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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Prime Rate Income & Dividend Enterprises, Inc.
---------------------------------------------
(Name of Small business Issuer in its charter)
Colorado 84-1308436
------------------------------ ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12835 E. Arapahoe Road, T-II #110, Englewood, Colorado 80112
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (303) 792-2466
--------------------------
Securities to be registered under Section 12(b) of the Acts
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
----
Securities to be registered under Section 12(g) of the Acts
Common Stock $0.05 par value per share
--------------------------------------
(Title of Class)
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PART I
ALTERNATIVE 3
ITEM 1. DESCRIPTION OF BUSINESS.
(ITEM 101 OF REGULATION S-B)
ORGANIZATION
Prime Rate Income & Dividend Enterprises, Inc. (PRIDE) is a corporation which
was formed under the laws of the State of Colorado on May 1, 1995. The
Articles of Incorporation of the Company authorized it to issue 10,000,000
shares of common stock with $1.00 per share par value and 1,000,000 shares of
preferred stock with a par value of $10.00 per share. PRIDE owns 100% of the
issued and outstanding stock of Birch Branch, Inc. and GAP Enterprises, Inc.
PRIDE was a wholly-owned subsidiary of Rocky Mountain Power Co. (RMPC).
On September 22, 1999, the directors of RMPC approved, subject to the
effectiveness of a registration with the Securities and Exchange Commission,
the spin-off of PRIDE to the RMPC shareholders of record on October 8, 1999
on a pro rata basis. The shares of PRIDE are being held by Corporate Stock
Transfer, an independent entity, in escrow with instructions to distribute
the PRIDE shares once the PRIDE Form 10-SB is effective with the Securities
and Exchange Commission.
The principal executive offices of the Company are located at 12835 E.
Arapahoe Road, T-II, #110, Englewood, Colorado 80112, and the Company's
telephone number is (303) 792-2466.
BUSINESS OF ISSUER: PRINCIPAL PRODUCTS AND SERVICES
PRIDE, is principally in the real estate investment business. PRIDE and its
subsidiaries own real estate in California, Nebraska, North Dakota, Florida and
Arkansas. PRIDE also is in the business of investing in foreclosure sale real
estate certificates of purchase in the Denver Metropolitan area. PRIDE
acquires the certificates of purchase by bidding at foreclosure sales. Under
Colorado statutes, there is generally a minimum redemption period of seventy-
five (75) days whereby the property owner can redeem the foreclosed property
by paying the certificate of purchase balance bid price plus interest at the
rate specified on the mortgage note, plus reimbursement of certain costs and
expenses incurred by the holder of the certificate of purchase during the
redemption period. If the former property owner fails to redeem the property,
then junior lienholders have a right to redeem. If the property is not
redeemed, the holder of the certificate of purchase will be granted title to
the property. It is PRIDE's investment policy to invest in certificates of
purchase that have sufficient equity such that it is likely that the property
will be redeemed.
DISTRIBUTION OF PRODUCTS AND SERVICES
PRIDE markets its real estate generally through listings with real estate
brokers.
COMPETITION
PRIDE's real estate business is highly competitive. There are thousands of
real estate investors in the United States of America that are investing in
similar rental properties. The level of competition in the acquisition, sale
and renting of real estate properties is effected by economic conditions in
the area as well as interest rates available to borrowers. PRIDE's business
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of investing in certificates of purchase is also highly competitive since
there is open bidding allowed on all real estate foreclosures. Typically at
the foreclosure sales, there will be between five and twenty individuals in
attendance and between three and seven actual bidders in addition to the
foreclosing lenders bidding on the properties collateralizing their loans.
AVAILABILITY OF RAW MATERIAL: PRINCIPAL SUPPLIERS
Since the Company is not involved in manufacturing, there is no need for raw
materials. Supplies used in the business are minimal. The number of
foreclosure sales is directly related to economic conditions and interest
rates in the area and therefore, the inventory of potential certificates of
purchase available varies over time.
PATENTS AND INTELLECTUAL PROPERTY
The Company has no patent or intellectual property rights.
GOVERNMENTAL APPROVAL
There are no governmental approval requirements related to the Company's
business.
EFFECT OF GOVERNMENTAL REGULATIONS: COMPLIANCE WITH
ENVIRONMENTAL LAWS
The Company is not materially effected by any specific governmental regulations
other than various states limit the interest rates charged on loans. Under
certain circumstances, the Company will sell properties and carry back
mortgage loans on the properties. The Company does not charge interest rates
in excess of rates allowed by law. The types of costs and expenses incurred
during the redemption period which may be reimbursed are defined by statutes.
The Company complies with the applicable provisions of the statutes.
Various local zoning, homeowners associations and various other rules and
regulations limit how properties may be used and require certain maintenance
and repairs for properties. Certain federal and state environmental
protection statutes exist related to hazardous wastes and other environmental
concerns. The Company is in compliance with all environmental laws.
RESEARCH AND DEVELOPMENT
The Company has not been involved in any research and development projects.
EMPLOYEES
The Company has no employees. Real estate properties are managed by various
independent property management companies.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(Item 303 of Regulation S-B)
GENERAL
RESULTS OF OPERATIONS
Year Ended June 30, 1998
- ------------------------
Revenue for the year ended June 30, 1998 was approximately $320,000 as compared
to revenue of approximately $341,000 for the eight months ended June 30, 1997.
The Company changed its fiscal year of October 31 to June 30 effective June
30, 1997, therefore, comparative amounts relate to averages per month for the
periods ended June 30, 1997 and June 30, 1998. The average per month for the
year ended June 30, 1998 was approximately $27,000 as compared to
approximately $43,000 per eight month period ended June 30, 1997. This
decrease resulted principally from less rental income during the period ended
June 30, 1998 since various properties were sold near the end of the period
ended June 30, 1997. The Company's interest income increased principally due
to the carry back mortgages on properties sold. During the year ended June
30, 1998 and the eight month period ended June 30, 1997 the Company had gains
from the sale of real estate of approximately $97,000 and $114,000
respectively. Past gains may not necessarily be indicative of future results.
Operating expenses were approximately $182,000 during the year ended June 30,
1998, and approximately $167,000 during the eight month period ended June 30,
1997. The average per month for the Period ended June 30, 1998 was
approximately $15,000 as compared to approximately $21,000 per month for the
eight month period ended June 30, 1997. The decreases relate principally to
the decrease in operating and interest expenses on properties previously
owned.
Net income after the provision for income taxes decreased from approximately
$133,000 during the eight month period ended June 30, 1997 to approximately
$100,000 during the year ended June 30, 1998, a decrease of approximately
$2,700 per month.
Year Ended June 30, 1999
Revenue for the year ended June 30, 1999 was approximately $210,000 as
compared to revenue of approximately $320,000 for the year ended June 30,
1998. The average per month for the year ended June 30, 199 was approximately
$17,500 as compared to approximately $27,000 per month for the year ended June
30, 1998. This decrease resulted in part from less rental income and less
management fee income during the period ended June 30, 1999 since various
properties were sold near the end of the period ended June 30, 1998. The
Company's interest income decreased principally due to the payoff of several
mortgages on properties sold. During the year ended June 30, 1999 and the
year ended June 30, 1998 the Company had gains from the sale of real estate of
approximately $44,000 and $97,000 respectively. Past gains may not
necessarily be indicative of future results.
Operating expenses were approximately $59,000 during the year ended June 30,
1999, and approximately $182,000 during the year ended June 30, 1998. The
average per month for the period ended June 30, 1999 was approximately $5,000
as compared to approximately $15,000 per month for the year ended June 30,
1998. The decreases relate principally to the decrease in operating and
interest expenses on properties previously owned.
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Net income after the provision for income taxes increased from approximately
$100,000 during the year ended June 30, 1998 to approximately $110,000 during
the year ended June 30, 1999, an increase of approximately $800 per month.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998 the Company had an unrestricted cash balance of approximately
$70,000. The Company's current assets were approximately $1,337,000 at June
30, 1998 and its current liabilities totaled approximately $389,000, resulting
in net working capital of approximately $948,000, a current ratio of
approximately 3.52 to one.
At June 30, 1999 the Company had an unrestricted cash balance of approximately
$445,000. The Company's current assets were approximately $1,166,000 at June
30, 1999 and its current liabilities totaled approximately $87,000, resulting
in net working capital of approximately $1,079,000, a current ratio of
approximately 13.40 to one.
FINANCIAL POSITION
Stockholders' equity totaled approximately $2,072,000 at June 30, 1999 as
compared to approximately $1,955,000 at June 30, 1998, an increase of
approximately $117,000. This increase resulted from a net income of
approximately $110,000 and paid-in capital in the approximate amount of
$7,000.
Management has not made any commitments which will require any material
financial resources in excess of resources now available to the Company.
SUBSEQUENT EVENTS
None
FORWARD-LOOKING STATEMENTS
Certain statements concerning the Company's plans and intentions included
herein constitute forward-looking statements for purposes of the Securities
Litigation Reform Act of 1995 for which the Company claims a safe harbor
under that Act.
There are a number of factors that may affect the future results of the
Company, including, but not limited to, (a) interest rates, (b) general
economic conditions and (c) specific economic conditions within the areas
where the Company operates.
This annual report contains both historical facts and forward-looking
statements. Any forward-looking statements involve risks and uncertainties,
including, but not limited to, those mentioned above. Moreover, future
revenue and margin trends cannot be reliably predicted.
ITEM 3. DESCRIPTION OF PROPERTY
(Item 102 of Regulation S-B)
(a) PRIDE currently uses minimal office space and facilities provided at
no cost by the Company's President.
(b) PRIDE and its subsidiaries invest in real estate and real estate
mortgages primarily for rental and interest income. By investing in real
estate that provides current income plus the opportunity of long-term capital
gains, the Company is attempting to realize reasonable current operating
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income plus a potential hedge against long-term inflation. Historically
residential real estate values have appreciated at least equal to the
inflation rate, but there can be no assurance of future appreciation. The
Company has no limitations or policies on the percentage of assets which may
be invested in any one investment, or type of investment.
(1) The Company may invest in any type of real estate but currently
principally has investments in residential rental houses. The Company also
owns one residential condominium and thirteen residential lots. The Company
engages independent property management companies to manage the rental
properties. The property management companies find tenants, collect the rent
and pay certain expenses on the Company's behalf and remit net rent monthly to
the Company. The Company has financed its real estate acquisitions with its
own capital plus
assumption of existing loans on properties or owner carry back loans on
properties. The Company has no limitation policy on the number or amount of
mortgages which may be placed on any one piece of property. Appropriateness
of real estate investments and related financing decisions are determined by
the officers of the Company.
(2) The Company's investments in mortgage loans are principally
loans carried back on properties sold. Management has no current plans to
actively invest in mortgage loans other than those related to properties sold
by the Company. The Company has and may continue to provide carry back loans
on properties equal to 100% of the sales price of properties if adequate
additional collateral is provided.
(3) The Company currently has no investments and no plans to invest
in securities of or interests in persons primarily engaged in real estate
activities.
(c) As of June 30, 1999, the Company had no investments in real estate
which amounted to ten percent or more of the total assets of the Company.
The Company has approximately $241,000 invested in other real estate.
Generally summarized as follows:
Description
Three acres of land with a rental home on the property
located in Oakhurst, California, near Yosemite National
Park. This property is zoned for multiple family housing. $160,000
Thirteen residential lots located in Nebraska, Arkansas,
Florida and North Dakota 81,000
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$241,000
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All of the above properties are free and clear of encumbrances. The rental
house has an annual lease. There are no options or contracts related to the
sale of any of the properties owned by the Company. There are no plans for
renovation, improvement or development of any of the properties owned. The
Company intends to hold the residential rental property for its current income
production and also for the possibility of long-term capital gains.
Management believes that all properties have adequate insurance coverage. The
residential rental property has had vacancies of less than 5% during the last
two years.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(Item 403 of Regulation S-B)
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. The table below sets
forth all persons (including any "group," whose holdings are set forth in Item
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4(b)) who are known to the Company to be the beneficial owner of more than
five percent of the common stock, $1.00 par value, of the PRIDE, which is the
only class of voting securities of the Company issued and outstanding. This
schedule gives effect to the spin off of PRIDE to the shareholders of record
of PRIDE's parent company declared September 22, 1999 to be effective October
8, 1999.
Title of Class Name and Address Amount and Nature Percent
- -------------- of Beneficial Holder of Beneficial of Class
-------------------- Ownership --------
--------------
Common Stock Michael L. Schumacher (1) 234,552 shares 38.37%
12835 E. Arapahoe, T-II, #110
Englewood, CO 80112
Common Stock Terry and Susan R. Seipelt 52,959 shares 8.66%
11330 North Scioto Avenue
Oro Valley, AZ 85737
Common Stock Jackie Sanders 68,304 shares 11.18%
1301 Electric Avenue
Seal Beach, CA 90740
Common Stock Harold L. Morris (2) 132,548 shares 21.68%
3991 MacArthur Blvd. #100
Newport Beach, CA 92660
______________ ______
Total 488,363 shares 79.89%
(b) SECURITY OWNERSHIP OF MANAGEMENT. The table below sets forth the
holdings of common stock, $1.00 par value of the Company owned by the
Company's directors and executive officers.
Title of Class Name and Address Amount and Nature Percent
- -------------- of Beneficial Holder of Beneficial of Class
-------------------- Ownership --------
------------------
Common Stock Michael L. Schumacher (1) 234,552 shares 38.37%
President, Treasurer and
Director
12835 E. Arapahoe, T-II, #110
Englewood, CO 80112
Common Stock George A. Powell 1,284 shares 00.21%
Vice President, Secretary
and Director
7333 S. Fillmore Circle
Littleton, CO 80122
_____________ _____
Total 235,836 shares 38.58%
(1) Michael L. Schumacher owns 628 shares individually. In addition, Mr.
Schumacher, President and Director of PRIDE and his spouse Zona R. Schumacher
are the sole beneficiaries of the Schumacher & Associates, Inc. Money Purchase
Plan & Trust (Schumacher Plan) which owns 230,399 shares of PRIDE. Shares
owned by the Schumacher Plan are considered to be beneficially owned by Mr.
Schumacher. Mr. Schumacher's beneficial ownership also includes the following
shares to be owned by certain relatives of Mr. Schumacher:
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Owner Relationship Number of Shares
- ----- ------------ ----------------
Zona Schumacher Spouse 493
Jada Schumacher Daughter 512
Spencer Schumacher Son 512
Quinn Schumacher Son 512
Ralph and Alma Schumacher Parents 183
Roberta and Timothy Weiss Sister and her spouse 164
Constance and Gary Novak Sister and her spouse 164
Cynthia and Greg Becker Sister and her spouse 164
Katheryn and Ken Zeeb Sister-in-law and her spouse 164
Lowell and Ginett Janssen Brother-in-law and his spouse 329
Warren and Cathy Janssen Brother-in-law and his spouse 164
Rachel and Charles Paprocki Sister-in-law and her spouse 164
-----
Total 3,525
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Mr. Schumacher disclaims beneficial ownership of an additional 76,703 shares
held by the Plan as collateral for promissory notes totaling approximately
$275,000 including accrued interest at June 30, 1999. The promissory notes
are nonrecourse, bear interest at 8% per annum and are totally due January 6,
2000. Failure to collect the note balances and accrued interest at that time
would result in the Schumacher Plan obtaining ownership of the 76,703
additional shares.
(2) Harold L. Morris individually owns 64,399 shares of PRIDE. In addition,
Harold L. Morris and his spouse, Connie Morris are the sole beneficiaries of
the Harold L. Morris Profit Sharing Plan which owns 34,978 shares of PRIDE.
Applegates Landing I, a Harold L. Morris family partnership owns 24,299 shares.
Professional Investors, a Utah Limited Partnership, of which Mr. Morris is a
partner, owns 1,679 shares. Mr. Morris' beneficial ownership also includes
the following shares owned by certain relatives:
Owner Relationship Number of Shares
- ----- ------------ ----------------
Debra L. Morris Daughter 4,796
Gary A. Morris Brother 2,397
-----
Total 7,193
=====
Mr. Morris disclaims beneficial ownership of an additional 68,222 shares held
by Mr. Morris, or entities controlled by him, as collateral for promissory
notes, totaling approximately $251,000 including accrued interest at June 30,
1999. The promissory notes are nonrecourse, bear interest at 8% per annum
and are totally due January 6, 2000. Failure to collect the note balances and
accrued interest would result in Mr. Morris, or entities controlled by him,
obtaining ownership of the additional 68,222 shares.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
(Item 401 of Regulation S-B)
The Company's Board of Directors is responsible for the management of the
Company, and directors are elected to serve until the next regular meeting of
shareholders or until their successors are elected and shall qualify.
Executive officers of the Company are elected by, and serve at the discretion
of the Board of Directors. Currently, there are no formal committees of the
Board of Directors. The Company anticipates forming an audit committee at
the next meeting of the Board of Directors in January 1997.
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EXECUTIVE OFFICERS AND DIRECTORS
The current executive officers and directors of PRIDE are as follows:
NAME AGE POSITION(S)
- ---- --- -----------
Michael L. Schumacher 50 President, Treasurer and Director
George A. Powell 73 Vice President, Secretary and Director
Michael L. Schumacher has been a director, president and treasurer of PRIDE
since inception, May 1, 1995. Mr. Schumacher was previously, until September
22, 1999, a director, and president and chairman of the board of directors of
Rocky Mountain Power Co., a public reporting company. Mr. Schumacher is the
director and President of Schumacher & Associates, Inc., a certified public
accounting firm located in Englewood, Colorado that provides audit services,
principally to public companies on a national basis throughout the U.S.A.
Mr. Schumacher is a Certified Public Accountant, Certified Management
Accountant and an Accredited Financial Planning Specialist. Mr. Schumacher
has a bachelors degree in Business Administration with a major in accounting
from the University of Nebraska at Kearney and a Masters in Business
Administration from the University of Colorado.
George A. Powell has been a director, secretary and vice president of PRIDE
since October, 1996. Mr. Powell was previously a director and president of
Continental Investors Life, Inc., a public reporting insurance company. Since
Mr. Powell's retirement from the insurance business in 1988, he has been self-
employed as a business consultant.
SIGNIFICANT EMPLOYEES
The Company has no employees. Michael L. Schumacher and George A. Powell
devote approximately 5% and 50%, respectively, of their time to the Company's
business. The Company's rental properties are managed by independent
management companies. Secretarial and bookkeeping services are performed by
independent contract persons.
There are no family relationships among directors or officers.
No officer or director of PRIDE currently, or during the last five years have;
(a) had any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of
the bankruptcy or within two years prior to that time.
(b) had any conviction in a criminal preceding or is being subject to a
pending criminal preceding.
(c ) is being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily limiting involvement in any type of business,
securities or banking activities.
(d) has been found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated.
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ITEM 6. EXECUTIVE COMPENSATION.
(Item 402 of Regulation S-B)
COMPENSATION OF EXECUTIVE OFFICERS
There was no compensation paid to any officer of PRIDE other than $500 each
paid as director fees to PRIDE directors during each of the two years ended
June 30, 1999 and June 30, 1998. Mr. Powell received approximately $2,000 in
consulting fees from PRIDE during the year ended June 30, 1999 and
approximately $15,000 in consulting fees during the year ended June 30, 1998.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(Item 404 of Regulation S-B)
Effective March 31, 1998, the Company sold its investment in a health
club/racquetball building to Mr. Harold L. Morris, the shareholder that
originally contributed the property for stock. The gross proceeds were
145,762 shares of the common stock of PRIDE's parent company and a mortgage
note receivable of $139,079 collateralized by the property. This note bears
interest at 8% per annum and is totally due on March 31, 2000. The Company
recognized a gain on this sale of $78,947. The parent company shares of
stock were recorded at net book value, canceled and returned to authorized but
unissued stock of the parent company and recorded in PRIDE's financial
statements as a dividend distribution to its parent company.
ITEM 8. DESCRIPTION OF SECURITIES
(Item 202 of Regulation S-B)
PRIDE has two classes of securities authorized. The Company's Articles of
Incorporation authorized it to issue 10,000,000 shares of common stock, $1.00
par value, and 1,000,000 shares of preferred stock, $10.00 par value. A total
of 611,290 common shares will be issued to approximately 439 shareholders upon
the effectiveness of this Form 10-SB registration statement. PRIDE was a
wholly-owned subsidiary of Rocky Mountain Power Co. (RMPC). On September 22,
1999, the directors of RMPC approved, subject to the effectiveness of a
registration with the Securities and Exchange Commission, the spin-off of
PRIDE to the RMPC shareholders of of record on October 8, 1999 on a pro rata
basis. The shares of PRIDE are being held by Corporate Stock Transfer, an
independent entity, in escrow with instructions to distribute the PRIDE
shares once the PRIDE Form 10-SB is effective with the Securities and Exchange
Commission.
No share of Common Stock is entitled to preference over any other share and
each share of Common Stock is equal to any other share in all respects. The
holders of Common Stock are entitled to one vote for each share held of
record at each meeting of shareholders. In any distribution of assets,
whether voluntary or involuntary, holders are entitled to receive pro rata the
assets remaining after creditors have been paid in full and after any
liquidation preference of any other class of stock has been satisfied. The
outstanding Common Stock is fully paid and nonassessable. The Preferred Stock
is entitled to preference in liquidation over Common Stock.
The Board of Directors of the Company has the authority to issue the remaining
unissued authorized preferred shares and to fix the powers, preferences, rights
and limitations of such shares or any class or series thereof, without
shareholder approval. Persons acquiring such shares could have preferential
rights with respect to voting, liquidation, dissolution or dividends over
existing shareholders. Shares could be issued to deter or delay a takeover or
other change in control of the Company.
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Holders of Common Stock have no preemptive rights to purchase additional
securities which may be offered by the Company. There is no cumulative voting
for the election of directors. Accordingly, the owners of a majority of
outstanding voting shares may elect all of the directors if they choose to do
so. All shares of Common Stock are entitled to participate equally in all
dividends when, as and if declared by the Board of Directors out of funds
legally available therefor.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS.
(Item 201 of Regulation S-B)
There is no public trading market for PRIDE common stock.
Upon effectiveness of this Form 10-SB, the Company plans to apply for
quotation of the Common Stock on the OTC Bulletin Board operated by the
National Association of Securities Dealers, Inc. PRIDE will have 611,290
shares of common stock issued and outstanding. Of such shares, approximately
120,000 shares, held by approximately 420 shareholders are eligible for
resale. The remaining outstanding shares will be restricted shares under
Rule 144. The Company presently has no existing stock option or other plans
nor are there any outstanding options, warrants or securities convertible
into Common Stock.
PRIDE has never paid a dividend on its common stock other than during the year
ended June 30, 1998, PRIDE made a dividend distribution to its former parent
company of parent company stock in the approximate amount of $473,000. The
Company does not anticipate paying any dividends on its common stock in the
foreseeable future. Management anticipates that earnings, if any, will be
retained to fund the Company's working capital needs and the expansion of its
business. The payment of any dividends is in the discretion of the Board of
Directors.
ITEM 2. LEGAL PROCEEDINGS.
(Item 103 of Regulation S-B)
PRIDE is not party to any material legal proceeding, nor is the Company's
property the subject of any material legal proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
(Item 304 of Regulation S-B)
The Company's principal independent accountant has not resigned (nor declined
to stand for re-election) and was not dismissed during the Company's two most
recent fiscal years or any later interim period.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
(Item 701 of Regulation S-B)
During the last three years, PRIDE has not issued any securities that were not
registered under the Securities Act of 1933, as amended (the "Act"):
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(Item 702 of Regulation S-B)
The Company's Restated Articles of Incorporation limit the liability of its
officers, directors, agents, fiduciaries and employees to the fullest extent
permitted by the Colorado Revised Statutes. Specifically, directors of the
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Company will not be personally liable to the Company or any of its shareholders
for monetary damages for breach of fiduciary duty as directors, except
liability for (I) any breach of the director's duty of loyalty to the
corporation or its shareholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii)
voting for or assenting to a distribution in violation of Colorado Revised
Statutes S 7-106-401 or the articles of incorporation if it is established
that the director did not perform his duties in compliance with Colorado
Revised Statutes S 7-108-401, provided that the personal liability of a
director in this circumstance shall be limited to the amount of distribution
which exceeds what could have been distributed without violation of Colorado
Revised Statutes S 7-106-401 or the articles of incorporation; or (iv) any
transaction from which the director directly or indirectly derives an
improper personal benefit. Nothing contained in the provisions will be
construed to deprive any director of his right to all defenses ordinarily
available to the director nor will anything herein be construed to deprive
any director of any right he may have for contribution from any other
director or other person.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company is
aware that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
PART F/S
ITEM 1. INDEX TO FINANCIAL STATEMENTS
Description Period Page
- ----------- ------ ----
Prime Rate Income & Dividend Two years ended F-1
Enterprises, Inc. June 30, 1999
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(3)(i) Articles of Incorporation
(3)(ii) Bylaws
(10)(a) Agreement dated September 24,
1999 between Rocky Mountain
Power Co. and MPEG Super
Site, Inc.
(23)(a) Consent of Accountant
(27) Financial Data Schedule
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
(Registrant) PRIME RATE INCOME AND DIVIDENDS ENTERPRISES INC.
(Date)
By:(Signature) /s/ Michael L. Schumacher
(Name and Title) Michael L. Schumacher
President, Treasurer and Director
(Date)
By:(Signature) /s/ George A. Powell
(Name and Title) George A. Powell
Vice President, Secretary and Director
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INDEX TO FINANCIAL STATEMENTS
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
FINANCIAL STATEMENTS
June 30, 1999 and 1998
Report of Independent Certified Public Accountants F-2
Consolidated Financial Statements:
Consolidated Balance Sheets F-3
Consolidated Statements of Income F-4
Consolidated Statement of Changes in F-5
Stockholders' Equity
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Prime Rate Income & Dividend Enterprises, Inc.
Englewood, CO 80112
We have audited the accompanying consolidated balance sheets of Prime
Rate Income & Dividend Enterprises, Inc. and Consolidated Subsidiaries
as of June 30, 1999 and 1998, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the years ended
June 30, 1999 and June 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements, referred to above,
present fairly, in all material respects, the financial position of Prime
Rate Income & Dividend Enterprises, Inc. and Consolidated Subsidiaries as of
June 30, 1999 and June 30, 1998, and the results of its operations, changes
in stockholders' equity and its cash flows for the years ended June 30, 1999
and June 30, 1998, in conformity with generally accepted accounting
principles.
/s/ Miller and McCollom
Certified Public Accountants
7400 W. 14th Avenue
Lakewood, Colorado 80215
September 15, 1999
F-2
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
Current Assets: -------- --------
<S> <C> <C>
Cash $ 445,158 $ 70,229
Certificates of purchase, real estate
foreclosures (Note 3) 197,247 799,801
Mortgage notes receivable, current
portion (Note 3) 111,108 301,574
Mortgage note receivable, related
party (Note 3) 139,079 139,079
Sale proceeds receivable (Note 7) 246,500 -
Other 26,831 26,685
--------- ---------
Total Current Assets 1,165,923 1,337,368
Real estate, net of accumulated deprec-
iation of $5,500 at June 30, 1999 and
$4,000 at June 30, 1998 (Note 3) 234,817 244,317
Transportation equipment, net of accumulated
depreciation of $6,125 at June 30, 1999
and $3,125 at June 30, 1998 8,875 11,875
Mortgage notes receivable, net of
of current portion (Note 3) 795,356 814,010
----------- -----------
TOTAL ASSETS $ 2,204,971 $ 2,407,570
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 8,158 $ 6,931
Notes payable, current portion (Note 2) 10,005 318,519
Income taxes payable (Note 5) 41,689 39,531
Deferred taxes payable, current portion
(Note 5) 2,104 1,621
Accrued expenses and other 24,598 22,243
-------- --------
Total Current Liabilities 86,554 388,845
Deferred taxes payable, long term (Note 5) 27,595 35,906
Notes payable, net of current portion
(Note 2) 18,872 28,109
-------- --------
TOTAL LIABILITIES 133,021 452,860
-------- --------
Stockholders' Equity:
Preferred stock, $10.00 par value,
1,000,000 shares authorized, none issued
& outstanding - -
Common stock, $1.00 par value,
10,000,000 shares authorized, 611,290
shares issued and outstanding 611,290 611,290
Additional paid-in capital 975,408 968,252
Retained earnings 485,252 375,168
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 2,071,950 1,954,710
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,204,971 $ 2,407,570
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, June 30,
1999 1998
----------- ------------
Revenue:
<S> <C> <C>
Rent income $ 7,960 $ 26,557
Interest income 150,261 157,838
Management fee income - 38,350
Gain on the sale of real estate 43,570 97,174
Other income 7,293 -
-------- --------
209,084 319,919
======== ========
Expenses:
Property management fees 660 15,591
Rent - 28,219
Depreciation 4,500 12,250
Interest 3,163 47,401
Real estate taxes and insurance 3,677 9,079
Repairs and maintenance 229 5,101
Professional fees 28,119 21,487
Other 18,402 43,262
------- -------
58,750 182,390
======= =======
Net income before provision
for income taxes 150,334 137,529
Provision for income taxes (Note 5):
Current 41,686 39,531
Deferred (1,436) (2,515)
------ ------
40,250 37,016
-------- --------
Net income $ 110,084 $ 100,513
======== ========
Per Share $ .18 $ .16
======== ========
Weighted Average Shares
Outstanding 611,290 611,290
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From June 30, 1997 through June 30, 1999
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
No./Shares Stock Amount Capital Earnings Total
---------- ------------ ------- -------- ---------
<S> <C> <C> <C> <C> <C>
Balance at June 30,
1997 611,290 $ 611,290 $ 1,425,936 $ 274,655 $2,311,881
Paid-in capital - - 16,042 - 16,042
Dividend distribution
to parent company - - (473,726) - (473,726)
Net income for the
year ended June 30,
1998 - - - 100,513 100,513
Balance at June 30, ------- ------- ------- ------- ---------
1998 611,290 611,290 968,252 375,168 1,954,710
Paid-in capital - - 7,156 - 7,156
Net income for the
year ended June 30,
1999 - - - 110,084 110,084
Balance at June 30, ------- ------- ------- ------- ---------
1999 611,290 $ 611,290 $ 975,408 $ 485,252 $2,071,950
======= ======= ======= ======= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended Year ended
June 30, June 30,
1999 1998
----------- -----------
Cash Flows Operating Activities:
<S> <C> <C>
Net income $ 110,084 $ 100,513
Depreciation 4,500 12,250
Increase in income taxes payable 2,158 23,371
(Decrease) in deferred income taxes payable (4,172) (2,515)
Increase in accounts payable, accrued
expenses and other 7,082 8,293
(Gain) on sale of assets - (78,947)
------- -------
Net Cash Provided by Operating Activities 119,652 62,965
------- -------
Cash Flows from Investing Activities:
(Increase) in sales proceeds receivable (246,500) -
Collection of (Investments in) certificates
of purchase 602,554 (233,224)
Collection of notes receivable 485,666 564,554
(Investment) in mortgage notes receivable (276,546) (255,240)
Disposition of real estate 8,000 37,877
Other (146) 154,273
------- -------
Net Cash Provided by Investing Activities 573,028 268,240
------- -------
Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital - 12,386
(Repayment) of notes payable (7,851) (1,282,793)
Loan from bank 2,565,004 -
(Repayment) of loan from bank (2,774,904) -
(Repayment) of loan from related party (100,000) (150,000)
Net Cash Provided by --------- --------
Financing Activities (317,751) (1,420,407)
--------- ---------
Increase (decrease) in Cash 374,929 (1,089,202)
Cash, Beginning of Period 70,229 1,159,431
-------- ---------
Cash, End of Period $ 445,158 $ 70,229
======== =========
Interest Paid $ 3,163 $ 47,401
======== =========
Income Taxes Paid $ 42,846 $ 16,122
======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(1) Summary of Accounting Policies
-------------------------------
This summary of significant accounting policies of Prime Rate Income &
Dividend Enterprises, Inc. (PRIDE) and its wholly-owned subsidiaries, Birch
Branch, Inc., and GAP Enterprises, Inc., is presented to assist in
understanding the Company's financial statements. The financial statements
and notes are representations of the Company's management who is responsible
for their integrity and objectivity. These accounting policies conform to
generally accepted accounting principles and have been consistently applied
in the preparation of the financial statements.
(a) Organization and Principles of Consolidation
---------------------------------------------
The consolidated financial statements include the accounts of the companies
listed above. The Company is principally in the real estate ownership and
rental business. The Company also invests in mortgage notes receivable and
certificates of purchase related to real estate foreclosures. All intercompany
account balances have been eliminated in the consolidation. The Company has
selected June 30 as its year end.
(b) Per Share Information
----------------------
Per share information is based upon the weighted average number of shares
outstanding during the period.
(c) Investment in Real Estate and Related Depreciation
---------------------------------------------------
The Company's investments in rental real estate are carried at cost, net of
accumulated depreciation. Depreciation on rental real estate is being
computed using the straight-line method over estimated useful lives of 40
years. Major renovations are capitalized. Repairs and maintenance costs are
expensed as incurred.
(d) Use of Estimates in the Preparation of Financial Statements
------------------------------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(1) Summary of Accounting Policies, Continued
-------------------------------------------
(e) Geographic Area of Operations and Interest Rates
-------------------------------------------------
The Company owns properties principally in California, Nebraska, North Dakota,
Florida and Arkansas. The potential for severe financial impact can result
from negative effects of economic conditions within the market or geographic
area. Since the Company's business is principally in four areas, this
concentration of operations results in an associated risk and uncertainty.
(f) Provision for Deferred Income Taxes
------------------------------------
Timing differences exist related to recognition of gains on sale of real
estate for income tax purposes and financial reporting purposes. Income tax
regulations allow the use of the installment method for reporting sales of
assets. The Company has provided a deferred income tax provision for this
timing difference.
(2) Notes Payable
--------------
As of June 30, 1999 the Company had outstanding $28,877 on a note payable
bearing interest at 15%. Maturities of this note payable is summarized as
follows:
Year ending June 30,
2000 $ 10,005
2001 11,614
2002 7,258
2003 -
Thereafter -
----------
Total $ 28,877
==========
This note is due in monthly installments of $1,129 through December, 2002.
This note is not collateralized by any assets of the Company. Also included
in notes payable at June 30, 1998, was $209,900 payable to a bank
collateralized by certain mortgage notes receivable and certificates of
purchase. This note was paid in full during the year ended June 30, 1999.
The terms of the bank loan are more fully disclosed in Note 6. In addition,
the Company had a $100,000 note payable to a shareholder which was
uncollateralized and was paid in full during the year ended June 30, 1999.
F-8
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(3) Concentration of Credit Risk
-----------------------------
The Company's material concentration of credit risk consists principally of
investments in mortgage loans and certificates of purchase. The Company's
investments in mortgage loans are collateralized principally by first or
second deeds of trust on real estate located primarily in Colorado, Arizona
and California. At June 30, 1999, the Company had seven mortgage loans
receivable from one individual totaling approximately $87,243. The loans as
a percentage of value were approximately 90% at the time of sale. The
Company also had seventeen mortgage loans receivable from another individual
totaling approximately $565,497. The second individual's loans as a percentage
of value were approximately 100% at the time of sale but, as additional
collateral for the loans receivable from this individual, the Company has a
junior lien on another property owned by this individual. The weighted
average interest rate on mortgagee notes receivable is approximately 8% per
annum with monthly repayment terms being amortized over periods up to twenty
years.
The Company has one investment in a foreclosure certificate of purchase
totaling $197,247 as of June 30, 1999. This certificate of purchase entitles
the Company to receive interest at the original foreclosed mortgage loan rate
over the redemption period, which is generally 75 days, or title to the
property if not redeemed within the redemption period. The interest rate on
the Company's investment in certificate of purchase was 30%. Subsequent to
June 30, 1999, the Company obtained title to the property that was subject to
the certificate of purchase.
Effective March 31, 1998, the Company sold its investment in a health club/
racquetball building to the shareholder that originally contributed the
property for stock of the parent company. The gross proceeds were 145,762
shares of the parent company's common stock and a mortgage note receivable of
$139,079 collateralized by the property. This note bears interest at 8% per
annum and is totally due on March 31, 2000. The Company recognized a gain on
this sale of $78,947. The parent company 2001. shares of stock were recorded
at net book value, returned to the parent company, 2002. canceled and
returned to authorized but unissued stock of the parent company 2003. and
recorded in PRIDE's financial statements as a dividend to its parent company.
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of temporary cash investments. The Company
places its temporary cash investments with financial institutions. As of June
30, 1999, the Company had a concentration of credit risk since it had temporary
cash investments in bank accounts totalling $309,112 in excess of the FDIC
insured amounts.
F-9
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(4) Fair Value Financial Instruments
---------------------------------
As of June 30, 1999, the Company had various investments in long term mortgage
notes receivable and was obligated under various mortgage notes payable.
Management believes that the fair value of these financial instruments does
not materially differ from the carrying value of these notes based upon
discounting at current market rates of interest.
(5) Income Taxes
--------------
A reconciliation between the expected income tax provision computed at a
federal statutory rate of 39% and the actual income tax provision follows:
Year Year
Ended Ended
June 30, June 30,
1999 1998
-------- --------
Expected income tax $ 58,630 $ 53,636
Graduated tax brackets (16,750) (16,750)
State tax net of federal
benefit 4,584 4,194
Other, net (6,214) (4,064)
--------- -------
$ 40,250 $ 37,016
========= =======
The tax effects of temporary differences that give rise to the deferred tax
liability at June 30, 1999 follow:
Installment sale reporting $ 29,699
less current portion (2,104)
--------
$ 27,595
========
The change in the deferred tax liability during the year ended June 30, 1999
was $8,311.
F-10
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(6) Notes Payable, Bank
--------------------
As of June 30, 1999, the Company had a line of credit from a bank of
$1,500,000.
The Company's President has personally guaranteed the total $1,500,000 balance
of the notes payable and has assigned to the bank a life insurance policy with
a $500,000 death benefit as additional collateral.
The Company has agreed to provide annual audited financial statements to the
bank. The terms of the loan agreement require that the Company maintain a
debt to tangible net worth ratio not to exceed one to one, a debt service
coverage ratio of greater than 1.25 to one and a current ratio of greater than
one to one.
The line of credit is collateralized by certain real estate mortgage notes
receivable and certificates of purchase, and bears interest at .5% over prime
plus has an annual fee of .5% of the total amount of the line. The line of
credit is subject to annual renewal and is due in December, 1999. At June
30, 1999, the Company had no outstanding borrowing on this line of credit.
(7) Sale Proceeds Receivable
-------------------------
Effective June 30, 1999, the Company sold a real estate property resulting in
a receivable of $246,500. During July, 1999 the Company received the
$246,500 in cash.
(8) Year 2000 Compliance
---------------------
The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The Company has
assessed these issues as they relate to the Company, and since the Company
currently has no operating business and does not use any computers, and since
it has no customers or supplier, it does not believe that there are any
material year 2000 issues to disclose in this Report.
(9) Subsequent Event
-----------------
During September, 1999, PRIDE effected a 2.4324 for one forward stock split
increasing the outstanding common stock of the Company from 251,311 shares to
611,290 shares. All references to common stock in the financial statements
have been retroactively given effect for this split.
F-11
<PAGE>
EXHIBIT I
Mail to: Secretary of State For office use only
Corporations Section
1560 Broadway, Suite 200
Denver, CO 82020 951057619 M $50.00
(303) 894-2251 SECRETARY OF STATE
MUST BE TYPED Fax (303) 894-2242 05-01-95 11:56
FILING FEE: $50.00
MUST SUBMIT TWO COPIES
Please Include a typed
self-addressed envelope ARTICLES OF INCORPORATION
Name Prime Rate Income & Dividend Enterprises, Inc.
-------------------------------------------------------------------
Principal
Street Address 12835 E. Arapahoe Road, Tower II, #110, Englewood, CO 80112
--------------------------------------------------------------
Cumulative voting shares of stock authorized Yes No X
------- -------
If duration is less than perpetual enter number of years
--------
Preemptive rights are granted to shareholders. Yes No X
------- -------
Stock information: (If additional space is needed, continue on a separate
sheet of paper.)
Stock Class Common Authorized Shares 10,000,000 Par Value $1.00
---------------- ------------ ------
Stock Class Preferred Authorized Shares 1,000,000 Par Value $10.00
---------------- ------------ ------
The name of the initial registered agent and the address of the registered of
fice is: (Corporations use last name space)
Last Name Schumacher First & Middle Name Michael Lee
---------------------- ----------------------
Street Address 12835 E. Arapahoe Road, Tower II, #110, Englewood, CO 80112
------------------------------------------------------------
Signature of Registered Agent /s/ Michael L. Schumacher
----------------------------------------------
These articles are to have a delayed effective date of:
----------------------
Incorporators: Names and addresses: (If more than two, continue on a separate
sheet of paper.)
NAME ADDRESS
Michael L. Schumacher 12835 E. Arapahoe Road, T-II, #110
- --------------------- ----------------------------------
Englewood, CO 80112
----------------------------------
Incorporators who are natural persons must be 18 years or more. The
undersigned, acting as incorporator(s) of a corporation under the Colorado
Business Corporation Act, adopt the above Articles of Incorporation.
Signature /s/ Michael L. Schumacher Signature
- ----------------------------------- ----------------------------------
1
<PAGE>
EXHIBIT II
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
BYLAWS
ARTICLE I. SHAREHOLDER MEETINGS
Section 1.1. Place. Meetings of shareholders shall be held at the registered
office of the corporation unless another place in the State of Colorado shall
have been determined by the board of directors or the president and stated in
the notice of meeting or the waiver of notice for the meeting.
Section 1.2. Annual Meeting. This section is reserved for the time, day and
month of the annual meetings of the shareholders.
ARTICLE II. DIRECTORS
Section 2.1. Number. The number of directors shall be fixed by resolution of
the board of directors.
Section 2.2 Regular Meetings. A regular meeting of the board of directors
shall be held, without notice, immediately following the annual meeting of
shareholders and at the same place.
Section 2.3. Special Meetings. Special meetings of the board of directors may
be called by the president or any two directors on twenty-four hours notice if
notice is given in person or by telephone, or, if notice is given by mail, on
five days notice, including the day of mailing and the day of the meeting.
Special meetings shall be held at the registered office of the corporation,
unless another place in the State of Colorado shall have been determined by
the person or persons calling the meeting and stated as part of the notice.
ARTICLE III. OFFICERS
Section 3.1. Election and Term. The officers of the corporation required by
law (president, secretary and treasurer) and one or more vice presidents shall
be elected annually at the regular meeting of the board of directors held
after the annual meeting of shareholders. These officers shall hold office
until the next such meeting of the board of directors and until their
respective successors are duly elected and qualified.
Section 3.2. Dual Offices. Any two or more offices may be held by the same
persons, except that the offices of president and secretary shall be held by
different persons, as is required by law.
Section 3.3. President. The president shall be the principal executive
officer of the corporation. Subject to the decisions of the board of
1
<PAGE>
directors, the president shall supervise and control the business and affairs
of the corporation. The president shall preside at meetings of the
shareholders and the directors.
Subject to any specific assignments of duties made by the board of directors,
the other officers of the corporation shall act under the direction of the
president.
Section 3.4. Vice President. The corporation shall have one or more vice-
presidents, as the board of directors may determine by resolution. The vice-
president shall have the authority and perform the duties of the president
when the president is absent or unable to act. If more than one vice-
president is serving, the board of directors shall, by resolution, determine
the order of succession.
Section 3.5. Secretary. The secretary shall prepare and keep minutes of the
meetings of the shareholders and the directors and shall have general charge
of the stock records of the corporation.
Section 3.6. Treasurer. The treasurer shall have custody of the funds of the
corporation and keep its financial records.
Section 3.7. Assistant Officers. The president shall have authority to
appoint and remove assistant secretaries and assistant treasurers of the
corporation.
ARTICLE IV. STOCK TRANSFERS
Transfers of shares shall be made only on the stock transfer books of the
corporation. The person in whose name shares are recorded on the stock
transfer books of the corporation shall be considered the owner thereof for
all purposes by the corporation.
ARTICLE V. REGISTERED AGENT
The president shall have the authority to designate, and to change the
designation of, the registered agent, the registered office, or both, of the
corporation in any state or other place.
CERTIFICATE
As directed by the board of directors, I certify that the foregoing by-laws
were adopted as the by-laws of the corporation by the board of directors at
its meeting on May 1, 1995.
/s/ Michael L. Schumacher
------------------------------
Michael L. Schumacher, President
ATTEST:
/s/ Jada K. Schumacher
-----------------------------
Jada K. Schumacher, Secretary
2
<PAGE>
EXHIBIT III
AGREEMENT DATED SEPTEMBER 24, 1999
BETWEEN ROCKY MOUNTAIN POWER CO. AND
MPEG SUPER SITE, INC.
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT is made this 24th day of September, 1999,
by and between Rocky Mountain Power Company, a Colorado corporation
(hereinafter referred to as "Rocky"), MPEG Super Site, Inc., a Colorado
corporation (hereinafter referred to as "MPEG").
WHEREAS, Rocky desires to acquire all of the issued and outstanding
shares of common stock of MPEG in exchange for an aggregate of 13,390,000
authorized but un-issued restricted shares of the common stock, no par value,
of Rocky (the "Common Stock") (the "Exchange Offer"); and
WHEREAS, MPEG desires to assist Rocky in a business combination which
will result in the shareholders of MPEG owning approximately 92% of the then
issued and outstanding shares of Rocky's Common Stock, and Rocky holding 100%
of the issued and outstanding shares of MPEG's common stock; and
WHEREAS, the share exchange contemplated hereby will result in the MPEG
shareholders tendering all of the outstanding common stock of MPEG to Rocky in
exchange solely for the Common Stock and no other consideration, which the
parties hereto intend to treat as a reorganization under I.R.C. Section
368(a)(1)(B).
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
representations contained herein,
THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE 1
EXCHANGE OF SECURITIES
1.1 Issuance of Shares. Subject to all of the terms and conditions of
this Agreement, Rocky agrees to offer one share of Common Stock for each share
of MPEG common stock issued and outstanding, or a total of 13,390,000 shares
of Rocky's Common Stock. The Common Stock will be issued directly to the
shareholders of MPEG on the Closing, in the amounts set forth on the attached
Shareholder list, which is attached hereto and incorporated herein by
reference.
1.2 Exemption from Registration. The parties hereto intend that the
Common Stock to be issued by Rocky to MPEG shareholders shall be exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Act"), pursuant to Section 4(2) of the Act and the rules and regulations
promulgated thereunder.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF MPEG
Except as disclosed in Schedule 2 which is attached hereto and
incorporated herein by reference, MPEG hereby represents and warrants to Rocky
that:
1
<PAGE>
2.1 Organization. MPEG is a corporation duly organized, validly
existing, and in good standing under the laws of Colorado, has all necessary
corporate powers to own its properties and to carry on its business as now
owned and operated by it, and is duly qualified to do business and is in good
standing in each of the jurisdictions where its business requires
qualification.
2.2 Capital. The authorized capital stock of MPEG consists of
50,000,000 shares of Common Stock, of which 13,390,000 are currently issued
and outstanding. All of the issued and outstanding shares of MPEG are duly
authorized, validly issued, fully paid, and non-assessable. There are no
outstanding subscriptions, options, rights, warrants, debentures, instruments,
convertible securities, or other agreements or commitments obligating MPEG to
issue or to transfer from treasury any additional shares of its capital stock
of any class.
2.3 Subsidiaries. MPEG does not have any subsidiaries or own any
interest in any other enterprise (whether or not such enterprise is a
corporation) except for the Nevada subsidiary named MPEG Super Site, Inc..
2.4 Directors and Officers. Schedule 2 contains the names and titles
of all directors and officers of MPEG as of the date of this Agreement.
2.5 Financial Statements. MPEG has delivered to Rocky the audited
balance sheet its wholly owned subsidiary as of June 30, 1999, and operating
statement covering the period from inception through June 30, 1999 (the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated. The Financial Statements accurately set out and describe
the financial condition of MPEG's subsidiary as of June 30, 1999.
2.6 Absence of Changes. Since June 30, 1999, except for changes in
the ordinary course of business which have not in the aggregate been
materially adverse, to the best of MPEG's knowledge, MPEG has conducted its
business only in the ordinary course and has not experienced or suffered any
material adverse change in the condition (financial or otherwise), results of
operations, properties, business or prospects of MPEG or waived or surrendered
any claim or right of material value.
2.7 Absence of Undisclosed Liabilities. Neither MPEG nor any of its
properties or assets are subject to any material liabilities or obligations of
any nature, whether absolute, accrued, contingent or otherwise and whether due
or to become due, that are not reflected in the financial statements presented
to Rocky or have otherwise been disclosed to Rocky.
2.8 Tax Returns. Within the times and in the manner prescribed by
law, MPEG has filed all federal, state and local tax returns required by law,
or has filed extensions which have not yet expired, and has paid all taxes,
assessments and penalties due and payable.
2.9 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, Rocky
and/or its attorneys shall have the opportunity to meet with accountants and
attorneys to discuss the financial condition of MPEG. MPEG shall make
available to Rocky and/or its attorneys all books and records of MPEG.
2.10 Trade Names and Rights. MPEG does not use any trademark, service
mark, trade name, or copyright in its business, or own any trademarks,
trademark registrations or applications, trade names, service marks,
copyrights, copyright registrations or applications.
2
<PAGE>
2.11 Compliance with Laws. MPEG has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and
regulations (including, without limitation, any applicable building, zoning or
other law, ordinance or regulation) affecting its properties or the operation
of its business, except for matters which would not have a material affect on
MPEG or its properties.
2.12 Litigation. MPEG is not a party to any suit, action, arbitration
or legal, administrative or other proceeding, or governmental investigation
pending or, to the best knowledge of MPEG, threatened against or affecting
MPEG or its business, assets or financial condition, except for matters which
would not have a material affect on MPEG or its properties. MPEG is not in
default with respect to any order, writ, injunction or decree of any federal,
state, local or foreign court, department, agency or instrumentality
applicable to it. MPEG is not engaged in any lawsuit to recover any material
amount of monies due to it.
2.13 Authority. MPEG has full corporate power and authority to enter
into this Agreement. The board of directors of MPEG has taken all action
required to authorize the execution and delivery of this Agreement by or on
behalf of MPEG and the performance of the obligations of MPEG under this
Agreement. No other corporate proceedings on the part of MPEG are necessary
to authorize the execution and delivery of this Agreement by MPEG in the
performance of its obligations under this Agreement. This Agreement is, when
executed and delivered by MPEG, and will be a valid and binding agreement of
MPEG, enforceable against MPEG in accordance with its terms, except as such
enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors' rights
generally.
2.14 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement, the performance by MPEG of its obligations under
this Agreement, nor the consummation of the transactions contemplated under
this Agreement will to the best of MPEG's knowledge: (a) materially violate
any provision of MPEG's articles of incorporation or bylaws; (b) with or
without the giving of notice or the passage of time, or both, violate, or be
in conflict with, or constitute a material default under, or cause or permit
the termination or the acceleration of the maturity of, any debt, contract,
agreement or obligation of MPEG, or require the payment of any prepayment or
other penalties; (c) require notice to, or the consent of, any party to any
agreement or commitment, lease or license, to which MPEG is bound; (d) result
in the creation or imposition of any security interest, lien, or other
encumbrance upon any material property or assets of MPEG; or (e) violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental authority to which MPEG is bound or subject.
2.15 Full Disclosure. None of the representations and warranties made
by MPEG herein, or in any schedule, exhibit or certificate furnished or to be
furnished in connection with this Agreement by MPEG, or on its behalf,
contains or will contain any untrue statement of material fact.
2.16 Assets. MPEG has good and marketable title to all of its tangible
properties and such tangible properties are not subject to any material liens
or encumbrances.
2.17 Material Contracts and Obligations. Attached hereto on Schedule 2
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which MPEG is a party or by which it is bound that are material
to the conduct and operations of its business and properties, which provide
for payments to or by the Company in excess of $10,000; or which involve
transactions or proposed transactions between the Company and its officers and
directors. Copies of such agreements and contracts and documentation
3
<PAGE>
evidencing such liabilities and other obligations have been made available for
inspection by Rocky and its counsel. All of such agreements and contracts are
valid, binding and in full force and effect in all material respects, assuming
due execution by the other parties to such agreements and contracts.
2.18 Consents and Approvals. No consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by MPEG in connection with: (a)
the execution and delivery by MPEG of this Agreement; (b) the performance by
MPEG of its obligations under this Agreement; or (c) the consummation by MPEG
of the transactions contemplated under this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ROCKY
Except as disclosed in Schedule 3 which is attached hereto and
incorporated herein by reference, Rocky represents and warrants to MPEG that:
3.1 Organization. Rocky is a corporation duly organized, valid
existing, and in good standing under the laws of Colorado, has all necessary
corporate powers to own properties and to carry on business, and it is not now
conducting any business, except to the extent to which the effecting of the
transaction contemplated by this Agreement constitutes doing business.
3.2 Capitalization. The authorized capital stock of Rocky consists of
100,000,000 shares of no par value Common Stock of which 611,270 shares of
Common Stock are currently issued and outstanding. All of the issued and
outstanding shares of Common Stock are duly authorized, validly issued, fully
paid and non-assessable. There are no outstanding subscriptions, options,
rights, warrants, convertible securities, or other agreements or commitments
obligating Rocky to issue or to transfer from treasury any additional shares
of its capital stock of any class. Prior to the Closing, the board of
directors of Rocky will approve a 2.0 for 1 forward split which will increase
the number of shares issued and outstanding to 1,222,540.
3.3 Subsidiaries. Rocky does not presently have any subsidiaries or
own any interest in any other enterprise (whether or not such enterprise is a
corporation) except for Prime Rate Income & Dividend Enterprises, Inc.
("Pride").
3.4 Directors and Officers. Schedule 3 contains the names and titles
of all directors and officers of Rock as of the date of this Agreement.
3.5 Financial Statements. Rocky has delivered to MPEG its audited
balance sheet and statements of operations and cash flows as of and for the
period ended June 30, 1998, and its unaudited balance sheet and statements of
operations for the nine months ended March 31, 1999 (the "Financial
Statements"). The Financial Statements are complete and correct in all
material respects and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated. The Financial Statements accurately set out and describe the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein. The current liabilities of Rocky are set
forth on Schedule 2. As of the Closing, the total liabilities of Rocky shall
be zero
3.6 Absence of Changes. Since March 31, 1999, except for changes in
the ordinary course of business which have not in the aggregate been
materially adverse, to the best of Rocky's knowledge, Rocky has not
experienced or suffered any material adverse change in its condition
(financial or otherwise), results of operations, properties, business or
prospects or waived or surrendered any claim or right of material value.
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<PAGE>
3.7 Absence of Undisclosed Liabilities. To the best of Rocky's
knowledge, neither Rocky nor any of its properties or assets are subject to
any liabilities or obligations of any nature, whether absolute, accrued,
contingent or otherwise and whether due or to become due, that are not
reflected in the financial statements presented to MPEG.
3.8 Tax Returns. Within the times and in the manner prescribed by
law, Rocky has filed all federal, state and local tax returns required by law
and has paid all taxes, assessments and penalties due and payable.
3.9 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, MPEG
shall have the opportunity to meet with Rocky's accountants and attorneys to
discuss the financial condition of Rocky. Rocky shall make available to MPEG
all books and records of Rocky.
3.10 Trade Names and Rights. Rocky does not use any trademark, service
mark, trade name, or copyright in its business, or own any trademarks,
trademark registrations or applications, trade names, service marks,
copyrights, copyright registrations or applications.
3.11 Compliance with Laws. To the best of Rocky's knowledge, Rocky has
complied with, and is not in violation of, applicable federal, state or local
statutes, laws and regulations (including, without limitation, any applicable
building, zoning, or other law, ordinance, or regulation) affecting its
properties or the operation of its business.
3.12 Litigation. Rocky is not a party to any suit, action,
arbitration, or legal, administrative, or other proceeding, or governmental
investigation pending or, to the best knowledge of Rocky, threatened against
or affecting Rocky or its business, assets, or financial condition. Rocky is
not in default with respect to any order, writ, injunction, or decree of any
federal, state, local, or foreign court, department agency, or
instrumentality. Rocky is not engaged in any legal action to recover moneys
due to it.
3.13 No Prior or Pending Investigation. Rocky is not aware of any
prior or pending investigations or legal proceedings by the SEC, any state
securities regulatory agency, or any other governmental agency regarding
Rocky.
3.14 Authority. Rocky has full corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. The Board of Directors of Rocky has taken all action required to
authorize the execution and delivery of this Agreement by or on behalf of
Rocky, the performance of the obligations of Rocky under this Agreement and
the consummation by Rocky of the transactions contemplated under this
Agreement. No other corporate proceedings on the part of Rocky Are necessary
to authorize the execution and delivery of this Agreement by Rocky in the
performance of its obligations under this Agreement. This Agreement is, and
when executed and delivered by Rocky, will be a valid and binding agreement of
Rocky, enforceable against Rocky in accordance with its terms, except as such
enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors rights
generally.
3.15 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement, the performance by Rocky of its obligations under
this Agreement, nor the consummation of the transactions contemplated under
this Agreement will, to the best of Rocky's knowledge: (a) violate any
provision of Rocky's articles of incorporation or bylaws; (b) with or without
5
<PAGE>
the giving of notice or the passage of time, or both, violate, or be in
conflict with, or constitute a default under, or cause or permit the
termination or the acceleration of the maturity of, any debt, contract,
agreement or obligation of Rocky, or require the payment of any prepayment or
other penalties; (c) require notice to, or the consent of, any party to any
agreement or commitment, lease or license, to which Rocky is bound; (d) result
in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets of Rocky; or (e) violate any statute
or law or any judgment, decree, order, regulation or rule of any court or
governmental authority to which Rocky is bound or subject.
3.16 Validity of Rocky Shares. The shares of Rocky Common Stock to be
delivered pursuant to this Agreement, when issued in accordance with the
provisions of this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable.
3.17 Full Disclosure. None of the representations and warranties made
by Rocky herein, or in any exhibit, certificate or memorandum furnished or to
be furnished by Rocky, or on its behalf, contains or will contain any untrue
statement of material fact, or omit any material fact the omission of which
would be misleading.
3.18 Assets. Rocky will not have any assets at the time of closing
except for assets in PRIDE which are being spun off.
3.19 Material Contracts and Obligations. Rocky has no material
contracts to which it is a party or by which it is bound.
3.20 Consents and Approvals. No consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by Rocky in connection with: (a)
the execution and delivery by Rocky of its obligations under this Agreement;
(b) the performance by Rocky of its obligations under this Agreement; or (c)
the consummation by Rocky of the transactions contemplated by this Agreement.
3.21 Real Property. Rocky does not own, use or claim any interest in
any real property, including without limitation any license, leasehold or any
similar interest in real property or will mot at the time of closing except as
set forth in Rocky's SEC filings.
ARTICLE 4
COVENANTS
4.1 Investigative Rights. From the date of this Agreement until the
Closing Date, each party shall provide to the other party, and such other
party's counsels, accountants, auditors, and other authorized representatives,
full access during normal business hours and upon reasonable advance written
notice to all of each party's properties, books, contracts, commitments, and
records for the purpose of examining the same. Each party shall furnish the
other party with all information concerning each party's affairs as the other
party may reasonably request. If the transaction contemplated hereby is not
completed, all documents received by each party and/or its attorneys and
accountants, auditors or other authorized representatives shall be returned to
the other party who provided same upon request. The parties hereto, their
directors, employees, agents and representatives shall not disclose any of the
information described above unless such information is already disclosed to
the public, without the prior written consent of the party to which the
confidential information pertains. Each party shall take such steps as are
necessary to prevent disclosure of such information to unauthorized third
parties.
6
<PAGE>
4.2 Conduct of Business. Prior to the Closing, Rocky and MPEG shall
each conduct its business in the normal course, and shall not sell, pledge, or
assign any assets, without the prior written approval of the other party,
except in the regular course of business except for transactions by PRIDE.
Neither Rocky nor MPEG shall amend its Articles of Incorporation or Bylaws,
declare dividends, redeem or sell stock or other securities, incur additional
or newly-funded liabilities, acquire or dispose of fixed assets, change
employment terms, enter into any material or long-term contract, guarantee
obligations of any third party, settle or discharge any balance sheet
receivable for less than its stated amount, pay more on any liability than its
stated amount, or enter into any other transaction other than in the regular
course of business except as otherwise contemplated herein.
ARTICLE 5
CONDITIONS PRECEDENT TO ROCKY'S PERFORMANCE
5.1 Conditions. The obligations of Rocky hereunder shall be subject
to the satisfaction, at or before the Closing, of all the conditions set forth
in this Article 6. Rocky may waive any or all of these conditions in whole or
in part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by Rocky of any other condition of or any
of Rocky's other rights or remedies, at law or in equity, if MPEG shall be in
default of any of their representations, warranties, or covenants under this
Agreement.
5.2 Accuracy of Representations. Except as otherwise permitted by
this Agreement, all representations and warranties by MPEG in this Agreement
or in any written statement that shall be delivered to Rocky by MPEG under
this Agreement shall be true and accurate on and as of the Closing Date as
though made at that time.
5.3 Performance. MPEG shall have performed, satisfied, and complied
with all covenants, agreements, and conditions required by this Agreement to
be performed or complied with by it, on or before the Closing Date.
5.4 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against MPEG on or before the Closing Date.
ARTICLE 6
CONDITIONS PRECEDENT TO MPEG'S PERFORMANCE
6.1 Conditions. MPEG's obligations hereunder shall be subject to the
satisfaction, at or before the Closing, of all the conditions set forth in
this Article 7. MPEG may waive any or all of these conditions in whole or in
part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by MPEG of any other condition of or any
of MPEG's rights or remedies, at law or in equity, if Rocky shall be in
default of any of its representations, warranties, or covenants under this
Agreement.
6.2 Accuracy of Representations. Except as otherwise permitted by
this Agreement, all representations and warranties by Rocky in this Agreement
or in any written statement that shall be delivered to MPEG by Rocky under
this Agreement shall be true and accurate on and as of the Closing Date as
though made at that time.
6.3 Performance. Rocky shall have performed, satisfied, and complied
with all covenants, agreements, and conditions required by this Agreement to
be performed or complied with by them, on or before the Closing Date.
7
<PAGE>
6.4 Absence of Litigation. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against Rocky on or before the Closing Date.
6.5 Directors of Rocky. Effective on the Closing, Rocky shall have
fixed the size of its Board of Directors at three (3) persons, and such Board
of Directors shall include Kanematsu Misawa, Joseph S. Muto, and Randall J.
Lanham.
6.6 Officers of Rocky. Effective on the Closing, Rocky shall have
elected the following new Officers of Rocky:
Kunimitsu Misawa: Chairman
Bruce M. Tomiyama: CFO, President and Secretary
6.7 Forward Split. Just prior to Closing, Rocky shall complete a 2.0
for 1 forward stock split.
ARTICLE 7
CLOSING
7.1
Closing. The Closing of this transaction shall be held at the
offices of Krys Boyle Freedman & Sawyer, P.C., 600 Seventeenth Street,
Suite 2700 South Tower, Denver, Colorado 80202, or such other place as
shall be mutually agreed upon, on such date as shall be mutually agreed
upon by the parties. At the Closing:
(a) Shareholders shall deliver letters of acceptance and duly
endorsed certificates representing their shares of MPEG being exchanged for
shares of Rocky.
(b) Shareholders shall receive a certificate or certificates
representing the number of shares of Rocky Common Stock for which the shares
of MPEG common stock shall have been exchanged.
(c) Rocky shall deliver a signed Consent and/or Minutes of the
Directors of Rocky approving this Agreement and each matter to be approved by
the Directors of Rocky under this Agreement.
(d) MPEG shall deliver a signed Consent or Minutes of the
Directors of MPEG approving this Agreement and each matter to be approved by
the Directors of MPEG under this Agreement.
ARTICLE 8
SPIN OFF OF PRIDE
8.1 The parties agreed that prior to the Closing, Rocky shall spin off
all of the issued and outstanding shares of Rocky's wholly-owned subsidiary
named Prime Rate Income & Dividend Enterprises, Inc. ("PRIDE") to its
shareholders based on a shareholder list prepared one (1) day prior to
Closing. Certificates representing the shares to be spun off will be placed
with an escrow agent mutually acceptable to Rocky and MPEG with instructions
to distribute the shares once PRIDE has a Form 10-SB which is effective with
the Securities and Exchange Commission.
8.2 In the event that a Form 10-SB has not become effective with the
Securities and Exchange Commission within twelve (12) months after the
Closing, PRIDE will use its best effects to liquidate all of its assets and
liabilities and then distribute all proceeds pro rata to the shareholders on
the shareholder list being held in escrow.
8
<PAGE>
8.3 The current directors of PRIDE will remain as the directors of
PRIDE until the spin off of either the PRIDE stock or the proceeds of
liquidation is completed.
8.4 PRIDE will be responsible for all of its expenses of operation
including the costs of the Form 10-SB until the spin off is complete.
ARTICLE 9
MISCELLANEOUS
9.1 Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall in
no way be deemed to define, limit, or add to the meaning of any provision of
this Agreement.
9.2 No Oral Change. This Agreement and any provision hereof, may not
be waived, changed, modified, or discharged orally, but it can be changed by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, or discharge is sought.
9.3 Non-Waiver. Except as otherwise expressly provided herein, no
waiver of any covenant, condition, or provision of this Agreement shall be
deemed to have been made unless expressly in writing and signed by the party
against whom such waiver is charged; and (i) the failure of any party to
insist in any one or more cases upon the performance of any of the provisions,
covenants, or conditions of this Agreement or to exercise any option herein
contained shall not be construed as a waiver or relinquishment for the future
of any such provisions, covenants, or conditions, (ii) the acceptance of
performance of anything required by this Agreement to be performed with
knowledge of the breach or failure of a covenant, condition, or provision
hereof shall not be deemed a waiver of such breach or failure, and (iii) no
waiver by any party of one breach by another party shall be construed as a
waiver with respect to any other or subsequent breach.
9.4 Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
9.5 Entire Agreement. This Agreement contains the entire Agreement
and understanding between the parties hereto, and supersedes all prior
agreements and understandings.
9.6 Choice of Law. This Agreement and its application shall be
governed by the laws of the State of Colorado, except to the extent its
conflict of laws provisions would apply the laws of another jurisdiction.
9.7 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice
is to be given, or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified,
postage prepaid, and properly addressed as follows:
Rocky:
Rocky Mountain Power Company
____________________________
____________________________
9
<PAGE>
with a copy to:
Tom Boyle, Esq.
Krys Boyle Freedman & Sawyer, P.C.
600 Seventeenth Street, Suite 2700 South Tower
Denver, Colorado 80202
MPEG:
MPEG Super Site, Inc.
1358 5th Street
Santa Monica, California 90401
with a copy to:
Randall J. Lanham, Esq.
Lanham & Associates
45 Glen Echo
Dove Canyon, California 92679
9.8 Binding Effect. This Agreement shall inure to and be binding upon
the heirs, executors, personal representatives, successors and assigns of each
of the parties to this Agreement.
9.9 Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement, and shall execute such other
and further documents and take such other and further actions as may be
necessary or convenient to effect the transaction described herein.
9.10 Brokers. The parties hereto represent and agree that no broker
has brought about the aforementioned transaction and no finder's fee has been
paid or is payable by any party. Each of the parties hereto shall indemnify
and hold the other harmless against any and all claims, losses, liabilities or
expenses which may be asserted against it as a result of its dealings,
arrangements or agreements with any broker or person, except as described in
this paragraph.
9.11 Announcements. Rocky and MPEG will consult and cooperate with
each other as to the timing and content of any announcements of the
transactions contemplated hereby to the general public or to employees,
customers or suppliers.
9.12 Expenses. Rocky and MPEG will pay their own legal, accounting and
any other out-of-pocket expenses reasonably incurred in connection with this
transaction, whether or not the transaction contemplated hereby is
consummated.
9.13 Exhibits. As of the execution hereof, the parties hereto have
provided each other with the Exhibits provided for herein above, including any
items referenced therein or required to be attached thereto. Any material
changes to the Exhibits shall be immediately disclosed to the other party.
9.14 After the closing, Rocky's name will be changed and the rights to
the name "Rocky Mountain Power Co." will belong to Rocky's management.
AGREED TO AND ACCEPTED as of the date first above written.
ROCKY MOUNTAIN POWER COMPANY MPEG SUPER SITE, INC.
By: By:
-------------------------- ------------------------
Mick Schumacher, President Bruce M. Tomiyama, CFO and Secretary
10
<PAGE>
SHAREHOLDER LIST TO BE PROVIDED
11
<PAGE>
EXHIBIT IV
CONSENT OF ACCOUNTANT
We hereby consent to the use of our report dated September 15, 1999, on the
financial statements of Prime Rate Income & Dividend Enterprises, Inc. and
Consolidated Subsidiaries for the two years ended June 30, 1999. Such report
is being included in a Registration Statement to be filed by Prime Rate
Income & Dividend Enterprises, Inc. on Form 10-SB.
Miller and McCollom, CPA's
/S/ Miller and McCollom CPA's
-----------------------------
Lakewood, Colorado
January 24, 1999
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet and statements of operations found on pages F-1 of
the Company's Form 10-SB for the fiscal year ended June 30, 1999, and is
qualified in its entierty by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 445,158
<SECURITIES> 0
<RECEIVABLES> 554,855
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,165,923
<PP&E> 255,317
<DEPRECIATION> 11,625
<TOTAL-ASSETS> 2,204,971
<CURRENT-LIABILITIES> 86,554
<BONDS> 0
611,290
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,204,971
<SALES> 0
<TOTAL-REVENUES> 209,084
<CGS> 0
<TOTAL-COSTS> 58,750
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,163
<INCOME-PRETAX> 150,334
<INCOME-TAX> 40,250
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110,084
<EPS-BASIC> .18
<EPS-DILUTED> .18
</TABLE>
