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Eron Lenders
Project Name: Maxim Resorts Ltd. ("Maxim")
Lender update
February 10, 2000
Further to our letter of December 18, 1997 we are writing to update you on the status of the above noted project.
Current Status
Maxim Resorts Ltd. owns 100% of the shares of Maxim Resources Ltd. (USA) ("Maxim USA") a company incorporated in Washington State.
The assets acquired by Maxim and Maxim USA consisted of an interest in three oil and gas producing properties in California, and one in Texas, a time-share in Whistler, and a condominium in Kona, Hawaii. In addition, Maxim USA made a US$300,000 non-refundable deposit for an uncompleted purchase of an oil and gas property in Louisiana.
During 1998, the cash flow from the oil and gas interests steadily declined as oil prices fell and production facilities deteriorated due to a lack of capital funds. At a meeting of the Lenders in September 1998, they agreed the Judicial Trustee should sell the properties immediately and wind Maxim up. In December 1998, Maxim USA's interest in the Rosedale and Bellevue field in California was sold for US$50,000. An agreement was tentatively reached in early 1999 to sell the Edison and Portals field in California for US$85,000. Following the buyer's due diligence period, it was found that two wells showed signs of severe hydrocarbon contamination. As a result, the buyer reduced his offer price to US$10,000, which was declined. Another buyer was located and in May 1999 a sale of the Edison and Portals field was finalised at US$45,000 plus the buyer agreed to take over responsibility for the Helm field, a non-producing field in California. With the interest in the three fields in California disposed of, the Judicial Trustee made application to the Oil and Gas Division of the State of California for the return of a US$100,000 Blanket Bond. These funds were finally received late last month.
Sale of the Whistler time-share netted Cdn $6,600 after repaying an outstanding loan used for the purchase of the time-share. The value of the condominium in Kona, Hawaii based on an opinion of value was less than the amount of the outstanding mortgage on the unit. As a result, the Judicial Trustee agreed to allow the mortgage holder to foreclose on the property.
An effort was made to recover the US$300,000 deposit on the Louisiana field from the seller, EAMC, Inc. Default Judgement against EAMC, Inc. was obtained, but it was decided that the costs to enforce the judgement could be substantial with no assurance of any recovery. EAMC, Inc. owed the firm, who brokered the deal, funds and it was agreed that we would assign the judgement to this firm and let them pursue the principles with any recovery after legal costs to be shared equally. Although they are pursuing the judgement, we do not expect any recovery.
Maxim USA continues to own a 10% interest in the Brittani-Lost Prairie Joint Venture in Texas. This interest was deemed to have no value and Maxim USA had decided to quit claim their interest to Daystar, the Operator of the field. Before arrangements could be finalised, a majority of the remaining ownership group launched a law suite against Daystar to have them removed as operator citing questionable operating and reporting practices.
With the exception of the Lost Prairie Joint Venture interest, all other assets of Maxim and Maxim USA have been sold. The total of the funds received has not been sufficient to cover the direct costs associated with this project. There will no recovery of Lender funds from the project.
Lender Communications
We will continue to communicate directly with all lenders. However, we urge you to take advantage of the web site at http://www.eron-pwl.com for project specific updates as well as related court orders and other general information. The Eron Lenders Committee has set up an information line, which can be reached by dialling (604) 878-4484. If you need information on reclaiming tax paid on interest income in prior years, please call David Craig at (604) 713-6680.
Yours truly,
Judicial Trustee
Eron Lenders
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