SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File No. 0-9458
Eagle Exploration Company
(Name of small business issuer in its charter)
Colorado 84-0804143
(State or other jurisdiction of (I.R.S. Employer ID Number)
incorporation or organization)
1776 Lincoln Street, Suite 1311, Denver, Colorado, 80203
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: (303) 863-0800
Securities registered pursuant to section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, No Par Value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will
be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB [X]
State Registrant's revenues for its most recent fiscal year. $137,165
At July 15, 1996, 3,072,836 shares of common stock, no par value, (the
Registrant's only class of voting stock) were outstanding. The aggregate
market value of the 1,678,336 common shares of Registrant held by
nonaffiliates was approximately $681,824 at July 15, 1996, based on the
mean between the bid and asked prices on the National Quotation Bureau's
"Bulletin Board". See Item 5 herein for additional information in this
regard.
This report consists of pages. The exhibit index appears on page
14.
PART I
Item 1. Description of Business.
Nature of Business and Management's Plan
Eagle Exploration Company's primary operations include the
purchase and development of residential real estate. The Company's
primary operations previously included engaging in oil and gas
exploration and production activities, acquiring whole or partial
interests in oil and gas leases, and farming out or reselling all or
part of its interest in these leases to other companies in the oil
and gas industry. The Company has sold all land held for sale during
the year ended March 31, 1995. Currently, the Company has no plans
to acquire additional land for development and sale but is
investigating various financial acquisitions or business
opportunities. Eagle Exploration Company and its wholly owned
subsidiary, Eagle Development Company, are referred to herein
collectively as "the Company".
1996 Activities
During the fiscal year 1996 the Company wrote off a $600,000
note receivable executed July 26, 1995, between James D. Alderton and
the Company. The note was collateralized with 180,000 shares of
Incomnet, Inc., a Small Cap NASDAQ Company, then trading at $22.00
per share.
On September 8, 1995, a notice of default was given to Alderton.
Default under terms of the Pledge Agreement gave the Company the
right to sell the collateral. Arrangements were made with Barron
Chase Securities in Denver, Colorado, to sell the collateral for
approximately $6.00 per share.
On September 14, 1995, the Company contacted the transfer agent
for assistance and verification of the proposed sale, and on
September 15, 1995, the American Stock Transfer & Trust Company
advised that the certificates were apparently forged.
Alderton requested that the Company consider an alternate plan
for repayment and offered to re-collateralize the note. An Amended
Pledge Agreement was entered into effective September 29, 1995, when
Alderton agreed to collateralize the note with gold nuggets, stock in
a private company and assignment of certain German historical bonds.
However no adequate substitute collateral was forthcoming. Hence, on
December 4, 1995, the Company served Alderton with a lawsuit.
On February 2, 1996, the Company received an order from the
court entering judgment on the Company's first claim for relief in
the civil action brought by the Company against Alderton for the sum
of $757,794.12, the amount due under the note, and judgment for an
additional $1.2 million under the Colorado conversion of property
statute. Management is pursuing the collection of this judgment, but
is not optimistic that sufficient assets are owned by Alderton to
satisfy the amount of the note or the judgment.
As discussed in the Company's previous quarterly reports for the
periods ended June 30, 1995, and September 30, 1995, the Company
acquired a 40 percent membership interest in Eagle's Landing, LLC,
owner of a 176 unit apartment complex. On December 12, 1995, the LLC
held its annual meeting. Among other resolutions the members of the
LLC unanimously approved nonrecourse permanent financing for the
apartment complex in the amount of $11 million subject to certain
covenants by the developer. In January of 1996 permanent financing
for the project was closed. The $9.2 million construction loan,
approximately $825,000 of cost overruns, and closing costs were paid
by the title company from the permanent loan proceeds. The lender's
appraisal of the property is $14.7 million.
The developer who assigned the interest in the LLC to the
Company on May 26, 1995, has challenged the Company's 40 percent
ownership. On January 25, 1996, the Company was served with a
summons and complaint by the developer of the project. He filed this
action to obtain a declaration from the court that the transaction
between the parties was in substance, a real estate loan. The
complaint alleged that the assignment was intended to secure the
payment of an obligation affecting an interest in real property, and
as a result the assignment did not constitute a conveyance and
consequently the Company was not entitled to possession of the
property without instituting foreclosure proceedings. The Company
and its legal counsel believed it was unlikely that the courts would
rule in favor of the developer's claim. However, management
attempted to settle the matter.
Out of court settlement negotiations were unsuccessful and
management instructed the Company's legal counsel to proceed in
defending the Company's ownership in the LLC. Subsequent to the
fiscal year ended March 31, 1996, the Company through its counsel
motioned the court for Summary Judgment. Shortly after the
plaintiff's receipt of this motion the Company was contacted by the
plaintiff requesting that the lawsuit be dismissed. The Company's
legal counsel prepared a Notice and Stipulation of Dismissal with
Prejudice, stipulating that the Company is the owner and holder of a
40 percent membership interest in Eagle's Landing, LLC, effective May
26, 1995. On June 24, 1996, the Company received from Eagle's
Landing, LLC, approximately $320,000. This payment represents the
Company's share of loan proceeds resulting from the difference
between the construction loan and the permanent financing. The
Company will aggressively strive to promote proper management of the
apartment complex and pursue its goal of selling this asset.
Due to the litigation satisfactory financial information was not
distributed to the Company. Therefore, this report has not
incorporated the financial information concerning the Company's
ownership in the LLC. It is expected that the necessary audited
financial information concerning the LLC will be available by
September 1, 1996, at which time the Company will file an amended
report on Form 10-KSB/A.
Employees
At July 15, 1996, the Company had two full-time employees. The
Company has and may retain independent consultants from time to time
on a limited basis.
Item 2. Properties.
Other than cash and a note receivable which was collected after
the end of the Company's fiscal year ended March 31, 1996, the
Company's assets consist of a 40 percent interest in Eagle's Landing,
LLC, described above, office furniture and equipment, and very minor
interests in oil and gas properties including one lease operated by
the Company.
Item 3. Legal Proceedings.
See Item 1. "1996 Activities" immediately above.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of fiscal 1996
to a vote of the Company's security holders.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The table below presents the range of high and low bid
quotations for the Company's common stock on a calendar quarter basis
as reported in the National Quotation Bureau's Bulletin Board. The
Company's trading symbol is EGXP. There is little or no trading in
the Company's common stock; hence the quotations set forth below may
not represent actual transactions and do not represent transactions
in any material number of the Company's shares.
<TABLE>
<CAPTION>
Bid
High Low
<S> <C> <C>
1994
2nd Quarter $.25 $.1875
3rd Quarter $.25 $.1875
4th Quarter $.2825 $.1575
1995
1st Quarter $.30 $.22
2nd Quarter $.30 $.22
3rd Quarter $.50 $.3125
4th Quarter $.50 $.3125
1996
1st Quarter $.50 $.3125
</TABLE>
As of July 15, 1996, the Company had approximately 568 holders
of record of its common stock.
Holders of common stock are entitled to receive such dividends
as may be declared by the Company's Board of Directors. No dividends
on its common stock have been paid by the Company, nor does the
Company anticipate that such dividends will be paid in the
foreseeable future.
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Financial Condition, Liquidity and Capital Resources
Cash, temporary cash investments and certificates of deposit
decreased approximately 97 percent for the fiscal year ended March
31, 1996. This decrease in cash and the redemption of certificates
of deposit was due to the Company's investment in Eagle's Landing,
LLC, and a note receivable advance of $600,000.
The Company's note receivable in the amount of $500,000 was paid
in full subsequent to fiscal 1996 year end.
Stockholder's equity decreased from $196,390 to $1,291,815 or
$704,575 for the year ended March 31, 1996, primarily due to the
impairment of a note receivable in the amount of $600,000. See Item
1. above.
The Company's initial investment in the 40 percent membership
interest in Eagle's Landing, LLC, of approximately $850,000 has
returned to date approximately $445,000. The Company received
$125,000 in October, 1995, and subsequent to fiscal year ended, 1996,
the Company received approximately $320,000 representing its
proportionate share of permanent loan proceeds. See Item 1. above.
These proceeds have reduced the Company's investment in the apartment
complex to approximately $405,000.
The income from the property is projected to create a good
return on the Company's current investment. However, more
importantly the occupancy rate is currently near 95 percent and is
projected to be 95 percent in August, 1996. This increased occupancy
rate should facilitate the sale of this asset at an increased sales
price.
Results of Operations
Fiscal 1996 Compared with Fiscal 1995
Total revenues for the year ended March 31, 1996, were $137,165
as compared to $548,760 for the year ended March 31, 1995. The
Company reported a net loss of $704,575 for the year ended March 31,
1996, and as compared to the year ended March 31, 1995, it reported
net income of $277,388. This loss was essentially due to the
impairment of a note receivable in the amount of $600,000 and the
lack of interest income generated in the previous fiscal year by the
Company's cash, temporary cash investments and certificates of
deposit.
Item 7. Financial Statements.
See pages F-1 through F-19.
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
The disclosure requirements of Item 304 of Regulation SB are not
applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.
The following are the directors and executive officers of the
Company.
Raymond N. Paul M. M. D.
Joeckel(1) Joeckel(1) Young
Director Since October, October, February,
1979 1979 1990
Position(s) with President & Secretary & Director
the Company Director Director
Age 70 44 70
(1) Messrs. Raymond N. Joeckel and Paul M. Joeckel, the Company's
only executive officers, have served as the Company's President and
Secretary, respectively, since December, 1979. The executive
officers of the Company hold office until their death, resignation,
or removal by the Board of Directors. There is no arrangement or
understanding between any director or officer or any other person or
persons pursuant to which he was or is to be selected as a director
or an officer. Paul M. Joeckel is the son of Raymond N. Joeckel.
Raymond N. Joeckel attended Los Angeles City College and the
University of Southern California in programs which did not lead to
degrees. He received an LL.B. degree from Southwestern University,
Los Angeles, California in 1950. Mr. Joeckel joined Shell Oil
Company as a landman in 1950 and became Land Manager for the Rocky
Mountain region for Shell Oil Company in 1962. He remained in that
position until 1969 at which time he became an independent oil and
gas operator dealing primarily in oil and gas leases.
Paul M. Joeckel received a B.A. degree in Economics from
Colorado State University in 1976. During 1976 and until 1977, Mr.
Joeckel was self-employed as an independent landman. From June, 1977
until joining the Company on a full-time basis in January, 1980, he
was employed as a senior landman by Diamond Shamrock Corporation.
M. D. Young received a B.A. degree in Geology from Vanderbilt
University in 1951 at Nashville, Tennessee. From 1952 to 1960 Mr.
Young worked for Gulf Oil Corporation as an Area Geologist.
Subsequently he has been a consultant to various companies in the
industry. Mr. Young has also been a working interest owner in many
wildcat wells in the Rocky Mountains. Mr. Young is a member of the
American Association of Petroleum Geologists.
No director serves as a member of the Board of Directors of any
other company with a class of equity securities registered under the
Securities Exchange Act of 1934 or any company registered as an
investment company under the Investment Company Act of 1940.
Item 10. Executive Compensation.
The following information shows the compensation of the named
executive officers for each of the Company's last two fiscal years.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation
<TABLE>
<CAPTION>
Other Rest- All
Name and Annual ricted Other
Principa Compen- Stock Option LTIP Compen-
l s/
Year SARs
Position Salary Bonus sation Awards Payout sation
* s
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond 1996 N/A N/A $2,115 N/A N/A N/A N/A
N.
Joeckel 1995 N/A N/A $814 N/A N/A N/A N/A
Presiden
t
Paul M. 1996 $75,00 $3,590 N/A N/A N/A N/A
0 N/A
Joeckel 1995 $65,00 N/A $2,750 N/A N/A N/A N/A
0
Secretar
y
</TABLE>
It is anticipated that salary payments to officers by the
Company during the next fiscal year for services in all capacities
will not exceed the amount set forth above.
There are no stock and/or other compensatory plans or
arrangements by which the Company compensates its directors for
services as directors, other than a director's fee of $100 per
meeting of directors.
The Company provides medical insurance for all of its full-time
employees and executive officers.
* Other annual compensation does not include the amount
attributable to Company cars that the officers are allowed to use.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth information, as of July 15, 1996,
regarding the common stock ownership of those persons known by the
Company to be the beneficial owner of more than 5% of its common
stock, its directors, and its officers and directors as a group. All
of stock listed below is no par value common stock.
Name & Address of Amount Percent
and of
Nature
of
Beneficial Owner Benefici Class
al
Ownershi
p
Paul M. Joeckel (1) 171,141 5.6%
shares
8101 E. Dartmouth Direct
Denver, CO 80231
M. D. Young 500 -0-
shares
800 Pearl Street, #406 Direct
Denver, CO 80203
Paul M. Joeckel, Trustee 1,222,85 39.8%
9 shares
Joeckel Family Trust Direct
1775 Sherman Street
Suite 2995
Denver, CO 80203
Norman K. Brown 269,641 8.775%
shares
801 Broadway Direct
Suite 808
Seattle, WA 98122
All officers and 1,394,50 45.4%
0 shares
directors as a group Direct
(three persons)
(1) Does not include 21,000 shares owned by Mr. Joeckel's wife of
which he disclaims beneficial ownership.
The Company knows of no arrangements which could at a subsequent
date result in a change in control of the Company.
Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act") requires the Company's directors and officers and
persons who own more than ten percent of the Company's equity
securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission (the "SEC"). Directors,
officers and greater than ten-percent shareholders are required by
the SEC regulation to furnish the Company with copies of all section
16(a) reports filed.
Based solely on its review of the copies of the reports it
received from persons required to file, the Company believes that
during the period ended March 31, 1996, all filing requirements
applicable to its officers, directors and greater than ten-percent
shareholders were complied with.
Item 12. Certain Relationships and Related Transactions.
There were no transactions during this fiscal year required to
be reported hereunder.
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports on Form
8-K.
(a) (1) and (2) Financial Statements and Schedules:
See "Index to Consolidated Financial Statements" on page F-1.
Item No.
Per S-K Document as Form 10-KSB Exhibit Reference
(2) Plan of purchase, sale, reorganization -None-
arrangement, liquidation or succession
(3) Articles of Incorporation and By-Laws *
(4) Instruments defining the rights of -None-
security holders, including indentures
(5) Opinion re: legality -None-
(7) Opinion re: liquidation preference -None-
(8) Opinion re: tax matters -None-
(9) Voting trust agreement -None-
(10) Material contracts
Agreement - Meadows at Westwoods *
Operating Agreement - Meadows at Westwoods *
Promissory Note - Meadows at Westwoods ***
Assignment of Membership Interest - Eagle's
Landing, LLC
Operating Agreement - Eagle's Landing, LLC 96.10
(11) Statement re: computation of per * *
share earnings
(12) Statement re: computation of ratios -None-
(13) Annual report to security holders, Form -None-
10-Q or quarterly report to security
holders
(14) Material Foreign Patents -None-
(15) Letter re: unaudited interim financial -None-
statements
(16) Letter re: change in certifying -None-
accountants
(17) Letter re: director's resignations -None-
(18) Letter re: change in accounting -None-
principles
(19) Previously unfiled documents -None-
(20) Reports to securities holder -None-
(21) Other documents or statements -None-
to security holder
(22) Subsidiaries of the Registrant *
(23) Published report regarding matters -None-
submitted to vote of security holders
(24) Consents of experts and counsel -None-
(25) Power of attorney -None-
(26) Statement of eligibility of trustee -None-
(27) Financial data schedule -None-
(28) Information from reports furnished -None-
to state insurance regulatory
authorities
* Previously filed documents incorporated herein by reference to
the Company's Registration Statement on Form S-1 (No. 2-67971)
effective September 14, 1980, and the Company's Reports on Form 10-K
for the fiscal year ended March 31, 1994, and previous years.
** Not required, since information is ascertainable from the basic
consolidated financial statements.
*** Filed with the Company's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1995.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
EAGLE EXPLORATION COMPANY
By
Raymond N. Joeckel
President
Date: July , 1996
In accordance with the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Date
July , 1996
Raymond N.
Joeckel
Principal
Executive, Accounting and Financial
Officer and a director
July , 1996
Paul M. Joeckel
Secretary and a director
July , 1996
M. D. Young
A director
EAGLE EXPLORATION COMPANY
Financial Statements and
Independent Auditors' Report
March 31, 1996
Table of Contents
Page
Independent Auditors' Report F - 2
Consolidated Financial Statements
Consolidated Balance Sheet as of March 31, 1996 F - 4
Consolidated Statements of Operations for the Years
Ended March 31, 1996 and 1995 F - 5
Consolidated Statement of Stockholders' Equity for
the Years Ended March 31, 1996 and 1995 F - 6
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1996 and 1995 F - 7
Notes to Consolidated Financial Statements F - 8
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Eagle Exploration Company
Denver, Colorado
We were engaged to audit the accompanying balance sheet of Eagle
Exploration Company and Subsidiaries as of March 31, 1996 and the
related statements of operations, stockholders' equity and cash flows
for the year then ended. These consolidated financial statements are
the responsibility of the Company's management.
We are unable to obtain audited financial statements supporting the
Company's investment in a limited liability company (LLC) stated at
$726,287 at March 31, 1996 or its equity in earnings or losses of
that affiliate, as described in Note 5 to the consolidated financial
statements; nor were we able to satisfy ourselves as to the carrying
value of the investment in the LLC or the equity in its earnings or
losses by other auditing procedures.
Since the Company has not received audited financial statements for
the LLC and we were not able to apply other auditing procedures to
satisfy ourselves as to the carrying value of the investment, the
scope of our work was not sufficient to enable us to express, and we
do not express, an opinion on these consolidated financial
statements.
Ehrhardt Keefe Steiner & Hottman PC
May 16, 1996
Denver, Colorado
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Eagle Exploration Company
Denver, Colorado
We have audited the accompanying consolidated statements of
operations, stockholders' equity, and cash flows of Eagle Exploration
Company and Subsidiaries for the year ended March 31, 1995. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatements. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
results of operations and cash flows of Eagle Exploration Company and
subsidiaries for the year ended March 31, 1995, in conformity with
generally accepted accounting principles.
Ehrhardt Keefe Steiner & Hottman PC
May 12, 1995
Denver, Colorado
Consolidated Balance Sheet
March 31, 1996
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash $ 41,387
Note receivable (Note 2) 500,000
Other receivables 3,822
Office furniture, equipment and other,
net of $209,321 of 44,444
accumulated depreciation
Other 23,387
Investment in limited liability company 726,287
(Note 5)
$1,339,3
27
Liabilities and Stockholders' Equity
Accounts payable $ 37,251
Deposits, deferred revenue and other 10,261
Total liabilities 47,512
Contingencies (Notes 2 and 5)
Stockholders' equity
Common stock, no par value; authorized
10,000,000 6,632,99
shares; 3,072,836 shares issued and 8
outstanding
Accumulated deficit (5,341,1
83)
1,291,81
5
$1,339,3
27
Consolidated Statements of Operations
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended
March
31,
1996 1995
<S> <C> <C>
Revenues (Note 3)
Gain on land held for sale -
Proceeds from sales $ - $ 1,288,000
Less cost of land sold - (827,555)
- 460,445
Interest income 97,470 50,910
Other income 39,695 37,405
137,165 88,315
Total net revenues 137,165 548,760
Expenses
Depreciation 18,329 6,646
Write-off of note receivable (Note 2) 600,000 -
Other operating expenses 223,411 189,726
841,740 196,372
(Loss) income before income taxes (704,575) 352,388
Provision for income taxes (Note 4) - 75,000
Net (loss) income $ (704,575) $ 277,388
Net (loss) income per share $ $
(.23) .09
Weighted average number of shares 3,072,836
outstanding 3,063,567
Consolidated Statement of Stockholders' Equity
For the Year Ended March 31, 1996 and 1995
</TABLE>
<TABLE>
<CAPTION>
Total
Common Stockhold
Stock Accumulat ers'
ed
Shares Amount Deficit Equity
<S> <C> <C> <C> <C>
Balances - March 31, 3,062,83 $6,630, $(4,913, $1,716,
1994 6 798 996) 802
Issuance of common stock
for services 10,000 2,200 - 2,200
Net income for the year - - 277,388 277,388
Balances - March 31, 3,072,83 6,632,9 (4,636,6 1,996,3
1995 6 98 08) 90
Net (loss) for the year - - (704,575 (704,57
) 5)
Balance - March 31, 3,072,83 $6,632, $(5,341, $1,291,
1996 6 998 183) 815
Consolidated Statements of Cash Flows
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities
Net (loss) income $ $277,388
(704,575
)
Adjustments to reconcile net (loss)
income to net cash (used) provided by
operating activities -
Gain on sale of real estate (460,445
- )
Loss on abandonment of undeveloped oil
and gas properties 11,993
-
Depreciation 6,646
18,329
Write-off of note receivable -
600,000
Stock issued for services 2,200
-
Deferred taxes 75,000
-
Change in assets and liabilities -
Proceeds from sale of real estate 788,000
held for sale -
Purchase of and improvements in real
estate held for sale (21,486)
-
Receivables 1,303
(366)
Accounts payable (41,052)
28,514
Deposits, deferred revenue and 2,196
other (4,661)
364,355
641,816
Net cash (used) provided by 641,743
operating activities (62,759)
Cash flows from investing activities
Redemption (purchase) of certificates of (825,913
deposit 1,018,91 )
3
Purchases of office furniture and (24,590)
equipment (4,534)
(Advances) payments on notes receivable 70,000
(600,000
)
Investment in limited liability company (1,800)
(726,287
)
Net cash used by investing (782,303
activities (311,908 )
)
Net decrease in cash and temporary cash (140,560
investments (374,667 )
)
Cash and temporary cash investments, 556,614
beginning of year 416,054
Cash and temporary cash investments, end $ $416,054
of year 41,387
Supplemental disclosure of cash flow
information
Cash paid during the year for income taxes was $0 in 1996 and $5,200 in 1995.
Supplemental disclosure of non-cash operating, investing and
financing activities
In fiscal year 1995, the Company sold real estate held for sale
for cash of $788,000 and a note receivable of $500,000.
Note 1 - Nature of Business and Summary of Significant Accounting
Policies
Nature of Business and Management's Plans
Eagle Exploration Company's primary operations include the purchase
and development of residential real estate. The Company's primary
operations previously included engaging in oil and gas exploration
and production activities, acquiring whole or partial interests in
oil and gas leases, and farming out or reselling all or part of its
interest in these leases to other companies in the oil and gas
industry. As discussed in Note 3, the Company sold all land held for
sale during the year ended March 31, 1995. Currently, the Company has
no plans to acquire additional land for development and sale but is
investigating various financial acquisitions or business
opportunities.
Principles of Consolidation
The consolidated financial statements include the accounts of Eagle
Exploration Company and its wholly owned subsidiaries (hereinafter
the Company) after elimination of all significant intercompany
accounts and transactions. The following is a listing of the wholly
owned subsidiaries of Eagle Exploration Company, Colorado Eagle
Exploration Company, Emsen Energy, Inc., Eagle Development Company
and Overland Energy, Inc.
Use of Estimates
The preparation of consolidated 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 consolidated financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
The effect of exchange rate changes on cash flows is not material.
Property and Equipment
Property and equipment are recorded at cost. The Company depreciates
its office furniture and equipment over an estimated useful life of
five years using straight-line and accelerated methods.
Investment in Limited Liability Company
The Company accounts for its 40 percent investment in a limited
liability company using the equity method of accounting.
Note 1 - Nature of Business and Summary of Significant Accounting
Policies (continued)
(Loss) Income Per Share
(Loss) income per common share is computed based on the weighted
average number of shares outstanding during each year.
Income Taxes
The Company calculates and records the amount of taxes payable or
refundable currently or in the future years for temporary differences
between the consolidated financial statement basis and income tax
based on the current enacted tax laws.
Statement of Cash Flows
For purposes of reporting cash and temporary cash investments (cash
equivalents) for cash flow purposes, cash equivalents consist of
money market funds and certificates of deposit with original
maturities of 90 days or less.
Accounting Standards Not Yet Adopted
Statement of Financial Accounting Standards No. 121 - Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of is effective for fiscal years beginning after December
15, 1995. This Statement establishes standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed of.
Statement of Financial Accounting Standards No. 123 - Accounting for
Stock-Based Compensation is effective for transactions entered into
after December 15, 1995. This Statement establishes financial
accounting and reporting standards for stock-based employee
compensation plans, including stock purchase plans, stock options,
restricted stock and stock appreciation rights.
Management believes the adoption of these standards will not have a
material impact on the consolidated financial statements.
Note 2 - Note Receivable
The note receivable consists of a $500,000 note from a third party
developer, interest at 9% due monthly, unpaid interest and principal
were due September 2, 1995. The note is collateralized by a first
deed of trust on real estate. On September 2, 1995 the note
receivable was in default and as stated in the note accrued interest
at 16%. The original $500,000 principal balance was outstanding at
March 31, 1996 and 1995 and was paid in full subsequent to March 31,
1996.
Note 2 - Note Receivable (continued)
In July, 1995, the Company advanced $600,000 to a third party in the
form of a note receivable. The note bore interest at 45% and was
collateralized by 180,000 shares of stock of a small cap NASDAQ
company. The holder defaulted on the note and the Company exerted
its rights to the collateral, for which it was later discovered, was
allegedly illegally obtained. On February 2, 1996, the Company
obtained a judgment against the holder for the principal balance plus
interest for a total amount of $757,794 and an additional $1.2
million under the Colorado conversion of property statute. The
Company has written-off the note balance and has not accrued the
balance of the judgments.
Note 3 - Land Held for Sale
During the year ended March 31, 1995, the Company sold all of its
interest in land with a cost of $827,555 for $1,288,000.
Note 4 - Income Taxes
The provision for income taxes consists of the following:
</TABLE>
<TABLE>
<CAPTION>
March
31,
1996 1995
<S> <C> <C>
Current provision $ - $ -
Deferred provision - 75,000
$ - $75,000
</TABLE>
Reconciliations between the statutory federal income tax expense
(benefit) rate as a percentage of income (loss) before income taxes
is as follows:
<TABLE>
<CAPTION>
March
31,
1996 1995
<S> <C> <C>
Statutory federal income tax expense rate 34% 34%
Federal net operating losses utilized (34%) (34%)
Effective income tax expense - -
</TABLE>
Note 4 - Income Taxes (continued)
At March 31, 1996, the Company has net operating loss carryforwards
for federal and state income tax purposes as follows:
<TABLE>
<CAPTION>
Federal Year
Net
Operating of
Losses Expiration
<S> <C>
$1,040,00 2000
0
1,482,000 2001
1,162,000 2002
426,000 2003
464,000 2004
1,000 2005
33,000 2006
- 2007
$4,608,00
0
</TABLE>
In the years prior to fiscal year 1995, the Company had significant
land held for sale and contracts to sell the land at guaranteed
profit levels. At March 31, 1995, the Company had sold all land held
for sale and currently has no plans to purchase and develop
additional land for resale. There is uncertainty as to whether the
Company will generate sufficient revenues in the future to utilize
the net operating loss carryforwards and therefore the deferred tax
asset resulting from the net operating loss carryforwards has been
fully impaired, although, overall the impairment of deferred tax
assets decreased approximately $8,000 during the year ended March 31,
1996 due to the utilization of net operating loss carryforwards:
Note 5 - Investment in Limited Liability Company
In May 1995, the Company acquired a 40 percent interest in a limited
liability company (LLC) for $851,287. The agreement between the
Company and seller included an option for the seller to repurchase
the Company's investment for $976,287, through September 26, 1995.
On September 26, 1995 the option was extended until October 26, 1995
for which the Company received a $125,000 extension fee, which is
recorded as a reduction of the Company's investment in the
accompanying consolidated financial statements. The option
subsequently expired and on January 25, 1996, the seller filed an
action against the Company challenging the nature of the original
sales transaction. Subsequent to March 31, 1996, the lawsuit was
dismissed.
Note 5 - Investment in Limited Liability Company (continued)
The audited financial statements for the LLC as required by generally
accepted accounting principles were not available due to the above
litigation. As a result, the Company has not recorded its share of
income or loss of the LLC and summarized the balance sheet and
statement of operations of the LLC are not presented.
ASSIGNMENT
OF
MEMBERSHIP INTEREST
THIS ASSIGNMENT is made this 26th day of May, 1995, by and
between TERRENCE J. O'CONNOR as the "Assignor" and EAGLE DEVELOPMENT
COMPANY, a Colorado corporation, as the "Assignee."
RECITALS AND DEFINITIONS
Assignor is the owner of 80 Units, representing an 80%
Percentage Interest in Eagle's Landing, LLC, a limited liability
company formed and existing under the laws of the State of Colorado
(the "Company").
Assignor desires to sell and Assignee desires to purchase one-
half of Assignor's interest in the Company, being 40 Units
representing a 40% Percentage Interest in the Company (the "Units").
ASSIGNMENT
For and in consideration of the sum of $851,287.86, paid by
Assignee to Assignor at the time of the execution of this
Assignment, Assignor does hereby transfer and assign unto Assignee,
its successors and assigns, forever, the Units and all right, title
and interest of the Assignor in the Units and all proceeds,
entitlements, distributions and attributes appurtenant thereto.
Assignor represents and warrants to Assignee that he has full
right, power and authority to make this assignment and that he is
the sole legal and beneficial owner of the Units herein transferred
and that the Units are free and clear of all liens, encumbrances,
pledges or other hypothecation by Assignor.
Assignee understands and agrees that he shall be bound by and
shall have and enjoy all of the rights and benefits under all of the
terms and provisions of the Articles of Organization and the
Operating Agreement of the Company.
Assignor agrees to and with Assignee that neither Assignee nor
the Units nor the economic interest under the Units shall bear any
obligation to pay Richard C. McKay any amount due him pursuant to an
Assignment of Interest in Net Operating Cash Flow and Net Profits
From Sale dated May 23, 1994, and Assignor hereby indemnifies and
agrees to hold Assignee harmless from and against any economic foes
or diminution in profits, losses and distributions attributable to
the Units as a result of payments due Richard C. McKay under said
Agreement.
Assignor agrees to pay any and all capital calls or assessments
levied by the company and payable during the term of that option to
Purchase of even date herewith between the parties to this
Assignment.
IN WITNESS WHEREOF, the parties have executed this Assignment
as of the day and year first above written.
ASSIGNOR: ASSIGNEE:
EAGLE DEVELOPMENT COMPANY,
a Colorado corporation,
/s/ Paul M. Joeckel, President
Terrence J. O'Connor Paul M. Joeckel, President
OPERATING AGREEMENT
OF
EAGLE'S LANDING LLC
THIS OPERATING AGREEMENT ("Agreement") is made and entered into
as of the 25TH day of May, 1993, by and between TERRENCE J.
O'CONNOR, an individual resident of the State of Colorado,
("O'Connor"), JEFFREY M. CLINE, an individual resident of the State
of Colorado, ("Cline") and CMC LAND GROUP, LLC, a Colorado limited
liability company ("CMC").
W I T N E S S E T H:
WHEREAS, Eagle's Landing LLC, a Colorado limited liability
company ("Company"), was formed as a Colorado limited liability
company pursuant to the Colorado Limited Liability Company Act,
C.R.S. 70-80-101, et seq. ("Act") on May 25, 1994, the date on
which executed Articles of Organization for the Company ("Articles")
were filed with the Secretary of State of the State of Colorado; and
WHEREAS, O'Connor, Cline and CMC, the sole Members (defined
below) of the Company, desire to establish their agreements
regarding the operation and management of the Company, and such
other matters as are set forth below.
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, O'Connor,
Cline and CMC hereby agree as follows:
ARTICLE I
FORMATION
A. NAME. The name of this organization is EAGLE'S LANDING LLC.
B. PURPOSE. The purpose of the Company is to acquire, own,
manage, lease, operate, hold and utilize real property and personal
property.
ARTICLE II
DEFINITIONS
The following terms shall have the following meanings when used
herein, unless the context otherwise requires:
1. PROPERTY. "Property" shall mean that real property more
particularly described on Exhibit A attached hereto and incorporated
herein, together with all improvements thereon and all other
appurtenances "hereunto belonging, including all personal property
utilized in the Company's operations.
2. UNIT. "Unit" shall mean a one percent (1%) ownership
interest in the Company.
3. MEMBER. "Member" shall mean each person or entity identified
in Exhibit B attached hereto who owns an interest in the Company.
Exhibit B shall be modified and amended as shall be required from
time to time to accurately reflect the names and addresses of all
current Members of the Company.
4. MANAGER OR MANAGERS. "Manger" or "Managers" means that
person or those persons who are from time to time chosen by the
Company to operate and perform the day-by-day operations of the
Company. All references to Manager herein shall be deemed to include
the plural as applicable.
5. EXPENSES. "Expenses" mean utilities, taxes, maintenance,
repair, operation, management, administration and other costs
declared by the Manager to be expenses of the Company and items for
which sums are lawfully assessed by the Company.
ARTICLE III
INTEREST IN THE COMPANY
Each Member of the Company is identified in Exhibit B attached
hereto. The percentage interest that each Member owns in the Company
is that percentage interest identified in Exhibit B.
ARTICLE IV
THE COMPANY
A. MEMBERSHIP. Each person or entity named in Exhibit B is a
Member of the Company. Membership in the Company may be transferred
to a transferee if previously approved as hereinafter provided.
B. VOTING. The Company shall have one (1) class of voting
membership. Each Member shall be entitled to one (1) vote for each
Unit owned. If any Unit is owned by multiple parties, all such
parties shall be Members; provided, however, the vote for such Unit
to which such membership is entitled shall be exercised as the
several Members amongst themselves shall determine, but in no event
shall more than one (1) vote be case with respect to each Unit.
Voting may be by proxy, if the proxy is delivered in writing to the
Manager at or before any meeting.
C. BORROWING. The Company shall have the right to borrow up to
$9,200,000 from Key Bank of Wyoming for the purpose of constructing
improvements upon the Property. Other than the borrowing mentioned
in the preceding sentence, the Company shall have the right to
borrow for other purposes only with the prior written approval of
the Members owning not less than ninety percent (90%) of the Units.
D. RULES AND REGULATIONS. The Company may promulgate and, from
time to time, supplement and amend reasonable rules and regulations
governing the use of the Property, which rules and regulations shall
be consistent with the rights and duties established in this
Agreement.
E. EXERCISE OF POWERS. The Company may exercise any right or
privilege given it expressly by this Agreement and every other
right, privilege and power reasonably implied from the existence of
the Company or from any right or privilege or reasonably necessary
to effectuate its functions and purposes. Actions for which voting
is required shall be taken by majority vote except when a greater
percentage of votes cast is required by this Agreement.
ARTICLE V
CAPITAL CONTRIBUTIONS, ACCOUNTS AND ASSESSMENTS
A. INITIAL CAPITAL CONTRIBUTIONS. Each Member shall contribute
such amount as is set forth in Exhibit B hereto as its share of the
initial capital contribution to the Company. The members agree that
the real property comprising the initial capital contribution of CMC
has a fair market value of $600,000.00.
B. RIGHT OF COMPANY. The Company shall have the right to levy
and make assessments against O'Connor, but not against Cline or CMC,
in accordance with this Agreement for the purpose of paying the
Expenses of the Company.
C. PAYMENT OF ASSESSMENTS O'Connor shall pay to the Company
such assessments as may be periodically levied by the Manager of the
Company for the purposes authorized in this Agreement.
D. APPORTIONMENT OF ASSESSMENTS. All assessments shall be made
among the Members who are subject to assessment, in proportion to
the percentage of the Units owned by each such Member.
E. CAPITAL ASSESSMENTS. The Company may levy special
assessments for the purpose of defraying, in whole or in part, the
cost of any construction, reconstruction or replacement of a capital
improvement upon the Property with the prior written approval of the
Members owning not less than fifty-one percent (51%) of the Units.
All such special assessments shall be made among the Members in
proportion to the number of Units owned by each Member.
F. CAPITAL ACCOUNTS. A separate capital account shall be
maintained for each Member in compliance with the requirements of
Section 704(b) of the Internal Revenue Code of 1986, as amended, and
Treasury Regulation 1.704-l(b)(2)(iv), all as interpreted and
applied by the Manager. Upon liquidation of the Company (or any
Member's interest therein), liquidating distributions shall be made
in accordance with the positive capital account balances of the
Members, as determined after taking into account all capital account
adjustments for the Company's taxable year during which the
liquidation occurs. If a Member has a deficit balance in his capital
account following the liquidation of his interest in the Company, as
determined after taking into account adjustments for the Company's
taxable year during which the liquidation occurs, such Member shall
restore the amount of such deficit balance to the Company by the end
of such taxable year (or, if later, within ninety (90) days after
the date of such liquidation).
G. INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS. No Member
shall be entitled to interest on its capital contributions to the
Company or to a return thereof, except as otherwise explicitly
provided for herein.
ARTICLE VI
MEETINGS
An annual meeting of all Members of the Company shall be held
between the dates of January 1 and June 1 upon notice first being
given to all Members at least thirty (30) days prior to such
meeting. At such annual meeting the Members shall elect a Manager to
serve for the ensuing year, establish assessments for the ensuing
year and act upon any and all other matters brought before such
meeting. Special meetings may be called by the Manager of his own
volition or upon petition by the owners of fifteen percent (15%) of
the Units. Only matters stated in the call of such special meeting
shall be considered at such meeting. Notices of special meeting
shall be given no less than thirty (30) days prior to the date
thereof. All meetings shall be held at the registered office of the
Company or such other location as shall be specified in the call of
the meeting, provided the same is located within the County of
Boulder, Colorado.
ARTICLE VII
USE OF PROPERTY
The business of the Company shall be as from time to time
determined by the Company. A definitive statement of the Company's
business by the Members shall be adopted at the organizational
meeting of the Company, which statement shall remain in effect until
amended by the Company at any annual or special meeting of the
Company. All changes or amendments to such statement shall forthwith
be delivered to all Members by the Company.
ARTICLE VIII
TRANSFER OF MEMBERSHIP
For so long as CMC is a Member of the Company, no Member shall
sell, transfer or otherwise dispose of their interest in the Company
without the prior written consent of CMC, which consent shall not be
unreasonably withheld; provided, however, that upon the death of
O'Connor or Cline, their interest in the Company may be bequeathed
or devised to an heir or devisee without such consent. At such time
as CMC is no longer a Member in the Company, any individual Member
may at any time sell, convey or devise his interest in the Company
to a member of his immediate family, and any Member may also at any
time sell, convey or devise his or its interest in the Company to
any other person or entity who is currently a Member of the Company,
provided that such conveyance shall be subject to the terms of this
Agreement other than the right of first refusal described below. In
the event any Member desires to sell or convey his interest to any
entity or person not a Member of the Company and not a member of his
immediate family, he shall first offer to sell and convey his
interest to all other Members upon the same terms and conditions as
he desires to sell to such outside party. Thereupon, the other
Members shall have the right and privilege to purchase the interest
so offered upon such terms and conditions at any time within sixty
(60) days after receiving notice in writing from the Member so
desiring to sell, upon the same terms and conditions as the proposed
sale to a third party. If such terms and conditions are not accepted
and complied with within such sixty (60) day period, such right to
purchase shall thereupon terminate. In any event, any sale to any
third person shall be subject to the terms and conditions of this
Agreement and the Articles of Organization of the Company.
Except as herein provided, no interest in the Company shall be
transferred by any Member without the prior written consent of all
other Members being first obtained. A "transfer of interest", as
used herein, shall mean any conveyance, assignment, lease,
hypothecation or any other diminution of the Member's full ownership
interest in the Company.
Notwithstanding anything contained herein to the contrary, no
transferee of a Member's interest in the Company shall be admitted
as a Member without the unanimous written consent of all Members.
ARTICLE IX
MANAGER OR MANAGERS
A. NUMBER AND QUALIFICATIONS. The affairs of the Company shall
be governed by not less than one (1) Manager nor more than three (3)
Managers. The person named in the Articles of Organization of the
Company shall act in such capacity and shall manage the affairs of
the Company until the first annual meeting of the Company and until
his successor is elected and qualified.
B. POWERS AND DUTIES. The Manager shall have the power and
duties necessary for the administration of the affairs of the
Company and for the operation and maintenance of the Property.
Except as provided in paragraph F of this Article, the Manager shall
receive no salary for his services.
C. OTHER POWERS AND DUTIES. The Manager shall be empowered and
shall have the following duties:
1. To administer and enforce the rules and regulations adopted
by the Company;
2. To oversee and cause to be performed such maintenance and
repair duties as is necessary to maintain the Property;
3. To insure and keep in force and in effect hazard and
liability insurance as hereinafter provided;
4. To submit to the Company an annual budget upon which to base
annual assessments;
5. To collect delinquent assessments by suit or otherwise;
6. To protect and defend the Property from loss and damage;
7. To borrow funds when authorized by the consent of the
Company and to execute all instruments evidencing such indebtedness
as is expressly authorized;
8. To enter into contracts within the scope of his duties and
powers;
9. To establish a bank account for the common treasury of the
Company and to pay all costs and expenses from such account;
10. To keep and maintain accurate books and records showing all
of the receipts, expenses or disbursements and to permit examination
thereof at any time by any Member;
11. To prepare and deliver annually to each Member a statement
showing, in at least summary form, all receipts, expenses or
disbursements since the last such statement;
12. To generally carry on the administration of the Company and
to do all things necessary or reasonable in order to carry out the
communal aspect of the ownership of the Property.
D. ELECTION AND TERM OF MANAGER. At the first annual meeting of
the Company, the Manager shall be elected for a term which will
expire on the succeeding annual meeting of the Company. At each
annual meeting thereafter, the Manager shall be elected for a term
of one (1) year and such Manager shall serve until his successor has
been elected.
E. INITIAL MANAGER. The initial Manager shall be O'Connor, who
shall function in such capacity until his successor(s) qualifies and
assumes office.
F. VACANCIES. In the event there is more than one (1) Manager
and one (1) Manager resigns or ceases to act as such Manager, the
remaining Manager shall carry out the duties of Manager until the
next annual meeting of the Company. In the event of the death or
incapacity of Terrence J. O'Connor prior to January 10, 1996, CMC
shall have the right to participate in the management of the Project
and shall receive a fee of $5,000.00 per month (prorated for any
fractional month) from the time of such death or incapacity until
January 10, 1996.
G. REMOVAL OF MANAGER. At any annual meeting of the Company or
at any special meeting called for that purpose, any Manager may be
removed with or without cause by a majority of the Unit owners. A
successor shall then be elected to fill the vacancy.
H. TAX MATTERS PARTNER. Members owning a majority of the Units
may appoint a Manager at any annual meeting of the Company to serve
as the Tax Matters Partner of the Company. The initial Tax Matters
Partner shall be O'Connor.
ARTICLE X
INSURANCE
The Company shall purchase and maintain: (i) a policy of
comprehensive public liability insurance insuring the Company
against any liability arising out of ownership, use, occupancy,
maintenance or construction of the Project or Project Land, in an
amount of not less that $1,000,000 for injury or death of one person
and $5,000,000 for more than one person plus property damage of not
less than $100,000; and (ii) hazard insurance upon all improvements
on the Property and liability insurance upon the operation of the
Property. The amounts and type of coverage shall be as from time to
time determined by the Company at its annual meeting. Any portion of
the Property damaged by casualty shall be reconstructed or repaired
from proceeds of such insurance. The Company, however, may elect to
utilize such proceeds for another purpose, provided that the same is
determined by the Company at an annual meeting or special meeting
called for that purpose, by a vote of the Members owning ninety
percent (90%) of the Units.
ARTICLE XI
ALLOCATIONS, DISTRIBUTIONS, AND ACCOUNTING MATTERS
1. ALLOCATIONS AND DISTRIBUTIONS. Subject to the requirements
of Section 704(c) of the Code, all Company profits, losses and
credits shall be allocated among the Members in proportion to the
number of Units owned by each; provided, however, to the extent not
prohibited by provisions of the Internal Revenue Code or applicable
regulations, when making proportionate allocations of profits among
the Members, items of long-term capital gains shall be allocated
first to CMC to the extent necessary or available to achieve
proportionate allocation of profits to CMC. From time to time, the
Manager shall estimate the funds necessary to accomplish the
Company's purposes as determined at periodic meetings of Members. If
a surplus is available, the Manager shall effect a distribution to
the Members in proportion to the number of Units owned by each. The
Manager shall distribute at least annually, no less cash than may be
required to pay the amount of income tax liability of each Member,
or in the case of CMC from the members of CMC, on the taxable income
distributed by the Company, calculated at the highest effective tax
rate of any Member or any member of CMC.
2. ACCOUNTING MATTERS. The profits and losses of the Company
shall be determined in accordance with accounting principles applied
on a consistent basis using the cash method of accounting. The
Company's accounting period shall be the calendar year.
ARTICLE XII
DISSOLUTION AND TERMINATION
1. DISSOLUTION.
The Company shall be dissolved upon the occurrence of any
of the following events:
(1) when the period fixed for the duration of the Company
shall expire pursuant to the Articles;
(2) by the unanimous written agreement of all Members; or
(3) upon the death, retirement, resignation, expulsion,
bankruptcy or dissolution of a Member or occurrence of any
other event which terminates the continued membership of a
Member in the Company (a "Withdrawal Event"), unless the
business of the Company is continued by the consent of all the
remaining Members within ninety (90) days after the Withdrawal
Event and there are at least two remaining Members. Each of the
Members hereby agrees that within the sixty (60) days after the
occurrence of a Withdrawal Event, he will promptly consent, in
writing, to continue the business of the Company.
2. WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS. Upon
dissolution, an accounting shall be made by the Company's
independent accountants of the accounts of the Company and of the
Company's assets, liabilities and operations, from the date of the
last previous accounting until the date of dissolution, and the
Manager shall:
(1) Sell or otherwise liquidate all of the Company's assets as
promptly as practicable (except to the extent the Manager may
determine to distribute any assets to the Members in kind),
(2) Allocate any profit or loss resulting from such sales to
the Members' capital accounts in accordance with Article XI hereof,
(3) Discharge all liabilities of the Company, including
liabilities to Members who are creditors, to the extent otherwise
permitted by law, other than liabilities to Members for
distributions, and establish such reserves as may be reasonably
necessary to provide for contingent liabilities of the Company (for
purposes of determining the capital accounts of the Members, the
amounts of such reserves shall be deemed to be an expense of the
Company),
(4) Distribute the remaining assets in the following order:
(i) If any assets of the Company are to be distributed in
kind, the net fair market value of such assets as of the date
of dissolution shall be determined by independent appraisal or
by agreement of the Members. Such assets shall be deemed to
have been sold as of the date of dissolution for their fair
market value, and the capital accounts of the Members shall be
adjusted to reflect such deemed sale.
(ii) The positive balance (if any) of each Member's
capital account (as determined after taking into account all
capital account adjustments for the Company's taxable year
during which the liquidation occurs) shall be distributed to
the Members, either in cash or in kind, as determined by the
Manager, with any assets distributed in kind being valued for
this purpose at their fair market value as determined
hereinabove. Any such distributions to the Members in respect
of their capital accounts shall be made in accordance with the
time requirements set forth in 704-l(b)(2)(ii)(b)(2) of the
Treasury Regulations.
ARTICLE XIII
RIGHT OF FIRST REFUSAL TO BUY PROJECT
If Eagle's Landing, at any time, proposes to transfer all or
any part of its interest in the Property, it shall give written
notice of such proposed transfer to CMC, naming the proposed
transferee and specifying the price and any and all of the other
terms, conditions and credits of the proposed transfer. For a period
of thirty (30) days after receipt of such notice, CMC shall have the
right by written notice to Eagle's Landing within such time period
to acquire the Property for equivalent terms, conditions and credits
of the proposed sale or transfer. Closing shall occur at the time
and place and upon the terms' conditions and credits described in
the original notice from Eagle's Landing to CMC. This right of first
refusal shall terminate at such time as CMC no longer is a Member of
the Company. Any transfer of the Project Land or Project without
compliance with the provisions of this right of first refusal shall
be void and of no force and effect.
ARTICLE XIV
MISCELLANEOUS
1. REVOCATION OR AMENDMENT. This Agreement shall not be revoked
or amended unless the Members owning ninety percent (90%) of the
Units consent and agree to such revocation or amendment by written
instrument.
2. DURATION. This Agreement shall continue in full force and
effect until amended, revoked or terminated as provided by law.
3. ENFORCEMENT. Upon the failure of any Member to comply with
the provisions of this Agreement, the Company may proceed against
the Member for the recovery of damages or for injunctive relief, or
both. Failure by the Company to enforce such rights shall in no
event be deemed a waiver of the right to do so in the future.
4. INDEMNIFICATION OF MANAGER. The Company shall indemnify the
Manager and make advances for expenses to the full extent permitted
by 7-80-410 of the Act.
5. NOTICES. Any notice, demand, or communication required or
permitted to be given by any provision of this Agreement shall be
deemed to have been sufficiently given or served for all purposes if
delivered personally to the party to whom the same is directed or,
if sent by registered or certified mail, postage and charges
prepaid, addressed to the Member's address, as appropriate, which is
set forth in Exhibit B hereto. Except as otherwise provided herein,
any such notice shall be deemed to be given three (3) business days
after the date on which the same was deposited in a regularly
maintained receptacle for the deposit of United States mail,
addressed and sent as aforesaid.
6. APPLICATION OF COLORADO LAW. This Agreement, and the
application and interpretation hereof, shall be governed exclusively
by its terms and by the laws of the State of Colorado, and
specifically the Act.
7. WAIVER OF ACTION FOR PARTITION. Each Member irrevocably
waives during the term of the Company any right that it may have to
maintain any action for partition with respect to the property of
the Company.
8. CONSTRUCTION. Whenever the singular number is used in this
Agreement and when required by the context, the same shall include
the plural and vice versa, and the masculine gender shall include
the feminine and neuter genders and vice versa.
9. HEADINGS. The headings in this Agreement are inserted for
convenience only and are in no way intended to describe, interpret,
define, or limit the scope, extent or intent of this Agreement or
any provision hereof.
10. WAIVERS. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any
covenant or condition of this agreement shall not prevent a
subsequent act, which would have originally constituted a violation,
from having the effect of an original violation.
11. RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies
provided by this Agreement are cumulative and the use of any one
right or remedy by any party shall not preclude or waive the right
to use any or all other remedies. Said rights and remedies are given
in addition to any other rights the parties may have by law,
statute, ordinance or otherwise.
12. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid,
illegal or unenforceable to any extent, the remainder of this
Agreement and the application thereof shall not be affected and
shall be enforceable to the fullest extent permitted by law.
13. HEIRS SUCCESSORS AND ASSIGNS. Each and all of the
covenants, terms, provisions and agreements herein contained shall
be binding upon and inure to the benefit of the parties hereto and,
to the extent permitted by this Agreement, their respective heirs,
legal representatives, successors and assigns.
14. CREDITORS. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any creditors of the
Company.
15. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same instrument.
DATE:_________________ /s/ Terrence J. O'Connor
Terrence J. O'Connor
1600 38th Street, Suite 203
Boulder, CO 80301
DATE:_________________ /s/ Jeffrey M. Cline
Jeffrey M. Cline
1600 38th Street, Suite 203
Boulder, CO 80301
DATE:__________________ CMC LAND GROUP, LLC
a Colorado Limited Liability Company
By:/s/ Jeffrey M. Cline. Manager
Jeffrey M. Cline, Manager
By:/s/ Barbara Evans, Manager
Barbara Evans, Manager
