Page 1 of 14
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 14, 1996
-----------------------
Phoenix Leasing Cash Distribution Fund III, A California Limited Partnership
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 0-16615 68-0062480
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2401 Kerner Blvd, San Rafael CA 94901-5527
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 485-4500
--------------------------
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Item 2. Acquisition or Disposition of Assets.
(a) Phoenix Leasing Cash Distribution Fund III and Phoenix Grassroots Cable
Systems, L.L.C. (collectively referred to as "the Partnership") entered into a
Settlement Agreement and Releases (the "Agreement") with Grassroots Cable
Systems, Inc., a cable television company that the Partnership, along with other
affiliated partnerships, had extended credit. Phoenix Grassroots Cable Systems,
L.L.C is a newly formed limited liability company and majority owned subsidiary
of Phoenix Leasing Cash Distribution Fund III. The closing date of the Agreement
was February 14, 1996. This Agreement allowed the Partnership to foreclosure
upon the cable television system (the collateral for the note) of Grassroots
Cable Systems, Inc. The Partnership's net carrying value for this outstanding
note receivable, before considering any allowance for losses on notes
receivable, was $9,014,483 at December 31, 1995. The Partnership made a cash
payment of $75,000 and will assume certain liabilities and accounts payable as
specified in the agreement.
The assets received through foreclosure generally consists of headend equipment,
cable plant, franchise agreements, subscriber lists, leased property, land,
tools, vehicles and miscellaneous other assets. The Partnership plans to
continue the operations of the cable television company received through
foreclosure.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a) Financial Statements of Businesses Acquired.
Balance Sheet of Grassroots Cable Systems, Inc. as of December 31, 1995
(unaudited).
Income Statement of Grassroots Cable Systems, Inc. for the year ended
December 31, 1995 (unaudited).
Balance Sheet of Grassroots Cable Systems, Inc. as of December 31, 1994
(unaudited).
Income Statement of Grassroots Cable Systems, Inc. for the year ended
December 31, 1994 (unaudited).
Balance Sheet of Grassroots Cable Systems, Inc. as of December 31, 1993
(unaudited).
Income Statement of Grassroots Cable Systems, Inc. for the year ended
December 31, 1993 (unaudited).
The accompanying balance sheets and income statements for Grassroots Cable
Systems, Inc. are unaudited. The assets of Grassroots Cable Systems, Inc. were
transferred to the Partnership pursuant to a settlement agreement in full
satisfaction of a defaulted note receivable held by the Partnership.
Audited financial statements of Grassroots Cable Systems, Inc. satisfying the
requirements of Rule 3-05 of Regulation S-X are not available. In lieu of the
audited financial statements required under Rule 3-05 of Regulation S-X, the
Registrant has included unaudited balance sheets as of December 31, 1995, 1994
and 1993, and unaudited income statements for the years ended December 31, 1995,
1994 and 1993.
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GRASSROOTS CABLE SYSTEMS, INC.
BALANCE SHEET
Year-To-Date As Of
12/31/95
Cash on Hand and in Banks $ 72,605.73
Accounts Receivable, Net $ 63,592.36
Inventory $ 245,061.65
Note Receivable - Felkon $ 58,352.94
Prepaid Insurance $ 11,147.47
Miscellaneous Prepaids $ 25,623.84
-----------------
Total Current Assets $ 478,383.99
Capitalized Labor $ 653,714.41
Capitalized Overhead $ 191,486.42
Storage Buildings $ 9,658.00
Tools & Support Equipment $ 9,214.18
Service & Test Equipment $ 26,333.65
Makeready $ 1,077,945.65
Headend Electronics $ 1,090,020.02
Headend Buildings $ 127,923.09
Capitalized Interest, Net $ 169,446.26
System Design $ 75,290.82
Cable and Line Costs $ 4,379,770.53
Installation Costs $ 710,962.76
Converters $ 122,816.15
Vehicles $ 122,512.37
Furniture and Fixtures $ 10,687.84
Program Origination Equipment $ 17,492.17
Accumulated Depreciation $ (6,731,080.85)
-----------------
Total Plant and Equipment $ 2,064,193.45
Deposits $ 1,285.34
System Acquisition Costs $ 344,663.32
Deferred Closing Costs $ 345,781.03
Leases $ 8,500.00
Accumulated Amortization $ (543,473.03)
-----------------
Total Other Assets $ 156,736.66
-----------------
Total Assets $ 2,699,334.10
Accounts Payable $ 226,759.19
Customer Advance Payments $ 135,664.60
Unearned Revenue $ 1,562.68
Accrued Expenses $ 502,782.82
Sales Tax Payable $ 410.67
Notes Payable $ 32,134.41
-----------------
Total Current Liabilities $ 899,314.37
Phoenix Leasing Loan $ 10,012,896.26
Total Liabilities $ 10,912,210.63
Common Stock $ 100.00
Paid In Capital $ 1,674,900.00
Deficit $ (8,796,617.89)
Net Income (Loss) $ (1,091,258.64)
-----------------
Total Stockholder's Equity $ (8,212,876.53)
-----------------
Liab & Stockholders' Equity $ 2,699,334.10
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GRASSROOTS CABLE SYSTEMS, INC.
INCOME STATEMENT
For the Period 1/01/95 TO 12/31/95
Ytd
Amount
Revenues:
Economy $ 1,011,153.28
Basic $ 1,188,369.48
Standard $ 43,881.53
FM Revenue $ 219.18
Showtime $ 93,416.07
HBO $ 61,451.81
NESN $ 46,673.36
Cinemax $ 119,057.70
Equipment Rental $ 84,969.38
Installations $ 134,087.00
Promotional Discounts $ (60,075.73)
QVC/Q2 Revenue $ 9,382.29
Construction Charges $ 540.38
Cable Advertising $ 1,185.00
Misc. Subscriber Revenue $ 29,061.81
Equipment Sales - Net $ 647.76
Customer Credit $ (1,484.33)
Trade Revenues $ 28,887.88
Other Revenues $ 109,134.62
----------------
Total Revenues $ 2,902,448.47
----------------
Programming Expenses:
Programming Fees $ 573,151.67
----------------
Total Programming Expenses $ 573,151.67
----------------
Technical Expenses:
Pole & Land Rentals $ 278,652.03
System Power $ 140,663.68
License Fees $ 25,595.95
Contract Labor - Service $ 13,898.50
Salaries, Technical $ 146,193.45
Insurance, Technical $ 16,912.98
Miscellaneous, Technical $ 10,842.18
Tools & Support Supplies $ 3,906.10
Repairs & Maint., Technical $ 10,710.48
Vehicles Expense $ 103,021.97
----------------
Total Technical Expenses $ 750,397.32
----------------
Marketing Expenses:
Salaries, Marketing $ 5,049.25
Commissions $ 1,674.40
Commissions - Contract Labor $ 199.10
Entertainment & Meals $ 25.86
Travel & Lodging $ 4,543.41
----------------
Total Marketing Expenses $ 11,492.02
----------------
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GRASSROOTS CABLE SYSTEMS, INC.
INCOME STATEMENT
For the Period 1/01/95 TO 12/31/95
Ytd
Amount
General & Administrative Expenses:
Salaries, G & A $ 214,342.21
Payroll Taxes $ 34,275.01
Health Insurance $ 30,002.68
Workman's Comp $ 10,451.75
Key Man Life Insurance $ 12,305.20
Miscellaneous, G & A $ 2,262.79
Repairs & Maint., General $ 465.02
Bad Debt Expense $ 27,648.09
Billings & Supplies $ 14,786.91
Dues & Subscriptions $ 3,441.26
Entertainment & Meals $ 4,946.11
Office Expense $ 150,380.30
Office Rent $ 26,250.00
Professional Services $ 191,964.36
Taxes $ 37,446.16
Telephone Expense $ 33,145.14
Travel & Lodging $ 27,820.35
Utilities $ 4,699.32
----------------
Total G & A Expenses $ 826,852.66
----------------
Total Operating Expenses $ 2,161,893.67
----------------
Operating Income (Loss) $ 740,354.80
Depreciation & Amortization $ 1,310,594.96
Interest Expense $ 511,580.35
Loss (Gain) on Sale of Assets $ 9,638.13
----------------
Net Profit or (Loss) $ (1,091,258.64)
================
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GRASSROOTS CABLE SYSTEMS, INC.
BALANCE SHEET
Year-To-Date As Of
12/31/94
Cash on Hand and in Banks $ 37,803.60
Accounts Receivable, Net $ 49,246.18
Inventory $ 306,538.91
Note Receivable - Felkon $ 68,376.70
Prepaid Insurance $ 9,243.92
Miscellaneous Prepaids $ 12,758.63
Due from Affiliates $ 238,226.40
-----------------
Total Current Assets $ 722,194.34
Capitalized Labor $ 637,178.55
Capitalized Overhead $ 190,194.99
Storage Buildings $ 9,658.00
Tools & Support Equipment $ 10,220.08
Service & Test Equipment $ 26,333.65
Makeready $ 1,073,052.26
Headend Electronics $ 979,342.08
Headend Buildings $ 127,923.09
Capitalized Interest, Net $ 218,118.26
System Design $ 71,930.82
Cable and Line Costs $ 4,259,246.32
Installation Costs $ 673,565.95
Converters $ 197,123.27
Vehicles $ 105,804.11
Furniture and Fixtures $ 10,532.30
Program Origination Equipment $ 17,492.17
Accumulated Depreciation $ (5,621,571.03)
-----------------
Total Plant and Equipment $ 2,986,144.87
System Acquisition Costs $ 344,663.32
Deferred Closing Costs $ 345,781.03
Leases $ 8,500.00
Accumulated Amortization $ (473,313.07)
-----------------
Total Other Assets $ 225,631.28
-----------------
Total Assets $ 3,933,970.49
-----------------
Accounts Payable $ 222,279.52
Customer Advance Payments $ 158,818.78
Unearned Revenue $ 3,363.68
Accrued Expenses $ 175,206.18
Sales Tax Payable $ 1,114.49
Notes Payable $ 39,264.56
Stockholder Loans $ 160,000.00
-----------------
Total Current Liabilities $ 760,047.21
Phoenix Leasing Loan $ 3,838,896.26
Citizens Bank Loan $ 6,286,500.00
-----------------
Total Liabilities $ 10,885,443.47
-----------------
Common Stock $ 100.00
Paid In Capital $ 1,674,900.00
Deficit $ (7,677,827.08)
Net Income (Loss) $ (948,645.90)
-----------------
Total Stockholder's Equity $ (6,951,472.98)
-----------------
Liab & Stockholders' Equity $ 3,933,970.49
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GRASSROOTS CABLE SYSTEMS, INC.
INCOME STATEMENT
12/31/94
Ytd
Amount
Revenues:
Economy $ 555,223.53
Basic $ 1,396,033.84
FM Revenue $ 138.16
Showtime $ 104,830.35
Disney $ 65,239.44
NESN $ 48,043.69
Cinemax $ 130,414.02
Equipment Rental $ 95,467.14
Installations $ 95,661.68
Promotional Discounts $ (28,364.42)
Cable Value Network Revenue $ 9,522.29
Construction Charges $ 11,964.00
Cable Advertising $ 1,530.00
Misc. Subscriber Revenue $ 27,445.83
Equipment Sales - Net $ 853.15
Customer Credit $ (898.11)
Trade Revenues $ 26,545.09
Other Revenues $ 55,230.91
----------------
Total Revenues $ 2,594,880.59
----------------
Programming Expenses:
Programming Fees $ 473,777.57
----------------
Total Programming Expenses $ 473,777.57
----------------
Technical Expenses:
Pole & Land Rentals $ 148,674.85
System Power $ 136,418.33
License Fees $ 22,971.42
Contract Labor - Service $ 5,387.50
Salaries, Technical $ 130,614.72
Employee Benefits, Technical $ 612.18
Insurance, Technical $ 16,682.90
Miscellaneous, Technical $ 5,914.32
Tools & Support Supplies $ 3,169.20
Repairs & Maint. Technical $ 8,055.76
Vehicles Expense $ 68,016.79
----------------
Total Technical Expenses $ 546,517.97
----------------
Marketing Expenses:
Salaries, Marketing $ 8,283.01
Advertising $ 775.04
Commissions $ 1,614.50
Promotional Programs $ 55.00
Entertainment & Meals $ 144.80
Travel & Lodging $ 6,464.33
----------------
Total Marketing Expenses $ 17,336.68
----------------
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GRASSROOTS CABLE SYSTEMS, INC.
INCOME STATEMENT
12/31/94
Ytd
Amount
General & Administrative Expenses:
Contract Services G&A $ 22.50
Salaries, G & A $ 179,152.25
Payroll Taxes $ 29,169.91
Health Insurance $ 27,909.39
Workman's Comp $ 11,250.37
Key Man Life Insurance $ 10,363.29
Miscellaneous, G & A $ 3,477.58
Contributions $ 100.00
Repairs & Maint, General $ 739.94
Bad Debt Expense $ 25,131.87
Billings & Supplies $ 12,923.06
Dues & Subscriptions $ 3,084.87
Entertainment & Meals $ 1,492.75
Office Expense $ 63,148.75
Office Rent $ 25,519.13
Professional Services $ 134,295.03
Taxes $ 30,096.77
Telephone Expense $ 31,702.01
Travel & Lodging $ 2,375.03
Utilities $ 5,096.04
----------------
Total G & A Expenses $ 597,050.54
----------------
Total Operating Expenses $ 1,634,682.76
----------------
Operating Income (Loss) $ 960,197.83
Depreciation & Amortization $ 1,304,929.96
Interest Expense $ 599,697.21
Loss (Gain) on Sale of Assets $ 4,216.56
----------------
Net Profit or (Loss) $ (948,645.90)
================
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GRASSROOTS CABLE SYSTEMS, INC.
BALANCE SHEET
12/31/93
Cash on Hand and in Banks $ 32,460.06
Accounts Receivable, Net $ 45,570.97
Inventory $ 311,772.14
Note Receivable - Felkon $ 79,763.60
Prepaid Insurance $ 7,019.24
Miscellaneous Prepaids $ 6,350.53
Due From Affiliates $ 219,155.71
-----------------
Total Current Assets $ 702,092.25
Capitalized Labor $ 637,178.55
Capitalized Overhead $ 190,194.99
Storage Buildings $ 9,658.00
Tools & Support Equipment $ 9,863.43
Service & Test Equipment $ 26,333.65
Makeready $ 1,073,875.21
Headend Electronics $ 969,947.08
Headend Buildings $ 127,923.09
Capitalized Interest, Net $ 266,790.26
System Design $ 71,930.82
Cable and Line Costs $ 4,237,741.24
Installation Costs $ 643,026.08
Converters $ 194,111.74
Vehicles $ 122,305.11
Furniture and Fixtures $ 9,987.35
Program Origination Equipment $ 15,842.17
Accumulated Depreciation $ (4,473,747.00)
-----------------
Total Plant and Equipment $ 4,132,961.77
System Acquisition Costs $ 344,663.32
Deferred Closing Costs $ 345,781.03
Leases $ 8,500.00
Accumulated Amortization $ (399,767.11)
-----------------
Total Other Assets $ 299,177.24
-----------------
Total Assets $ 5,134,231.26
Accounts Payable $ 65,798.20
Customer Advance Payments $ 191,482.21
Unearned Revenue $ 5,164.68
Accrued Expenses $ 317,614.81
Sales Tax Payable $ 679.92
Capitalized Lease Obligation $ 1,343.09
Notes Payable $ 57,061.54
Stockholder Loans $ 160,000.00
-----------------
Total Current Liabilities $ 799,144.45
Phoenix Leasing Loan $ 3,838,896.26
Citizens Bank Loan $ 6,499,000.00
-----------------
Total Liabilities $ 11,137,040.71
-----------------
Common Stock $ 100.00
Paid In Capital $ 1,674,900.00
Deficit $ (6,178,612.01)
Net Income (Loss) $ (1,499,197.44)
-----------------
Total Stockholders' Equity $ (6,002,809.45)
-----------------
Liab & Stockholders' Equity $ 5,134,231.26
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GRASSROOTS CABLE SYSTEMS, INC.
INCOME STATEMENT
12/31/93
Ytd
Amount
Revenues:
Economy $ 38,150.28
Basic $ 1,787,473.36
FM Revenue $ 19.41
Showtime $ 96,000.89
Disney $ 60,386.13
NESN $ 45,091.17
Cinemax $ 115,260.53
Equipment Rental $ 101,345.86
Installations $ 89,877.50
Promotional Discounts $ (40,418.12)
Cable Value Network Revenue $ 7,498.14
Construction Charges $ 7,313.66
Cable Advertising $ 1,440.00
Misc. Subscriber Revenue $ 19,312.68
Equipment Sales - Net $ 944.73
Customer Credit $ (572.23)
Trade Revenues $ 19,881.10
Other Revenues $ 70,059.67
----------------
Total Revenues $ 2,419,064.76
----------------
Programming Expenses:
Programming Fees $ 445,164.21
----------------
Total Programming Expenses $ 445,164.21
----------------
Technical Expenses:
Pole & Land Rentals $ 139,881.10
System Power $ 128,023.76
License Fees $ 21,881.04
Contract Labor - Service $ 7,112.50
Salaries, Technical $ 147,547.83
Employee Benefits, Technical $ 242.64
Insurance, Technical $ 21,008.67
Miscellaneous, Technical $ 3,658.27
Tools & Support Supplies $ 2,526.23
Repairs & Maint. Technical $ 5,131.10
Vehicles Expense $ 86,032.44
----------------
Total Technical Expenses $ 563,045.58
----------------
Marketing Expenses:
Salaries, Marketing $ 13,126.80
Commissions $ 1,641.00
Miscellaneous, Marketing $ 28.00
Travel & Lodging $ 3,106.72
----------------
Total Marketing Expenses $ 17,902.52
----------------
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GRASSROOTS CABLE SYSTEMS, INC.
INCOME STATEMENT
12/31/93
Ytd
Amount
General & Administrative Expenses:
Salaries, G & A $ 167,860.22
Payroll Taxes $ 29,969.69
Health Insurance $ 29,580.39
Workman's Comp $ 5,722.77
Key Man Life Insurance $ 8,093.40
Miscellaneous, G & A $ 5,921.25
Contributions $ 245.00
Repairs & Maint, General $ 519.52
Bad Debt Expense $ 23,397.55
Billings & Supplies $ 11,752.98
Dues & Subscriptions $ 1,851.05
Entertainment & Meals $ 1,584.86
Office Expense $ 63,446.77
Office Rent $ 24,558.93
Professional Services $ 44,752.32
Taxes $ 27,841.63
Telephone Expense $ 31,062.01
Travel & Lodging $ 2,694.48
Utilities $ 4,971.13
----------------
Total G & A Expenses $ 485,825.95
----------------
Total Operating Expenses $ 1,511,938.26
----------------
Operating Income (Loss) $ 907,126.50
Depreciation & Amortization $ 1,326,476.28
Interest Expense $ 698,769.77
Interest Expense - Deferred $ 384,919.39
Loss (Gain) on Sale of Assets $ (3,841.50)
----------------
Net Profit or (Loss) $ (1,499,197.44)
================
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b) Pro forma financial information.
Phoenix Leasing Cash Distribution Fund III and Phoenix Grassroots Cable Systems,
L.L.C. (collectively referred to as "the Partnership") entered into a Settlement
Agreement and Releases (the "Agreement") with Grassroots Cable Systems, Inc., a
cable television company that the Partnership, along with other affiliated
partnerships, had extended credit. Phoenix Grassroots Cable Systems, L.L.C. is a
newly formed limited liability company and majority owned subsidiary of Phoenix
Leasing Cash Distribution Fund III. The closing date of the Agreement was
February 14, 1996. This Agreement allowed the Partnership to foreclosure upon
the cable television system (the collateral for the note) of Grassroots Cable
Systems, Inc. The Partnership's net carrying value for this outstanding note
receivable, before considering any allowance for losses on notes receivable, was
$9,014,483 at December 31, 1995. The Partnership made a cash payment of $75,000
and will assume certain liabilities and accounts payable as specified in the
agreement.
The following table summarizes the unaudited pro forma changes to certain items
of the consolidated balance sheet of the Partnership as of December 31, 1995 as
if the cable television system had been acquired on December 31, 1995. These pro
forma amounts reflect certain adjustments which, among other things, include a
decrease in notes receivable, an increase in cable systems, property and
equipment, and an increase in accounts payable and partners capital.
December 31,
1995
(Amounts in Thousands)
Notes receivable $ 6,174
Cable systems, property and equipment 10,882
Total assets 23,005
Accounts payable and accrued expenses 4,092
Total liabilities 4,866
Partners' capital 18,139
The following table summarizes the unaudited pro forma changes to certain items
of the consolidated results of operations of the Partnership for the year ended
December 31, 1995 as if the cable television system had been acquired at the
beginning of the year. These pro forma amounts reflect certain adjustments
which, among other things, include an increase in operating revenues from cable
subscribers, increases in operating expenses of the cable television system,
depreciation and amortization of tangible and intangible assets and adjustments
of interest expense on outstanding debt. Not included in the following table of
pro forma income statement adjustments is a reduction in the allowance for loan
losses of $2,035,000. This reduction in the allowance for loan losses will be
recognized as income.
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For the year ended
December 31,
1995
(Amounts in Thousands
except for per unit amounts)
Cable subscriber revenue $ 3,578
Total revenues 8,011
Depreciation and amortization 2,150
Program service, cable system 1,515
Total expenses 4,447
Net income before minority interest 3,564
Minority interest 20
Net income 3,544
Net income per limited
partnership unit $ 6.79
The above pro forma consolidated information should not necessarily be
considered as indicative of the results that would have occurred had the
acquisition been made at the beginning of the year and their operations
consolidated for the twelve month period.
c) Exhibits:
(2) Settlement Agreement and Releases. (43 pages)
<PAGE>
Page 14 of 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned hereunto duly authorized.
PHOENIX LEASING CASH DISTRIBUTION FUND III
A CALIFORNIA LIMITED PARTNERSHIP
(Registrant)
Date Title Signature
April 25, 1996 Senior Vice President, /S/ Bryant J. Tong
- -------------- Financial Operations ------------------
(Principal Accounting Officer) (Bryant J. Tong)
of Phoenix Leasing Incorporated
the General Partner
Exhibit 2
SETTLEMENT AGREEMENT AND RELEASES
This Settlement Agreement and Releases ("Agreement") is
entered into as of this 14th day of February, 1996 by and among Grassroots Cable
Systems, Inc., a New Hampshire corporation ("Borrower"), W. Robert Felder ("R.
Felder"),Phoenix Leasing Incorporated, a California corporation, Phoenix Leasing
Cash Distribution Fund III, a California limited partnership, Phoenix Leasing
Cash Distribution Fund IV, a California limited partnership, Phoenix Income
Fund, L.P., a California limited partnership, and Phoenix Grassroots Cable
Systems, L.L.C., a Delaware limited liability company ("Phoenix Grassroots"),
with reference to the following facts.
RECITALS
A. Borrower owns cable television systems located in, among
other areas, the Maine counties of Franklin, Hancock, Kennebec, Knox, Oxford and
Penobscot and the New Hampshire counties of Carroll, Coos, Grafton, Merrimack,
Strafford and Sullivan (individually and collectively referred to as the
"Systems").
B. On or about November 7, 1989, Borrower made, executed and
delivered to Citizens Savings Bank ("Citizens") its revolving credit and term
loan agreement ("Senior Loan Agreement"). Under the terms of said Senior Loan
Agreement, Citizens agreed to make various advances of money to Borrower,
provided Borrower complied with the various terms and conditions of the Senior
Loan Agreement.
C. Contemporaneously with its execution of the Senior Loan
Agreement, Borrower executed its revolving credit and term note secured by
security agreement and other collateral ("Senior Note") in favor of Citizens.
Pursuant to the terms of the Senior Loan Agreement and Senior Note, Citizens
made advances of money to Borrower in the principal sum of $6,499,000.
D. On or about October 30, 1990, Borrower made, executed and
delivered to Citizens its first amendment to revolving credit and term loan
agreement ("First Amendment to Senior Loan Agreement"). Contemporaneously with
its execution of the First Amendment to Senior Loan Agreement, Borrower executed
its amended revolving credit and term note secured by a security agreement and
other collateral ("Amended Senior Note").
E. On or about October 13, 1992, Borrower made, executed and
delivered to Citizens its second amendment to revolving credit and term loan
agreement ("Second Amendment to Senior Loan Agreement").
1
<PAGE>
F. On or about November 16, 1992, Borrower made, executed and
delivered to Citizens its third amendment to revolving credit and term loan
agreement ("Third Amendment to Senior Loan Agreement").
G. On or about March 31, 1994, Borrower, R. Felder and Marsha
Felder ("M. Felder") made, executed and delivered to Citizens their forbearance
agreement ("Forbearance Agreement"). In the Forbearance Agreement, Borrower
acknowledged, inter alia, that it was obligated to pay to Citizens the full
amount of the obligations owed to Citizens under the Senior Loan Agreement,
Senior Note, First Amendment to Senior Loan Agreement, Amended Senior Note,
Second Amendment to Senior Loan Agreement and Third Amendment to Senior Loan
Agreement as a result of the defaults which had occurred thereunder.
H. On or about March 8, 1995, Borrower, R. Felder, and M.
Felder made, executed and delivered to Citizens their second forbearance
agreement ("Second Forbearance Agreement to Senior Loan Agreement").
I. That pursuant to the terms of the Second Forbearance
Agreement to Senior Loan Agreement, Citizens agreed, inter alia, to forbear from
collecting the outstanding obligations owed by Borrower to Citizens pursuant to
the terms of the Senior Loan Agreement, Senior Note, First Amendment to Senior
Loan Agreement, Amended Senior Note, Consent Agreements, Second Amendment to
Senior Loan Agreement, Third Amendment to Senior Loan Agreement and First
Forbearance Agreement to Senior Loan Agreement until no later than June 30,
1995. The Senior Loan Agreement, Senior Note, First Amendment to Senior Loan
Agreement, Amended Senior Note, Consent Agreements, Second Amendment to Senior
Loan Agreement, Third Amendment to Senior Loan Agreement, First Forbearance
Agreement to Senior Loan Agreement and Second Forbearance Agreement to Senior
Loan Agreement and all documents and instruments executed in connection
therewith and related thereto shall hereinafter be referred to as the "Senior
Secured Loan Documents."
J. On September 26, 1995, Phoenix Leasing Cash Distribution
Fund III, a California limited partnership of which Phoenix Leasing Incorporated
is a general partner, was allegedly assigned all of Citizens' right, title and
interest in the Senior Secured Loan Documents. Thereafter, on September 28 and
September 29, 1995, Phoenix Leasing Cash Distribution Fund III gave notice of
said assignment to Borrower, R. Felder and M. Felder, and demanded that Borrower
pay to Phoenix Leasing Cash Distribution Fund III all of the outstanding
obligations owed by Borrower under the terms of the Senior Secured Loan
Documents on or before October 5, 1995. Subsequent to September 29, 1995,
Phoenix Leasing Cash Distribution Fund III's interest in the Senior Secured Loan
Documents was allegedly assigned, in part, to
2
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Phoenix Income Fund L.P. and Phoenix Leasing Cash Distribution Fund IV, both of
which are also California limited partnerships in which Phoenix Leasing
Incorporated is the general partner. Borrower failed to pay said sums.
K. On or about November 7, 1989, Borrower made, executed and
delivered to Phoenix Leasing Incorporated its subordinated loan agreement
("Subordinated Loan Agreement"). Under the terms of said Subordinated Loan
Agreement, Phoenix Leasing Incorporated agreed to make various advances of money
to Borrower, providing Borrower complied with the various terms and conditions
of the Subordinated Loan Agreement.
L. Contemporaneously with its execution of the Subordinated
Loan Agreement, Borrower executed its promissory note ("Subordinated Note") in
favor of Phoenix Leasing Incorporated. Subsequent to November 7, 1989, Phoenix
Leasing Incorporated allegedly assigned its interest in the Subordinated Loan
Agreement and Subordinated Note to Phoenix Leasing Cash Distribution Fund III,
Phoenix Income Fund L.P. and Phoenix Leasing Cash Distribution Fund IV, all of
which are California limited partnerships in which Phoenix Leasing Incorporated
is the general partner.
M. On or about November 30, 1990, Borrower made, executed and
delivered to Phoenix Leasing Incorporated its first amendment to loan agreement
("First Amendment to Subordinated Loan Agreement"). The Subordinated Loan
Agreement, Subordinated Note and First Amendment to Subordinated Loan Agreement
are hereinafter collectively referred to as the "Subordinated Secured Loan
Documents."
N. Pursuant to the terms of the Subordinated Secured Loan
Documents, Phoenix Leasing Incorporated made advances of money to Borrower in
the principal sum of $2,240,019.41.
O. Borrower breached the terms of the Subordinated Secured Loan
Documents by, inter alia, failing to pay the entire monthly payment of interest
due thereunder on February 1, 1993, and all subsequent monthly payments and by
failing to make the payments required to be made pursuant to the terms of the
Senior Loan, as that term is defined in the Subordinated Loan Agreement.
P. That in order to secure repayment of all amounts owed to
Citizens under the terms of the Senior Secured Loan Documents, on or about
November 7, 1989, Borrower executed a security agreement ("Senior Security
Agreement"). That on September 26, 1995, all of Citizen's interest in the Senior
Security Agreement was allegedly assigned to Phoenix Leasing Cash Distribution
Fund III, of which Phoenix Leasing Incorporated is the general partner and the
holder thereof. Subsequent to September 29, 1995, Phoenix Leasing Cash
Distribution Fund III's
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interest in the Senior Security Agreement was allegedly assigned, in part, to
Phoenix Income Fund L.P. and Phoenix Leasing Cash Distribution Fund IV, both of
which are California limited partnerships in which Phoenix Leasing Incorporated
is the general partner.
Q. That in order to further secure repayment of all amounts
owed to Citizens under the terms of the Senior Secured Loan Documents, on or
about December 20, 1991, Borrower executed and delivered to Citizens a
collateral assignment of insurance policy issued by the Travelers Insurance
Company, in favor of Felder as insured ("Collateral Assignment"). That on
September 26, 1995, all of Citizen's interest in the Collateral Assignment was
allegedly assigned to Phoenix Leasing Cash Distribution Fund III, of which
Phoenix Leasing Incorporated is the general partner and the holder thereof.
Subsequent to September 29, 1995, Phoenix Leasing Cash Distribution Fund III's
interest in the Senior Security Agreement was allegedly assigned, in part, to
Phoenix Income Fund L.P. and Phoenix Leasing Cash Distribution Fund IV, both of
which are California limited partnerships in which Phoenix Leasing Incorporated
is the general partner.
R. That in order to secure repayment of all amounts owed to
Phoenix Leasing Incorporated under the terms of the Subordinated Secured Loan
Documents, on or about November 7, 1989, Borrower executed a security agreement
("Subordinated Security Agreement").
S. In order to induce Citizens to extend or grant credit to
Borrower, R. Felder executed, in writing, and delivered to Citizens, his
continuing guaranty, whereby R. Felder agreed to pay to Citizens an amount equal
to all credit advanced by Citizens to Borrower ("Citizens Guaranty"). Citizens
allegedly assigned to Phoenix Leasing Cash Distribution Fund III, of which
Phoenix Leasing Incorporated is the general partner, all of its right, title and
interest in the Citizens Guaranty. Subsequent to September 29, 1995, Phoenix
Leasing Cash Distribution Fund III's interests in the Senior Security Agreement
and Citizens Guaranty were allegedly assigned, in part, to Phoenix Income Fund
L.P. and Phoenix Leasing Cash Distribution Fund IV, both of which are California
limited partnerships in which Phoenix Leasing Incorporated is the general
partner.
T. In order to induce Borrower to extend or grant credit to
Borrower, R. Felder executed, for valuable consideration, in writing, and
delivered to Phoenix Leasing Incorporated, his continuing guaranty, ("Phoenix
Guaranty"). Subsequent to November 7, 1989, Phoenix Leasing Incorporated
assigned its interest in the Phoenix Guaranty to Phoenix Leasing Cash
Distribution Fund III, Phoenix Income Fund L.P. and Phoenix Cash Distribution
Fund IV, all of which are California limited
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partnerships in which Phoenix Leasing Incorporated is the general partner.
U. On or about November 7, 1989, R. Felder and M. Felder made,
executed and delivered to Citizens their Stock Pledge Agreement ("Citizens Stock
Pledge"). All of Citizens' right, title and interest in the Citizens Stock
Pledge was allegedly assigned to Phoenix Leasing Cash Distribution Fund III, of
which Phoenix Leasing Incorporated is the general partner. Subsequent to
September 29, 1995, Phoenix Leasing Cash Distribution Fund III's interest in the
Citizens Stock Pledge was allegedly assigned, in part, to Phoenix Income Fund
L.P. and Phoenix Leasing Cash Distribution Fund IV, both of which are California
limited partnerships in which Phoenix Leasing Incorporated is the general
partner.
V. On or about November 7, 1989, R. Felder and M. Felder made,
executed and delivered to Phoenix Leasing Incorporated their stock pledge
agreement ("Phoenix Stock Pledge"). Subsequent to November 7, 1989, Phoenix
Leasing Incorporated has assigned its interest in the Phoenix Stock Pledge to
Phoenix Leasing Cash Distribution Fund III, Phoenix Income Fund L.P. and Phoenix
Cash Distribution Fund IV, all of which are California limited partnerships in
which Phoenix Leasing Incorporated is the general partner.
W. Felkon made, executed and delivered to Borrower its
substituted promissory note dated as of June 30, 1990, in the principal amount
of $165,445.76 ("Felkon Note"). The Felkon Note provided, inter alia, that
Felkon would pay to Borrower the amounts due thereunder on or before June 30,
1995. That on or about April 19, 1994, Borrower assigned all of its interest in
the Felkon Note to Citizens pursuant to a written assignment. That on September
26, 1995, Citizens allegedly assigned to Phoenix Leasing Cash Distribution Fund
III, of which Phoenix Leasing Incorporated is a general partner, all of
Citizens' right, title and interest in the Felkon Note. On September 29, 1995,
Phoenix Leasing Cash Distribution Fund III gave notice of said assignment to
Felkon and demanded that Felkon pay to Phoenix Leasing Cash Distribution Fund
III all of the outstanding obligations owed by Felkon under the terms of the
Felkon Note to Phoenix Leasing Cash Distribution Fund III on or before October
5, 1995. Subsequent to September 29, 1995, Phoenix Leasing Cash Distribution
Fund III's interest in the Felkon Note was allegedly assigned, in part, to
Phoenix Income Fund, L.P. and Phoenix Leasing Cash Distribution IV, both of
which are also California limited partnerships in which Phoenix Leasing
Incorporated is the general partner.
X. Felkon breached the terms of the Felkon Note by failing to
pay the entire amount due thereunder on June 30, 1995.
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Y. That in order to secure repayment of the amounts owed under
the terms of the Felkon Note, on or about April 20, 1994, Felkon executed a
security agreement ("Felkon Security Agreement") in favor of Citizens. That on
September 26, 1995, Citizens allegedly assigned to Phoenix Leasing Cash
Distribution Fund III, of which Phoenix Leasing Incorporated is a general
partner, all of Citizens' right, title and interest in the Felkon Security
Agreement. Subsequent to September 29, 1995, Phoenix Leasing Cash Distribution
Fund III's interest in the Felkon Security Agreement was allegedly assigned, in
part, to Phoenix Income Fund L.P. and Phoenix Leasing Cash Distribution Fund IV,
both of which are California limited partnerships in which Phoenix Leasing
Incorporated is the general partner.
Z. The Senior Secured Loan Documents, Senior Security
Agreement, Citizens Stock Pledge, Collateral Assignment, Subordinated Secured
Loan Documents, Subordinated Security Agreement, and Phoenix Stock Pledge and
any and all documents and instruments executed in connection therewith and/or
related thereto (except for the Citizens Guaranty and Phoenix Guaranty) shall be
individually and collectively referred to as the "Loan Documents." The Felkon
Note and Felkon Security Agreement and any and all documents related thereto
shall hereinafter collectively be referred to as the "Felkon Loan Documents."
AA. The Loan Documents are secured by valid security interests
in all of Borrower's assets ("Collateral"), including, but not limited to (I)
the Systems; (ii) those certain franchises more particularly described in
Exhibit "A" attached hereto and incorporated herein ("Franchises"); and (iii)
the certain leases more particularly described in Exhibit "B" attached and
incorporated herein ("Leases").
BB. That subsequent to November 1, 1995, the Loan Documents,
Felkon Loan Documents, Citizens Guaranty and Phoenix Guaranty were assigned by
Phoenix Leasing Cash Distribution Fund III, Phoenix Income Fund L.P. and Phoenix
Leasing Cash Distribution Fund IV to Phoenix Grassroots. Phoenix Leasing
Incorporated, Phoenix Leasing Cash Distribution Fund III, Phoenix Income Fund
L.P. and Phoenix Leasing Cash Distribution Fund IV are hereinafter collectively
referred to as "Phoenix".
CC. Borrower and R. Felder, and Felkon are currently in default
of the performance of their obligations to Phoenix Grassroots. By virtue of said
defaults, Phoenix Leasing Cash Distribution Fund III previously accelerated the
unpaid balance of all indebtedness owed by Borrower under the terms of the Loan
Documents and declared all obligations and indebtedness of Borrower thereunder
to be immediately due, owing and payable.
DD. As of January 31, 1996, the unpaid principal balance
allegedly owed under the terms of the Senior Secured Loan
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Documents is $6,743,042.85, plus interest, late charges and other unpaid costs
and expenses, including attorneys' fees and costs all of which continue to
accrue and the unpaid principal balance owed under the terms of the Subordinated
Secured Loan Documents allegedly is $6,310,846.08 plus interest, late charges,
other unpaid costs and expenses, including attorneys' fees and costs and other
amounts due thereunder, all of which continue to accrue (all of which are
individually and collectively referred to as the "Phoenix Obligations"). That as
of January 31, 1996, the unpaid principal balance allegedly owed under the
Felkon Loan Documents is $257,819.64, plus interest, late charges and other
unpaid costs and expenses, including attorneys' fees and costs and other amounts
due thereunder, all of which continue to accrue (the "Felkon Obligations").
EE. On October 12, 1995, Phoenix Leasing Incorporated filed a
complaint and expedited motion for appointment of receiver in the United States
District for District of New Hampshire, Case No. C-95-496-B ("the Federal Court
Action"), seeking to, inter alia, enforce the terms of the Loan Documents and to
have a receiver appointed over Borrower.
FF. After a review of the options and alternatives, Borrower
and R. Felder hereby request Phoenix Grassroots to accept transfer of the
Collateral in full satisfaction of the Phoenix Obligations.
GG. Phoenix and Phoenix Grassroots are willing to agree to the
transfer of the Collateral to Phoenix Grassroots in full satisfaction of the
Phoenix Obligations, provided that Borrower and R. Felder, and each of them,
enter into this Agreement and specifically acknowledge the defaults of Borrower
to Phoenix and Phoenix Grassroots and make certain representations, warranties,
waivers and agreements, and satisfy all conditions precedent to the
effectiveness of this Agreement as provided for below.
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. Phoenix Grassroots,
Phoenix, Borrower and R. Felder agree that the information set forth in Recitals
A through DD, inclusive, is true and correct; provided, however, that as to
transactions between Citizens and the various Phoenix affiliates and
transactions among the various Phoenix affiliates, Borrower and R. Felder have
no direct or independent knowledge concerning
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those transactions. All terms not defined herein shall have the meanings given
them in the Loan Documents.
2. Acknowledgment. As of the Closing Date, Borrower and R.
Felder, and each of them, acknowledge that they are in default under the Loan
Documents, Citizens Guaranty and Phoenix Guaranty according to their terms and
that all said amounts have been accelerated and are immediately due and payable
in full. As of the Closing Date, Borrower and R. Felder, and each of them, agree
not to cause any abatement, postponement or termination of enforcement
proceedings with respect to the Loan Documents, Citizens Guaranty and Phoenix
Guaranty.
3. Conditions Precedent. The "Closing Date" shall mean the
date on which Phoenix and Phoenix Grassroots shall have received all of the
following documents, agreements, certificates and other instruments, in a form
satisfactory to Phoenix and Phoenix Grassroots in their sole and absolute
discretion, opinion and judgment, or the following having occurred:
A. The original Borrower Bill of Sale (as defined in Section 4
below), in the form attached hereto as Exhibit "C" and incorporated herein,
fully executed and acknowledged;
B. The original Assignment(s) of Cable Television Franchise
("Assignment(s) of Franchises") in the form attached hereto as Exhibit "D" and
incorporated herein, fully executed and acknowledged;
C. The original Assignment(s) of Leases, Easements and Pole
Attachments Agreements ("Assignment(s) of Lease") in the form attached hereto as
Exhibit "E" and incorporated herein, fully executed and acknowledged;
D. Applications for transfers and/or transfers of certificates
of title, registrations and/or evidence of ownership pertaining to any vehicles
owned by Borrower;
E. The original Environmental Agreement and Indemnification
("Environmental Indemnification"), in the form attached hereto as Exhibit "F"
and incorporated herein, fully executed and acknowledged;
F. 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;
G. The original Subscriber Report and Receivables Certificate
(as defined in Section 6 below), in the
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form attached hereto as Exhibit "H" and incorporated herein, fully executed and
acknowledged;
H. 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;
I. The completion of all recordings and filings as may be
reasonably necessary or, in the opinion of Phoenix or Phoenix Grassroots, to
complete the transfer of all right, title and interest in the Collateral to
Phoenix Grassroots;
J. A certificate of good standing showing that Borrower is in
good standing under the laws of the state of its incorporation and/or formation
and certificates indicating that Borrower qualified to transact business;
K. The favorable opinion of counsel to Borrower, as to due
authorization under applicable New Hampshire law and proper execution of this
Agreement and the documents and instruments executed in connection herewith and
any related agreements or instruments;
L. The delivery by Borrower to Phoenix Grassroots of evidence
reasonably satisfactory to counsel for Phoenix and Phoenix Grassroots that the
Borrower has delivered the notices, proposed resolutions, and/or consents which
Phoenix and Phoenix Grassroots have required Borrower to send to each of the
towns or communities described in Exhibit "I" attached hereto;
M. The original M. Felder Release Agreement ("M. Felder Release
Agreement"), in the form attached hereto as Exhibit "J", fully executed; and
N. The original Felkon Settlement Agreement and Releases, in
the form attached hereto as Exhibit "K", fully executed.
4. Transfer of Collateral in Full Satisfaction of the Obligations.
A. Subject to the terms and conditions of this Agreement and in
partial consideration of the satisfaction of the Phoenix Obligations, upon the
Closing Date, Borrower shall transfer to Phoenix Grassroots all right, title and
interest in all of the Collateral in full satisfaction of the Phoenix
Obligations. Borrower and R. Felder, and each of them, specifically acknowledge
and agree that such transfer of the
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Collateral in full satisfaction of the Phoenix Obligations is a benefit to
Borrower and R. Felder, and each of them, and that Phoenix and Phoenix
Grassroots are acting in good faith. Borrower shall execute and deliver to
Phoenix Grassroots that certain bill of sale ("Borrower Bill of Sale"), Exhibit
"C" hereto, which Borrower Bill of Sale provides, in part, that Borrower sells,
transfers, assigns, conveys and delivers to Phoenix Grassroots all of its right,
title and interest in the Collateral.
B. Borrower and R. Felder, and each of them, hereby waive and
renounce any right that they may have to notice of any proposals to transfer the
Collateral 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, New Hampshire, Maine, or any
other state law, and any notice requirement contained in the Loan Documents,
Citizens Guaranty and Phoenix Guaranty and agree that any notice requirement
shall be deemed to have occurred and been satisfied, fulfilled, terminated and
waived by Borrower and R. Felder, and each of them. Borrower and R. Felder, and
each of them, further waive and renounce any right they may have to object to
such transfer of the Collateral to Phoenix Grassroots. Borrower and R. Felder,
and each of them, further waive and renounce any and all rights they may have to
redeem the Collateral. Borrower and R. Felder, and each of them, hereby
specifically agree and acknowledge that all such waivers are made after default.
C. Borrower and R. Felder, and each of them, hereby acknowledge
and agree that Borrower has, without duress, voluntarily and freely relinquished
possession and control of the Collateral to Phoenix Grassroots. Borrower and R.
Felder, and each of them, hereby consent and authorize Borrower to turn over
possession of the Collateral to Phoenix Grassroots upon the Closing Date.
D. Borrower and R. Felder, and each of them, acknowledge and
agree that Phoenix Grassroots has a legal right to accept transfer of the
Collateral from Borrower, and that such transfer shall remain validly perfected,
proper in all respects, and full force and effect.
E. As of the Closing Date, Borrower and R. Felder, and each of
them, agree not to object to the transfer of the Collateral to Phoenix
Grassroots nor to invoke or obtain legal or equitable relief, whether injunctive
relief or otherwise, in order to abate, postpone or terminate such transfer. As
of the Closing Date, Borrower and R. Felder, and each of them, hereby relinquish
any right they may have to prevent the transfer of the Collateral to Phoenix
Grassroots, and acknowledge Phoenix Grassroots shall have an absolute right to
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accept transfer of the Collateral in consideration of the forgiveness of the
Phoenix Obligations.
F. Borrower and R. Felder, and each of them, specifically
acknowledge and agree that the transfer of the Collateral to Phoenix Grassroots
in full satisfaction of the Phoenix Obligations constitutes a full and complete
transfer of all right, title and interest in and to the Collateral in exchange
for reasonably equivalent value and made in good faith, by and between Borrower
and R. Felder, on the one hand, and Phoenix and Phoenix Grassroots, on the other
hand.
G. The transfer of the Collateral to Phoenix Grassroots shall
be immediate and absolute and, after the Closing Date, neither Borrower nor R.
Felder shall have (and none of them reserves) any right, title or interest of
any kind whatsoever in or to the Collateral including, without limitation, any
legal, beneficial or equitable interest, all of which are negated on the Closing
Date. Borrower and R. Felder, and each of them, represent and warrant that the
transfer of the Collateral is absolute and that Borrower and R. Felder do not
have equitable or other liens on the Collateral and that the Borrower Bill of
Sale, Assignment(s) of Franchises and Assignment(s) of Lease are not in any way
to be construed as an equitable or other lien. Borrower and R. Felder, 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 and R. Felder, might have or otherwise have had after the
Closing Date in connection with the Collateral.
H. Borrower and R. Felder, and each of them, hereby represent
and warrant, to the best of their knowledge, that the value of the Collateral is
substantially less than the total outstanding balance of the Phoenix
Obligations. Borrower and R. Felder, Phoenix and Phoenix Grassroots further
specifically and individually agree that the valuation of the Collateral has
been fairly, justly and impartially established in open negotiations between the
parties, without duress of any kind, and as a result of Borrower's voluntary
offer to permit Phoenix and Phoenix Grassroots to strictly foreclose upon the
Collateral in exchange for the forgiveness of the Phoenix Obligations, following
the inability of Borrower and R. Felder and their agents and representatives to
locate a willing and able buyer in the open market for the Collateral at a
purchase price greater than or equal to the sum of the Phoenix Obligations.
I. Subsequent to the Closing Date, Borrower shall obtain and
deliver to Phoenix Grassroots written consents, approvals, notifications,
assignments and other documents and agreements from various persons or entities
with respect to franchises substantially in the form of Exhibit "M" attached
hereto and incorporated herein (the "Franchise Consents"), which
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Borrower was not able to deliver to Phoenix and Phoenix Grassroots on the
Closing Date. Subsequent to the Closing Date, Borrower shall cooperate with
Phoenix Grassroots in order to obtain written consents necessary for the
operation of the Systems, and approvals and authorizations from the Federal
Communications Commission and 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 and use permits (collectively referred to as the "Other Consents").
Borrower shall not incur any expense in obtaining the Other Consents.
J. Borrower and R. Felder, and each of them, hereby represent
and warrant to Phoenix and Phoenix Grassroots, and Phoenix and Phoenix
Grassroots 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 plan benefits or other employee benefits (except as to Phoenix and
Phoenix Grassroots) are set forth on Exhibit "O" attached hereto and
incorporated herein. Borrower and R. Felder, and each of them, shall defend and
hold Phoenix and Phoenix Grassroots 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 Grassroots as a
result of or in connection with any liability for any amount of such debts,
obligations and liabilities which are not disclosed on Exhibit "O" attached
hereto and incorporated herein.
K. Except as specifically and expressly stated in this
Agreement, Phoenix and/or Phoenix Grassroots 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. In the event
that any claim is made against Phoenix and/or Phoenix Grassroots by any third
party seeking to impose liability on Phoenix and/or Phoenix Grassroots for the
performance, payment, discharge or other resolution for any of the
aforementioned liabilities, nothing contained in this section 4K. shall be
construed as an
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agreement by Borrower and/or R. Felder to indemnify Phoenix and/or Phoenix
Grassroots against any such claims made by any third party.
L. In the event this Agreement is set aside for any reason
whatsoever and Phoenix and/or Phoenix Grassroots are required to return or
restore any of the Collateral transferred to Phoenix and Phoenix Grassroots, or
any portion thereof, then (I) all liabilities, obligations and indebtedness
under the Loan Documents, Phoenix Guaranty and Citizens Guaranty shall
automatically be revived, reinstated and restored and shall exist as though the
transfer of the Collateral in satisfaction of Phoenix Obligations had never
occurred, to the extent of the fair market value of the Collateral returned
and/or transferred; and (ii) all payments made by Phoenix and/or Phoenix
Grassroots to the Borrower and/or R. Felder, if any hereunder, shall forthwith
be refunded and paid to Phoenix and/or Phoenix Grassroots to the extent of the
fair market value of the Collateral returned and/or transferred.
M. Borrower and R. Felder, and each of them, acknowledge and
agree that:
(1) As a consequence of the transfer of the Collateral in full
satisfaction of the Phoenix Obligations described in this Agreement, Phoenix
and/or Phoenix Grassroots must file a Form 1099A with the Internal Revenue
Service which (among other things) may require Phoenix and/or Phoenix Grassroots
to report any forgiveness of debt to Borrower;
(2) The transfer of the Collateral in full satisfaction of the
Phoenix Obligations is a compromise by Phoenix and Phoenix Grassroots which,
among other things, considers the fact that Phoenix and Phoenix Grassroots were
entitled to be paid under the Loan Documents in cash, without Phoenix and
Phoenix Grassroots having to incur the significant carrying costs and risks
associated with the Collateral; and
(3) Each party accepts the risks associated with the valuation
of Borrower's assets and the Collateral and Borrower and R. Felder, and each of
them, shall have no right to any proceeds from any sale made by Phoenix
Grassroots of the assets of Borrower and/or the Collateral.
N. Borrower and R. Felder, and each of them, confirm,
acknowledge and agree that all of Borrower's right, title and interest in and to
the Collateral owned by Borrower upon the Closing Date is being transferred to
Phoenix and Phoenix Grassroots and that Borrower holds no right, title or
interest in the Collateral. Should any party discover subsequent to the Closing
Date that any property of Borrower was not included in the Collateral
transferred to Phoenix and Phoenix Grassroots,
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Borrower and R. Felder, 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 Grassroots,
in their sole and absolute discretion, opinion and judgment, to transfer title
to such omitted Collateral. Borrower and R. Felder, and each of them,
acknowledge and agree that they will indemnify and hold Phoenix and Phoenix
Grassroots harmless from any costs and expenses incurred by Phoenix and Phoenix
Grassroots including, but not limited to, attorneys' fees, in the event that it
is necessary for Phoenix Grassroots and/or Phoenix to take additional steps to
obtain title to such omitted Collateral, but only if such additional steps are
necessitated by a failure of Borrower and R. Felder or any of them to cooperate
in a transfer of title to such omitted collateral.
O. As partial consideration for the transfer of the Collateral
in full satisfaction of the Phoenix Obligations, Borrower and R. Felder, and
each of them, upon the Closing Date, shall execute and deliver that certain
Covenant Not to Compete, in the form of Exhibit "G" attached hereto and
incorporated herein ("Covenant").
P. Borrower, hereby agrees to terminate that certain management
agreement entered into between Borrower and Felkon dated November 6, 1989
("Management Agreement") and any amendments, modifications, renewals or
replacements thereof, and any other management agreements, as of the Closing
Date. Neither Borrower nor Phoenix Grassroots 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 Closing Date.
Q. After the Closing Date, Phoenix Grassroots shall operate the
Systems in any manner it chooses in its sole and absolute discretion, opinion
and judgment and neither Borrower nor R. Felder shall have any right to
participate in the operation and/or management of the Systems. Borrower and R.
Felder, and each of them, acknowledge that Phoenix Grassroots may sell any or
all of the Collateral in any manner that it wishes without any notice to, or
consent from, Borrower and R. Felder, or any of them.
R. On the Closing Date, Borrower, and R. Felder, and each of
them, shall deliver to Phoenix Grassroots all of the Collateral, all books,
records and other data in Borrower's or R. Felder's possession relating to the
Collateral, including, but not limited to, all cash, monies in any bank,
deposit, payroll and checking accounts, customer lists, suppliers, employee
lists, plans, strand maps, house counts, maintenance records, market studies,
copies of insurance policies, copies of any and all
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correspondence, reports, memoranda, modifications and/or amendments by and
between Borrower, R. Felder, and any telephone and/or utility company
franchising authority, the Federal Communications Commission ("FCC") or any
other governmental instrumentality and other documents reasonably requested by
Phoenix and Phoenix Grassroots. Notwithstanding the foregoing, Borrower may
retain all books and records which it or its financial advisor or accountant
deems necessary for completing federal tax returns and other corporate filings
but shall, after the Closing Date, make said books and records available to
Phoenix and/or Phoenix Grassroots for inspection and copying at their sole
expense upon reasonable prior notice by Phoenix and/or Phoenix Grassroots.
S. On the Closing Date, Phoenix Leasing Incorporated, Borrower
and R. Felder shall enter into a stipulation in the form attached hereto as
Exhibit "P" (the "Stipulation") which shall provide that the Federal Court
Action shall be dismissed with prejudice and that all parties thereto shall bear
their own attorneys' fees and costs in connection with the prosecution and
defense of the Federal Court Action. Within ten days after the Stipulation has
been executed, Phoenix shall file a motion in the Federal Court Action, at its
own expense, to obtain an order approving of the Stipulation.
T. On the Closing Date, Phoenix Grassroots shall pay to R.
Felder and M. Felder (the "Felders") the sum of $50,000, in immediately
available funds, in consideration of the Felders' execution of the Covenant.
Thereafter, Phoenix shall pay the Felders the additional sum of $25,000 (I) one
year from the Closing Date; or (ii) after Borrower has obtained consents
substantially in the form attached as Exhibit "M" to the transfer and assignment
of the Franchises to Phoenix Grassroots from all of the towns which issued
Franchises that are described in Exhibit "A" attached hereto, whichever first
occurs.
U. On or before ten days have elapsed from the Closing Date,
Phoenix Grassroots shall pay: (I) the obligations owed by the Felders to First
NH Bank under that certain promissory note in the original principal amount of
$102,000, dated July 23, 1990, as amended, in an amount not to exceed the sum of
$83,127.73 through and including January 26, 1996 and accruing thereafter at the
rate of $21.94 per day until the date of payment (the "First NH Payoff"); (ii)
the obligations owed by Borrower, the Felders and Felkon to First Savings of New
Hampshire under that certain promissory note in the original principal sum of
$20,000, dated March 7, 1995, in an amount not to exceed the sum of $11,445.51
through and including February 7, 1996 and accruing thereafter at the rate of
$3.66 per day until the date of payment (the "First Savings Payoff No. 1");
(iii) the obligations owed by Borrower, the Felders and Felkon to First
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Savings of New Hampshire under that certain promissory note in the original
principal sum of $48,230, dated November 19, 1993, in an amount not to exceed
the sum of $14,707.53 through and including January 19, 1996 and accruing
thereafter at the rate of $3.68 per day until the date of payment (the "First
Savings Payoff No. 2"); (iv) the obligations owed by Borrower to AT&T Automobile
Services Inc. under that certain lease, dated March 22, 1995 ("Lease"), which
must be paid by Borrower to exercise its purchase option thereunder (the "AT&T
Payoff") in an amount not to exceed $32,282.79; and (v) the obligations owed by
Borrower under that certain Equipment Agreement dated November 12, 1992 with
SportsChannel New England Limited Partnership in an amount not to exceed the sum
of $3,471.25 through and including February 1, 1996 and accruing at the rate of
$.65 per day until the date of payment ("the SportsChannel Payoff"). Borrower
agrees that, on or before twenty calendar days have elapsed from the date of
Phoenix Grassroots' payment of the First NH Payoff, the First Savings Payoff No.
1, the First Savings Payoff No. 2, and the SportsChannel Payoff, it shall
deliver to Phoenix Grassroots lien releases, in a form reasonably satisfactory
to Phoenix Grassroots, of the security interests held by First NH Bank, First
Savings of New Hampshire, and SportsChannel New England Limited Partnership in
all property of Borrower which secures repayment of the obligations which were
paid by Phoenix Grassroots. Borrower further agrees, that on or before twenty
days have elapsed from the date of Phoenix Grassroots' payment of the AT&T
Payoff, Borrower shall execute and/or deliver to Phoenix Grassroots any
documentation reasonably necessary to transfer ownership of the vehicle which is
the subject of the Lease to Phoenix Grassroots.
V. On or before 10 days after the Closing Date, Phoenix
Grassroots shall (I) cancel the Senior Note, Subordinated Note, the Felkon Note
Citizens Guaranty, Phoenix Guaranty and Collateral Assignment, mark them
"Canceled-Paid in Full" and shall thereafter return the originals thereof to the
Felders; and (ii) release any security interest in any insurance policy which is
the subject of the Collateral Assignment.
5. Costs and Expenses.
Borrower, R. Felder, Phoenix and Phoenix Grassroots shall each
bear their own attorneys fees, costs and expenses arising out of the
negotiation, execution, delivery and performance of this Agreement, the
dismissal of the Federal Court Action, and the consummation of the transactions
contemplated hereby.
6. Security Deposits and Subscribers.
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A. Borrower and R. Felder, and each of them, represent and
warrant that, to the best of their knowledge, as of December 31,1995, the total
deposits for cable equipment and credit balances due and owing to Borrower's
subscribers are $135,664.60 ("Security Deposits"). Borrower and R. Felder, and
each of them, represent and warrant that, to the best of their knowledge, prior
to the Closing Date, they have not made any disbursements of the Security
Deposits, except for legitimate refunds made by Borrower to Borrower's
subscribers.
B. Borrower 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 Closing Date ("Subscriber Report and Receivables Certificate"), in the form
of Exhibit "H", attached hereto and incorporated herein.
C. Borrower and R. Felder, and each of them, represent and
warrant that, to the best of their knowledge, Borrower possesses 34 FCC licenses
or registrations and no other FCC licenses or registrations.
7. Borrower's and R. Felder's Representations and Warranties.
Except as specifically and expressly set forth in Exhibit "Q"
attached hereto and incorporated herein, Borrower and R. Felder, and each of
them, represent and warrant to Phoenix and Phoenix Grassroots as of the Closing
Date, and Phoenix and Phoenix Grassroots are relying thereon, as follows:
A. Borrower and R. Felder, and each of them, represent and
warrant, to the best of their knowledge that Phoenix Grassroots has a
first-priority, perfected security interest in the Collateral by virtue of the
Loan Documents. Borrower and R. Felder and each of them represent and warrant
that neither Borrower nor R. Felder assert any ownership and/or security
interests in the Felkon Transferred Collateral as defined in the Felkon
Settlement Agreement and Release.
B. Borrower and R. Felder, and each of them, represent and
warrant that, to the best of their knowledge, Phoenix Grassroots' security
interest in the Collateral is valid and binding in accordance with the terms of
the Loan Documents.
C. Borrower and R. Felder, and each of them, represent and
warrant that the obligations owed by Borrower, Felkon Inc., and the Felders to
First NH Bank, First Savings of New Hampshire, AT&T Automobile Services, Inc.
and SportsChannel
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New England Limited Partnership are the amounts set forth in section 4U. above.
D. Borrower and R. Felder, and each of them, represent and
warrant that the Collateral has not been pledged, hypothecated, encumbered or
conveyed, except as to Phoenix and Phoenix Grassroots pursuant to the Loan
Documents and except to the extent that the Collateral secures the SportsChannel
New England Limited Partnership, First NH Bank and First Savings of New
Hampshire obligations, is owned by Borrower, free and clear of all security
interests, claims, liens (voluntary or involuntary), encumbrances, judgment
liens, leases and rights of others except as to Phoenix and Phoenix Grassroots,
except to the extent that the Collateral secures the First NH Bank, First
Savings of New Hampshire and SportsChannel New England Limited Partnership
obligations. Borrower and R. Felder, and each of them, further represent and
warrant that Borrower has the full right, power and authority to transfer and
deliver to Phoenix Grassroots, in accordance with this Agreement, the Collateral
free and clear of all liens, charges, claims, equities, restrictions,
encumbrances, preemptive and other similar rights and that the transfer of the
Collateral 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
(except as to the Senior Secured Loan Documents and the Subordinated Secured
Loan Documents).
E. Borrower and R. Felder, and each of them, represent and
warrant, the best of their knowledge, that the execution and carrying out of the
provisions of this Agreement and compliance with its provisions 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 respective articles of incorporation, bylaws, or any indenture, mortgage,
deed of trust, agreement or other instrument to which the Borrower are a party
or by which each is bound or affected;
F. Borrower and R. Felder, and each of them, represent and
warrant that attached hereto collectively as Exhibit "R" and incorporated herein
by this reference as though set forth in full are statements of income and
retained earnings of the Borrower for the fiscal year ending December 31, 1995
and period ending December 31, 1995 and a balance sheet of the Borrower as of
the fiscal year ending December 31, 1995 and period ending December 31, 1995
(collectively referred to as "Borrower Financial Statements") which have been
prepared by Borrower and present fairly and accurately the financial condition
and results of the operations of the Borrower.
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G. Borrower and R. Felder, and each of them, represent and
warrant that attached hereto collectively as Exhibit "S" 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, 1995 and the period ending
December 31, 1995; 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.
H. Borrower and R. Felder, and each of them, represent and
warrant that except as to the extent reflected or reserved in the Borrower
Financial Statements attached hereto as Exhibit "R", the Borrower, as of the
date of the Borrower Financial Statements, had no liabilities of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, 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.
I. Borrower and R. Felder, and each of them, represent and
warrant that since December 31, 1995, Borrower has not:
(i) Incurred any obligation or liability,
absolute or contingent, except current liabilities incurred in
the ordinary course of business or fees and expenses incurred
by Borrower and/or R. Felder for professional, legal,
accounting, tax or financial advise in connection with the
negotiation, drafting, closing and execution of this
Agreement;
(ii) Discharged or satisfied any lien or
encumbrance, or paid any obligation or liability, absolute or
contingent, other than current liabilities shown on the
Borrower Financial Statements, and current liabilities
incurred since such date in the ordinary course of business or
fees and expenses incurred by Borrower and/or R. Felder for
professional, legal, accounting, tax or financial advice in
connection with the negotiation, drafting, closing and
execution of this Agreement;
(iii) Declared or paid any dividends, made any
payment or distribution of any kind to shareholders, or
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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.
J. Borrower and R. Felder, and each of them, represent and
warrant that since December 31, 1995, 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, or which it has not fully
disclosed in writing to Phoenix and Phoenix Grassroots. Material change shall be
defined as a change which reduces the assets and/or increases the liabilities of
the Borrower by $5,000 or more.
K. Borrower and R. Felder, and each of them, represent and
warrant that except in each case as listed in Exhibit "T", 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;
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(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;
(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.
L. Borrower and R. Felder represent and warrant that except as
set forth in the Recitals and Exhibits hereto, and except as set forth in any
contractual obligations under any franchise agreements to complete the built-out
of any plans, including but not limited to those shown on the Borrower's plans,
strand maps or in any correspondence, reports, memoranda, modifications and/or
amendments by and between Borrower, R. Felder and any telephone and/or utility
company, franchising authority, the Federal Communications Commission or any
governmental instrumentality which have been delivered to or will be transferred
to Phoenix and Phoenix Grassroots at the Closing Date, Borrower has performed
all material obligations required to be performed by it to date, and are not in
default under any contract, agreement, lease, commitment, indenture, mortgage,
deed of trust, or other document to which it is a party.
M. Borrower represents and warrants it has filed all federal
and state tax returns which are required to be filed, and have paid all taxes
which have become due pursuant to such returns or pursuant to any assessment
received by Borrower. Borrower acknowledges that Phoenix and/or Phoenix
Grassroots do
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not have any knowledge of any tax deficiency proposed or threatened against the
Borrower.
N. Borrower represents and warrants that it 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.
O. Borrower represents and warrants, to the best of its
knowledge, it has complied with, and is complying with, all non-environmental
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 represents and warrants that, to the best of its knowledge, it 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
their business or to their properties. Borrower and R. Felder, and each of them,
further represent and warrant that Borrower and R. Felder 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 or R. Felder, 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. Borrower and
R. Felder, and each of them, represent and warrant that, to the best of their
knowledge, there have been no wrongful discharges of any hazardous or toxic
substances including, but not limited to, fuel or motor oil, gasoline, diesel
fuel or grease, arising from the operation, maintenance or repair of any
vehicle, movable equipment used by Borrower in its business, or any equipment
used by Borrower in its business to receive and transmit electrical signals,
including but not limited to its head-end units at any existing or prior
locations and/or its cable plant on the streets and the communities served by
Borrower.
P. Borrower represents and warrants that it has good and
sufficient title in and to all of the assets listed on the Borrower 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 Borrower Financial
Statements and except for liens held by First NH Bank, First Savings of New
Hampshire,
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AT&T Automobile Services, Inc., and SportsChannel New England Limited
Partnership.
Q. Borrower and R. Felder, and each of them, represent and
warrant that, to the best of their knowledge, assets of Borrower are in
reasonable operating condition and repair, and conform with all applicable
non-environmental ordinances, regulations, zoning, and other laws.
R. Borrower and R. Felder, and each of them, represent and
warrant that all accounts receivable reflected in the Borrower Financial
Statements are current and collectible, except for accounts receivables in an
amount which does not exceed 2% of the outstanding accounts receivables set
forth in the Borrower Financial Statements after reasonably exhausting its
customary collection efforts through its collection agency.
S. Borrower and R. Felder, and each of them, represent and
warrant that 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.
T. Borrower represents and warrants that it is a New Hampshire
corporation, in good standing and duly organized and existing under the laws of
the State of New Hampshire. Borrower, R. Felder and each of them, represent and
warrant that 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.
U. Borrower and R. Felder, 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 Grassroots to operate, use or manage the
Systems in any way Phoenix Grassroots sees fit, or (iii) take any action to
exercise rights, titles and interests of Phoenix Grassroots, which would
adversely affect any of the rights provided for herein.
V. Borrower and/or Felder, and each of them, acknowledge and
agree that neither nor both shall assert any claim or institute any proceeding
challenging the validity and enforceability of this Agreement and the documents
and instruments executed in connection herewith.
W. Borrower and R. Felder, and each of them, represent and
warrant that all actions, suits or proceedings pending, or to the knowledge of
Borrower or R. Felder, or any of them, threatened or affecting Borrower or R.
Felder, or any of them, are described in the litigation list ("Litigation List")
attached hereto as Exhibit "W" and incorporated herein. Borrower and R. Felder,
and each of them, represent and warrant there are no actions, suits or
proceedings pending, except for the Federal Court Action, or to the knowledge of
Borrower or R. Felder, or any of them, threatened against them or affecting
Borrower or R. Felder, or actions, suits or proceedings involving the validity
or enforceability of this Agreement, the
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documents and instruments executed in connection with this Agreement or any of
the Loan Documents, the Citizens Guaranty, the Phoenix Guaranty or the priority
of the liens thereof, at law or in equity, or before or by any governmental
agency.
X. Borrower and R. Felder represent and warrant that none of
them are aware of any matter, defect or problem existing with respect to the
condition of the Systems, and/or the Collateral which has not been disclosed in
writing to Phoenix and Phoenix Grassroots prior to the Closing Date.
Y. Borrower and R. Felder, and each of them, represent and
warrant that they have consulted their independent tax advisors and/or
accountants to advise them with respect to the tax consequences of the transfer
of the Collateral to Phoenix Grassroots in full satisfaction of the Phoenix
Obligations and each is aware of such tax consequences. Borrower and R. Felder,
and each of them, represent and warrant that neither Phoenix nor Phoenix
Grassroots shall have any responsibility or liability to Borrower and R. Felder,
or any of them, for the tax consequences to Borrower or R. Felder, or any of
them, which may result from the effects of consummation of this Agreement or the
timing thereof, and neither Phoenix, Phoenix Grassroots nor any officer,
employee, attorney or agent of Phoenix or Phoenix Grassroots has made any
representation or warranty of any kind whatsoever or provided any advice to
Borrower and R. Felder, or any of them, with respect to the tax consequences, if
any, to Borrower and R. Felder, or any of them.
Z. Borrower and R. Felder, and each of them, represent and
warrant that they 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, except as may be set forth in
the Senior Secured Loan Documents and/or Subordinated Secured Loan Documents.
AA. Borrower and R. Felder, and each of them, represent and
warrant all of Borrower's Leases are described in Exhibit "B" attached hereto,
and to the best of their knowledge, that Borrower has a leasehold interest, as
lessee, in all of the Leases subject to the terms and conditions reflected in
each of the Leases and that there are no rights or powers in any entity or
person, other than the lessor, which would terminate Borrower's leasehold
interests and each said Leases are in full force and effect.
BB. Borrower and R. Felder, and each of them, represent and
warrant that none of them have filed any voluntary petition nor have sought any
other relief under the Bankruptcy Code, nor under any other state or federal law
granting relief to debtors and that no involuntary petition has been filed
against Borrower and R. Felder, 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.
CC. Borrower and R. Felder represent and warrant that neither
Borrower nor R. Felder nor M. Felder is a "foreign person" and Borrower and R.
Felder and M. Felder 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).
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DD. Borrower and R. Felder represent and warrant that attached
hereto as Exhibit "V" and incorporated herein by this reference is a true and
complete list of all of the personal property assets of the Borrower which
comprise the Collateral. Borrower and R. Felder represent and warrant that
Borrower owns no real property.
EE. Borrower and R. Felder represent and warrant that there
are, and as of the Closing Date, there will be, no pending actions, suits,
arbitrations, claims or proceedings, at law or in equity, affecting all or any
portion of the Systems and the Collateral. Borrower and R. Felder, or any of
them, do not know of the existence of any threatened actions, claims or
proceeding or the
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existence of any facts which might give rise to such actions, claims or
proceedings.
FF. Borrower and/or R. Felder, and each of them, represent and
warrant that they have no knowledge of 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.
GG. Borrower and R. Felder, and each of them, represent and
warrant that no notices of violations of governmental regulations relating to
the Systems and the Collateral have been issued to or entered against the
Borrower or received by Borrower, or R. Felder, or any of them.
HH. Borrower and R. Felder, and each of them, represent and
warrant that, to the best of their knowledge, all licenses, approvals, permits
and certificates from the authorities or private parties necessary for the
operation of the Systems are possessed by Borrower.
II. Borrower and R. Felder, and each of them, represent and
warrant that, to the best of their knowledge, they have no knowledge 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 property subject to
lease, or will result from work, activities or improvements done to the real
property subject to Leases, by Borrower and/or R. Felder, or
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any of them except for any taxes, special assessments or charges that may be
levied against the Borrower or any of its assets arising under any Franchise
agreement or any Lease (pole or head-end) with respect to public or private
work, improvement, maintenance, repairs or construction performed before the
Closing Date and which has not been invoiced to the Borrower by the Close Date.
JJ. Borrower and R. Felder, and each of them, represent and
warrant, that there has been no change in the ownership, operation or control of
the Systems and the Collateral from November 2, 1989 until the Closing Date.
KK. Borrower and the R. Felder, and each of them, represent and
warrant that, to the best of Borrower's and R. Felder's knowledge, there are no
material physical or mechanical defects or deficiencies in the condition of the
Systems, the Collateral or any part thereof.
LL. Borrower and R. Felder, and each of them, represent and
warrant that, to the best of Borrower's and R. Felder's knowledge, 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 and R. Felder's knowledge, the soil
condition of the real property subject to Leases, is such that it 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.
MM. Borrower and R. Felder, and each of them, represent and
warrant that they have not received any notices from any insurance company of
any defects or inadequacies in the Systems.
NN. Borrower and R. Felder, and each of them, represent and
warrant that they have not entered into any contracts for the sale of the
Systems, and/or the 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, and/or the Collateral or any portion thereof.
All representations, warranties and covenants of the Borrower
and R. Felder, and each of them, shall survive the execution of this Agreement
and the consummation of the transfers provided for hereunder for a period of two
years after the Closing Date.
8. Phoenix's and Phoenix Grassroots' Representations and Warranties.
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Phoenix Leasing Incorporated and Phoenix Grassroots represent
and warrant to Borrower and R. Felder on the Closing Date, and they are relying
thereon, as follows:
A. Phoenix Leasing Incorporated is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and Phoenix Grassroots is a limited liability company duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
with full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby; and
B. Phoenix Grassroots alone is the owner and holder of the Loan
Documents, Citizens Guaranty and Phoenix Guaranty free and clear of all liens
and Phoenix Grassroots's execution of this Agreement does not require the
authorization, consent, approval, order or license of any third party.
C. To the best of their knowledge, the amounts owed under the
Senior Secured Loan Documents are as set forth in Recital DD above.
D. That the amounts owed under the Subordinated Secured Loan
Documents are as set forth in Recital DD above.
9. Covenants. In addition to any other covenants given by Borrower and R.
Felder, or any of them, Borrower, and R. Felder, and each of them, will:
A. Execute any and all documents as Phoenix or Phoenix
Grassroots may reasonably request in connection with this Agreement;
B. Cooperate fully with and assist Phoenix and Phoenix
Grassroots with respect to the transfer of the Collateral to Phoenix Grassroots
for a period of one year after the Closing Date;
C. Deliver to Phoenix Grassroots all books, records and data
and the operating systems and software necessary to maintain and retrieve the
books, records and data relating to the Collateral; and
D. On or before the Closing Date, deliver the Collateral to
Phoenix Grassroots.
10. 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 and/or Phoenix Guaranty
and/or Citizens Guaranty:
27
<PAGE>
A. Phoenix or Phoenix Grassroots 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 and R. Felder, or any of them, or any other persons or entities;
B. Phoenix or Phoenix Grassroots shall not be deemed
responsible to perform nor participate in any acts, omissions or decisions of
Borrower or R. Felder, or any of them; and
C. Borrower and R. Felder, and each of them, acknowledge and
agree that Phoenix and Phoenix Grassroots do not manage or control them in any
way.
11. Limited Release of Phoenix and Phoenix Grassroots.
A. Excepting only the rights, duties, obligations, indemnities,
representations and warranties imposed by this Agreement, Borrower and R.
Felder, and each of them, do hereby forever, finally, fully, unconditionally and
completely release, relieve, acquit, remise and discharge Phoenix Grassroots 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, in their capacities as such ,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 GG, inclusive, set forth above; the origination and/or
administration and/or servicing and/or enforcement of the Loan Documents, the
Phoenix Guaranty and the Citizens Guaranty; all breaches or defaults under the
Loan Documents, and/or Felkon Loan Documents, the Phoenix Guaranty and the
Citizens Guaranty; management fees and/or monies owed by Borrower to Felkon,
Inc. and/or R. Felder prior to the Closing Date; the transfer of the Collateral
and/or Felkon Transferred Collateral to Phoenix Grassroots 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. As to the matters released herein, Borrower and R. Felder,
and each of them, hereby expressly waive any and all rights under section 1542
of the California Civil Code, and
28
<PAGE>
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.
C. Borrower and R. Felder, 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 and R. Felder, 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 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 and R. Felder, or any of them. In entering into this
Agreement, Borrower and R. Felder, 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.
D. In entering into this Agreement and the releases provided
for herein, Borrower and R. Felder, and each of them, assume the risk of any
mistake, and if Borrower and R. Felder, or any of them, should subsequently
discover that any understanding of the facts or of the law was incorrect,
Borrower and R. Felder, 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 mistake of fact or law or any other circumstances whatsoever.
Borrower, and R. Felder, and each of them, and their attorneys, have made such
investigation of the facts pertaining to this release as they deem necessary.
E. Borrower and R. Felder, 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 as set forth in section 11A. and that
each has not heretofore assigned or transferred, to any individual, partnership,
corporation, firm or entity any claims or other matters herein released.
Borrower and R. Felder, and
29
<PAGE>
each of them, shall, jointly and severally, indemnify Phoenix and Phoenix
Grassroots and defend and hold them harmless against all claims based upon or
arising in connection with prior assignments or transfers of any claims or
matters released herein.
12. Limited Release of Borrower and R. Felder.
A. Excepting only the rights, duties, obligations, indemnities,
representations and warranties imposed on Borrower and R. Felder in this
Agreement and the documents and instruments executed in connection herewith,
Phoenix and Phoenix Grassroots do hereby forever, finally, fully,
unconditionally and completely release, relieve, acquit, remise and discharge
Borrower and R. Felder from those certain claims,
30
<PAGE>
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 GG, inclusive, set forth above.
B. As to the matters released herein, Phoenix and Phoenix
Grassroots, and each of them, hereby expressly waive 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.
C. Phoenix and Phoenix Grassroots acknowledge that they are
aware that they may hereafter discover claims presently unknown or unsuspected,
or facts in addition to or different from those which they now know or believe
to be true, as to the matters released herein. Nevertheless, it is the intention
of Phoenix and Phoenix Grassroots 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 and Phoenix
Grassroots. In entering into this Agreement, Phoenix and Phoenix Grassroots 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.
D. In entering into this Agreement and the releases provided
for herein, Phoenix and Phoenix Grassroots, and each of them, assume the risk of
any mistake, and if Phoenix and Phoenix Grassroots, or any of them, should
subsequently discover that any understanding of the facts or of the law was
incorrect, Phoenix and Phoenix Grassroots, 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 mistake of fact or law or any other
circumstances whatsoever.
31
<PAGE>
Phoenix and Phoenix Grassroots, and each of them, and their attorneys, have made
such investigation of the facts pertaining to this release as they deem
necessary.
E. Phoenix and Phoenix Grassroots represent and warrant that
they are the sole and lawful owners of all right, title and interest in and to
every claim and other matter which they release herein as set forth in section
12A. and that they have 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 and Phoenix Grassroots
shall indemnify Borrower and R. Felder 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.
13. Miscellaneous.
A. Warranty of Accuracy of Recitals
Borrower and R. Felder, and each of them, hereby represent and
warrant that the material contained in Recitals A through GG above, has been
reviewed in detail by them and they know of their own knowledge that such
statements are accurate, subject to the qualifications set forth in Section 1
above.
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, Citizens Guaranty and Phoenix Guaranty, except as
expressly provided by this Agreement.
C. Failure or Indulgence Not Waiver.
No failure or delay on the part of Phoenix or Phoenix
Grassroots in the exercise of any right, power, or privilege hereunder, under
the documents or instruments referred to herein, including the Loan Documents,
Citizens Guaranty and Phoenix Guaranty 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.
D. Notices.
Except for any notices required under applicable law or this
Agreement to be given in another manner:
32
<PAGE>
(i) Any notice to Borrower or R. Felder
shall be addressed as follows:
W. Robert Felder
42 Epping Road
P.O. Box 1930
Exeter, NH O3833
With a copy to:
Matthew L. Caras, Esq.
Verril & Dana
1 Portland Square
P.O. Box 586
Portland, ME 04112-0586
Facsimile No.: (207) 774-7499; and
Stan Bernstein, Esq.
Foley, Hoag & Elliott
1 Post Office Square
Boston, Mass. 02109-2170
Facsimile No. (617) 832-7000
(ii) Any notice to Phoenix and/or Phoenix
Grassroots 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.
E. Applicable Law.
33
<PAGE>
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 Grassroots 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 Grassroots of such rights and remedies as may be available
under federal law.
F. 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
or R. Felder's rights are not assignable without the prior written consent of
Phoenix and Phoenix Grassroots, which Phoenix and Phoenix Grassroots may give or
withhold in their sole and absolute discretion, opinion and judgment. Borrower's
and R. Felder's obligations hereunder shall not be delegated, assumed or
transferred.
G. Expenses and Fees.
In the event that Phoenix or Phoenix Grassroots 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 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 Grassroots shall be
entitled to be reimbursed by Borrower and R. Felder, and each of them, 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 Grassroots. In the event Phoenix or Phoenix Grassroots
employs attorneys in connection with any bankruptcy proceeding, Phoenix and
Phoenix Grassroots shall be entitled to be reimbursed by Borrower and R. Felder,
and each of them, 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 Grassroots, as
provided for by applicable bankruptcy law. In the event that Phoenix and/or
Phoenix Grassroots obtains a judgment in connection with the enforcement or
interpretation of this Agreement, Phoenix and Phoenix Grassroots shall be
entitled to recover from Borrower and R. Felder, and each of them, all costs and
expenses incurred in connection with the enforcement of such judgment,
including, without limitation,
34
<PAGE>
attorneys' fees, whether incurred prior to or after the entry of the judgment.
The provisions of this Section 13G. 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.
H. Modifications and Amendments.
This Agreement may only be modified or amended by written
agreement duly executed by the party to be charged.
I. Integration.
This Agreement, the documents and instruments referred to herein
and executed in connection herewith (except for that certain settlement letter
dated October 25, 1995 executed by the parties hereto) and the Loan Documents,
Citizens Guaranty and Phoenix Guaranty constitute the entire agreement of the
parties hereto relative to the subject matter hereof. This Agreement, together
with the documents and instruments referred to herein and executed in connection
with this Agreement, the Loan Documents, Citizens Guaranty and Phoenix Guaranty
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.
J. 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.
35
<PAGE>
K. Acknowledgment.
(1) Borrower and R. Felder, and each of them,
agree that all of the terms, conditions, waivers, warranties and promises set
forth in this Agreement are reasonable.
(2) Borrower and R. Felder, and each of them,
further acknowledge and agree as follows:
(A) Borrower and R. Felder, 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, made an investigation
of the facts pertaining to 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 Grassroots nor any other person or entity has
made any statement or representation to Borrower and R.
Felder, or any of them, regarding facts which are
relied upon by Borrower and R. Felder, and each of
them, in entering into this Agreement and the documents
and instruments executed in connection with this
Agreement;
(C) Borrower and R. Felder, and each of them,
do not rely upon any statement, representation or
promise of Phoenix or Phoenix Grassroots 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.
36
<PAGE>
(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 and R. Felder, 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.
L. 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 11 and 12 above.
M. 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 and R.
Felder, and each of them, are made in their individual and representative
capacities. All schedules and 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 and R. Felder, 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.
37
<PAGE>
N. 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 and
Phoenix Grassroots.
O. 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.
P. No Representations by Phoenix or Phoenix Grassroots.
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 Grassroots pursuant hereto or pursuant to
any of the documents or instruments executed in connection with this Agreement,
the Loan Documents, the Phoenix Guaranty and the Citizens Guaranty, Phoenix or
Phoenix Grassroots 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 Grassroots.
Q. Authority to File and Record Notices.
Borrower, irrevocably appoints, designates and authorizes
Phoenix and Phoenix Grassroots (and any of their officers, employees or agents)
as its agent (said agency being coupled with an interest) to file for record any
notices that Phoenix and Phoenix Grassroots deem necessary or desirable to
protect their interests hereunder, under any documents or instruments executed
in connection with this Agreement and/or the Loan Documents, or to endorse the
name of Borrower, 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.
R. No Admission of Liability.
38
<PAGE>
Nothing contained herein shall be construed as an admission by
any party hereto of any liability of any kind, all such liability being
expressly denied.
S. No Broker.
There is no brokerage or sales commission or finder's or other
such fees to be paid in connection with the closing of the transactions
contemplated in this Agreement and/or any sale of the Systems. Borrower and R.
Felder, and each of them, agree and warrant to Phoenix and Phoenix Grassroots
and Phoenix and Phoenix Grassroots 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 Collateral to Phoenix
Grassroots and/or the transfer of the Collateral and Systems to a third party.
Borrower and R. Felder, and each of them, further represent and warrant to
Phoenix and Phoenix Grassroots, and Phoenix and Phoenix Grassroots are relying
thereon, that neither Borrower nor R. Felder, 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 and R.
Felder, and each of them, shall, jointly and severally, indemnify and hold
Phoenix and Phoenix Grassroots 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 Collateral or any other transactions
contemplated in this Agreement.
T. WAIVER OF RIGHT TO JURY TRIAL.
BORROWER AND R. FELDER, 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 BORROWER AND R. FELDER 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
39
<PAGE>
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 GRASSROOTS MAY FILE
AN ORIGINAL COUNTERPART OR COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF BORROWER'S AND R. FELDER'S WAIVER OF RIGHT TO TRIAL BY JURY.
BORROWER AND R. FELDER, 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, HE OR SHE IS A PARTY AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR PHOENIX AND PHOENIX GRASSROOTS
ACCEPTING THIS AGREEMENT.
Borrower
Initials: WRF BY:WRF
--- ------
Its President
U. Confidentiality.
Phoenix, Phoenix Grassroots, Borrower and R. Felder, 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; provided, however, that nothing contained in this
Agreement shall prevent the parties from disclosing information regarding this
Agreement to their accountants, partners, auditors, regulators, bankers,
shareholders, attorneys, members of their respective boards of directors, senior
officers and/or pursuant to duly enacted governmental regulations, statutes or
laws governing or affecting the operations of the parties and/or as may be
required in the ordinary course and/or conduct of their businesses.
V. Time of the Essence.
The parties hereto expressly acknowledge and agree that time is
of the essence and that all deadlines of time periods provided for under this
Agreement are ABSOLUTE and FINAL.
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.
Dated: 2/14 , 1996 GRASSROOTS CABLE SYSTEMS, a New
----------- Hampshire corporation
By: /S/ W. Robert Felder
-----------------------
Its: President
40
<PAGE>
Dated: 2/14 , 1996 /S/ W. Robert Felder
----------- --------------------
W. ROBERT FELDER, an individual
Dated: February 14 , 1996 PHOENIX LEASING INCORPORATED,
------------ a California corporation
By: /S/ Gary Martinez
-----------------------
Its: Sr. V.P.
Dated: February 14 , 1996 PHOENIX GRASSROOTS CABLE SYSTEMS,
------------ L.L.C., a Delaware limited
liability company
By: PHOENIX LEASING INCORPORATED,
Its Manager
By: /S/ Gary Martinez
-----------------------
Its: Sr. V.P.
[SIGNATURES CONTINUED]
Dated: February 14 , 1996 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.
41
<PAGE>
Dated: February 14 , 1996 PHOENIX LEASING CASH DISTRIBUTION
------------ FUND IV, a California limited
partnership
By: PHOENIX LEASING INCORPORATED,
a California corporation, its
general partner
By: /S/ Gary Martinez
-----------------------
Its: Sr. V.P.
Dated: February 14 , 1996 PHOENIX INCOME FUND L.P., a California
------------ limited partnership
By: PHOENIX LEASING INCORPORATED,
a California corporation, its
general partner
By: /S/ Gary Martinez
---------------------------
Its: Sr. V.P.
42
<PAGE>
APPROVED AS TO FORM AND, AS TO
SECTION 13K(2)(A) ONLY, CONTENT:
Dated: Feb. 14 , 1996
-------------
By: /S/ Stan Bernstein
-------------------
STAN BERNSTEIN
Attorneys for BORROWER
Dated: February 14 , 1996
---------------
FRANDZEL & SHARE
A Law Corporation
By: /S/ Robert B. Kaplan
---------------------
ROBERT B. KAPLAN
Attorneys for PHOENIX and
PHOENIX GRASSROOTS
43
