hospitalization benefits, life benefits, disability
benefits, health insurance plans benefits or other employee benefits (except as
to Phoenix) are set forth on Exhibit "J" attached hereto and incorporated
herein. Borrower agrees to pay in the normal course of business all of the
debts, obligations and liabilities listed on Exhibit "K" which are due and
owing up to the Execution Date. H. Belisle and B. Belisle hereby agree to
indemnify, defend and hold Phoenix, Phoenix Concept and Borrower harmless from
and against any and all suits, claims, liabilities, losses, damages and costs,
including attorneys' fees, interest and penalties, incurred by Phoenix and/or
Phoenix Concept and/or Borrower as a result of or in connection with any
liability for any amount of such debts, obligations and liabilities (i) which
are not paid by Borrower as provided for on Exhibit "K"; and/or (ii) which are
not disclosed on Exhibit "J" attached hereto and incorporated herein.
J. Phoenix and/or Phoenix Concept does not directly
or indirectly assume any liability or responsibility for the performance,
payment, discharge or other resolution of any liability, obligation,
indebtedness, litigation, action, proceeding, contract, lien, security
interest, encumbrance, claim or other problem or matter which has been created
or assumed by Borrower, or which Borrower is involved in including, but not
limited to, any wages, salaries or overtime pay, bonuses, vacation pay or
holiday pay, payroll taxes, employment fees, employment contracts (or the
retention or employment of any of Borrower's employees) and other benefits
owing from Borrower, including, but not limited to, pension plans, deferred
compensation plans, hospitalization, life, disability, health insurance plan or
other employee benefit plan.
K. In the event that this Agreement is not closed on
the Effective Date and Phoenix Concept returns the Systems and the Stock to
Borrower and H. Belisle, respectively, Phoenix reserves (and continues to have)
all of its rights, remedies and recourse, including, but not limited to,
rights, remedies and recourse against Borrower, H. Belisle and B. Belisle, and
each of them, including, but not limited to, those set forth in Section 7
below. In that event, Borrower, H. Belisle and B. Belisle, and each of them,
shall remain liable and responsible on all of their liabilities and obligations
to Phoenix. In the event this Agreement is set aside for any reason whatsoever
and/or Phoenix Concept is required to return or restore any of the Stock
transferred to Phoenix Concept, or any portion thereof, then all liabilities,
obligations and indebtedness under the Loan Documents shall automatically be
revived, reinstated and restored and shall exist as though such payments had
never been made to Phoenix and/or the transfer of the Stock in satisfaction of
Phoenix Obligations never occurred.
L. Borrower, H. Belisle and B. Belisle, and each of
them, acknowledge and agree that:
(1) As a consequence of the transfer of the Stock in
full satisfaction of the Phoenix Obligations described in this Agreement,
Phoenix must file a Form 1099, Acquisition or Abandonment of Secured Property,
with the Internal Revenue Service which (among other things) may require
Phoenix to state the actual fair market value of the Stock as agreed to and to
report any forgiveness of debt to Borrower;<PAGE>
<PAGE>
E2 16 of 36
(2) The transfer of the Stock in full satisfaction of
the Phoenix Obligations is a compromise by Phoenix which, among other things,
considers the fact that Phoenix was entitled to be paid under the Loan
Documents in cash, without Phoenix and Phoenix Concept having to incur the
significant carrying costs and risks associated with the Collateral and the
Stock; and
(3) Each party accepts the risks associated with the
valuation of Borrower's assets and the Stock and Borrower, H. Belisle and
B. Belisle, and each of them, shall have no right to any proceeds from any sale
made by Phoenix Concept of the assets of Borrower and/or the Stock.
M. Borrower, H. Belisle and B. Belisle, and each of
them, confirm, acknowledge and agree that all of H. Belisle's right, title and
interest in and to the Stock owned by H. Belisle upon the Execution Date is
being transferred to Phoenix Concept and that B. Belisle holds no right, title
or interest in the Stock. Should any party discover subsequent to the
Execution Date that any stock of Borrower was not included in the Stock
transferred to Phoenix Concept, Borrower, H. Belisle and B. Belisle, and each
of them, hereby confirm, acknowledge and agree that they will immediately take
such action and execute such documents and instruments deemed necessary or
advisable by Phoenix and/or Phoenix Concept, in their sole and absolute
discretion, opinion and judgment, to transfer title to such omitted stock. H.
Belisle and B. Belisle, and each of them, acknowledge and agree that they will
indemnify and hold Phoenix and Phoenix Concept harmless from any costs and
expenses incurred by Phoenix and Phoenix Concept including, but not limited to,
attorneys' fees, in the event that it is necessary for Phoenix Concept and/or
Phoenix to take additional steps to obtain title to such omitted stock.
N. As partial consideration for the transfer of the
Stock in full satisfaction of the Phoenix Obligations, BCI, H. Belisle and
B. Belisle, and each of them, upon the Execution Date, shall execute and
deliver that certain Covenant Not to Compete, in the form of Exhibit "G"
attached hereto and incorporated herein ("Covenant"), which Covenant is given
as partial consideration for the transfer of the Stock to Phoenix Concept in
full satisfaction of the Phoenix Obligations. The Covenant shall provide, in
part, that H. Belisle and B. Belisle shall not compete either directly or
indirectly with Borrower within the area covered by the Systems and within 25
miles in the area contiguous and surrounding the Systems.
O. Until the Execution Date, Borrower, H. Belisle
and B. Belisle shall continue to operate the Systems and maintain the assets of
the Borrower diligently and in the same manner as Borrower, H. Belisle and
B. Belisle have been operating the Systems and shall not destroy, tamper with,
modify or make unavailable any books and records relating to the operations of
the Systems. Borrower and H. Belisle hereby agree to terminate the Management
Agreement and any amendments, modifications, renewals or replacements thereof,
and any other management agreements, as of the Execution Date. Neither
Borrower nor Phoenix Concept nor Phoenix shall have any liability or
responsibility of any kind or nature for the performance, payment, discharge of
the Management Agreement or any other management agreements after the Execution
Date.
P. On or after the Execution Date, Phoenix Concept
shall operate the Systems in any manner it chooses in its sole and absolute
discretion, opinion and judgment and neither Borrower, nor H. Belisle nor
B. Belisle shall have any right to participate in the operation and/or
management of the Systems.
Q. On the Execution Date, Borrower, H. Belisle and
B. Belisle, and each of them, shall deliver to Phoenix Concept all assets of
the Borrower, all books, records and other data in Borrower's or H. Belisle's
or B. Belisle's possession relating to the Collateral and the Stock, including,
but not limited to, all monies in any bank, deposit, payroll and checking<PAGE>
<PAGE>
E2 17 of 36
accounts, customer lists, suppliers, cost sheets, employee lists, copy of
payroll records and accounting records, plans, strand maps, house counts,
maintenance records, market studies, copies of insurance policies, copies of
any and all correspondence, reports, minute books, stock record books,
memoranda, modifications and/or amendments by and among Borrower, H. Belisle,
B. Belisle and any telephone and/or utility company franchising authority, the
FCC or any other governmental instrumentality and other documents reasonably
requested by Phoenix Concept.
R. All of the current officers of Borrower shall
execute and acknowledge and deliver to Phoenix Concept that certain resignation
of officers and directors ("Resignation of Officers and Directors"),
Exhibit "D", hereto of even date herewith, which Resignation of Officers and
Directors provides, in part, that the current officers and directors of
Borrower shall resign upon the Execution Date and shall not be entitled to any
compensation from either Borrower or Phoenix or Phoenix Concept, or any of
them, after the Execution Date;
S. Borrower, H. Belisle and B. Belisle, and each of
them, acknowledge that upon the Execution Date of this Agreement, Phoenix
Concept shall become the 100% and sole shareholder of Borrower and that
immediately following the Execution Date, Phoenix Concept shall: (1) call a
special meeting of Borrower and terminate the Borrower's current board of
directors and elect a new board of directors; (2) call a special meeting of the
new board of directors of Borrower and terminate the officers of the Borrower
and elect new officers; (3) make any changes to the bylaws and articles of
incorporation of Borrower which Phoenix Concept deems appropriate in its sole
and absolute discretion, opinion and judgment; (4) have the sole and exclusive
right to exercise all voting, consensual and other powers of ownership
pertaining to the Stock and shall exercise such powers in such a manner as
Phoenix Concept, in its sole and absolute discretion, opinion and judgment,
shall determine to be necessary, appropriate or advisable; and (5) shall have
the right to be paid and retain all dividends and other distributions on
account of the Stock;
T. On the Execution Date, Phoenix shall dismiss the
Action without prejudice; and
U. Subsequent to the Effective Date, Borrower,
H. Belisle and B. Belisle, and each of them: (1) shall deliver such additional
assignments, bills of sale, agreements, certificates, estoppel certificates,
reports, approvals, instruments, consents and opinions as Phoenix and Phoenix
Concept may request, in their sole and absolute discretion, opinion and
judgment necessary to effectuate the transactions reflected in this Agreement;
and (2) shall obtain and deliver to Phoenix Concept written consents,
approvals, notifications, assignments and other documents and agreements from
the towns of Holly Hill, St. George, Reevesville, Eutawville and the Counties
of Orangeburg necessary for an operation of the Systems; and (3) shall obtain
such agreements for the use of head end sites and public utility and municipal
facilities including, without limitation, all necessary leases, pole attachment
contracts, railroad crossing permits, easements, use permits and other
agreements which are required for the operation of the Systems, all of which
shall hereinafter be collectively referred to as the "Post Closing Consents".
On or before ten days after Phoenix and Phoenix Concept's receipt of the Post
Closing Consents, Phoenix shall (1) cancel and mark the Note and Amended Note
"paid in full"; (2) return to H. Belisle and B. Belisle their original
Guarantees; and (3) pay to H. Belisle and B. Belisle the sum of $190,000.00 in
consideration for the releases provided by them hereunder.
5. Costs and Expenses.
Except as provided in this Agreement, Borrower, H. Belisle,
B. Belisle and Phoenix shall each bear their own attorneys fees, costs and
expenses arising out of the negotiation, execution, delivery and performance of
<PAGE>
<PAGE>
E2 18 of 36
this Agreement, the dismissal of the Action, and the consummation of the
transactions contemplated hereby.
6. Security Deposits and Subscribers.
A. Borrower, H. Belisle and B. Belisle, and each of
them, represent and warrant that as of September 1, 1994, the total deposits
for cable equipment and credit balances due and owing to Borrower's subscribers
are $ 3,790.00 ("Security Deposits"). Borrower, H. Belisle and B. Belisle,
and each of them, represent and warrant that prior to the Execution Date, they
shall not make any disbursements of the Security Deposits, except for
legitimate refunds made by Borrower to Borrower's subscribers under binding
written contracts between the parties.
B. Borrower, H. Belisle and B. Belisle, and each of
them, shall execute, acknowledge and deliver that certain subscriber report and
receivables certificate which shall set forth the total number of subscribers
of the Borrower and receivables owed to the Borrower as of the date of this
Agreement ("Subscriber Report and Receivables Certificate"), in the form of
Exhibit "H", attached hereto and incorporated herein.
C. Borrower, H. Belisle and B. Belisle, and each of
them, represent and warrant that Borrower possesses two Television Receive Only
FCC licenses or registrations and no other FCC licenses or registrations.
7. New Litigation. In the event that the conditions
precedent to this Agreement are not satisfied on or before September 30, 1994,
Phoenix shall have the right, in its sole and absolute discretion, opinion and
judgment, to file a new action in Marin County Superior Court or any other
court having jurisdiction over Borrower, H. Belisle, or B. Belisle, or any of
them, in order to collect the outstanding amounts owed on the Loan; provided,
however, in that event nothing contained in this Agreement shall in any way
prevent Borrower, H. Belisle, B. Belisle, or any of them, from raising any
defenses and/or claims they consider appropriate in any such new action filed
by Phoenix.
8. Borrower's, H. Belisle's and B. Belisle's
Representations and Warranties. Except as specifically and expressly set forth
in Exhibit "P" attached hereto and incorporated herein, Borrower, H. Belisle
and B. Belisle, and each of them, represent and warrant to Phoenix and Phoenix
Concept as of the Execution Date, and Phoenix and Phoenix Concept are relying
thereon, as follows:
A. Phoenix has a first-priority, perfected security
interest in the Collateral and the Stock by virtue of the Loan Documents;
B. The security interest in the Collateral and the
Stock is valid, binding and enforceable, in accordance with the terms of the
Loan Documents.
C. The Collateral and the Stock have not been
pledged, hypothecated, encumbered or conveyed, except as to Phoenix pursuant to
the Loan Documents and are owned by Borrower and H. Belisle, as applicable,
free and clear of all security interests, claims, liens (voluntary or
involuntary), encumbrances, judgment liens, leases and rights of others except
as to Phoenix. Borrower, H. Belisle and B. Belisle, and each of them, further
represent and warrant that H. Belisle has the full right, power and authority
to transfer and deliver to Phoenix Concept, in accordance with this Agreement,
the Stock free and clear of all liens, charges, claims, equities, restrictions,
encumbrances, preemptive and other similar rights and that the transfer of the
Stock does not constitute a breach or a violation of, or default under, any
will, deed of trust, agreement or other instrument by which they are bound.<PAGE>
<PAGE>
E2 19 of 36
D. The execution and carrying out of the provisions
of this Agreement and compliance with the provisions will not violate any
provision of law and will not conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any property or
assets of the Borrower pursuant to its articles of incorporation, bylaws, or
any indenture, mortgage, deed of trust, agreement or other instrument to which
the Borrower or H. Belisle is a party or by which it is bound or affected;
E. Borrower has an authorized capital of 1,000
shares of common stock, of which 100 are validly issued and outstanding, fully
paid and nonassessable, all of which are held by H. Belisle and have been
previously pledged to Phoenix. There are no outstanding stock options or
warrants with respect to, or privileges or rights to purchase or subscribe for,
any capital stock of Borrower, obligations or securities issued by Borrower
convertible into shares of capital stock of Borrower, agreements provided for
or relating to any options, warrants, purchase rights, privileges, convertible
obligations, or securities to which the Borrower is a party, or any agreements
by Borrower to issue, sell or acquire any of its capital stock.
F. The following constitute the present officers and
directors of the Borrower:
(i) H. Belisle - President,
Treasurer and Member of the
Board of Directors;
(ii) B. Belisle - Vice President
and Secretary
G. Attached hereto and incorporated herein by this
reference as though set forth in full as Exhibit "L" are statement of income
and retained earnings of the Borrower for the fiscal year ending December 31,
1993 and quarter ending June 30, 1994 and a balance sheet of the Borrower as of
the fiscal year ending December 31, 1993 and quarter ending June 30, 1994
(collectively referred to as "Financial Statements") which have been prepared
by Borrower and present fairly and accurately the financial condition and
results of the operation of the Borrower.
H. Attached hereto as Exhibit "M" and incorporated
herein by this reference is a true and complete list, as of the date hereof,
showing the names of all persons who are entitled to receive compensation from
the Borrower for the fiscal year ending December 31, 1993 and the quarter
ending June 30, 1994; the name of each bank in which the Borrower has an
account or safe deposit box, and the names of all persons authorized to draw
thereon or to have access thereto and the names of all persons, if any, holding
tax or other powers of attorney from the Borrower and a summary of the terms
thereof.
I. Except as to the extent reflected or reserved in
the Financial Statements attached hereto as Exhibit "L", the Borrower, as of
the date of the Financial Statements, had no liabilities of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
known or unknown, including without limitation, tax liabilities due or to
become due, and incurred in respect of or measured by the Borrower's income for
any period up to such date, arising out of transactions entered into, or any
state of facts existing prior thereto and/or personal property taxes and
assessments owed to any state and county taxing authority.
J. Since June 30, 1994, the Borrower has not:
(i) Incurred any obligation or liability, absolute
or contingent, known or unknown, except current liabilities
incurred in the ordinary course of business;<PAGE>
<PAGE>
E2 20 of 36
(ii) Discharged or satisfied any lien or
encumbrance, or paid any obligation or liability, absolute
or contingent, other than current liabilities shown on the
Financial Statements, and current liabilities incurred
since such date in the ordinary course of business;
(iii) Declared or paid any dividends, made any
payment or distribution of any kind to shareholders, or
purchased or redeemed or otherwise acquired any shares of
capital stock;
(iv) Mortgaged, pledged, or subjected to lien,
charge or other encumbrance, any of its assets, tangible or
intangible;
(v) Sold or transferred any of its tangible
assets, or canceled any debts or claims, except in the
ordinary course of business;
(vi) Engaged in any transactions affecting its
business or properties not in the ordinary course of
business, or suffered any extraordinary losses or waived
any rights of substantial value;
(vii) Made or authorized any change in its
outstanding stock, or in its articles of incorporation or
bylaws;
(viii) Granted or agreed to grant any increase in
compensation to, or paid or agreed to pay any bonus to, or
made any similar arrangement with any of its directors,
officers, employees, or agents;
(ix) Suffered any damage, destruction, or loss
(whether or not covered by insurance) materially and
adversely affecting its properties or business; or
(x) Experienced any labor trouble, or any event or
condition of any character, materially and adversely
affecting its business or properties.
K. Since June 30, 1994, there have been no material
changes in the assets, liabilities, business, or condition of the Borrower
other than changes in the ordinary course of business, which changes have not
adversely affected its business, properties, prospects, or condition.
L. Except in each case as listed in Exhibit "N",
attached hereto and incorporated herein by this reference, the Borrower is not
a party to any written or oral:
(i) Contract for the employment of any officer or
individual employee;
(ii) Contract with any labor union;
(iii) Contract for the purchase of materials,
supplies, services, machinery, or equipment involving
payment by the Borrower of more than $1,000.00 in each
case, or more than $5,000.00 in the aggregate;
(iv) Contract continuing over a period of more than
one year from the date hereof;<PAGE>
<PAGE>
E2 21 of 36
(v) Contract not terminable on thirty (30) days'
notice or less without liability on the part of the
Borrower;
(vi) Distributor, sales agency, or advertising
contract, or contract for the sale of its products or
services;
(vii) Lease;
(viii) Contract with any subcontractor;
(ix) Bonus, pension, profit-sharing, retirement,
stock purchase, stock option, hospitalization, insurance,
or similar plan or practice, formal or informal, in effect
with respect to its employees or others; or
(x) Contract not made in the ordinary course of
business.
M. Except as set forth in the Recitals hereto, the
Borrower has performed all obligations required to be performed by it to date,
and is not in default under any contract, agreement, lease, commitment,
indenture, mortgage, deed of trust, or other document to which it is a party.
N. Borrower has filed all federal and state tax
returns which are required to be filed, and has paid all taxes which have
become due pursuant to such returns or pursuant to any assessment received by
Borrower. The amounts set up as a provision for taxes on the Financial
Statements are sufficient for the payment of all accrued and unpaid federal,
state, county, and local taxes of Borrower for the period ending on said date,
and for all fiscal years prior thereto. Borrower acknowledges that Phoenix
and/or Phoenix Concept do not have any knowledge of any tax deficiency proposed
or threatened against the Borrower.
O. Borrower is not a party to any contract or
agreement, or subject to any charter or other corporate restriction, which
materially and adversely affects its business, property, assets, operations, or
conditions, financial or otherwise, and Borrower is not a party to any contract
or agreement for the sale, transfer, assignment, or other disposition of the
Collateral, any of the assets of Borrower and/or any of the Systems.
P. Borrower has complied with, and is complying
with, all applicable laws, orders, rules, and regulations promulgated by any
federal, state, municipal, or other governmental authority relating to the
operation and conduct of the property and business of Borrower, and there are
no material violations of any such law, order, rule, or regulation existing or
threatened. Borrower has not received any notices of violation of any
applicable zoning regulation or order, or other law, order, regulation, or
requirement relating to the operation of its business or to its properties.
Borrower, H. Belisle and B. Belisle, and each of them, represent and warrant
that they have conducted an appropriate inquiry into previous uses and
ownership of the Systems, the property underlying the Systems and the
Collateral, and after such inquiry, have determined that, except as otherwise
disclosed to Phoenix in writing, the Collateral or the property underlying the
Systems has never been used by Borrower, H. Belisle and B. Belisle and/or
previous owners and/or operators in the disposal of or to refine, generate,
manufacture, produce, store, handle, treat, transfer, release, process or
transport any hazardous substance, except in compliance with all applicable
state and federal environmental laws, and further represent and warrant that
Borrower, H. Belisle and B. Belisle have never received a summons, citation,
notice, directive, letter or other communication, written or oral, from the
Environmental Protection Agency or other federal, state, or local governmental
agency or instrumentality concerning any action or omission by Borrower,<PAGE>
<PAGE>
E2 22 of 36
H. Belisle or B. Belisle, or any of them, resulting in the releasing, spilling,
leaking, pumping, pouring, emitting, emptying, dumping or otherwise disposing
of hazardous substances in connection with the Collateral, the Systems, or the
property underlying the Systems or the environment resulting in damages thereto
or to fish, shellfish, wildlife, biota or other natural resources.
Q. Borrower has good and sufficient title in and to
all of the assets listed on the Financial Statements or acquired by it after
such date, other than inventories sold or otherwise disposed of in the ordinary
course of business subsequent to such date; and such assets are in each case
free and clear of all mortgages, liens, charges, encumbrances, equities,
pledges, conditional sales agreements, or claims of any nature whatsoever,
except as stated in the Financial Statements.
R. The assets of Borrower are in good operating
condition and repair, and conform with all applicable ordinances, regulations,
zoning, and other laws.
S. All accounts receivable reflected in the
Financial Statements are current and collectible, except to the extent of the
reservation for bad debts included therein, and to the extent that they have
been collected since the date of the Financial Statements. All accounts
receivable arising since the date of the Financial Statements, to the extent
remaining unpaid as of the date hereof, are current and collectible.
T. No representation or warranty contained herein,
and no statement made in any certificate or schedule furnished in connection
with or attached to this Agreement, contains any untrue statement of a material
fact or omits to state any material fact necessary to make any such
representation, warranty, or statement not misleading to a prospective
purchaser of all of the capital stock of Borrower.
U. Borrower is a Delaware corporation, in good
standing and duly organized and existing under the laws of the State of
Delaware. Each person executing this Agreement and the documents and
instruments executed in connection with this Agreement in a representative
capacity has been duly authorized to execute said documents and instruments by
all appropriate action and is empowered to do so;
V. Borrower, H. Belisle and B. Belisle, and each of
them, agree that they will not (i) take any action which would interfere with
the performance of this Agreement or the documents and instruments executed in
connection with this Agreement by any of the parties hereto, (ii) take any
action which would interfere with the efforts of Phoenix Concept to operate,
use or manage the Systems in any way Phoenix Concept sees fit, or (iii) take
any action to exercise rights, titles and interests of Phoenix Concept, which
would adversely affect any of the rights provided for herein;
W. This Agreement and the documents and instruments
executed in connection with this Agreement constitute legal, valid and binding
obligations of Borrower and H. Belisle and B. Belisle, and each of them, as the
case may be, to Phoenix;
X. All actions, suits or proceedings pending, or to
the knowledge of Borrower, H. Belisle or B. Belisle, or any of them, after due
inquiry and investigation, threatened or affecting Borrower, H. Belisle or
B. Belisle, or any of them, are described in the litigation list ("Litigation
List") attached hereto as Exhibit "E" and incorporated herein. There are no
actions, suits or proceedings pending, or to the knowledge of Borrower,
H. Belisle or B. Belisle, or any of them, after due inquiry and investigation,
threatened against them or affecting Borrower, H. Belisle or B. Belisle, or
actions, suits or proceedings involving the validity or enforceability of this
Agreement, the documents and instruments executed in connection with this<PAGE>
<PAGE>
E2 23 of 36
Agreement or any of the Loan Documents or the priority of the liens thereof, at
law or in equity, or before or by any governmental agency;
Y. Borrower, H. Belisle or B. Belisle, or any of
them, are not aware, after due inquiry and investigation, of any matter, defect
or problem existing with respect to the condition of the Systems, the
Collateral or the Stock which has not been disclosed in writing to Phoenix
prior to the Execution Date;
Z. Borrower, H. Belisle and B. Belisle, and each of
them, have consulted their independent tax advisors, counsel and/or accountants
to advise them with respect to the tax consequences of the transfer of the
Stock to Phoenix Concept in full satisfaction of the Phoenix Obligations and
each is aware of such tax consequences. Neither Phoenix nor Phoenix Concept
shall have any responsibility or liability to Borrower, H. Belisle or
B. Belisle, or any of them, for the tax consequences to Borrower, H. Belisle or
B. Belisle, or any of them, which may result from the effects of consummation
of this Agreement or the timing thereof, and neither Phoenix, Phoenix Concept
nor any officer, employee, attorney or agent of Phoenix or Phoenix Concept has
made any representation or warranty of any kind whatsoever or provided any
advice to Borrower, H. Belisle or B. Belisle, or any of them, with respect to
the tax consequences, if any, to Borrower, H. Belisle or B. Belisle, or any of
them;
AA. Borrower, H. Belisle or B. Belisle, or any of
them, has not made or suffered any transfer which constitutes a fraudulent or
otherwise voidable transfer under Section 548 or any other provision of the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended from time
to time (the "Bankruptcy Code") or under any other applicable law. Borrower,
H. Belisle or B. Belisle, or any of them, have not made an assignment for the
benefit of creditors, or suffered or applied for, or consented to the
appointment of, any receiver, custodian or trustee for any of their property;
BB. Phoenix Concept may sell any or all of the Stock
in any manner that it wishes without any notice to, or consent from, Borrower,
H. Belisle or B. Belisle, or any of them;
CC. Borrower owns the entire fee interest in and to
the Real Properties, subject to no (1) purchase option, (2) lease or equitable
estate or ownership interest, (3) right to purchase or possession of any other
person or entity, or (4) other lien, claim, or encumbrance, except for those
lien claims or encumbrances set forth in Exhibit "I" attached hereto and
incorporated herein;
DD. Borrower has an enforceable leasehold interest,
as lessee, in all of the Leases subject to the terms and conditions reflected
in each individual Lease. There are no rights or powers in any entity or
person which would terminate Borrower's leasehold interests and each said Lease
is in full force and effect;
EE. Borrower, H. Belisle or B. Belisle, or any of
them, have not filed any voluntary petition or have sought any other relief
under the Bankruptcy Code, or under any other state or federal law granting
relief to debtors. No involuntary petition has been filed against Borrower,
H. Belisle or B. Belisle, or any of them, by any person or entity under any
provision of the Bankruptcy Code or any other applicable state or federal law
relating to bankruptcy or reorganization or other relief for debtors;
FF. Neither Borrower nor H. Belisle nor B. Belisle is
a "foreign person" and Borrower, H. Belisle and B. Belisle are each a "United
States Person" as such term is defined in Section 7701(a)(30) of the Internal
Revenue Code, as amended (Title 26 of the United States Code); <PAGE>
<PAGE>
E2 24 of 36
GG. Attached hereto as Exhibit "O" and incorporated
herein by this reference is a true and complete list of all of the personal and
real property assets of the Borrower;
HH. Borrower shall pay or will pay in full, to the
extent received by Borrower, all charges, bills and invoices for utilities,
labor, goods, materials and services of any kind relating to the Systems for
the period prior to the Execution Date as described in Exhibit "K" hereto;
II. There are, and as of the Execution Date, there
will be, no pending or contemplated actions, suits, arbitrations, claims or
proceedings, at law or in equity, affecting all or any portion of the Systems,
Collateral and/or Stock. Borrower, H. Belisle and B. Belisle, or any of them,
do not know, after due inquiry and investigation, of the existence of any
threatened or contemplated actions, claims or proceedings or of the existence
of any facts which might give rise to such actions, claims or proceedings;
JJ. Borrower, H. Belisle and/or B. Belisle, and each
of them, have no knowledge of, after due inquiry and investigation, and have
not received notice to the contrary, of any plan, study or effort which in any
way would materially affect the use of the Systems, or any portion thereof, for
its present uses or any intended public improvements which will result in any
charge being levied against or any lien assessed upon the Systems;
KK. No notices of violations of governmental
regulations relating to the Systems, Stock and/or Collateral have been issued
to or entered against any Borrower or received by Borrower, H. Belisle or B.
Belisle, or any of them, and, to the best of their knowledge, after due inquiry
and investigation, no such violations exist. The present use and operation of
the Systems are authorized by and in compliance with all governmental
regulations. The improvements located at the Real Properties and the real
property subject to the Leases are permitted, conforming structures under
applicable zoning and building laws and ordinances and the present uses thereof
are permitted, conforming uses under applicable zoning and building laws and
ordinances.
LL. All licenses, approvals, permits and certificates
from the authorities or private parties necessary for the operation of the
Systems are possessed by Borrower.
MM. Borrower, H. Belisle and/or B. Belisle, and each
of them, have no knowledge, after due inquiry and investigation, and have not
received any notice that any taxes or that any special assessments or charges
have been levied against the Systems and/or Real Properties or will result from
work, activities or improvements done to the Real Properties by Borrower, H.
Belisle and/or B. Belisle, or any of them.
NN. Except as set forth in this Agreement, there will
be no change in the ownership, operation or control of the Systems and
Collateral from the date hereof until the Effective Date;
OO. To the best of Borrower's, H. Belisle's and B.
Belisle's knowledge, after due inquiry and investigation, there are no physical
or mechanical defects or deficiencies in the condition of the Systems and
Collateral or any part thereof;
PP. To the best of Borrower's, H. Belisle's and B.
Belisle's knowledge, after due inquiry and investigation, there are no defects
which will impair the present use and operation of the Systems, or any portion
thereof. To the best of Borrower's, H. Belisle and B. Belisle's knowledge,
after due inquiry investigation, the soil condition of the Real Properties are
such that they will support all the improvements located thereon for their
foreseeable life without the need for unusual or new subsurface excavations,
fill, footings, or other installations;<PAGE>
<PAGE>
E2 25 of 36
QQ. Borrower, H. Belisle and B. Belisle, and each of
them, have not received any notices from any insurance company of any defects
or inadequacies in the Systems; and
RR. Borrower, H. Belisle and B. Belisle, or any of
them, have not entered into any contracts for the sale of the Systems, the
Stock and/or Collateral or any portion thereof or interest therein, nor do
there exist any rights of first refusal, options to purchase or offers by
Borrower to sell the Systems, the Stock and/or Collateral or any portion
thereof.
All representations, warranties and covenants of the
Borrower, H. Belisle and B. Belisle shall survive the execution of this
Agreement and the consummation of the transfers provided for hereunder.
9. Phoenix's Representations and Warranties. Phoenix and
Phoenix Concept represent and warrant to Borrower, H. Belisle and B. Belisle on
the Execution Date, and they are relying thereon, as follows:
A. Phoenix is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and
Phoenix Concept is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Nevada, with full power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby; and
B. Phoenix alone is the owner and holder of the Loan
Documents free and clear of all liens and Phoenix's execution of this Agreement
does not require the authorization, consent, approval, order or license of any
third party.
10. Covenants. In addition to any other covenants given
by Borrower, H. Belisle and B. Belisle, or any of them, Borrower, H. Belisle
and B. Belisle, and each of them, will:
A. Execute any and all documents as Phoenix or
Phoenix Concept may request in connection with this Agreement;
B. Cooperate fully with and assist Phoenix with
respect to the transfer of the Stock to Phoenix Concept;
C. Deliver to Phoenix Concept all books, records and
data and the operating systems and software necessary to maintain and retrieve
the books, records and data relating to the Stock and Collateral; and
D. On or before the Execution Date, deliver the
Stock and all assets of Borrower to Phoenix Concept.
11. No Joint Venture, Management and Control.
Notwithstanding any provision of this Agreement, any documents or instruments
executed in connection with this Agreement and/or the Loan Documents:
A. Prior to the Execution Date of this Agreement,
Phoenix or Phoenix Concept has not and shall not be construed to have been a
partner, joint venturer, alter ego, manager, controlling person or other
business associate or participant of any kind of Borrower, H. Belisle or
B. Belisle, or any of them, or any other persons or entities;
B. Prior to the Execution Date of this Agreement,
Phoenix or Phoenix Concept shall not be deemed responsible to perform nor
participate in any acts, omissions or decisions of Borrower, H. Belisle or
B. Belisle, or any of them; and<PAGE>
<PAGE>
E2 26 of 36
C. Borrower, H. Belisle and B. Belisle, and each of
them, do not have any claims, causes of action or defenses to their respective
obligations to Phoenix based on any allegations of management or control
exercised by Phoenix and Phoenix Concept. Borrower, H. Belisle and B. Belisle,
and each of them, acknowledge and agree that Phoenix and Phoenix Concept do not
manage or control them in any way.
12. Release of Phoenix and Phoenix Concept.
A. Excepting only the obligations imposed by this
Agreement, Borrower, BCI, H. Belisle and B. Belisle, and each of them, do
hereby forever, finally, fully, unconditionally and completely indemnify,
release, relieve, acquit, remise, discharge, and hold harmless Phoenix Concept
and Phoenix and their subsidiaries, parents, holding companies, partners,
affiliates, successors, predecessors and assigns, and past and present
employees, officers, directors, agents, representatives, attorneys,
accountants, and shareholders, and each of them, each in their individual and
representative capacities, from those certain claims, debts, liabilities,
demands, obligations, promises, acts, agreements, liens, losses, costs and
expenses (including, without limitation, attorneys' fees), damages, injuries,
suits, actions and causes of action, of whatever kind or nature, whether known
or unknown, suspected or unsuspected, contingent or fixed, at law or in equity
based on, arising out of or pertaining to, any such matters, facts, cases,
events or things alleged or set forth in Recitals A through O, inclusive, set
forth above; the origination and/or administration and/or servicing and/or
enforcement of the Loan Documents; all breaches or defaults under the Loan
Documents; this Agreement; management fees and/or monies owed by Borrower to
BCI, H. Belisle and/or B. Belisle; the transfer of the Stock to Phoenix Concept
in full satisfaction of the Phoenix Obligations; and any claims arising under
any provisions of the Bankruptcy Code, including, but not limited to, claims
based upon or arising out of preferential transfers and/or fraudulent
conveyances, or any part or portion thereof, all individually and collectively.
B. Nothing contained in the release set forth in
this Section 12 shall effect the release of or exonerate any of Phoenix's
obligations to H. Belisle and B. Belisle in connection with that certain loan
made by Phoenix to Concept Cablevision of Indiana, Inc. on or about December 2,
1987, it being the intention of Phoenix, H. Belisle and B. Belisle that all
such obligations shall remain in full force and effect and shall not in any way
be affected, impaired, exonerated, modified or changed by the release set forth
herein.
C. Borrower, BCI, H. Belisle and B. Belisle, and
each of them, acknowledge and agree that each has been informed by its
attorneys and advisors of, and each is familiar with and hereby expressly
waives, any and all rights under section 1542 of the California Civil Code, and
any similar statute, code, law or regulation of any state of the United States,
or of the United States, to the fullest extent that they may waive such rights
and benefits. Section 1542 provides:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
D. Borrower, BCI, H. Belisle and B. Belisle, and
each of them, acknowledge that each is aware that he, she or it may hereafter
discover claims presently unknown or unsuspected, or facts in addition to or
different from those which each now knows or believes to be true, as to the
matters released herein. Nevertheless, it is the intention of Borrower, BCI,
H. Belisle and B. Belisle, and each of them, through this release, to fully,
finally and forever release all such matters, and all claims related thereto,
which do now exist, may exist or heretofore have existed. In furtherance of<PAGE>
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E2 27 of 36
such intention, the releases herein given shall be and remain in effect as full
and complete releases of such matters, notwithstanding the discovery or
existence of any such additional or different claims or facts related thereto
by Borrower, BCI, H. Belisle and B. Belisle, or any of them. In entering into
this Agreement, Borrower, BCI, H. Belisle, and B. Belisle, and each of them, do
not rely upon any statement, representation or promise of any other party or
any other person or entity, except as expressly stated in this Agreement.
E. In entering into this Agreement and releases
provided for herein, Borrower, BCI, H. Belisle and B. Belisle, and each of
them, assume the risk of any misrepresentation, concealment, or mistake, and if
Borrower, BCI, H. Belisle and B. Belisle, or any of them, should subsequently
discover that any facts Borrower, BCI, H. Belisle and B. Belisle, or any of
them, relied upon in entering into this Agreement were untrue or that any facts
were concealed from them, or that any understanding of the facts or of the law
was incorrect, Borrower, BCI, H. Belisle and B. Belisle, or any of them, shall
not be entitled to set aside this Agreement or the releases provided for herein
by reason thereof, regardless of any claim of fraud, misrepresentation, promise
made without the intention of performing it, concealment of fact, mistake of
fact or law or any other circumstances whatsoever. Borrower, BCI, H. Belisle
and B. Belisle, and each of them, and their attorneys, have made such
investigation of the facts pertaining to this release as they deem necessary.
F. Borrower, BCI, H. Belisle and B. Belisle, and
each of them, each individually and in their representative capacities,
represent and warrant that each is the sole and lawful owner of all right,
title and interest in and to every claim and other matter which each releases
herein, and that each has not heretofore assigned or transferred, or purported
to assign or transfer, to any individual, partnership, corporation, firm or
entity any claims or other matters herein released. Borrower, BCI, H. Belisle
and B. Belisle, and each of them, shall, jointly and severally, indemnify
Phoenix and Phoenix Concept and defend and hold it harmless against all claims
based upon or arising in connection with prior assignments or purported
assignments or transfers of any claims or matters released herein.
13. Release of H. Belisle and B. Belisle.
A. Excepting the obligations, indemnities,
representations and warranties set forth in this Agreement, Phoenix does hereby
forever, finally, fully, unconditionally and completely indemnify, release,
relieve, acquit, remise, discharge, and hold harmless H. Belisle and B. Belisle
from those certain claims, debts, liabilities, demands, obligations, promises,
acts, agreements, liens, losses, costs and expenses (including, without
limitation, attorneys' fees), damages, injuries, suits, actions and causes of
action, of whatever kind or nature, whether known or unknown, suspected or
unsuspected, contingent or fixed, at law or in equity, based on, arising out of
or pertaining to, any such matters, facts, causes, events or things alleged or
set forth in Recitals A through N, inclusive, set forth above.
B. Nothing contained in the release set forth in
this Section 13 shall effect the release of, H. Belisle and/or B. Belisle,
and/or exonerate H. Belisle and B. Belisle from any of their obligations to
Phoenix in connection with that certain loan made by Phoenix to Concept
Cablevision of Indiana, Inc. on or about December 2, 1987 including, but not
limited to, the obligations evidenced by the certain guarantees executed by H.
Belisle and B. Belisle, a stock pledge agreement executed by H. Belisle and the
collateral assignment of a promissory note executed by B. Belisle, it being the
intention of Phoenix, H. Belisle and B. Belisle that all such obligations shall
remain in full force and effect, and shall not be in any way affected,
impaired, exonerated, modified or changed by the release set forth herein.
C. Phoenix acknowledges and agrees that it has been
informed by its attorneys and advisors of, and each is familiar with and, as to
the matters released herein, hereby expressly waives, any and all rights under<PAGE>
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E2 28 of 36
section 1542 of the California Civil Code, and any similar statute, code, law
or regulation of any state of the United States, or of the United States, to
the fullest extent that it may waive such rights and benefits. Section 1542
provides:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
D. Phoenix acknowledges that it is aware that it may
hereafter discover claims presently unknown or unsuspected, or facts in
addition to or different from those which it now knows or believes to be true,
as to the matters released herein. Nevertheless, it is the intention of
Phoenix through this release, to fully, finally and forever release all such
matters, and all claims related thereto, which do now exist, may exist or
heretofore have existed. In furtherance of such intention, the releases herein
given shall be and remain in effect as full and complete releases of such
matters, notwithstanding the discovery or existence of any such additional or
different claims or facts related thereto by Phoenix. In entering into this
Agreement, Phoenix does not rely upon any statement, representation or promise
of any other party or any other person or entity, except as expressly stated in
this Agreement.
E. Phoenix represents and warrants that it is the
sole and lawful owner of all right, title and interest in and to every claim
and other matter which it releases herein, and that it has not heretofore
assigned or transferred, or purported to assign or transfer, to any individual,
partnership, corporation, firm or entity any claims or other matters herein
released. Phoenix shall indemnify H. Belisle and B. Belisle and defend and
hold them harmless against all claims based upon or arising in connection with
prior assignments or purported assignments or transfers of any claims or
matters released herein.
14. Miscellaneous.
A. Warranty of Accuracy of Recitals. Borrower,
H. Belisle and B. Belisle, and each of them, hereby represent and warrant that
the material contained in the Recital paragraphs, Recitals A through O above,
has been reviewed in detail by them and they know of their own knowledge that
such statements are accurate.
B. Not a Novation. This Agreement and the documents
and instruments executed in connection with this Agreement are not to be
construed as a release or modification of any of the terms, conditions,
warranties, waivers or rights set forth in the Loan Documents, except as
provided by this Agreement.
C. Survival of Warranties. All agreements,
representations, and warranties made herein shall survive the execution and
delivery of this Agreement and the documents and instruments executed in
connection with this Agreement and will survive the transfer of the Stock to
Phoenix Concept.
D. Failure or Indulgence Not Waiver. No failure or
delay on the part of Phoenix or Phoenix Concept in the exercise of any right,
power, or privilege hereunder, under the documents or instruments referred to
herein, including the Loan Documents, shall operate as a waiver thereof, and no
single or partial exercise of any such power, right or privilege shall preclude
a further exercise of any right, power or privilege.
E. Notices. Except for any notices required under
applicable law or this Agreement to be given in another manner:<PAGE>
<PAGE>
E2 29 of 36
(i) Any notice to Borrower, H. Belisle or B.
Belisle shall be addressed as follows:
Helen and B. Richer Belisle
P. O. Box 1203
Coraopolis, PA 15108-1203
Fax No.: (412) 262-5518
With a copy to:
Buchanan Ingersoll
600 Grant Street, 57th Floor
Pittsburgh, PA 15219
Attention: Hugh Van der Veer
Fax No.: (412) 562-9316
(ii) Any notice to Phoenix and/or Phoenix Concept
shall be addressed as follows:
PHOENIX LEASING INCORPORATED
2401 Kerner Boulevard
San Rafael, California 94901
Attention: Gary Martinez, Sr. Vice President
Fax No.: (415) 485-4551
With a copy to:
FRANDZEL & SHARE
A Law Corporation
100 Pine Street, 26th Floor
San Francisco, California 94111-5212
Attention: Robert B. Kaplan, Esq.
Fax No.: (415) 291-9153
All notices, requests, demands, directions, and other
communications provided for in this Agreement must be in writing and must be
mailed, telegraphed, delivered, or sent by telex, facsimile or cable to the
appropriate party at that party's respective address set forth above; provided,
however, that notice shall be deemed sufficient if actually received by the
party regardless of the mode of transmission or delivery.
F. Applicable Law. This Agreement and the documents
and instruments required to be executed herein, except as otherwise expressly
stated, and the rights and obligations of the parties hereto shall be governed
by and construed in accordance with the laws of the State of California, except
to the extent that Phoenix or Phoenix Concept has greater rights or remedies
under federal law, in which case such choice of California law shall not be
deemed to deprive Phoenix or Phoenix Concept of such rights and remedies as may
be available under federal law.
G. Assignability. This Agreement shall be binding
upon and inure to the benefit of the parties, and their respective successors
and assigns, except that Borrower's, H. Belisle's or B. Belisle's rights are
not assignable without the prior written consent of Phoenix, which Phoenix may
give or withhold in its sole and absolute discretion, opinion and judgment.
Borrower's, H. Belisle's or B. Belisle's obligations hereunder shall not be
delegated, assumed or transferred.
H. Expenses and Fees. In the event that Phoenix or
Phoenix Concept employs attorneys to remedy, prevent or obtain relief from a
breach and/or default of this Agreement or the documents and instruments
executed in connection with this Agreement, or arising out of a breach and/or
default of this Agreement or the documents and instruments executed in
connection with this Agreement or in connection with, or contesting the<PAGE>
<PAGE>
E2 30 of 36
validity of, this Agreement, any of the terms, covenants, provisions, and/or
any conditions hereof or thereof or of any of the matters referred to herein,
Phoenix and Phoenix Concept shall be entitled to be reimbursed for all of their
reasonable attorneys' fees, whether or not suit is filed, and including,
without limitation, those incurred in each and every action, suit or
proceeding, appeals and petitions therefrom, and all fees and costs incurred by
Phoenix or Phoenix Concept. In the event Phoenix or Phoenix Concept employs
attorneys in connection with any bankruptcy proceeding, Phoenix and Phoenix
Concept shall be entitled to be reimbursed for all of their reasonable
attorneys' fees, whether or not suit is filed, including, without limitation,
bankruptcy appeals and petitions therefrom, and all fees and costs incurred by
Phoenix or Phoenix Concept, as provided for by applicable bankruptcy law. In
the event that Phoenix and/or Phoenix Concept obtains a judgment in connection
with the enforcement or interpretation of this Agreement, Phoenix and Phoenix
Concept shall be entitled to recover from Borrower, H. Belisle and B. Belisle,
and each of them, all costs and expenses incurred in connection with the
enforcement of such judgment, including, without limitation, attorneys' fees,
whether incurred prior to or after the entry of the judgment. The provisions
of this Section 14H. are severable from the other provisions of this Agreement
and the documents and instruments executed in connection with this Agreement,
shall survive the entry of any judgment referred to herein and shall not be
deemed merged into any judgment.
I. Modifications and Amendments. This Agreement may
only be modified or amended by written agreement duly executed by the party to
be charged.
J. Integration. This Agreement, the documents and
instruments referred to herein and the Loan Documents constitute the entire
agreement of the parties hereto relative to the subject matter hereof. This
Agreement, together with the documents and instruments executed in connection
with this Agreement and the Loan Documents, is intended by the parties as a
final expression of their agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof. Acceptance of or acquiescence
in a course of performance rendered under this Agreement shall not be relevant
in determining the meaning of this Agreement, even though the accepting or
acquiescing party had knowledge of the nature of the performance and
opportunity for objection. No covenants, agreements, representations or
warranties of any kind whatsoever have been made by any party hereto, except as
specifically set forth in this Agreement and the documents and instruments
referred to herein. All prior discussions and negotiations have been and are
merged and integrated into and are superseded by this Agreement and the
documents and instruments executed in connection herewith.
K. Severability. If any provision of this Agreement
is found to be illegal, invalid or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision never comprised a part of this Agreement;
and the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by severance from this Agreement.
L. Acknowledgment.
(1) Borrower, H. Belisle and B. Belisle, and each of
them, represent and warrant, and Phoenix and Phoenix Concept are relying
thereon, that all of the terms, conditions, waivers, warranties and promises
set forth in this Agreement are reasonable.
(2) Borrower, H. Belisle and B. Belisle, and each of
them, further represent and warrant, and Phoenix is relying thereon, as
follows:<PAGE>
<PAGE>
E2 31 of 36
(A) Borrower, H. Belisle and B. Belisle, and
each of them, have: (i) received independent legal
advice from attorneys of their choice with respect to
the advisability of executing this Agreement and the
documents and instruments executed in connection with
this Agreement; (ii) prior to the execution of this
Agreement and the documents and instruments executed
in connection with this Agreement, reviewed this
Agreement and the documents and instruments executed
in connection with this Agreement with their
respective attorneys; and (iii) carefully discussed
this Agreement and the documents and instruments
executed in connection with this Agreement with their
respective attorneys;
(B) Except as expressly stated in this Agreement
and the documents and instruments executed in
connection with this Agreement, neither Phoenix,
Phoenix Concept nor any other person or entity has
made any statement or representation to Borrower, H.
Belisle and B. Belisle, or any of them, regarding
facts which are relied upon by Borrower, H. Belisle
and B. Belisle, and each of them, in entering into
this Agreement and the documents and instruments
executed in connection with this Agreement;
(C) Borrower, H. Belisle and B. Belisle, and
each of them, do not rely upon any statement,
representation or promise of Phoenix or Phoenix
Concept or any other person or entity in executing
this Agreement and the documents and instruments
executed in connection with this Agreement, except as
expressly stated in this Agreement and the documents
and instruments executed in connection with this
Agreement; and
(D) The terms of this Agreement are contractual
and not a mere recital.
(3) This Agreement and the documents and instruments
executed in connection with this Agreement have been carefully read by, the
contents hereof are known and understood by, and they are signed freely and
without duress by Borrower, H. Belisle and B. Belisle, and each of them.
(4) This Agreement and the releases contained herein
are intended to be final and binding between the parties hereto, and each party
expressly relies on the finality of this Agreement and the documents and
instruments executed in connection with this Agreement as a substantial,
material factor inducing that party's execution of this Agreement and the
documents and instruments executed in connection with this Agreement.
M. Rights of Third Parties. Except as expressly
provided herein, nothing contained in this Agreement or the documents and
instruments executed in connection with this Agreement is intended, nor shall
it be construed or deemed, to confer any rights, powers or privileges on any
person, firm, partnership, corporation or other entity not an express party
hereto or a successor-in-interest, or any person or entity being released
pursuant to Sections 12 and 13 above.
N. Construction. Section headings used in this
Agreement are for convenience only and shall not affect the construction of
this Agreement. All representations, warranties conditions and covenants made
in this Agreement by Borrower, H. Belisle and B. Belisle, and each of them, are
made in their individual and representative capacities. All schedules and<PAGE>
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E2 32 of 36
exhibits to this Agreement, either as originally existing or as the same may
from time to time be supplemented, modified or amended, are incorporated herein
by reference. Any reference to this Agreement or any other document shall
include such document both as originally executed and as it may from time to
time be supplemented and modified. References herein to paragraphs, articles,
sections and exhibits shall be construed as references to this Agreement unless
a different document is named. The term "document" is used in its broadest
sense and encompasses agreements, certificates, opinions, consents, instruments
and other written material of every kind. The terms "including" and "include"
shall mean "including (include), without limitation." The obligations of
Borrower, H. Belisle and B. Belisle, and each of them, hereunder are joint and
several. Whenever the context so requires, the masculine gender shall include
the feminine or neuter, and the singular number shall include the plural, and
vice versa.
O. Counterparts. This Agreement may be executed in
one or more counterparts but all of the counterparts shall constitute one
Agreement. This Agreement shall not be effective and enforceable unless and
until it is executed by Phoenix.
P. Neutral Interpretation. This Agreement and the
documents and instruments executed in connection with this Agreement constitute
the product of the negotiation of the parties hereto, and the enforcement
hereof shall be interpreted in a neutral manner and not more strongly for or
against any party based upon the source of the draftsmanship hereof.
Q. No Representations by Phoenix or Phoenix Concept.
Except as specifically and expressly set forth above, by accepting or approving
anything required to be observed, performed or fulfilled, or to be given to
Phoenix or Phoenix Concept pursuant hereto or pursuant to any of the documents
or instruments executed in connection with this Agreement or the Loan
Documents, Phoenix or Phoenix Concept shall not be deemed to have warranted or
represented the sufficiency, legality, effectiveness or legal effect of the
same, or of any term, provision or condition thereof, and such acceptance or
approval thereof shall not be or constitute any warranty or representation with
respect thereto by Phoenix or Phoenix Concept.
R. Authority to File and Record Notices. Borrower,
H. Belisle and B. Belisle, and each of them, irrevocably appoint, designate and
authorize Phoenix and Phoenix Concept (and any of their officers, employees or
agents) as their agent (said agency being coupled with an interest) to file for
record any notices that Phoenix and Phoenix Concept deem necessary or desirable
to protect their interests hereunder, under any documents or instruments
executed in connection with this Agreement or under the Loan Documents, or to
endorse the names of Borrower, H. Belisle and B. Belisle, or any of them, on
any checks, notes, acceptances, money orders, drafts, UCC financing statements,
deeds of trust, modifications, amendments, or other documents or instruments,
and to do all acts necessary to carry out the intent of this Agreement.
S. No Admission of Liability. Nothing contained
herein shall be construed as an admission by Phoenix or Phoenix Concept of any
liability of any kind, all such liability being expressly denied.
T. Risk of Loss. Until the Effective Date,
Borrower, H. Belisle and B. Belisle, and each of them, shall have the risk of
loss by reason of fire, explosion, earthquake, windstorm, accident, flood, act
of God, war, seizure or activities of the armed forces, or other casualty,
ordinary wear and tear excepted, of any of the Collateral. If such loss or
damage shall be sufficiently substantial to preclude the resumption of normal
operation or a substantially complete restoration of service to more than 100
subscribers within 60 days, Borrower shall immediately notify Phoenix in
writing. Phoenix, at any time within 10 days after receipt of such notice, as
its sole remedy may elect to either (i) accept the proceeds of any insurance
coverage, if any, relating to the Collateral, and consummate the transactions<PAGE>
<PAGE>
E2 33 of 36
contemplated by this Agreement or (ii) terminate this Agreement. In the latter
event, Phoenix and Phoenix Concept shall be fully released and discharged from
any and all obligations under this Agreement.
U. No Broker. There is no brokerage or sales
commission or finder's or other such fee to be paid in connection with the
closing of the transactions contemplated in this Agreement and/or any sale of
the Systems. Borrower, H. Belisle and B. Belisle, and each of them, agree and
warrant to Phoenix and Phoenix Concept and Phoenix and Phoenix Concept are
relying thereon, that no broker, finder or any other person can or will claim a
right to a commission, finder's fee or other compensation respecting the
transfer of the Stock to Phoenix Concept and/or the transfer of the Collateral
and Systems to a third party. Borrower, H. Belisle and B. Belisle, and each of
them, further represent and warrant to Phoenix and Phoenix Concept, and Phoenix
and Phoenix Concept are relying thereon, that neither H. Belisle, Belisle,
Inc., nor B. Belisle, nor Belisle Communications, Inc. nor any of them are
entitled to any brokerage or sales commission or finder's or other such fee to
be paid in connection with the closing of the transactions contemplated in this
Agreement or any other transactions relating to the sale of the Systems.
Borrower, H. Belisle and B. Belisle, and each of them, shall, jointly and
severally, indemnify and hold Phoenix and Phoenix Concept harmless from and
against any loss, cost, expense, claim, cause of action or liability of any
kind (including, but not limited to, court costs and attorneys' fees),
resulting from any claim for a fee, commission or compensation by any such
broker, finder or other person in connection with the transfer of the Stock or
any other transactions contemplated in this Agreement.
V. WAIVER OF RIGHT TO JURY TRIAL. BORROWER, BCI,
H. BELISLE AND B. BELISLE, AND EACH OF THEM, HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE ANY RIGHT (WHETHER ARISING UNDER THE CONSTITUTION OF THE
UNITED STATES, THE STATE OF CALIFORNIA OR ANY OTHER STATE, OR ANY FOREIGN
JURISDICTION, UNDER ANY STATUTES REGARDING OR RULES OF CIVIL PROCEDURE
APPLICABLE IN ANY STATE OR FEDERAL OR FOREIGN LEGAL PROCEEDING, UNDER COMMON
LAW, OR OTHERWISE) TO DEMAND OR HAVE A TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE DOCUMENTS
AND INSTRUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT, OR IN ANY WAY
CONNECTED WITH OR RELATED TO OR INCIDENTAL TO THE DISCUSSIONS, DEALINGS OR
ACTIONS OF SUCH PERSONS OR ANY OF THEM (WHETHER ORAL OR WRITTEN) WITH RESPECT
THERETO, OR TO THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND EACH SUCH PERSON HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY TRIAL COURT WITHOUT A
JURY, AND THAT PHOENIX OR PHOENIX CONCEPT MAY FILE AN ORIGINAL COUNTERPART OR
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF BORROWER'S, BCI'S,
H. BELISLE'S AND B. BELISLE'S WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER, BCI,
H. BELISLE AND B. BELISLE, AND EACH OF THEM, ACKNOWLEDGE AND AGREE THAT THEY
HAVE RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND EACH
OTHER PROVISION OF EACH OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR PHOENIX ACCEPTING THIS AGREEMENT.
BY WAIVING A JURY TRIAL, BORROWER, BCI, H. BELISLE AND B. BELISLE, AND EACH OF
THEM, INTEND CLAIMS AND DISPUTES TO BE RESOLVED BY A JUDGE ACTING WITHOUT A
JURY IN ORDER TO AVOID THE DELAYS, EXPENSE AND RISKS OF MISTAKEN
INTERPRETATIONS WHICH EACH PARTY ACKNOWLEDGES TO BE GREATER WITH JURY TRIAL
THAN WITH NON-JURY TRIALS.
Initials: /s/BRB /s/HPB /s/HPB /s/HPB
------ ------ ------ ------
/s/President /s/President
W. Confidentiality. Borrower, H. Belisle and B.
Belisle, and each of them, promise and agree to keep the terms of this
Agreement confidential, and not to reveal the terms, or any of the provisions
of this Agreement and agree to exercise the same degree of care to keep the
terms and provisions of this Agreement confidential that they would normally
exercise for their own confidential information.<PAGE>
<PAGE>
E2 34 of 36
X. Scope of and Termination of Indemnities. In the
event that it is necessary for Phoenix and/or Phoenix Concept to pursue any
claims against H. Belisle and B. Belisle, or any of them, as a result of any
indemnities set forth in this Agreement in favor of Phoenix and/or Phoenix
Concept, Phoenix and Phoenix Concept agree that in the event they determine, in
their sole and absolute discretion, opinion and judgment, that potential
insurance coverage exists with respect to the claims which are the subject of
said indemnities, Phoenix and/or Phoenix Concept shall make a claim on the
insurance policy or policies. In the event that any such claim is not paid
within 90 days after it is made on the insurance policy or policies, then
Phoenix and/or Phoenix Concept shall therefore be free to exercise all rights
and remedies available at law, equity and otherwise to enforce the indemnities
provided in this Agreement without further notice to H. Belisle and B. Belisle,
or any of them. All of the indemnities provided in this Agreement by H.
Belisle and B. Belisle, and each of them, in favor of Phoenix and Phoenix
Concept, shall survive the closing of this Agreement for a period of three
years from the Effective Date and then expire, unless prior to the end of such
period, Phoenix and/or Phoenix Concept shall have made a specific written claim
or claims upon H. Belisle and B. Belisle, or any of them, based upon such
indemnifications, whereupon such indemnifications shall continue, but only with
respect to such specific written claim or claims; provided, however, in the
event that Phoenix Concept closes a sale of all of the Systems on or before two
years from the Effective Date, then the indemnities set forth in this Agreement
shall survive the closing of this Agreement for a period of two years from the
Effective Date and then expire, unless prior to the end of such two year
period, Phoenix and/or Phoenix Concept shall have made a specific written claim
or claims upon H. Belisle and B. Belisle, or any of them, based upon such
indemnifications, whereupon such indemnifications shall continue, but only with
respect to such specific written claim or claims.
Y. Payment of Obligations Owed by Borrower to the Small
Business Administration. Phoenix Concept agrees, that subsequent to the
Execution Date, it will cause Borrower to pay to the Small Business
Administration the outstanding amounts owed by Borrower thereto which Borrower,
H. Belisle and B. Belisle have represented to Phoenix and Phoenix Concept do
not exceed the total sum of $18,162.86, inclusive of all outstanding principal,
interest, attorneys' fees, costs and other collection charges. Phoenix shall
indemnify H. Belisle and B. Belisle, and each of them, and defend and hold them
harmless in an amount not to exceed the total sum of $20,000.00, inclusive of
all principal, interest, attorneys' fees, costs and other collections charges,
in the event that Phoenix Concept fails to cause Borrower to pay to the Small
Business Administration the amounts owed by Borrower thereto.
IN WITNESS WHEREOF, the parties hereto and their respective
attorneys have approved and executed this Agreement on the dates set forth
opposite their respective signatures.<PAGE>
<PAGE>
E2 35 of 36
Dated: September 15, 1994 CONCEPT CABLEVISION OF SOUTH
------------ CAROLINA, INC., formerly Belisle
Communications, Inc., a Delaware
corporation
By: /s/ Helen P. Belisle
--------------------
Its: President
Dated: September 15, 1994 /s/ Helen P. Belisle
------------ --------------------
HELEN P. BELISLE
Dated: September 15, 1994 /s/ B. Richer Belisle
------------ ---------------------
B. RICHER BELISLE
Dated: September 15, 1994 BELISLE COMMUNICATIONS, INC.,
------------ a Delaware corporation
By: /s/ Helen P. Belisle
--------------------
Its: President
Dated: September 15, 1994 PHOENIX LEASING INCORPORATED,
------------ a California corporation
By: /s/ Gary Martinez
-----------------
Its: Sr. V.P.
Dated: September 15, 1994 PHOENIX CONCEPT CABLEVISION, INC.,
------------ a Nevada Corporation
By: /s/ Gary Martinez
-----------------
Its: Sr. V.P.
Dated: September 15, 1994 PHOENIX LEASING CASH DISTRIBUTION
------------ FUND III, a California limited
partnership
By: PHOENIX LEASING INCORPORATED,
a California corporation, its
general partner
By: /s/ Gary Martinez
-----------------
Its: Sr. V.P.<PAGE>
<PAGE>
E2 36 of 36
APPROVED AS TO FORM
AND CONTENT:
Dated: September 15, 1994
------------
BUCHANAN INGERSOLL
By:/s/ Hugh Van Der Veer
---------------------
HUGH VAN DER VEER
Attorneys for Borrower, BCI,
H. Belisle and B. Belisle
Dated: September 15, 1994
------------
FRANDZEL & SHARE
A Law Corporation
By:/s/ Robert B. Kaplan
--------------------
ROBERT B. KAPLAN
Attorneys for Phoenix and
Phoenix Concept
<PAGE>
Exhibit 21 - Page 1 of 11
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Venturers of
Phoenix Joint Venture 1994-1
We have audited the accompanying balance sheet of Phoenix Joint Venture 1994-1
(a California general partnership) as of December 31, 1994 and the related
statements of operations, venturers' capital and cash flows for the period from
inception (October 28, 1994) through December 31, 1994. These financial
statements and the schedule referred to below are the responsibility of the
Joint Venture's management. Our responsibility is to express an opinion on
these financial statements and the schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Phoenix Joint Venture 1994-1
at December 31, 1994, and the results of its operations and its cash flows for
the period from inception (October 28, 1994) through December 31, 1994, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule II is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a
required part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
San Francisco, California ARTHUR ANDERSEN LLP
January 13, 1995<PAGE>
<PAGE>
Exhibit 21 - Page 2 of 11
PHOENIX JOINT VENTURE 1994-1
BALANCE SHEET
(Amounts in Thousands)
December 31,
1994
----
ASSETS
Cash and cash equivalents $ 106
Accounts receivable 389
Credits receivable, net 1,423
Assigned monthly rentals, net 890
Equipment on operating leases and held for lease
(net of accumulated depreciation of $77 at
December 31, 1994) 2,223
Capitalized acquisition fees (net of accumulated
amortization of $1 at December 31, 1994) 38
------
Total Assets $5,069
======
LIABILITIES AND VENTURERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 334
Total Liabilities 334
------
Venturers' Capital 4,735
------
Total Liabilities and Venturers' Capital $5,069
======
The accompanying notes are an integral part of these statements.<PAGE>
<PAGE>
Exhibit 21 - Page 3 of 11
PHOENIX JOINT VENTURE 1994-1
STATEMENT OF OPERATIONS
(Amounts in Thousands)
For the period
from inception
(October 28, 1994)
through
December 31, 1994
-----------------
INCOME
Rental income $389
Earned income, assigned monthly rentals 20
Other income 17
----
Total Income 426
----
EXPENSES
Depreciation and amortization 78
Lease related operating expenses 169
Management fees to General Partner 20
----
Total Expenses 267
----
NET INCOME $159
====
The accompanying notes are an integral part of these statements.<PAGE>
<PAGE>
Exhibit 21 - Page 4 of 11
PHOENIX JOINT VENTURE 1994-1
STATEMENT OF VENTURERS' CAPITAL
(Amounts in Thousands)
Balance at inception, October 28, 1994 $ 0
Net income 159
Contributions 4,576
------
Balance, December 31, 1994 $4,735
======
The accompanying notes are an integral part of these statements.<PAGE>
<PAGE>
Exhibit 21 - Page 5 of 11
PHOENIX JOINT VENTURE 1994-1
STATEMENT OF CASH FLOWS
(Amounts in Thousands)
For the period
from inception
(October 28, 1994)
through
December 31, 1994
-----------------
Operating Activities:
--------------------
Net income $ 159
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 78
Increase in accounts receivable (389)
Amortization of discount on credits (17)
Increase in accounts payable and
accrued expenses 295
Accrued interest, assigned monthly rentals (20)
-------
Net cash provided by operating activities 106
-------
Increase in cash and cash equivalents 106
Cash and cash equivalents, beginning of period -
-------
Cash and cash equivalents, end of period $ 106
=======
The accompanying notes are an integral part of these statements.<PAGE>
<PAGE>
Exhibit 21 - Page 6 of 11
PHOENIX JOINT VENTURE 1994-1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
Note 1. Organization.
Phoenix Joint Venture 1994-1 (the "Joint Venture"), a California general
partnership, was formed on October 28, 1994 for the purpose of investing in a
pool of reproduction equipment and receivables by several Phoenix Leasing
Partnerships (the "Venturers").
Income or loss is allocated to each Venturer based upon their respective
interest in the Joint Venture. Distributions will be made in the same manner.
As compensation for its management services, the Joint Venture pays a
management fee to Phoenix Leasing Incorporated (PLI) based upon the management
fee rate of each respective Venturer of the Joint Venture applied to the
Venturers' respective interest in the Joint Venture's gross revenues for the
quarter, which revenue generally includes rental and note receipts, proceeds
from the sale of equipment and other income. Any revenues subject to a
management fee at the Joint Venture level will not be subject to a management
fee at the Venturers' level.
As compensation for services performed in connection with the analysis
of equipment available to the Joint Venture, the Managing Venturer receives an
acquisition fee based on the acquisition fee rate of each respective Venturer
of the Joint Venture applied to the Venturer's respective interest in the Joint
Venture's purchase price of equipment acquired by the Joint Venture.
Acquisition fees are amortized over the average expected life of the
assets, principally on a straight-line basis.
Note 2. Summary of Significant Accounting Policies.
Leasing Operations - The Joint Venture's leasing operations consist of
reproduction equipment manufactured by Xerox Corporation. The leases have been
classified as operating leases.
Under the method of accounting for operating leases, the leased
equipment is recorded as an asset at cost and depreciated on a straight-line
basis over the estimated useful life of five years. Rental income for the year
is determined on the basis of rental payments due for the period under the
terms of the lease. Maintenance and repairs of the leased equipment are
charged to expense as incurred.<PAGE>
<PAGE>
Exhibit 21 - Page 7 of 11
PHOENIX JOINT VENTURE 1994-1
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 2. Summary of Significant Accounting Policies (Continued).
The Joint Venture's policy is to review periodically the probability of
recovering its undepreciated cost of equipment. Such reviews address, among
other matters recent and anticipated technological developments affecting
reproduction equipment and competitive factors within the reproduction
equipment marketplace. Although remarketing rental rates are expected to
decline in the future with respect to some of the Joint Venture's rental
equipment, such rentals are expected to exceed projected expenses, including
depreciation. Should subsequent reviews of the equipment portfolio indicate
that rentals plus anticipated sales proceeds will not exceed expenses in any
future period, the Joint Venture will revise its depreciation policy and may
accelerate depreciation as appropriate.
The Joint Venture has also been assigned the monthly rental payments
from a pool of engineering and graphics reprographic equipment owned by Xerox
Corporation. The Joint Venture has recorded these assigned monthly rentals at
the discounted value of the expected cash flows. The excess of the assigned
monthly rentals over the present value of the expected cash flows is recorded
as unearned income. Unearned income is credited to income monthly over the
term of the agreement on a declining basis to provide an approximate level rate
of return on the unrecovered cost of the investment.
In December 1991, the FASB issued Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"
which requires disclosure of the fair value of financial instruments for which
it is practicable to estimate fair value. For entities with less than $150
million in total assets, this statement must be applied to financial statements
issued for fiscal years ending after December 15, 1995.
Non-Cash Investing Activities. In October 1994, the Venturers formed
the Joint Venture to which they contributed the credits issued by Xerox
Corporation, the equipment purchased and the assigned monthly rentals from
Xerox Corporation as described in Notes 1, 3, 4 and 5 of the financial
statements. The following non-cash activities from this transaction were
excluded from the statement of cash flow.
Amounts
In Thousands
------------
Credit receivable $1,406
Equipment purchased 2,300
Assigned monthly rentals 870
------
$4,576
======
<PAGE>
<PAGE>
Exhibit 21 - Page 8 of 11
PHOENIX JOINT VENTURE 1994-1
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 2. Summary of Significant Accounting Policies (Continued).
Cash and Cash Equivalents - Cash and cash equivalents includes deposits
at banks and investments in money market funds.
Note 3. Credits Receivable.
The Joint Venture owns credits issued by Xerox Corporation for the
purchase of products and services from Xerox Corporation and its subsidiaries.
The credits granted are non-transferrable and are good for a period of seven
years at which time they expire. The credits will be used by Phoenix Leasing
Incorporated and affiliates, who will reimburse the Joint Venture for the fair
market value of the credits used.
The credits receivable at December 31, 1994 consist of the following:
(Amounts in Thousands)
Credits receivable $1,680
Unamortized discount (257)
------
Credits receivable, net $1,423
======
Note 4. Assigned Monthly Rentals.
The Joint Venture has obtained the right to receive payments on a pool
of leased equipment pursuant to the terms of an agreement with Xerox
Corporation. Title to this equipment continues to be held by Xerox
Corporation. As a result of this agreement, the Joint Venture has been
assigned the monthly rentals from a designated pool of engineering and graphics
reprographic equipment that are subject to lease. The agreement provides for
the Joint Venture to receive monthly payments from such pool of equipment for a
period of either three or five years, depending upon the performance of the
portfolio as measured during the first two years. All of the monthly rental
payments pursuant to this equipment, net of certain administrative and other
costs, are passed along to the Joint Venture and will be applied towards the
outstanding assigned monthly rentals balance and income.
The assigned monthly rentals consist of the following at December 31,
1994:
(Amounts in Thousands)
Assigned monthly rentals $ 1,000
Less: Unearned income (110)
-------
Assigned monthly rentals, net $ 890
=======
<PAGE>
<PAGE>
Exhibit 21 - Page 9 of 11
PHOENIX JOINT VENTURE 1994-1
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 5. Equipment on Operating Leases.
Equipment on lease consists of reproduction equipment classified as
operating leases. During the initial terms of the existing operating leases
the Joint Venture will not recover all the undepreciated cost and related
expenses of its rental equipment and therefore must remarket a portion of its
equipment in future years.
Minimum rentals to be received on non-cancellable operating leases for
the years ended December 31, are as follows:
(Amounts in Thousands)
1995 . . . . . . . . . . . . . . . . . . $ 525
1996 . . . . . . . . . . . . . . . . . . 306
1997 . . . . . . . . . . . . . . . . . . 224
1998 . . . . . . . . . . . . . . . . . . 88
1999 and future . . . . . . . . . . . . . 2
------
Total $1,145
======
The Joint Venture has an agreement with Xerox Corporation, whereby
Xerox Corporation provides administration, maintenance and repairs of leased
equipment on behalf of the Joint Venture. The agreement terminates upon the
earlier of (1) the Joint Venture receiving a specified dollar amount; (2) 66
months or (3) the date on which no equipment remains. As compensation for
these services, Xerox deducts a fee from the monthly rentals and sales
proceeds.
Also pursuant to the vendor agreement, Xerox Corporation undertakes
to remarket and refurbish off-lease equipment on a best efforts basis. This
agreement permits the Joint Venture to assume the remarketing function directly
if certain conditions contained in the agreement are not met. For its
remarketing services, Xerox Corporation is paid a remarketing and refurbishing
fee based on a specified percentage of the monthly rentals received by the
Joint Venture.
The Joint Venture also receives contingent rental payments on its
reproduction equipment that is not included in the minimum rentals to be
received. The contingent rentals consist of a monthly rental payment that is
based upon actual machine usage.<PAGE>
<PAGE>
Exhibit 21 - Page 10 of 11
PHOENIX JOINT VENTURE 1994-1
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
Note 6. Accounts Payable and Accrued Expenses.
Accounts payable and accrued expenses consist of the following at
December 31:
1994
----
(Amounts in Thousands)
Equipment lease operations $ 275
PLI and affiliates 59
-----
Total $ 334
=====
Note 7. Income Taxes.
Federal and state income tax regulations provide that taxes on the
income or loss of the Joint Venture are reportable by the Venturers on their
individual income tax returns. Accordingly, no provision for such taxes has
been made in the accompanying financial statements.
Note 8. Related Entities.
The Joint Venture is sponsored and funded by various partnerships
managed by PLI. PLI serves in the capacity of general partner in other
partnerships and managing venturer in other joint ventures, all of which are
engaged in the equipment leasing and financing business.<PAGE>
<PAGE>
<TABLE>
Exhibit 21 - Page 11 of 11
PHOENIX JOINT VENTURE 1994-1
SCHEDULE II
(Amounts in Thousands)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------------------------------------------------------------------------------------------------------
Classification Balance at Charged to Charged to Deductions Balance at
Beginning of Expense Revenue End of
Period Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for credits
receivable $ 320 $0 $ 0 $ 0 $ 320
----- -- --- --- -----
Totals $ 320 $0 $ 0 $ 0 $ 320
===== == === === =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<PERIOD-TYPE> YEAR
<CASH> 200
<SECURITIES> 0
<RECEIVABLES> 2,835
<ALLOWANCES> 445
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 15,287
<DEPRECIATION> 13,910
<TOTAL-ASSETS> 6,338
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 4,784
<TOTAL-LIABILITY-AND-EQUITY> 6,338
<SALES> 0
<TOTAL-REVENUES> 5,095
<CGS> 0
<TOTAL-COSTS> 2,144
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,949
<INCOME-TAX> 19
<INCOME-CONTINUING> 2,925
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,925
<EPS-PRIMARY> 7.63
<EPS-DILUTED> 0
<PAGE>
</TABLE>
