<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1998
REGISTRATION NO. 333-41837
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
CLYDE COMPANIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
UTAH 3272 87-0260879
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) Classification code number) Identification No.)
</TABLE>
1423 DEVONSHIRE DRIVE
SALT LAKE CITY, UTAH 84108
(801) 582-2783
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
------------------------------
CAROL C. SALISBURY
1423 DEVONSHIRE DRIVE
SALT LAKE CITY, UTAH 84108
(801) 582-2783
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
WITH COPY TO:
ARTHUR B. RALPH, ESQ.
VAN COTT, BAGLEY, CORNWALL & MCCARTHY
50 SOUTH MAIN STREET, SUITE 1600
SALT LAKE CITY, UTAH 84144
(801) 532-3333
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: At the effective time of the proposed merger of wholly-owned
subsidiaries of Clyde Companies, Inc. ("CCI") with and into W.W. Clyde & Co.
("Clyde"), Geneva Rock Products, Inc. ("Geneva Rock"), Utah Service, Inc. ("Utah
Service") and Beehive Insurance Agency, Inc. ("Beehive Insurance"), in
accordance with the Amended and Restated Agreement and Plan of Merger, dated as
of November 13, 1997, attached as Annex A to the Proxy Statement/Prospectus
forming a part of this Registration Statement, which shall occur as promptly as
practicable after this Registration Statement becomes effective and the
shareholders of each of CCI, Clyde, Geneva Rock, Utah Service and Beehive
Insurance have approved the merger.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------------
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------- --------------------- ------------------- ------------------------- ----------------
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered(1) offering price aggregate offering registration
per share(2) price(2) fee (2)
- -------------------------------- --------------------- ------------------- ------------------------- ----------------
<S> <C> <C> <C> <C>
Common Stock, no par value 4,634,789 shares $14.52 $67,297,137 $22,832
- -------------------------------- --------------------- ------------------- ------------------------- ----------------
</TABLE>
(1) Represents the estimated maximum number of shares of common stock, no par
value, of CCI issuable in connection with the merger, based upon an assumed
exchange ratio of (a) 33.93 shares for each outstanding share of common
stock, par value $10 per share, of Clyde, (b) 239.27 shares for each
outstanding share of common stock, par value $10 per share, of Geneva Rock,
(c) 43.43 shares for each outstanding share of common stock, par value $10
per share, of Utah Service, and (e) 4.33 shares for each outstanding share
of common stock, par value $1 per share, of Beehive Insurance.
(2) Estimated pursuant to Rule 457(f) under the Securities Act of 1933, as
amended, based on the book value of the merging companies.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME FURTHER EFFECTIVE IN ACCORDANCE WITH SECTION
8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
<PAGE> 3
CLYDE COMPANIES, INC.
W.W. CLYDE & CO.
GENEVA ROCK PRODUCTS, INC.
UTAH SERVICE, INC.
BEEHIVE INSURANCE AGENCY, INC.
May 8, 1998
Dear Shareholder:
Enclosed you will find proxy materials (Notice of Special Meeting of
Shareholders, letter to shareholders, Proxy Statement/Prospectus, and proxy
card) relating to the Special Meetings of Shareholders of Clyde Companies, Inc.
("CCI"), W.W. Clyde & Co. ("Clyde"), Geneva Rock Products, Inc. ("Geneva Rock"),
Utah Service, Inc. ("Utah Service"), and Beehive Insurance Agency, Inc.
("Beehive Insurance"). For your convenience, we have color coded the proxy cards
as follows:
CCI [white]
Clyde [green]
Geneva Rock [blue]
Utah Service [red]
Beehive Insurance [yellow]
IF YOU OWN SHARES OF MORE THAN ONE OF THESE COMPANIES, YOU WILL RECEIVE MORE
THAN ONE PROXY CARD. IT IS VERY IMPORTANT THAT YOU COMPLETE AND RETURN A
SEPARATE PROXY CARD FOR EACH COMPANY IN WHICH YOU OWN SHARES.
Sincerely,
- -------------------------- ----------------------------
Carol C. Salisbury, President Richard C. Clyde, President and General Manager
Clyde Companies, Inc. W.W. Clyde & Co.
- -------------------------- ----------------------------
Wilford W. Clyde, President David O. Cook, President
Geneva Rock Products, Inc. Utah Service, Inc.
- --------------------------
W. Douglas Snow, President
Beehive Insurance Agency, Inc.
Enclosures
<PAGE> 4
CLYDE COMPANIES, INC.
W.W. CLYDE & CO.
GENEVA ROCK PRODUCTS, INC.
UTAH SERVICE, INC.
BEEHIVE INSURANCE AGENCY, INC.
May 8, 1998
Dear Shareholder:
Special Meetings of Shareholders (each a "Special Meeting") of each of Clyde
Companies, Inc. ("CCI"), W.W. Clyde & Co. ("Clyde"), Geneva Rock Products, Inc.
("Geneva Rock"), Utah Service, Inc. ("Utah Service") and Beehive Insurance
Agency, Inc. ("Beehive Insurance") will be held at the places and times set
forth in the accompanying Notices of Special Meeting of Shareholders for your
respective company.
At your respective Special Meeting, you will be asked to consider and vote upon
a proposal to approve an Amended and Restated Agreement and Plan of Merger dated
as of November 13, 1997 (the "Merger Agreement") providing for the merger
("Merger") of wholly owned subsidiaries of CCI with Clyde, Geneva Rock, Utah
Service and Beehive Insurance, each of which will become wholly owned
subsidiaries of CCI. Upon the effective date of the Merger, each issued and
outstanding share of common stock of Clyde, Geneva Rock, Utah Service and
Beehive Insurance will be converted into, respectively, 33.93, 239.27, 43.43 and
4.33 shares of common stock, no par value, of CCI.
The Board of Directors of CCI, Clyde, Geneva Rock, Utah Service and Beehive
Insurance each has unanimously approved the Merger Agreement and the
transactions contemplated thereby, and has determined that it is in the best
interests of their respective shareholders. Your Board of Directors unanimously
recommends that shareholders vote to approve the Merger Agreement.
In the materials accompanying this letter, you will find a Notice of Special
Meeting of Shareholders, a Proxy Statement/Prospectus relating to the actions to
be taken by you at the Special Meeting and a proxy card. The Proxy
Statement/Prospectus more fully describes the proposed Merger.
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE SPECIAL MEETING IN PERSON. HOWEVER,
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE SPECIAL
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN THOUGH YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED
AT THE SPECIAL MEETING.
Sincerely,
- -------------------------- ----------------------------
Carol C. Salisbury, President Richard C. Clyde, President and General Manager
Clyde Companies, Inc. W.W. Clyde & Co.
- -------------------------- ----------------------------
Wilford W. Clyde, President David O. Cook, President
Geneva Rock Products, Inc. Utah Service, Inc.
- --------------------------
W. Douglas Snow, President
Beehive Insurance Agency, Inc.
<PAGE> 5
CLYDE COMPANIES, INC.
1423 DEVONSHIRE DRIVE
SALT LAKE CITY, UTAH 84108
(801) 582-2783
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 19, 1998
Notice is hereby given that a Special Meeting of Shareholders of Clyde
Companies, Inc. ("CCI") will be held on Friday, June 19, 1998, at 11:30 a.m.,
local time, at 1565 West 400 North, Orem, Utah for the following purposes:
(1) To consider and vote upon a proposal to approve an Amended and
Restated Agreement and Plan of Merger dated as of November 13, 1997
(the "Merger Agreement") providing for the merger ("Merger") of wholly
owned subsidiaries of CCI with W.W. Clyde & Co. ("Clyde"), Geneva Rock
Products, Inc. ("Geneva Rock"), Utah Service, Inc. ("Utah Service") and
Beehive Insurance Agency, Inc. ("Beehive Insurance"), each of which
will become wholly owned subsidiaries of CCI. Upon the effective date
of the Merger, each issued and outstanding share of common stock of
Clyde, Geneva Rock, Utah Service and Beehive Insurance will be
converted into, respectively, 33.93, 239.27, 43.43 and 4.33 shares of
common stock, no par value, of CCI.
(2) To transact such other business that may properly come before the
Special Meeting or any postponements or adjournments thereof.
Only shareholders of record at the close of business on April 24, 1998 are
entitled to notice of and to vote at the Special Meeting, or at any
postponements or adjournments thereof.
A complete list of shareholders entitled to vote at the Special Meeting will be
available for examination at CCI's principal executive offices, for any purposes
germane to the Special Meeting, during ordinary business hours, for a period of
at least 10 days prior to the Special Meeting.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES OF COMMON STOCK OF CCI
THAT YOU OWN. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT WITHOUT DELAY IN
THE ENCLOSED ENVELOPE, WHICH REQUIRES NO ADDITIONAL POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY THEN WITHDRAW YOUR
PROXY AND VOTE IN PERSON. YOUR PROXY CAN BE WITHDRAWN BY YOU AT ANY TIME BEFORE
IT IS VOTED.
May 8, 1998
BY ORDER OF THE BOARD OF DIRECTORS,
Carol C. Salisbury, Director and President
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
<PAGE> 6
W.W. CLYDE & CO.
1375 NORTH MAIN STREET
SPRINGVILLE, UTAH 84663
(801) 489-5616
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 19, 1998
Notice is hereby given that a Special Meeting of Shareholders of W.W. Clyde &
Co. ("Clyde") will be held on Friday, June 19, 1998, at 8:00 a.m., local time,
at 1565 West 400 North, Orem, Utah for the following purposes:
(1) To consider and vote upon a proposal to approve an Amended and
Restated Agreement and Plan of Merger dated as of November 13, 1997
(the "Merger Agreement") providing for the merger ("Merger") of wholly
owned subsidiaries of Clyde Companies, Inc. ("CCI") with Clyde, Geneva
Rock Products, Inc. ("Geneva Rock"), Utah Service, Inc. ("Utah
Service") and Beehive Insurance Agency, Inc. ("Beehive Insurance"),
each of which will become wholly owned subsidiaries of CCI. Upon the
effective date of the Merger, each issued and outstanding share of
common stock of Clyde, Geneva Rock, Utah Service and Beehive Insurance
will be converted into, respectively, 33.93, 239.27, 43.43 and 4.33
shares of common stock, no par value, of CCI.
(2) To transact such other business that may properly come before the
Special Meeting or any postponements or adjournments thereof.
Only shareholders of record at the close of business on April 24, 1998 are
entitled to notice of and to vote at the Special Meeting, or at any
postponements or adjournments thereof. The affirmative vote of the holders of a
majority of the outstanding shares of common stock of Clyde is required for the
approval of the Merger.
Under the Utah Revised Business Corporation Act, shareholders of Clyde will have
the right to assert dissenters' rights in connection with the proposed Merger.
See "Dissenters' Rights" in the Proxy Statement/Prospectus accompanying this
notice.
A complete list of shareholders entitled to vote at the Special Meeting will be
available for examination at Clyde's principal executive offices, for any
purposes germane to the Special Meeting, during ordinary business hours, for a
period of at least 10 days prior to the Special Meeting.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES OF COMMON STOCK OF
CLYDE THAT YOU OWN. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN
PERSON, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT WITHOUT
DELAY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO ADDITIONAL POSTAGE IF MAILED
IN THE UNITED STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY THEN WITHDRAW
YOUR PROXY AND VOTE IN PERSON. YOUR PROXY CAN BE WITHDRAWN BY YOU AT ANY TIME
BEFORE IT IS VOTED.
May 8, 1998
BY ORDER OF THE BOARD OF DIRECTORS,
Richard C. Clyde, Director, President and General Manager
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
<PAGE> 7
GENEVA ROCK PRODUCTS, INC.
1565 WEST 400 NORTH
OREM, UTAH 84057
(801) 328-2700
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 19, 1998
Notice is hereby given that a Special Meeting of Shareholders of Geneva Rock
Products, Inc. ("Geneva Rock") will be held on Friday, June 19, 1998, at 9:30
a.m., local time, at 1565 West 400 North, Orem, Utah for the following purposes:
(1) To consider and vote upon a proposal to approve an Amended and
Restated Agreement and Plan of Merger dated as of November 13, 1997
(the "Merger Agreement") providing for the merger ("Merger") of wholly
owned subsidiaries of Clyde Companies, Inc. ("CCI") with W.W. Clyde &
Co. ("Clyde"), Geneva Rock, Utah Service, Inc. ("Utah Service") and
Beehive Insurance Agency, Inc. ("Beehive Insurance"), each of which
will become wholly owned subsidiaries of CCI. Upon the effective date
of the Merger, each issued and outstanding share of common stock of
Clyde, Geneva Rock, Utah Service and Beehive Insurance will be
converted into, respectively, 33.93, 239.27, 43.43 and 4.33 shares of
common stock, no par value, of CCI.
(2) To transact such other business that may properly come before the
Special Meeting or any postponements or adjournments thereof.
Only shareholders of record at the close of business on April 24, 1998 are
entitled to notice of and to vote at the Special Meeting, or at any
postponements or adjournments thereof. The affirmative vote of the holders of a
majority of the outstanding shares of common stock of Geneva Rock is required
for the approval of the Merger.
Under the Utah Revised Business Corporation Act, shareholders of Geneva Rock
will have the right to assert dissenters' rights in connection with the proposed
Merger. See "Dissenters' Rights" in the Proxy Statement/Prospectus accompanying
this notice.
A complete list of shareholders entitled to vote at the Special Meeting will be
available for examination at Geneva Rock's principal executive offices, for any
purposes germane to the Special Meeting, during ordinary business hours, for a
period of at least 10 days prior to the Special Meeting.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES OF COMMON STOCK OF
GENEVA ROCK THAT YOU OWN. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL
MEETING IN PERSON, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT WITHOUT DELAY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO ADDITIONAL POSTAGE
IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY THEN
WITHDRAW YOUR PROXY AND VOTE IN PERSON. YOUR PROXY CAN BE WITHDRAWN BY YOU AT
ANY TIME BEFORE IT IS VOTED.
May 8, 1998
BY ORDER OF THE BOARD OF DIRECTORS,
Wilford W. Clyde, Director and President
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
<PAGE> 8
UTAH SERVICE, INC.
35 EAST 400 SOUTH
SPRINGVILLE, UTAH 84663
(801) 322-2772
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 19, 1998
Notice is hereby given that a Special Meeting of Shareholders of Utah Service,
Inc. ("Utah Service") will be held on Friday, June 19, 1998, at 10:30 a.m.,
local time, at 1565 West 400 North, Orem, Utah for the following purposes:
(1) To consider and vote upon a proposal to approve an Amended and
Restated Agreement and Plan of Merger dated as of November 13, 1997
(the "Merger Agreement") providing for the merger ("Merger") of wholly
owned subsidiaries of Clyde Companies, Inc. ("CCI") with W.W. Clyde &
Co. ("Clyde"), Geneva Rock Products, Inc. ("Geneva Rock"), Utah Service
and Beehive Insurance Agency, Inc. ("Beehive Insurance"), each of which
will become wholly owned subsidiaries of CCI. Upon the effective date
of the Merger, each issued and outstanding share of common stock of
Clyde, Geneva Rock, Utah Service and Beehive Insurance will be
converted into, respectively, 33.93, 239.27, 43.43 and 4.33 shares of
common stock, no par value, of CCI.
(2) To transact such other business that may properly come before the
Special Meeting or any postponements or adjournments thereof.
Only shareholders of record at the close of business on April 24, 1998 are
entitled to notice of and to vote at the Special Meeting, or at any
postponements or adjournments thereof. The affirmative vote of the holders of a
majority of the outstanding shares of common stock of Utah Service is required
for the approval of the Merger.
Under the Utah Revised Business Corporation Act, shareholders of Utah Service
will have the right to assert dissenters' rights in connection with the proposed
Merger. See "Dissenters' Rights" in the Proxy Statement/Prospectus accompanying
this notice.
A complete list of shareholders entitled to vote at the Special Meeting will be
available for examination at Utah Service's principal executive offices, for any
purposes germane to the Special Meeting, during ordinary business hours, for a
period of at least 10 days prior to the Special Meeting.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES OF COMMON STOCK OF
UTAH SERVICE THAT YOU OWN. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL
MEETING IN PERSON, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT WITHOUT DELAY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO ADDITIONAL POSTAGE
IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY THEN
WITHDRAW YOUR PROXY AND VOTE IN PERSON. YOUR PROXY CAN BE WITHDRAWN BY YOU AT
ANY TIME BEFORE IT IS VOTED.
May 8, 1998
BY ORDER OF THE BOARD OF DIRECTORS,
Vernon O. Cook, Chairman of the Board
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
<PAGE> 9
BEEHIVE INSURANCE AGENCY, INC.
302 WEST 5400 SOUTH, SUITE 109
MURRAY, UTAH 84107
(801) 685-2779
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 19, 1998
Notice is hereby given that a Special Meeting of Shareholders of Beehive
Insurance Agency, Inc. ("Beehive Insurance") will be held on Friday, June 19,
1998, at 11:00 a.m., local time, at 1565 West 400 North, Orem, Utah for the
following purposes:
(1) To consider and vote upon a proposal to approve an Amended and
Restated Agreement and Plan of Merger dated as of November 13, 1997
(the "Merger Agreement") providing for the merger ("Merger") of wholly
owned subsidiaries of Clyde Companies, Inc. ("CCI") with W.W. Clyde &
Co. ("Clyde"), Geneva Rock Products, Inc. ("Geneva Rock"), Utah
Service, Inc. ("Utah Service") and Beehive Insurance, each of which
will become wholly owned subsidiaries of CCI. Upon the effective date
of the Merger, each issued and outstanding share of common stock of
Clyde, Geneva Rock, Utah Service and Beehive Insurance will be
converted into, respectively, 33.93, 239.27, 43.43 and 4.33 shares of
common stock, no par value, of CCI.
(2) To transact such other business that may properly come before the
Special Meeting or any postponements or adjournments thereof.
Only shareholders of record at the close of business on April 24, 1998 are
entitled to notice of and to vote at the Special Meeting, or at any
postponements or adjournments thereof. The affirmative vote of the holders of a
majority of the outstanding shares of common stock of Beehive Insurance is
required for the approval of the Merger.
Under the Utah Revised Business Corporation Act, shareholders of Beehive
Insurance will have the right to assert dissenters' rights in connection with
the proposed Merger. See "Dissenters' Rights" in the Proxy Statement/Prospectus
accompanying this notice.
A complete list of shareholders entitled to vote at the Special Meeting will be
available for examination at Beehive Insurance's principal executive offices,
for any purposes germane to the Special Meeting, during ordinary business hours,
for a period of at least 10 days prior to the Special Meeting.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES OF COMMON STOCK OF
BEEHIVE INSURANCE THAT YOU OWN. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL
MEETING IN PERSON, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT WITHOUT DELAY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO ADDITIONAL POSTAGE
IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY THEN
WITHDRAW YOUR PROXY AND VOTE IN PERSON. YOUR PROXY CAN BE WITHDRAWN BY YOU AT
ANY TIME BEFORE IT IS VOTED.
May 8, 1998
BY ORDER OF THE BOARD OF DIRECTORS,
W. Douglas Snow, Director, President and General Manager
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
<PAGE> 10
PROXY STATEMENT
CLYDE COMPANIES, INC.
W.W. CLYDE & CO.
GENEVA ROCK PRODUCTS, INC.
UTAH SERVICE, INC.
BEEHIVE INSURANCE AGENCY, INC.
Special Meetings to be Held on
June 19, 1998
---------------------------------
PROSPECTUS
CLYDE COMPANIES, INC.
4,634,789 SHARES OF COMMON STOCK
(no par value per share)
-----------------------------
This Proxy Statement/Prospectus is being furnished to holders of common
stock, no par value ("CCI Common Stock"), of Clyde Companies, Inc., a Utah
corporation ("CCI"), holders of common stock, par value $10 per share ("Clyde
Common Stock"), of W.W. Clyde & Co., a Utah corporation ("Clyde"), holders of
common stock, par value $10 per share ("Geneva Rock Common stock"), of Geneva
Rock Products, Inc., a Utah corporation ("Geneva Rock"), holders of common
stock, par value $10 per share ("Utah Service Common Stock"), of Utah Service,
Inc., a Utah corporation ("Utah Service"), and holders of common stock, par
value $1 per share ("Beehive Insurance Common Stock"), of Beehive Insurance
Agency, Inc., a Utah corporation ("Beehive Insurance"), in connection with the
solicitation of proxies by the Boards of Directors of CCI, Clyde, Geneva Rock,
Utah Service, and Beehive Insurance for use at special meetings of each of those
companies to be held at 11:30, 8:00, 9:30, 10:30 and 11:00 a.m., respectively,
on Friday, June 19, 1998, at the offices of Geneva Rock located at 1565 West 400
North, Orem, Utah.
This Proxy Statement/Prospectus constitutes a prospectus of CCI with
respect to up to 4,634,789 shares of CCI Common Stock to be issued in connection
with the merger (the "Merger") of Clyde, Geneva Rock, Utah Service, and Beehive
Insurance with wholly owned subsidiaries of CCI. Upon the effective date of the
Merger, each issued and outstanding share of Clyde Common Stock, Geneva Rock
Common Stock, Utah Service Common Stock, and Beehive Insurance Common Stock will
be converted into respectively, 33.93, 239.27, 43.43 and 4.33 shares of CCI
Common Stock.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROXY STATEMENT/PROSPECTUS.
HOLDERS OF CCI, CLYDE, GENEVA ROCK, UTAH SERVICE AND BEEHIVE INSURANCE COMMON
STOCK ARE STRONGLY URGED TO READ AND CAREFULLY CONSIDER THIS PROXY
STATEMENT/PROSPECTUS IN ITS ENTIRETY, PARTICULARLY THE MATTERS REFERRED TO UNDER
"RISK FACTORS" BEGINNING ON PAGE 18.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to shareholders of CCI, Clyde, Geneva Rock, Utah Service and
Beehive Insurance on or about May 8, 1998.
The date of this Proxy Statement/Prospectus is May 8, 1998.
<PAGE> 11
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 12
ADDITIONAL INFORMATION
CCI has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (together with any amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities to be issued
pursuant to the Amended and Restated Agreement and Plan of Merger dated as of
November 13, 1997 (the "Merger Agreement"), attached as Annex A to this Proxy
Statement/Prospectus. This Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain parts of which have been omitted in accordance with
the rules and regulations of the Commission. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated by reference in this Proxy
Statement/Prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference. Copies of the
Registration Statement and the exhibits and schedules thereto may be obtained,
upon payment of the fee prescribed by the Commission, at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World
Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be examined without charge at the Commission's principal
office in Washington, D.C. The Commission maintains a World Wide Web site on the
Internet at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.
All disclosures contained in this Proxy Statement/Prospectus regarding
CCI, Clyde, Geneva Rock, Utah Service and Beehive Insurance, including the
information derived from any publicly available document described in the
preceding paragraph, have been provided by such corporations.
NO AUTHORIZATION
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY CCI, CLYDE, GENEVA ROCK, UTAH SERVICE,
BEEHIVE INSURANCE OR ANY OTHER PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this Proxy
Statement/Prospectus, including without limitation statements containing the
words "believes," "anticipates," "intends," "expects" and words of similar
import, constitute forward-looking statements. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of CCI to be materially
different from any future results, performance or achievements expressed or
implied by such forward looking statements. Such factors include, among other
things, the following: (1) expected cost savings from the Merger may not be
realized; (2) costs or difficulties related to the integration of the businesses
of Clyde, Geneva Rock, Utah Service and Beehive Insurance may be greater than
expected; (3) an increase of competitive pressure in the industries of Clyde,
Geneva Rock, Utah Service and Beehive Insurance may adversely affect the
businesses of those companies; and (4) general economic conditions, either
nationally or in the states in which Clyde, Geneva Rock, Utah Service and
Beehive do business, may be less favorable than expected. CCI disclaims any
obligation to update such factors or to publicly announce the result of any
revisions to any forward-looking statements included or incorporated by
reference herein to reflect future events or developments.
<PAGE> 13
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY...........................................................................................................1
THE COMPANIES............................................................................................1
CCI.............................................................................................1
CLYDE...........................................................................................1
GENEVA ROCK.....................................................................................1
UTAH SERVICE....................................................................................2
BEEHIVE INSURANCE...............................................................................2
THE SPECIAL MEETINGS.....................................................................................2
TIME, DATE AND PLACE............................................................................2
PURPOSES .......................................................................................2
VOTE REQUIRED; RECORD DATE......................................................................2
THE MERGER...............................................................................................3
EFFECT OF MERGER................................................................................3
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS..............................4
TASK FORCE......................................................................................5
VALUATION REPORTS FOR OPERATING COMPANIES BY FINANCIAL ADVISOR..................................5
EXCHANGE RATIOS.................................................................................6
INTEREST OF CERTAIN PERSONS IN THE MERGER.......................................................6
ACCOUNTING TREATMENT............................................................................6
REGULATORY APPROVAL.............................................................................6
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS.......................................................6
REPORTS TO SHAREHOLDERS.........................................................................7
STOCK REDEMPTION PLAN....................................................................................7
VOTING AGREEMENT.........................................................................................7
MANAGEMENT OF CCI AFTER THE MERGER.......................................................................8
COMPARISON OF SHAREHOLDER RIGHTS.........................................................................8
THE MERGER AGREEMENT.....................................................................................8
GENERAL ........................................................................................8
CONVERSION OF SHARES............................................................................8
CONDITIONS TO THE MERGER........................................................................9
WAIVER AND AMENDMENT............................................................................9
TERMINATION.....................................................................................9
FEES AND EXPENSES..............................................................................10
SURRENDER OF CERTIFICATES......................................................................10
DISSENTERS' RIGHTS......................................................................................10
SELECTED FINANCIAL INFORMATION..........................................................................11
SUMMARY HISTORICAL FINANCIAL INFORMATION.......................................................11
COMPARATIVE PER SHARE DATA.....................................................................13
PRO FORMA FINANCIAL INFORMATION................................................................14
MARKETS AND MARKET PRICES FOR SHARES....................................................................15
RISK FACTORS.....................................................................................................16
FAILURE TO REALIZE OPERATING EFFICIENCIES...............................................................16
NO PUBLIC TRADING MARKET FOR CCI COMMON STOCK; UNCERTAINTY OF STOCK REDEMPTION PLAN.....................16
UNCERTAINTY OF FUTURE DIVIDENDS.........................................................................16
TAX RISKS...............................................................................................16
DEPENDENCE ON KEY PERSONNEL.............................................................................17
UNCERTAINTY OF BUSINESS OF OPERATING COMPANIES..........................................................17
CONTROL OF CCI BY W.W. CLYDE FAMILY.....................................................................17
</TABLE>
i
<PAGE> 14
<TABLE>
<S> <C>
DETERMINATION OF EXCHANGE RATIOS........................................................................17
LACK OF SEPARATE LEGAL REPRESENTATION...................................................................18
CLYDE COMPANIES, INC.............................................................................................19
OVERVIEW ...............................................................................................19
MARKET PRICE OF AND DIVIDENDS ON CCI COMMON STOCK.......................................................19
CCI MANAGEMENT PRIOR TO CONSUMMATION OF THE MERGER......................................................19
DIRECTORS......................................................................................19
EXECUTIVE OFFICERS.............................................................................21
CCI MANAGEMENT UPON CONSUMMATION OF THE MERGER..........................................................21
DIRECTORS......................................................................................21
EXECUTIVE OFFICERS.............................................................................22
COMMITTEES OF CCI BOARD.................................................................................22
ATTENDANCE AT CCI BOARD MEETINGS........................................................................22
CCI EXECUTIVE COMPENSATION..............................................................................22
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION.................................................22
COMPENSATION OF DIRECTORS OF CCI...............................................................22
DEFINED BENEFIT RETIREMENT PLAN................................................................23
STOCK REDEMPTION PLAN...................................................................................23
VOTING AGREEMENT........................................................................................24
EMPLOYMENT AGREEMENT....................................................................................24
PRINCIPAL SHAREHOLDERS OF CCI PRIOR TO CONSUMMATION OF THE MERGER.......................................25
PRINCIPAL SHAREHOLDERS OF CCI UPON CONSUMMATION OF THE MERGER...........................................26
SELECTED FINANCIAL INFORMATION FOR CCI..................................................................27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CCI............28
CCI PRO FORMA COMBINED FINANCIAL INFORMATION............................................................29
CLYDE ........................................................................................................35
BACKGROUND..............................................................................................35
SERVICES AND MARKET.....................................................................................35
RAW MATERIALS, EQUIPMENT AND SUPPLIERS..................................................................36
INDUSTRY AND COMPETITION................................................................................36
SEASONALITY OF CLYDE BUSINESS...........................................................................36
REGULATION AND INSURANCE................................................................................36
EMPLOYEES...............................................................................................37
CUSTOMERS...............................................................................................37
BACKLOG ................................................................................................37
PROPERTIES..............................................................................................37
EQUIPMENT...............................................................................................37
LEGAL PROCEEDINGS.......................................................................................38
MARKET PRICE OF AND DIVIDENDS ON CLYDE COMMON STOCK.....................................................38
CLYDE MANAGEMENT........................................................................................38
DIRECTORS......................................................................................38
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES...................................................39
COMMITTEES OF CLYDE BOARD......................................................................39
ATTENDANCE AT CLYDE BOARD MEETINGS.............................................................39
COMPENSATION OF DIRECTORS OF CLYDE.............................................................39
PRINCIPAL SHAREHOLDERS OF CLYDE.........................................................................40
SELECTED FINANCIAL INFORMATION FOR CLYDE................................................................41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CLYDE..........42
FORWARD-LOOKING STATEMENTS.....................................................................42
GENERAL ................................................................................................42
RESULTS OF OPERATIONS..........................................................................42
GENEVA ROCK....................................................................................44
LIQUIDITY AND CAPITAL RESOURCES................................................................44
</TABLE>
ii
<PAGE> 15
<TABLE>
<S> <C>
INFLATION......................................................................................44
SEASONALITY....................................................................................45
THE YEAR 2000 ISSUE............................................................................45
CERTAIN TRANSACTIONS....................................................................................45
GENEVA ROCK......................................................................................................46
BACKGROUND..............................................................................................46
PRODUCTS AND SERVICES...................................................................................46
NORTHERN DIVISION..............................................................................47
SOUTHERN DIVISION..............................................................................47
RAW MATERIALS AND SUPPLIERS.............................................................................47
NORTHERN DIVISION..............................................................................47
SOUTHERN DIVISION..............................................................................48
COMPETITION.............................................................................................48
NORTHERN DIVISION..............................................................................48
SOUTHERN DIVISION..............................................................................48
SEASONALITY OF BUSINESS.................................................................................48
NORTHERN DIVISION..............................................................................48
SOUTHERN DIVISION..............................................................................48
REGULATION..............................................................................................49
EMPLOYEES...............................................................................................49
NORTHERN DIVISION..............................................................................49
SOUTHERN DIVISION..............................................................................49
CUSTOMERS...............................................................................................49
PROPERTIES..............................................................................................49
NORTHERN DIVISION..............................................................................49
SOUTHERN DIVISION..............................................................................51
FUTURE LAND DEVELOPMENT.................................................................................51
TRADE NAMES.............................................................................................52
BACKLOG ................................................................................................52
LEGAL PROCEEDINGS.......................................................................................52
MARKET PRICE OF AND DIVIDENDS ON GENEVA ROCK COMMON STOCK...............................................52
GENEVA ROCK MANAGEMENT..................................................................................52
DIRECTORS......................................................................................52
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES...................................................53
COMMITTEES OF GENEVA ROCK BOARD................................................................54
ATTENDANCE AT GENEVA ROCK BOARD MEETINGS.......................................................54
COMPENSATION OF DIRECTORS OF GENEVA ROCK.......................................................54
PRINCIPAL SHAREHOLDERS OF GENEVA ROCK...................................................................54
SELECTED FINANCIAL INFORMATION FOR GENEVA ROCK..........................................................56
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GENEVA
ROCK...........................................................................................57
FORWARD-LOOKING STATEMENTS.....................................................................57
RESULTS OF OPERATIONS..........................................................................57
LIQUIDITY AND CAPITAL RESOURCES................................................................58
INFLATION......................................................................................60
SEASONALITY....................................................................................60
THE YEAR 2000 ISSUE............................................................................60
CERTAIN TRANSACTIONS....................................................................................60
UTAH SERVICE.....................................................................................................61
BACKGROUND..............................................................................................61
PRODUCTS AND SERVICES...................................................................................61
BUILDING MATERIALS AND LUMBER..................................................................61
HARDWARE ......................................................................................61
CHEVRON GAS STATION/CONVENIENCE STORE..........................................................61
</TABLE>
iii
<PAGE> 16
<TABLE>
<S> <C>
AUTOMOTIVE AND INDUSTRIAL SUPPLIES.............................................................62
SUPPLIERS...............................................................................................62
COMPETITION.............................................................................................62
SEASONALITY OF BUSINESS.................................................................................62
EMPLOYEES...............................................................................................63
INFORMATION SYSTEMS.....................................................................................63
REGULATION..............................................................................................63
PROPERTIES..............................................................................................63
TRADE NAMES.............................................................................................63
LEGAL PROCEEDINGS.......................................................................................64
MARKET PRICE OF AND DIVIDENDS ON UTAH SERVICE COMMON STOCK..............................................64
UTAH SERVICE MANAGEMENT.................................................................................64
DIRECTORS......................................................................................64
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES...................................................65
COMMITTEES OF UTAH SERVICE BOARD...............................................................65
ATTENDANCE AT UTAH SERVICE BOARD MEETINGS......................................................65
COMPENSATION OF DIRECTORS OF UTAH SERVICE......................................................65
PRINCIPAL SHAREHOLDERS OF UTAH SERVICE..................................................................66
SELECTED FINANCIAL INFORMATION FOR UTAH SERVICE.........................................................67
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF UTAH
SERVICE........................................................................................69
FORWARD-LOOKING STATEMENTS.....................................................................69
RESULTS OF OPERATIONS..........................................................................69
LIQUIDITY AND CAPITAL RESOURCES................................................................70
INFLATION......................................................................................71
SEASONALITY....................................................................................71
THE YEAR 2000 ISSUE............................................................................71
CERTAIN TRANSACTIONS....................................................................................71
BEEHIVE INSURANCE................................................................................................72
BACKGROUND..............................................................................................72
THE INDUSTRY AND MARKET.................................................................................72
INSURANCE CARRIERS......................................................................................72
COMPETITION.............................................................................................72
SEASONALITY OF BUSINESS.................................................................................73
REGULATION..............................................................................................73
EMPLOYEES...............................................................................................73
PROPERTIES..............................................................................................73
TRADE NAMES.............................................................................................74
LEGAL PROCEEDINGS.......................................................................................74
MARKET PRICE OF AND DIVIDENDS ON BEEHIVE INSURANCE COMMON STOCK.........................................74
BEEHIVE INSURANCE MANAGEMENT............................................................................74
DIRECTORS......................................................................................74
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES...................................................75
COMMITTEES OF BEEHIVE INSURANCE BOARD..........................................................75
ATTENDANCE AT BEEHIVE INSURANCE BOARD MEETINGS.................................................75
COMPENSATION OF DIRECTORS OF BEEHIVE INSURANCE.................................................75
PRINCIPAL SHAREHOLDERS OF BEEHIVE INSURANCE.............................................................75
SELECTED FINANCIAL INFORMATION FOR BEEHIVE INSURANCE....................................................77
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
BEEHIVE INSURANCE..............................................................................78
FORWARD-LOOKING STATEMENTS.....................................................................78
RESULTS OF OPERATIONS..........................................................................78
LIQUIDITY AND CAPITAL RESOURCES................................................................79
INFLATION......................................................................................80
</TABLE>
iv
<PAGE> 17
<TABLE>
<S> <C>
SEASONALITY....................................................................................80
THE YEAR 2000 ISSUE............................................................................80
CERTAIN TRANSACTIONS....................................................................................80
THE SPECIAL MEETINGS.............................................................................................81
TIME, DATE AND PLACE OF THE SPECIAL MEETINGS............................................................81
PURPOSES OF THE SPECIAL MEETINGS........................................................................81
VOTE REQUIRED; RECORD DATE..............................................................................81
CCI ...........................................................................................81
CLYDE .........................................................................................81
GENEVA ROCK....................................................................................82
UTAH SERVICE...................................................................................82
BEEHIVE INSURANCE..............................................................................82
PROXIES; REVOCATION OF PROXIES..........................................................................83
THE MERGER.......................................................................................................85
GENERAL................................................................................................ 85
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF CCI, CLYDE, GENEVA ROCK,
UTAH SERVICE AND BEEHIVE INSURANCE.............................................................85
INCREASED FINANCIAL AND COMPETITIVE STRENGTH...................................................85
PROFESSIONAL MANAGEMENT TEAM...................................................................86
SPIN-OFFS OR SALES OF OPERATIONS...............................................................86
INCREASED PURCHASING POWER.....................................................................86
CONSOLIDATION OF OPERATIONS....................................................................86
CONSOLIDATION OF ADMINISTRATIVE FUNCTIONS......................................................86
POTENTIAL TAX SAVINGS..........................................................................86
TASK FORCE..............................................................................................87
VALUATION REPORTS FOR OPERATING COMPANIES BY FINANCIAL ADVISOR, HOULIHAN VALUATION ADVISORS.............88
BACKGROUND.....................................................................................88
VALUATIONS OF OPERATING COMPANIES..............................................................88
VALUATION OF CCI BY TASK FORCE.................................................................89
RECOMMENDATION OF TASK FORCE...................................................................89
LIMITATIONS ON HVA VALUATIONS..................................................................90
EXCHANGE RATIOS.........................................................................................90
INTERESTS OF CERTAIN PERSONS IN THE MERGER..............................................................90
CLYDE FAMILY TREE..............................................................................90
FAMILY RELATIONSHIPS; INTERRELATED MANAGEMENT AND STOCK OWNERSHIP..............................91
TASK FORCE.....................................................................................93
TAX SAVINGS FOR CCI AND CLYDE..................................................................93
EMPLOYMENT AGREEMENT...........................................................................93
VOTING AGREEMENT...............................................................................93
BYLAWS OF CCI..................................................................................94
LACK OF SEPARATE LEGAL REPRESENTATION..........................................................94
ACCOUNTING TREATMENT....................................................................................94
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS...............................................................94
REGULATORY APPROVALS....................................................................................96
FEDERAL SECURITIES LAW CONSEQUENCES.....................................................................96
THE MERGER AGREEMENT.............................................................................................97
GENERAL ................................................................................................97
CONVERSION OF SHARES....................................................................................97
CONDITIONS TO THE MERGER................................................................................97
WAIVER AND AMENDMENT....................................................................................98
TERMINATION.............................................................................................98
FEES AND EXPENSES.......................................................................................98
SURRENDER OF CERTIFICATES...............................................................................98
CORPORATE STRUCTURE AND RELATED MATTERS AFTER THE MERGER................................................99
BUSINESS OF THE OPERATING COMPANIES PENDING THE MERGER..................................................99
</TABLE>
v
<PAGE> 18
<TABLE>
<S> <C>
DISSENTERS' RIGHTS.............................................................................................100
DESCRIPTION OF CCI CAPITAL STOCK................................................................................102
COMMON STOCK...........................................................................................102
UTAH CONTROL SHARES ACQUISITION ACT....................................................................102
CERTAIN PROVISIONS OF CCI'S ARTICLES OF INCORPORATION AND BY-LAWS......................................103
COMPARISON OF THE RIGHTS OF HOLDERS OF CCI COMMON STOCK AND CLYDE, GENEVA ROCK, UTAH SERVICE AND BEEHIVE
INSURANCE COMMON STOCK.................................................................................104
AMENDMENTS TO ARTICLES AND BY-LAWS.....................................................................104
SPECIAL MEETINGS OF SHAREHOLDERS.......................................................................104
CORPORATE ACTION BY WRITTEN CONSENT OF SHAREHOLDERS....................................................105
DIVIDENDS..............................................................................................105
CAPITAL STOCK..........................................................................................105
DISSENTERS' RIGHTS.....................................................................................105
PROVISIONS RELATING TO DIRECTORS.......................................................................105
VALIDITY OF CCI COMMON STOCK....................................................................................107
EXPERTS ........................................................................................................107
OTHER MATTERS...................................................................................................107
SHAREHOLDER PROPOSALS...........................................................................................107
INDEX TO FINANCIAL STATEMENTS...................................................................................F-1
</TABLE>
LIST OF ANNEXES
ANNEX A AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
ANNEX B STOCK REDEMPTION PLAN
ANNEX C BYLAWS OF CCI
ANNEX D UTAH REVISED BUSINESS CORPORATION ACT SECTIONS 16-10A-1301 THROUGH
16-10A-1331
ANNEX E SUMMARY OF VALUATION METHODS OF HOULIHAN VALUATION ADVISORS
vi
<PAGE> 19
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE
IN THIS PROXY STATEMENT/PROSPECTUS. REFERENCE IS MADE TO, AND THIS SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS AND THE ANNEXES HERETO. UNLESS OTHERWISE DEFINED
HEREIN, CAPITALIZED TERMS USED IN THIS SUMMARY HAVE THE RESPECTIVE MEANINGS
ASCRIBED TO THEM ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS. CCI, CLYDE,
GENEVA ROCK, UTAH SERVICE AND BEEHIVE INSURANCE SHAREHOLDERS ARE URGED TO READ
THIS PROXY STATEMENT/PROSPECTUS AND THE ANNEXES HERETO IN THEIR ENTIRETY. SEE
"RISK FACTORS" FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY THE
SHAREHOLDERS OF CCI, CLYDE, GENEVA ROCK, UTAH SERVICE AND BEEHIVE INSURANCE.
THE COMPANIES
CCI
CCI was incorporated in the state of Utah in 1961 as a holding company
for shares of stock of Clyde, Geneva Rock, Utah Service and Beehive Insurance.
In November 1997, the name of CCI was changed from W.W. Clyde Investment Co. to
Clyde Companies, Inc. CCI has no operations of its own and, prior to the
consummation of the Merger, its assets consisted solely of shares of common
stock of Clyde (31,935 shares or 33.78% of the outstanding shares), Geneva Rock
(4,725 shares or 21.67% of the outstanding shares), Utah Service (1,698 shares
or 31.37% of the outstanding shares) and Beehive Insurance (3,700 shares or
17.22% of the outstanding shares). All cash held by CCI, other than an amount of
cash sufficient to satisfy CCI's tax obligations upon the consummation of the
Merger, will be distributed as a dividend to its shareholders prior to the
consummation of the Merger. It is anticipated that upon the consummation of the
Merger, CCI will continue to be a holding company with no operations of its own,
and that operations will be conducted by its wholly owned subsidiaries, Clyde,
Geneva Rock, Utah Service and Beehive Insurance (the "Operating Companies"). The
merging companies (CCI, Clyde, Geneva Rock, Utah Service and Beehive Insurance)
are sometimes collectively referred to herein as the "Constituent Corporations".
The principal executive offices of CCI are located at 1423 Devonshire Drive,
Salt Lake City, Utah 84108, and its telephone number is (801) 582-2783. See
"Clyde Companies, Inc."
CLYDE
Clyde was founded in approximately 1926 by W. W. Clyde and was
incorporated as a Utah corporation in 1933. Since that time, Clyde has been
involved in the construction of interstate highways, bridges, dams, airports,
mines, golf courses, environmental reclamation projects, large site work/site
preparation, and other types of large construction projects in the Intermountain
region requiring massive earth moving and professional management. Clyde has
completed more than $400 million of construction projects throughout the
Intermountain West. Clyde owns 7,581 shares, or 34.77% of the outstanding shares
of Geneva Rock Common Stock. The principal executive offices of Clyde are
located at 1375 North Main Street, Springville, Utah 84663, and its telephone
number is (801) 489-5616. See "Clyde".
GENEVA ROCK
Geneva Rock, which was incorporated in August 1954 as a Utah
corporation, was founded as a ready-mix concrete business by W.W. Clyde and his
associates. Geneva Rock is engaged in the construction business through its
Northern Utah and Southern Utah divisions. Geneva Rock's products consist
primarily of ready-mix concrete, asphalt, sand, gravel and other building
materials, and its services consist primarily of road and site construction.
Geneva Rock's market is primarily the Northern Utah area, including Utah, Salt
Lake, Davis, Weber, Summit and Wasatch Counties, and the Southern Utah area
surrounding St. George, Utah. Geneva Rock's client base is diversified, with no
one client generating more than 10% of Geneva Rock's total sales. Geneva Rock
has furnished much of the concrete for many of the large commercial office
buildings in downtown Salt Lake City. The principal executive offices of Geneva
Rock are located at 1565 West 400 North, Orem, Utah 84057, and its telephone
number is (801) 765-7800. See "Geneva Rock".
1
<PAGE> 20
UTAH SERVICE
Utah Service was founded in 1938 by W.W. Clyde to service Clyde. Utah
Service owns and operates a hardware store and lumber yard and an adjacent
gasoline station/convenience store, all located at 400 South Main Street in
Springville, Utah. The hardware store sells hardware items, electrical supplies,
plumbing fittings and other plumbing items, vanity goods, building materials,
locksets, hand tools, lawn and garden chemicals and supplies, housewares,
appliances, fasteners, paint, industrial supplies, automotive supplies, auto
care products, auto tools and conveyor belting. Sales are made directly to
retail customers, as well as to building contractors and retail auto shops. The
lumber yard sells a wide variety of lumber products, primarily to building
contractors. The gasoline station/convenience store, located directly to the
west of the hardware store, sells gasoline and diesel fuel, as well as a variety
of convenience items. The principal executive offices of Utah Service are
located at 35 East 400 South, Springville, Utah 84663, and its telephone number
is (801) 489-5686. See "Utah Service".
BEEHIVE INSURANCE
Beehive Insurance was incorporated in Utah in 1961 by W.W. Clyde to
operate as an independent insurance agency for the sale of insurance coverage to
Clyde and the general public. Beehive Insurance's operations have gradually
evolved into the sale of primarily commercial property insurance policies,
casualty insurance policies and surety bonds. Affiliated companies (particularly
Clyde and Geneva Rock) comprise a significant portion of Beehive Insurance's
client base. The principal executive offices of Beehive Insurance are located at
302 West 5400 South, Murray, Utah 84107, and its telephone number is (801)
685-2779. See "Beehive Insurance".
THE SPECIAL MEETINGS
TIME, DATE AND PLACE
The Special Meetings of CCI, Clyde, Geneva Rock, Utah Service and
Beehive Insurance will be held at 11:30, 8:00, 9:30, 10:30 and 11:00 a.m.,
respectively, on Friday, June 19, 1998, at the offices of Geneva Rock located at
1565 West 400 North, Orem, Utah.
PURPOSES
At the Special Meetings, the shareholders of each of CCI, Clyde, Geneva
Rock, Utah Service and Beehive Insurance will consider and vote upon a proposal
to approve the Amended and Restated Agreement and Plan of Merger dated as of
November 13, 1997 (the "Merger Agreement") and the transactions contemplated
thereby. A copy of the Merger Agreement is attached to this Proxy
Statement/Prospectus as Annex A.
VOTE REQUIRED; RECORD DATE
Shareholders of record at the close of business on April 24, 1998 (the
"Record Date") will be entitled to notice of and to vote at the CCI, Clyde,
Geneva Rock, Utah Service and Beehive Insurance Special Meetings and at any
adjournment or postponement thereof. On the Record Date, there were issued and
outstanding: (i) 2,303,920 shares of CCI Common Stock held by approximately 56
shareholders of record; (ii) 94,544 shares of Clyde Common Stock held by
approximately 100 shareholders of record; (iii) 21,802 shares of Geneva Rock
Common Stock held by approximately 81 shareholders of record; (iv) 5,413 shares
of Utah Service Common Stock held by approximately 52 shareholders of record;
and (v) 21,487 shares of Beehive Insurance Common Stock held by approximately 52
shareholders of record.
Under the Utah Revised Business Corporation Act ("URBCA"), the
adoption and approval of the Merger Agreement by the shareholders of Clyde,
Geneva Rock, Utah Service and Beehive Insurance requires the affirmative vote of
the holders of at least a majority of the outstanding shares of Clyde Common
Stock, Geneva Rock Common Stock, Utah Service Common Stock and Beehive Insurance
Common Stock. The URBCA does not require that the Merger Agreement be adopted
and approved by the shareholders of CCI since only CCI, as the sole shareholder
of its subsidiaries, will vote on the merger of its subsidiaries with Clyde,
Geneva Rock, Utah Service
2
<PAGE> 21
and Beehive Insurance. However, the Board of Directors of CCI has determined
that it is in the best interest of CCI and its shareholders for CCI to submit
the Merger Agreement to its shareholders for approval. Under the terms of the
Merger Agreement, the affirmative vote of holders of at least a majority of the
outstanding shares of CCI is required to approve the Merger. In determining
whether the approval of the Merger Agreement has received the requisite number
of affirmative votes, abstentions and shares not represented at the CCI, Clyde,
Geneva Rock, Utah Service and Beehive Insurance Special Meetings will have the
same effect as a vote against any such proposal. If the Merger Agreement is not
approved by the requisite number of votes at the Special Meetings, the Merger
Agreement will be terminated and each Constituent Corporation will bear its
pro-rata share of the expenses that have been incurred in connection with the
Merger Agreement. See "The Merger Agreement--Fees and Expenses." In the event
the Merger Agreement is terminated, it is anticipated that CCI will continue to
act as a holding company for the shares of the Operating Companies which it owns
and that the Operating Companies will continue to operate their respective
businesses.
As of the Record Date, the Directors and officers of CCI and their
affiliates owned 759,160 shares representing approximately 32.95% of the
outstanding shares of CCI Common Stock. All of such persons have indicated that
they intend to vote their shares FOR approval of the Merger.
As of the Record Date, the Directors and officers of Clyde and their
affiliates owned 12,680 shares, representing approximately 13.41% of the
outstanding shares of Clyde Common Stock, and CCI owned 31,935 shares,
representing approximately 33.78% of the outstanding shares of Clyde Common
Stock. All of such persons have indicated that they intend to vote their shares
FOR approval of the Merger.
As of the Record Date, the Directors and officers of Geneva Rock and
their affiliates owned 1,812 shares, representing approximately 8.31% of the
outstanding shares of Geneva Common Stock, Clyde owned 7,581 shares,
representing approximately 34.77% of the outstanding shares of Geneva Rock
Common Stock, and CCI owned 4,725 shares, representing approximately 21.67% of
the outstanding shares of Geneva Rock Common Stock. All of such persons have
indicated that they intend to vote their shares FOR approval of the Merger,
thereby assuring approval of the Merger by the Geneva Rock shareholders.
As of the Record Date, the Directors and officers of Utah Service and
their affiliates owned 1,423 shares, representing approximately 26.89% of the
outstanding shares of Utah Services Common Stock, and CCI owned 1,698 shares,
representing approximately 31.37% of the outstanding shares of Utah Service
Common Stock. All of such persons have indicated that they intend to vote their
shares FOR approval of the Merger, thereby assuring approval of the Merger by
the Utah Service shareholders.
As of the Record Date, the Directors and officers of Beehive Insurance
and their affiliates owned 6,734 shares, representing approximately 31.34% of
the outstanding shares of Beehive Insurance Common Stock, and CCI owned 3,700
shares of Beehive Insurance Common Stock, representing approximately 17.2% of
the outstanding shares of Beehive Insurance Common Stock. All of such persons
except J. Richard Walton have indicated that they intend to vote their shares
FOR approval of the Merger. Although J. Richard Walton, a Director of Beehive
Insurance, believes that the Merger is in the best interest of Beehive Insurance
and its shareholders and, therefore, voted in favor of the Merger as a Director
of Beehive Insurance, he has advised CCI that, because of personal financial
considerations, he intends to vote his shares AGAINST approval of the Merger at
the Beehive Insurance Special Meeting and exercise his dissenter's rights. See
"Dissenters' Rights."
THE MERGER
EFFECT OF MERGER
Upon the effective date of the Merger, Clyde, Geneva Rock, Utah Service
and Beehive Insurance each will become wholly owned subsidiaries of CCI, and
each share of common stock of Clyde, Geneva Rock, Utah Service and Beehive
Insurance (except for (i) shares of the Operating Companies owned by CCI and
(ii) shares of Geneva Rock owned by Clyde, which will be distributed as a
dividend to CCI) will be converted into 33.93, 239.27, 43.43 and 4.33 shares,
respectively, of CCI Common Stock. In anticipation of the Merger, in November
1997 each outstanding share of CCI Common Stock was converted into 40 shares of
CCI Common Stock.
3
<PAGE> 22
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
In accepting the recommendation of the majority of the Task Force (as
defined below) to approve the Merger, the Boards of Directors of CCI, Clyde,
Geneva Rock, Utah Service and Beehive Insurance considered a number of factors,
most of which were positive, but some of which were negative. After carefully
weighing all of these factors, the Boards of Directors concurred with the Task
Force that, on balance, the Merger is fair and in the best interest of each
Constituent Corporation and its respective shareholders. Accordingly, the Boards
of Directors of each Constituent Corporation unanimously approved the Merger
Agreement and recommends that their respective shareholders vote FOR approval of
the Merger Agreement and the transactions contemplated thereby. IN CONSIDERING
WHETHER TO VOTE FOR APPROVAL OF THE MERGER AGREEMENT, SHAREHOLDERS SHOULD BE
AWARE (i) THAT CERTAIN MEMBERS OF THE TASK FORCE AND CERTAIN DIRECTORS OF THE
CONSTITUENT CORPORATIONS MAY BE SUBJECT TO CONFLICTS OF INTEREST IN RECOMMENDING
THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT, AND (ii) THAT THE
CONSTITUENT CORPORATIONS DID NOT HAVE SEPARATE LEGAL REPRESENTATION IN
CONNECTION WITH NEGOTIATING THE TERMS AND PROVISIONS OF THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY. SEE "THE MERGER--TASK FORCE" AND "THE
MERGER--INTERESTS OF CERTAIN PERSONS IN THE MERGER."
Among the negative factors considered by the Task Force and the Boards
of Directors of the Constituent Corporations are the following. As a result of
the Merger, some shareholders will have a smaller equity interest in CCI then
they had in the Constituent Corporation(s) in which they owned shares and,
therefore, they will have less voice in the business and affairs of CCI then
they had with respect to the business and affairs of such Constituent
Corporation(s). Also, it is anticipated that the dividends to be paid by CCI on
its Common Stock will be less than the dividends previously paid on the Common
Stock of Utah Service - see "Summary--Selected Financial
Information--Comparative Per Share Data," and that Beehive Insurance may lose
some of the premiums it receives from insurance placed with CCI and Clyde - see
"Beehive Insurance--Regulation." Further, the Merger will result in a
consolidation of management, which may result in a loss of autonomy for the
Constituent Corporations.
Among the positive factors considered by the Task Force and the Boards
of Directors of the Constituent Corporations are the following. The Merger will
combine the financial strength of Clyde and Geneva Rock and increase their
respective competitive positions. The combination of entities resulting from the
Merger will create a company with greater financial strength to bid on large
construction projects. After the Merger, the benefits of a management team
comprised of the top management from the Constituent Corporations will be made
available to each of CCI, Clyde, Geneva Rock, Utah Service and Beehive Insurance
to help them address problems in their respective businesses. While there are no
present plans to sell part or all of any of the Operating Companies, the Boards
of Directors of the Constituent Corporations believe that the Merger will
increase shareholder value by creating a unified ownership structure that would
make it easier to sell one or more of the Operating Companies should CCI ever
elect to do so. The Merger will also create an entity with greater purchasing
power, eliminate duplicative purchasing and potentially reduce the cost of
obtaining such items as fuel, construction materials and equipment. After the
Merger, the management of CCI will be in a better position to combine divisions
of Clyde, Geneva Rock, Utah Service and Beehive Insurance that now have similar
operations and to consolidate the separate financial and accounting systems now
used by the Constituent Corporations, resulting in potential cost savings. In
addition, as a consequence of the Merger, taxable dividends to CCI and Clyde
from the other Constituent Corporations will be eliminated, resulting in tax
savings to CCI and Clyde. Also, it is anticipated that the Merger will result in
tax savings for the Constituent Corporations as a whole due to the elimination
of sales tax on certain intercompany transactions and the filing of consolidated
tax returns that will replace the current practice of each of the Constituent
Corporations filing separate tax returns.
Although J. Richard Walton, a Director of Beehive Insurance, believes
that the Merger is in the best interest of Beehive Insurance and its
shareholders and, therefore, voted in favor of the Merger as a Director of
Beehive Insurance, he has advised CCI that, because of personal financial
considerations, he intends to vote his shares AGAINST approval of the Merger at
the Beehive Insurance Special Meeting and exercise his dissenter's rights. See
"Dissenters' Rights."
For a more detailed discussion of the factors considered by the Task
Force and the Boards of Directors of the Constituent Corporations in reaching
their decisions to approve the Merger Agreement and the transactions
contemplated thereby and in recommending that the Constituent Corporations'
respective shareholders vote FOR the proposal to adopt and approve the Merger
Agreement and the transactions contemplated thereby, see "The Merger --Reasons
for the Merger; Recommendations of the Boards of Directors of CCI, Clyde, Geneva
Rock, Utah Service and Beehive Insurance."
TASK FORCE
In order to facilitate the Merger, an informal working group of
shareholders of the Constituent Corporations (the "Task Force") was formed for
the purpose of considering and making recommendations to the Board of Directors
of each Constituent Corporation with respect to the economic and other terms of
the Merger. The Task Force is comprised of (i) David E. Salisbury, who is a
Director of Clyde and the husband of Carol C. Salisbury, who is the President
and a Director of CCI and the Secretary, Treasurer and a Director of Beehive
Insurance, (ii) Hal M. Clyde, who is a Director of Utah Service and Beehive
Insurance, (iii) Wilford W. Clyde, who is the President and General Manager of
Geneva Rock and a Director of Clyde, Geneva Rock and Beehive Insurance, (iv)
Richard C. Clyde, who is the President and General Manager of Clyde and a
Director of CCI, Clyde, Geneva Rock and Beehive Insurance, (v) Paul B. Clyde,
who is a Vice President of Clyde and a Director of CCI, Clyde, Geneva Rock and
Utah Service, (vi) David O. Cook, who is the President and a Director of Utah
Service, (vii) James C. Gramoll, who is a grandson of Harry S. Clyde, (viii)
Steven L. Clyde, who is the Project Superintendent and a Director of Clyde, (ix)
A. Ray Gammell, who is the Vice President and a Director of Utah
4
<PAGE> 23
Service and a Director of Geneva Rock and (x) Norman D. Clyde, who is a Director
of Clyde, Geneva Rock, Utah Service and Beehive Insurance. The Board of
Directors of each of the Constituent Corporations has considered and approved
the recommendations of the majority of the Task Force with respect to the
Merger. See "The Merger--Task Force."
VALUATION REPORTS FOR OPERATING COMPANIES BY FINANCIAL ADVISOR
The Task Force requested Houlihan Valuation Advisors ("HVA") to prepare
valuation reports with respect to Clyde, Geneva Rock, Utah Service and Beehive
Insurance as of June 30, 1997. HVA provides professional services relative to
business valuations, fairness and solvency opinions, economic loss analyses and
other valuation and economic issues. HVA prepared two separate valuation reports
for these companies as of June 30, 1997, the first dated September 12, 1997 (the
"First HVA Report") and the second dated October 23, 1997 (the "Second HVA
Report"). Both the First HVA Report and the Second HVA Report resulted in the
same valuations for each of Geneva Rock, Utah Service and Beehive Insurance. The
Second HVA Report resulted in a different valuation for Clyde.
The First HVA Report was prepared valuing each of Clyde, Geneva Rock,
Utah Service and Beehive Insurance as a stand alone entity. This approach took
into account certain tax liabilities that would be incurred by Clyde with
respect to Geneva Rock Common Stock owned by Clyde in the event Clyde and its
assets were to be liquidated. Pursuant to this valuation approach, HVA estimated
the fair market enterprise value of Clyde Common Stock to be $520 per share for
a total value of $49,200,000. The Second HVA Report was prepared valuing each of
Clyde, Geneva Rock, Utah Service and Beehive Insurance based on the assumption
that they would be combining in a tax free transaction where Clyde would not be
liquidated and would incur no tax liabilities with respect to its Geneva Rock
Common Stock. Based on this second approach, the fair market enterprise value of
Clyde as of June 30, 1997 was estimated to be $657 per share for a total value
of $62,100,000. A majority of the Task Force recommended to the Board of
Directors of each of CCI, Clyde, Geneva Rock, Utah Service and Beehive Insurance
that the Second HVA Report be accepted for the purpose of determining the
exchange ratios in the Merger. It is the position of Task Force member James C.
Gramoll that the First HVA Report with respect to Clyde (reflecting the tax
liability which would be incurred by Clyde with respect to its Geneva Rock
Common Stock in the event Clyde were liquidated) should be the basis for
calculating the exchange ratios in the Merger. In Mr. Gramoll's view, by using
the higher value for Clyde reflected in the Second HVA Report, Clyde was
unfairly receiving the benefit of tax savings from a tax free reorganization,
and he believed that such tax savings should be spread among all of the
Constituent Corporations. However, the Task Force and the Boards of Directors of
the Constituent Corporations concluded that since there are no plans to sell
Clyde separately, the hypothetical tax savings should not be a factor to be
considered in valuing Clyde in the Merger, which is a tax free reorganization .
Accordingly, the Task Force and Boards of Directors decided to use the Second
HVA Report rather than the First HVA Report. Shareholders of the Constituent
Corporations should be aware that certain members of the Task Force and certain
Directors of the Constituent Corporations may be subject to conflicts of
interest in this regard. See "The Merger--Task Force" and "The Merger--Interests
of Certain Persons in the Merger."
As indicated above, the Second HVA Report estimated the fair market
enterprise value of Clyde to be $657 per share for a total value of $62,100,000.
The fair market enterprise value of the Geneva Rock Common Stock was estimated
by HVA to be $4,633 per share for a total value of $101,206,000 and rounded to
$101,000,000. The fair market enterprise value of the Utah Service Common Stock
was estimated by HVA to be $841 per share for a total value of $4,552,800 and
rounded to $4,550,000. The fair market enterprise value of Beehive Insurance
Common Stock was estimated by HVA to be $83.77 per share for a total value of
$1,795,700 and rounded to $1,800,000.
Since CCI's only assets are cash and the shares of common stock it owns
in the Operating Companies, the Task Force did not request HVA to prepare a
valuation report for CCI. The Task Force determined the value of CCI Common
Stock to be equal to the total value of the shares of the Operating Companies
owned by CCI. Based on the HVA valuations described above, the Task Force
determined that the total value of the shares of the Operating Companies owned
by CCI is approximately $44,610,187, which results in a valuation of
approximately $19.36 per share of CCI Common Stock. As indicated below, for the
purpose of establishing the exchange ratios in the Merger, the Task Force
discounted the above per share valuation for CCI by 25% to $14.52 per share to
reflect the value of minority shareholder interest. Based on this valuation and
in anticipation of the Merger, in November 1997 each outstanding share of CCI
Common Stock was converted into 40 shares, and presently there are 2,303,920
outstanding shares of CCI Common Stock.
Each of the valuation reports was prepared by HVA on the assumption HVA
was valuing a controlling interest in each corporation; that is, each
corporation was valued on a stand-alone basis as if the entire enterprise were
being sold. In determining the exchange ratios, the Task Force applied a
discount to HVA's valuation for each corporation. The
5
<PAGE> 24
Task Force and the Boards of Directors determined to apply a 25% discount,
because this is the discount that the Boards of Directors intend to use in
setting the price for shares to be redeemed under the Stock Redemption Plan. See
"Clyde Companies, Inc.--Stock Redemption Plan." Based on this 25% discount, the
per share valuation of CCI, Clyde, Geneva Rock, Utah Service and Beehive
Insurance Common Stock is $14.52, $492.63, $3,474.45, $630.43 and $62.83,
respectively. It should be noted that the application of the same discount to
each Constituent Corporation does not have any effect on the exchange ratios and
does not in any way affect the consideration to be received in the Merger by the
shareholders of the Constituent Corporations. The full text of the Second HVA
Report with respect to any Operating Company can be obtained by sending a
written request to the Secretary of such Operating Company. See "The Merger--
Valuation Reports for Operating Companies by Financial Advisor, Houlihan
Valuation Advisors" and Annex E--"Summary of Valuation Methods of Houlihan
Valuation Advisors."
EXCHANGE RATIOS
The exchange ratios at which shares of common stock of Clyde, Geneva
Rock, Utah Service and Beehive Insurance will be exchanged for shares of CCI
Common Stock were determined by the Task Force and approved by the Board of
Directors of each Constituent Corporation. Shareholders of the Constituent
Corporations should be aware that certain members of the Task Force and certain
Directors of the Constituent Corporations may be subject to conflicts of
interest in determining the exchange ratios. See "The Merger-Task Force,
Interest of Certain Persons in the Merger." The exchange ratios were determined
by dividing the discounted value determined by HVA for each share of common
stock of Clyde, Geneva Rock, Utah Service and Beehive Insurance, respectively,
by $14.52, the amount which the Task Force determined to be the discounted per
share value of CCI Common Stock. This resulted in an exchange ratio of (i) 33.93
shares of CCI Common Stock for each outstanding share of Clyde Common Stock,
(ii) 239.27 shares of CCI Common Stock for each outstanding share of Geneva Rock
Common Stock, (iii) 43.43 shares of CCI Common Stock for each outstanding share
of Utah Service Common Stock and (iv) 4.33 shares of CCI Common Stock for each
outstanding share of Beehive Insurance Common Stock, respectively.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Shareholders of CCI, Clyde, Geneva Rock, Utah Service and Beehive
Insurance should be aware that certain members of the Task Force and certain
Directors and executive officers of each of CCI, Clyde, Geneva Rock, Utah
Service and Beehive Insurance have interests in the Merger that are in addition
to the interests as shareholders generally and which may create potential
conflicts of interest. These interests include, among other things, the
following: (i) certain Task Force members and Directors and executive officers
of CCI, Clyde, Geneva Rock, Utah Service and Beehive Insurance are related
family members; (ii) certain Task Force members and Directors and executive
officers of each of CCI, Clyde, Geneva Rock, Utah Service and Beehive Insurance
will be Directors and/or executive officers of CCI; (iii) certain Task Force
members and Directors and executive officers of CCI may be deemed to be
principal shareholders of CCI, Clyde, Geneva Rock, Utah Service and Beehive
Insurance Common Stock; (iv) as a consequence of the Merger, taxable dividends
to CCI and Clyde from the other Constituent Corporations will be eliminated,
resulting in significant tax savings to CCI and Clyde; (v) Richard C. Clyde will
enter into an employment agreement with CCI; (vi) the shareholders of CCI as
constituted prior to the Merger will enter into a ten year voting agreement with
respect to the election of CCI Directors and certain other matters; (vii) as a
result of certain provisions in the CCI Bylaws, the W.W. Clyde family will have
effective control of the Board of Directors of CCI following the Merger; and
(viii) David E. Salisbury, a Director of Clyde, is a shareholder of the law firm
of Van Cott, Bagley, Cornwall & McCarthy, which has represented each of CCI,
Clyde, Geneva Rock, Utah Service and Beehive Insurance in connection with the
Merger. For a more detailed description of the interests described above, see
"The Merger Interests of Certain Persons in the Merger."
ACCOUNTING TREATMENT
The Merger will be accounted for using the purchase method of
accounting with CCI as the acquiror. See "The Merger - Accounting Treatment."
REGULATORY APPROVAL
CCI and Geneva Rock filed a notification with the Federal Trade
Commission ("FTC"), pursuant to the Hart Scott Rodino Antitrust Improvement Act
of 1976, requesting early termination of the waiting period required under that
Act. On November 21, 1997, the FTC granted CCI's and Geneva Rock's request for
early termination of the waiting period. See "The Merger--Regulatory
Approval."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Merger is intended to qualify as (i) a transfer to a controlled
corporation under Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code"), and/or (ii) a reorganization within the meaning of Section
368(a)(1)(B) of the Code so that no gain or loss will be recognized by a holder
of CCI, Clyde, Geneva Rock, Utah Service or Beehive Insurance Common Stock with
respect to the receipt of CCI Common Stock in exchange for Clyde, Geneva Rock,
Utah Service or Beehive Insurance Common Stock pursuant to the Merger (except
with respect to any cash received in lieu of fractional shares of CCI Common
Stock). Grant Thornton LLP, independent accountants ("Grant Thornton"), has
rendered an opinion to that effect. Payment received by holders of Clyde, Geneva
Rock, Utah Service or Beehive Insurance Common Stock in lieu of fractional
shares of CCI Common Stock will be treated as payment in redemption of such
fractional shares and, provided that the redeemed interest is held as a capital
asset at the effective time of the Merger, will generally result in the
recognition of capital gain or loss by such holders measured by the difference
between the amount received and the tax basis allocable to such fractional
shares. For a discussion of certain federal income tax consequences applicable
to shareholders who exercise their dissenters' rights and a further discussion
of certain of the federal income tax consequences of the Merger, see "The
Merger--Certain Federal Income Tax Considerations."
6
<PAGE> 25
Because of the complexity of the tax laws and the individual nature of
the tax consequences of the Merger to each holder of CCI, Clyde, Geneva Rock,
Utah Service or Beehive Insurance Common Stock, each such shareholder should
consult a tax advisor concerning certain other federal and all state, local and
foreign tax consequences of the Merger that may be applicable.
REPORTS TO SHAREHOLDERS
It is anticipated that following the consummation of the Merger, CCI
will furnish to its shareholders audited annual financial statements and
unaudited quarterly financial statements.
STOCK REDEMPTION PLAN
The Board of Directors of CCI has adopted a Stock Redemption Plan, a
copy of which is attached as Annex B hereto, pursuant to which it is anticipated
that CCI will make funds available for the redemption of a limited number of
shares of CCI Common Stock each year beginning in 1999, on a date to be
established each year by the Board of Directors (the "Redemption Date"). Each
year commencing in 1999, as soon as practicable following the issuance by CCI's
independent auditors of their report regarding the consolidated financial
statements of CCI and its subsidiaries for the prior year, the Board of
Directors will (i) cause an appraisal (or an update of a prior appraisal) of CCI
to be completed by an independent individual or firm selected by the Board of
Directors which will set forth a determination of the total fair market value of
CCI as of the last day of the prior year (the "Appraisal Value"), and (ii)
determine the amount which shall be made available by CCI on the Redemption Date
to fund the redemption of shares of CCI Common Stock (the "Redemption Fund").
The price to be paid to shareholders for each share of redeemed CCI Common Stock
(the "Redemption Price") will be an amount equal to the Appraisal Value divided
by the number of shares of CCI Common Stock outstanding on the last day of the
prior year, discounted by 25% (reflecting a lack of marketability and minority
interest). The Redemption Fund established (a) for the years 1999 through 2003
will be an amount which is greater than or equal to 7% and less than or equal to
15% of the net earnings of CCI (after taxes) for the prior year, and (b) for the
years 2004 and thereafter will be an amount which is greater than or equal to 5%
and less than or equal to 10% of the net earnings of CCI (after taxes) for the
prior year. All shares of CCI Common Stock will be eligible for redemption
subject to and in accordance with the terms of the Stock Redemption Plan. In the
event that the number of shares offered for redemption by shareholders is
greater than the number of shares that can be redeemed from the Redemption Fund,
such shares will be redeemed on a pro rata basis. Unused portions of the
Redemption Fund will not be carried forward to increase the Redemption Fund in
future years. The Stock Redemption Plan will be administered and interpreted by
the Board of Directors of CCI in its sole and absolute discretion, and the Stock
Redemption Plan may be amended or terminated, and/or the Redemption for any
particular year may be canceled, upon a vote of more than 75% of the Directors
of CCI.
VOTING AGREEMENT
In anticipation of the Merger, the current shareholders of CCI (the
"Original CCI Shareholders") entered into a Voting Agreement dated as of
November 14, 1997 (the "Voting Agreement") for the purpose of controlling
7
<PAGE> 26
the voting of the 2,303,920 shares of CCI Common Stock owned by the Original CCI
Shareholders on the Record Date, representing approximately 33.20% of the shares
of CCI Common Stock to be outstanding upon consummation of the Merger (the
"Voting Agreement Shares"). Pursuant to the Voting Agreement, William R. Clyde,
Ila C. Cook, Louise C. Gammell, Carol C. Salisbury, Richard C. Clyde and Paul B.
Clyde (the "Voting Committee Members") have been appointed to act as a committee
(the "Voting Committee") to determine how the Voting Agreement Shares will be
voted on each matter to be voted upon by the shareholders of CCI. Each Voting
Committee Member represents the other members of his or her family who are
Original CCI Shareholders.
Pursuant to the Voting Agreement, each Original CCI Shareholder has
granted to the Voting Committee an irrevocable proxy, for a period of 10 years
from November 13, 1997 (or until such time as the Voting Agreement is
terminated), to allow the Voting Committee to vote such Shareholder's Voting
Agreement Shares in accordance with the Voting Agreement. However, under the
Voting Agreement, the Original CCI Shareholders retain their right to vote any
shares of CCI Common Stock which they own, other than the Voting Agreement
Shares, as they wish. The Voting Agreement will remain in effect for 10 years,
unless earlier terminated because (i) the Voting Committee Members unanimously
agree in writing to terminate the Voting Agreement, (ii) CCI is in bankruptcy or
receivership or is dissolved, (iii) CCI ceases it business, (iv) CCI enters into
an underwriting agreement with respect to a public offering of CCI Common Stock
in excess of $30,000,000, (v) CCI sells all or substantially all of its assets
or is the non-surviving corporation in a merger, or (vi) there is only one CCI
Shareholder bound by the terms of the Voting Agreement.
The Voting Agreement provides that an Original CCI Shareholder will not
be permitted to sell, transfer or otherwise dispose of any Voting Agreement
Shares, except to (i) a spouse of such Original CCI Shareholder, (ii) a child of
such Original CCI Shareholder or such spouse, (iii) a trustee in trust for the
benefit of such Original CCI Shareholder, such spouse or such child, (iv) CCI in
the event such Original CCI Shareholder owns no CCI Common Stock other than such
Voting Agreement Shares or (v) a third party upon obtaining the prior written
consent of the Committee Members. All transferees of the Voting Agreement Shares
will be required to enter into the Voting Agreement and to receive and hold the
Voting Agreement Shares subject to the terms and provisions of the Voting
Agreement.
MANAGEMENT OF CCI AFTER THE MERGER
Certain provisions in the Bylaws of CCI will control the composition of
the Board of Directors of CCI upon the consummation of the Merger and for five
years thereafter. Pursuant to such Bylaw provisions, the Board of Directors of
CCI will consist of between eight and eleven Directors. Each of six Directors
must be the direct descendants (or the spouse of a direct descendant) of W.W.
Clyde and each of two Directors must be the direct descendants (or the spouse of
a direct descendant) of Edward Clyde. The Board of Directors of CCI will have
the right to add up to three additional Directors. In no event will there be
more than eleven Directors of CCI. For a more detailed description of the
applicable Bylaw provisions, see "Comparison of the Rights of Holders of CCI
Common Stock and Clyde, Geneva Rock, Utah Service and Beehive Insurance Common
Stock--Provisions Relating to Directors." The Bylaws of CCI are attached hereto
as Annex C. It is also contemplated that as soon as reasonably practicable after
the consummation of the Merger, Richard C. Clyde will serve as President and
Chief Executive Officer and Wilford W. Clyde will serve as Vice President and
Chief Operating Officer of CCI. See "Clyde Companies, Inc.--CCI Management Upon
Consummation of the Merger".
COMPARISON OF SHAREHOLDER RIGHTS
As a consequence of the Merger, the shareholders of Clyde, Geneva Rock,
Utah Service and Beehive Insurance will become shareholders of CCI. There will
be significant differences between the rights of shareholders of Clyde, Geneva
Rock, Utah Service and Beehive Insurance prior to the Merger and the rights of
CCI shareholders after the Merger. See "Comparison of the Rights of Holders of
CCI Common Stock and Clyde, Geneva Rock, Utah Service and Beehive Insurance
Common Stock" for a summary of the material differences between the rights of
holders of CCI Common Stock and Clyde, Geneva Rock, Utah Service and Beehive
Insurance Common Stock.
THE MERGER AGREEMENT
GENERAL
The description of the material terms and conditions of the Merger
Agreement and any related documents in this Proxy Statement/Prospectus is
qualified in its entirety by reference to the copy of the Merger Agreement
attached hereto as Annex A. Shareholders of CCI, Clyde, Geneva Rock, Utah
Service and Beehive Insurance are urged to read the Merger Agreement in its
entirety for a more complete description of the terms of such agreement.
CONVERSION OF SHARES
At the effective time of the Merger Agreement (the "Effective Time"),
each outstanding share of common stock of the Operating Companies (except (i)
those shares of the Operating Companies owned by CCI, (ii) those shares of
Geneva Rock owned by Clyde, which will be distributed as a dividend to CCI and
(iii) to the extent that the holders of shares of Clyde, Geneva Rock, Utah
Service or Beehive Insurance Common Stock duly elect to
8
<PAGE> 27
exercise their dissenters' rights under Part 13 of the URBCA) will be converted
into (i) in the case of Clyde Common Stock, 33.93 shares of CCI Common Stock,
(ii) in the case of Geneva Rock Common Stock, 239.27 shares of CCI Common Stock,
(iii) in the case of Utah Service Common Stock, 43.43 shares of CCI Common
Stock, and (iv) in the case of Beehive Insurance Common Stock, 4.33 shares of
CCI Common Stock (the ratios set forth in clauses (i) through (iv) above are
sometimes referred to herein as the "Exchange Ratios"). Fractional shares of CCI
Common Stock will not be issued. In lieu of fractional shares, shareholders of
Clyde, Geneva Rock, Utah Service and Beehive Insurance will receive cash equal
to the product of (i) such fraction multiplied by (ii) $14.52.
Clyde Reorganization Corporation ("CRC"), Geneva Rock Reorganization
Corporation ("GRRC"), Utah Service Reorganization Corporation ("USRC") and
Beehive Insurance Reorganization Corporation ("BIRC") (collectively, the "Merger
Subs") were recently organized by CCI for the purpose of effecting the
acquisition of the Operating Companies. CRC will merge with Clyde, GRRC will
merge with Geneva Rock, USRC will merge with Utah Service and BIRC will merge
with Beehive Insurance, with the Operating Companies being the surviving
corporations of such mergers. Each share of CRC, GRRC, USRC and BIRC Common
Stock issued and outstanding immediately prior to the Effective Time will be
converted into one share of common stock of the respective Operating Company.
CONDITIONS TO THE MERGER
Consummation of the Merger is subject to the satisfaction of various
conditions, including but not limited to (i) the approval and adoption of the
Merger Agreement by the requisite vote of the shareholders of each of the
Constituent Corporations; (ii) the aggregate number of dissenting shares shall
not be more than 5% of the total number of shares of CCI Common Stock that would
be outstanding upon consummation of the Merger if no dissenters' rights were
exercised (there would be 6,938,709 outstanding CCI shares and 5% of that number
is 346,935); (iii) no governmental authority shall have issued any order, and
there shall not be any statute, rule, decree or regulation restraining,
prohibiting or making illegal the consummation of the Merger; (iv) any waiting
period applicable to the consummation of the Merger under the Hart Scott Rodino
Act shall have expired or been terminated (such waiting period has been
terminated); (v) the representations and warranties of CCI contained in the
Merger Agreement shall be true and correct in all material respects when made
and as of the closing date of the Merger (the "Closing Date") (except for such
matters which specifically address a particular date which need only be true and
correct as of such date); (vi) CCI shall have performed in all material respects
all of the obligations to be performed by it under the Merger Agreement prior to
the Closing Date; (vii) a responsible officer of CCI shall have provided each of
the Operating Companies with a certificate with respect to the matters referred
to in the Merger Agreement; (viii) the representations and warranties of each of
the Operating Companies contained in the Merger Agreement shall be true and
correct in all material respects when made and as of the Closing Date (except
for matters which specifically address a particular date which need only be true
and correct as of such date); (ix) each of the Operating Companies shall have
performed in all material respects all of the obligations to be performed by it
under the Merger Agreement prior to the Closing Date; (x) a responsible officer
of each of the Operating Companies shall have provided CCI with a certificate
with respect to the matters referred to in the Merger Agreement; and (xi) the
receipt of an opinion from Grant Thornton to the effect that the Merger will
qualify as a tax free reorganization.
WAIVER AND AMENDMENT
Any provision of the Merger Agreement subject to waiver may be waived
in writing by the Board of Directors of the respective company that is entitled
to the benefits of such provision. The Boards of Directors of the Constituent
Corporations are not required to obtain shareholder approval prior to consenting
to any such waiver. The only provision of the Merger Agreement that is not
subject to waiver is the condition that the Merger Agreement be approved by a
majority of the outstanding Common Stock of each Constituent Corporation. The
Merger Agreement may be amended, modified or supplemented at any time prior to
the Closing Date by the written agreement of each of the Constituent
Corporations.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned
at any time prior to the Effective Time, whether before or after approval of the
shareholders of the Constituent Corporations, under the
9
<PAGE> 28
circumstances specified therein, including (i) automatically, without any
further actions by any of the parties (except as may be otherwise required by
the URBCA), (A) if the Merger of each of the Constituent Corporations has not
been consummated on or prior to September 30, 1998 or (B) if any governmental
authority shall have issued a statute, order, decree or regulation or taken any
other action permanently restraining or enjoining or otherwise materially
restricting the consummation of the transactions contemplated by the Merger
Agreement and such statute, order, decree, regulation or other action shall have
become final and non-appealable, (ii) by the Boards of Directors of the
Operating Companies, acting jointly, if CCI breaches or fails in any material
respect to perform or comply with any of its covenants and agreements contained
in the Merger Agreement or breaches its representations and warranties therein
in any material respect and fails to cure such breach as provided for therein,
or (iii) by the Board of Directors of CCI, if any of the Operating Companies
breaches or fails in any material respect to perform or comply with any of its
respective covenants and agreements contained in the Merger Agreement or
breaches its representations and warranties in any material respect and fails to
cure such breach as provided for therein.
FEES AND EXPENSES
If the Merger is consummated, CCI will pay all fees and expenses
incurred in connection with the Merger from the dividends CCI receives from the
Operating Companies. If the Merger is not consummated, each of the Constituent
Corporations will bear their pro-rata share of all such fees and expenses.
SURRENDER OF CERTIFICATES
Certificates nominally representing shares of the common stock of the
Operating Companies, other than any certificate representing dissenting shares,
if any ("Operating Company Certificates"), as of the Effective Time, for all
purposes, shall be deemed to evidence the number of shares of CCI Common Stock
determined in accordance with the applicable Exchange Ratio. As soon as
practicable after the Effective Time, CCI shall mail to each record holder of an
outstanding Operating Company Certificate, as of the Effective Time, a form of
letter of transmittal (the "Transmittal Letter") that contains instructions for
use in effecting the surrender of each Operating Company Certificate in exchange
for a CCI Common Stock certificate ("CCI Certificate"). Upon surrender to CCI of
an Operating Company Certificate, together with a duly executed Transmittal
Letter (and any other documents which may be reasonably required by CCI, if
any), the holder of such Operating Company Certificate shall receive promptly in
exchange therefor a CCI Certificate for the number of shares of CCI Common Stock
evidenced thereby in accordance with the applicable Exchange Ratio. At that
time, the Operating Company Certificate shall be canceled. If a CCI Certificate
is to be issued to a person other than the person in whose name the surrendered
Operating Company Certificate is registered, it shall be a condition of issuance
of the CCI Certificate (x) that the Operating Company Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and (y)
that the person requesting such issuance shall pay any transfer or other taxes
required by reason of the issuance to a person other than the registered holder
of the Operating Company Certificate surrendered or establish to the
satisfaction of CCI that such tax has been paid or is not applicable. CCI shall
pay all charges and expenses, including those of the Operating Companies, in
connection with the distribution of CCI Certificates.
DISSENTERS' RIGHTS
If the Merger is consummated, holders of shares of Clyde Common Stock,
Geneva Rock Common Stock, Utah Service Common Stock and Beehive Insurance Common
Stock will be entitled to dissenters' rights under the URBCA, provided that they
comply with the conditions of Sections 16-10a-1301 through 16-10a-1331 of the
URBCA. Original CCI Shareholders are not entitled to dissenters' rights. Those
shareholders of Clyde, Geneva Rock, Utah Service and Beehive Insurance who elect
to exercise their dissenters' rights and who properly and timely perfect such
rights will be entitled to receive the "fair value" in cash for their shares of
Clyde Common Stock, Geneva Rock Common Stock, Utah Service Common Stock and
Beehive Insurance Common Stock. Pursuant to Section 16-10a-1301(4) of the URBCA,
such "fair value" means the value of the shares immediately before the
effectuation of the applicable Merger, excluding any appreciation or
depreciation in anticipation of such Merger. In order to exercise their
dissenters' rights, the holders of Clyde Common Stock, Geneva Rock Common Stock,
Utah Service Common Stock and Beehive Insurance Common Stock must comply with
the procedural requirements of Sections 16-10a-1301 through 16-10a-1331 of the
URBCA, a description of which is provided in "Dissenters'
10
<PAGE> 29
Rights" and the full text of which is attached to this Proxy
Statement/Prospectus as Annex D and which is incorporated by reference herein.
Failure to comply with any of the steps required under Sections 16-10a-1301
through 16-10a-1331 of the URBCA on a timely basis may result in the loss of
dissenters' rights. See "Dissenters' Rights." ONE OF THE CONDITIONS TO THE
CONSUMMATION OF THE MERGER IS THAT THE AGGREGATE NUMBER OF DISSENTING SHARES
SHALL NOT BE MORE THAN 5% OF THE TOTAL NUMBER OF SHARES OF CCI THAT WOULD BE
OUTSTANDING UPON CONSUMMATION OF THE MERGER IF NO DISSENTERS' RIGHTS WERE
EXERCISED (THERE WOULD BE 6,938,709 OUTSTANDING CCI SHARES AND 5% OF THAT NUMBER
IS 346,935).
SELECTED FINANCIAL INFORMATION
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following summary historical financial information should be read
in conjunction with the financial statements of CCI, Clyde, Geneva Rock, Beehive
Insurance and Utah Service and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of each of the
respective companies included elsewhere in this Proxy Statement/Prospectus. The
summary historical financial information presented below has been derived from
the financial statements of CCI, Clyde, Geneva Rock, Beehive Insurance and Utah
Service. The financial statements for CCI and Clyde as of and for the two years
ended December 31, 1997 have been audited by Grant Thornton whose reports are
included elsewhere herein. The financial statements for Geneva Rock, Utah
Service and Beehive Insurance as of and for the year ended December 31, 1997
have been audited by Grant Thornton whose reports are included elsewhere herein.
The financial statements for Geneva Rock as of and for the year ended December
31, 1996 have been audited by Squire & Company, PC ("Squire") whose report is
included elsewhere herein. The financial statements for Beehive Insurance as of
and for the year ended December 31, 1996 have been audited by Daines Associates
LLC ("Daines") whose report is included elsewhere herein. The financial
statements of Utah Service as of and for the year ended December 31, 1996 have
not been audited.
11
<PAGE> 30
<TABLE>
<CAPTION>
Geneva Utah Beehive
CCI Clyde Rock Service Insurance
--- ----- ---- ------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Statement of earnings data:
Net revenues $ 487 $16,906 $131,107 $12,045 $ 607
Operating income (loss) 479 416 12,447 478 345
Net earnings 1,928 2,678 8,222 434 232
Earnings per common share-basic $ 0.84(1) $ 28.32 $ 377.10 $ 80.05 $ 10.79
Weighted average shares outstanding 2,303,920(1) 94,544 21,802 5,413 21,487
Balance sheet data (at period end):
Current assets $ 25 $17,761 $ 39,553 $ 3,129 $ 597
Current liabilities 338 2,064 8,869 515 302
Total assets 27,794 49,039 82,247 4,541 698
Total liabilities 10,377 12,009 17,501 629 302
Stockholders' equity 17,417 37,030 64,746 3,912 396
</TABLE>
12
<PAGE> 31
<TABLE>
<CAPTION>
Geneva Utah Beehive
CCI Clyde Rock Service Insurance
--- ----- ---- ------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Statement of earnings data:
Net revenues $ 404 $19,056 $116,349 $13,108 $ 578
Operating income 398 497 12,462 565 334
Net earnings 1,935 2,687 8,434 421 234
Earnings per common share $ 0.84(1) $ 28.42 $ 386.85 $ 77.78 $ 10.88
Weighted average shares outstanding 2,303,920(1) 94,544 21,802 5,413 21,487
Balance sheet data (at period end):
Current assets $ 31 $16,357 $ 35,240 $ 3,057 $ 679
Current liabilities 5 1,092 8,036 626 377
Total assets 25,088 44,916 74,848 4,387 756
Total liabilities 9,158 9,969 17,669 853 377
Stockholders' equity 15,930 34,947 57,179 3,534 379
</TABLE>
(1) Earnings per common share are based upon the weighted average number of
common shares outstanding during the period presented after giving retroactive
effect to all periods presented for the subsequent 40:1 stock split effected
November 13, 1997.
COMPARATIVE PER SHARE DATA
Set forth below are unaudited pro forma combined earnings from
continuing operations and book value per common share of CCI after giving effect
to the Merger. The information set forth below should be read in conjunction
with the financial statements and the "CCI Pro Forma Combined Financial
Information (Unaudited)" included elsewhere in this Proxy Statement/Prospectus,
in each case including the notes thereto. The equivalent pro forma information
is calculated for each of the Operating Companies by multiplying their
respective exchange ratios by the pro forma per share amounts for CCI. The pro
forma information presented herein is for illustrative purposes only.
Comparative Per Share Data as of and for the year
ended December 31, 1997
<TABLE>
<CAPTION>
CCI
<S> <C>
Historical
Earnings - basic $ 0.84
Book value (at period end) 7.56
Cash dividends declared by CCI(1) 0.19
Pro forma combined
Earnings - basic $ 0.94
Book value (at period end) 17.39
Cash dividends declared by CCI(2) 0.06
Cash dividends declared by 0.22
Operating Companies(3)
</TABLE>
<TABLE>
<CAPTION>
Clyde Geneva Rock Utah Service Beehive
----- ----------- ------------ -------
Insurance
---------
<S> <C> <C> <C> <C>
Historical
Earnings - basic $ 28.32 $ 377.10 $ 80.05 $ 10.78
Book value (at period end) 391.67 2,969.74 722.68 18.42
Cash dividends declared 8.00 30.00 20.00 10.00
Exchange ratio 33.98 239.27 43.43 4.33
======== ======== ======== ========
Equivalent pro forma combined
Earnings - basic $ 31.83 $ 224.49 $ 40.75 $ 4.06
Book value (at period end) 589.93 4,610.14 755.11 75.28
Cash dividends declared by CCI(4) 2.16 15.22 2.76 0.28
Cash dividends declared by 7.36 51.94 9.43 0.94
Operating Companies(5)
</TABLE>
13
<PAGE> 32
(1) This line represents the pro rata interest of one share of CCI Common
Stock before the Merger in the dividends paid by CCI during 1997. The
income of CCI is derived from undistributed and distributed income from
each of the Operating Companies plus the interest income it receives on
its cash accounts. CCI has historically paid out substantially all of
its distributed income (after the payment of certain expenses) in the
form of dividends to its shareholders.
(2) This line item represents the pro rata interest of one share of CCI
Common Stock (after the Merger and the issuance of 4,634,789 additional
shares of CCI Common Stock in exchange for all the shares of the
Operating Companies) in the dividends paid by CCI during 1997. It does
not include the dividends paid by each of the Operating Companies which
are reflected in the next line item captioned "Cash dividends declared
by Operating Companies".
(3) This line item represents the pro rata interest of one share of CCI
Common Stock (after the Merger and the issuance of 4,634,789 additional
shares of CCI Common Stock in exchange for all the shares of the
Operating Companies) in the dividends paid during 1997 by each of the
Operating Companies, after adjusting for the dividends which Clyde
received from its 34.77% interest in Geneva Rock. This disclosure is
not required but is included to provide additional information.
(4) This line item represents the pro rata interest of one share of each
Operating Company (based on the respective exchange ratio for each
Operating Company) in the dividends paid during 1997 by CCI.
(5) This line item represents the pro rata interest of one share of each
Operating Company (based on the respective exchange ratio for each
Operating Company) in the dividends paid during 1997 by each of the
Operating Companies, after subtracting the dividends which Clyde
received from its 34.77% interest in Geneva Rock. This disclosure is
not required but is included to provide additional information.
14
<PAGE> 33
PRO FORMA FINANCIAL INFORMATION
The CCI Summary Unaudited Pro Forma Financial Information as of and for
the year ended December 31, 1997 and December 31, 1996 included below gives
effect to the Merger as described in this Proxy Statement/Prospectus and the
estimated adjustments caused by the Merger as described in "Clyde Companies,
Inc.--CCI Pro Forma Combined Financial Information (Unaudited)" and the notes
thereto. Shareholders are urged to carefully read this document, "Clyde
Companies, Inc.--CCI Pro Forma Combined Financial Information (Unaudited)" and
the notes thereto.
CCI Summary Unaudited Pro Forma Financial Information
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Statement of earnings data:(1)
Operating Revenues $ 158,473 $ 147,303
Gross margin 22,877 17,553
Net earnings 6,509 5,993
Earnings per share - basic $ 0.94 $ 0.86
Weighted average shares outstanding (2) 6,938,711 6,938,711
Balance Sheet Data (at period end):(3)
Working capital $ 49,078
Total assets 152,781
Total liabilities 20,708
Retained earnings 90,201
Stockholders' equity 120,642
</TABLE>
- -------------------------------
(1) The pro forma statements of earnings data are presented assuming the
combination occurred at the beginning of the periods presented.
(2) Reflects the conversion of the Operating Companies' shares into CCI shares.
(3) The December 31, 1997 pro forma balance sheet data are presented assuming
the combination occurred on December 31, 1997.
MARKETS AND MARKET PRICES FOR SHARES
There is no public trading market for CCI Common Stock, Clyde Common
Stock, Geneva Rock Common Stock, Utah Service Common Stock or Beehive Insurance
Common Stock, and it is not anticipated that a public market for CCI Common
Stock will develop following the Merger. See "Clyde Companies, Inc.--Stock
Redemption Plan."
15
<PAGE> 34
RISK FACTORS
The following risk factors should be considered carefully by the
shareholders of CCI, Clyde, Geneva Rock, Utah Service and Beehive Insurance in
evaluating whether to approve and adopt the Merger Agreement and the
transactions contemplated thereby. These factors should be considered in
conjunction with the other information included in this Proxy
Statement/Prospectus.
FAILURE TO REALIZE OPERATING EFFICIENCIES
There can be no assurance that the Merger will result in operating
efficiencies for the Operating Companies. The ability of CCI to achieve
operating efficiencies will depend on a number of factors, including the ability
of CCI to: (i) realize economies, particularly in the areas of accounting and
financial reporting, advertising and public relations, human resources,
purchasing, project bidding and employee safety, (ii) implement effective
internal information systems and management, operational and financial controls,
and (iii) retain existing personnel and attract new personnel. Although CCI will
attempt to integrate and streamline overlapping functions of Clyde, Geneva Rock,
Utah Service and Beehive Insurance, there can be no assurance that it will be
successful in doing so or that the process of integrating businesses and
operations will not cause an interruption of, or loss in momentum in, the
businesses of the Operating Companies.
NO PUBLIC TRADING MARKET FOR CCI COMMON STOCK; UNCERTAINTY OF STOCK REDEMPTION
PLAN
There is no public trading market for CCI Common Stock, and no public
trading market is expected to develop in the future. Holders of CCI Common Stock
may be able to redeem a limited number of their shares pursuant to the terms of
CCI's Stock Redemption Plan, which provides that (i) for the years 1999 through
2003 between 7% and 15% and (ii) for the years 2004 and thereafter between 5%
and 10% of CCI's net after tax earnings, as determined by CCI's Board of
Directors, will be put into a redemption fund to provide for the redemption of
CCI Common Stock. There can be no assurance that CCI will have available
adequate funds to effect all shareholders' requests for redemption, or that the
plan will not be subsequently amended or repealed upon a vote of more than 75%
of the Directors of CCI. Also, there can be no assurance that the redemption
prices to be offered by CCI pursuant to the Stock Redemption Plan will be equal
to the prices which might be received by shareholders upon the sale or
liquidation of CCI. See "Clyde Companies, Inc.--Stock Redemption Plan".
UNCERTAINTY OF FUTURE DIVIDENDS
The amount, type and frequency of dividends paid by CCI on CCI Common
Stock will be determined by the Board of Directors of CCI based on the results
of operations, financial condition and liquidity needs of CCI. The amount, type
and frequency of dividends paid by CCI to its shareholders after the Merger will
not be equivalent to the amount, type and frequency of dividends paid by CCI and
the Operating Companies prior to the Merger. See "Summary--Selected Financial
Information--Comparative Per Share Data".
TAX RISKS
Although the Merger has been structured to qualify as tax-free
transfers within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended (the "Code"), and/or as tax-free reorganizations under Section
368(a)(1)(B) of the Code so that no gain or loss will be recognized by the
Operating Companies or by their shareholders on the exchange of stock of the
Operating Companies for shares of CCI Common Stock, and although the independent
accounting firm of Grant Thornton has rendered an opinion to that effect, no
ruling from the Internal Revenue Service ("IRS") has been obtained, and there
can be no assurance that the IRS will agree with Grant Thornton as to the tax
consequences of the Merger. Shareholders of the Constituent Corporations should
consult their own tax advisors concerning the federal, state and local tax
consequences to them of the Merger. See "The Merger--Certain Federal Income Tax
Considerations."
16
<PAGE> 35
DEPENDENCE ON KEY PERSONNEL
Management of the business of CCI will be substantially dependent on
Richard C. Clyde, President and Chief Executive Officer, and Wilford W. Clyde,
Vice President and Chief Operating Officer. The loss of either of these officers
could have a material adverse effect on CCI's business, financial condition and
results of operations.
UNCERTAINTY OF BUSINESS OF OPERATING COMPANIES
The construction business is by nature a cyclical business and there
can be no assurance that Geneva Rock will be able to maintain current levels of
revenues and earnings, or that the significant decline in revenues experienced
by Clyde over the last five years will not continue. The business of Utah
Service may be affected by cyclical declines in the construction industry and
the economy in general. The business of Beehive Insurance may be subject to more
restrictive regulations as a result of the Merger because the Utah Insurance
Code restricts the amount of compensation an insurance agency may receive for
placing insurance upon "controlled business" and such restriction may limit the
amount of insurance business that Beehive Insurance may place upon the property
of Clyde and Geneva Rock after the Merger. At the present time, Clyde and Geneva
Rock together account for more than 50% of the insurance business placed by
Beehive Insurance. See "Beehive Insurance--Regulation".
CONTROL OF CCI BY W.W. CLYDE FAMILY
CCI will be controlled by the W.W. Clyde family as a result of (i)
certain provisions in the CCI Bylaws and (ii) the Voting Agreement entered into
by the Original CCI Shareholders, which are described below.
Section 3.2( c) of the CCI Bylaws, which are attached as Annex C
hereto, restricts the configuration of the CCI Board of Directors during the
five year period beginning on November 12, 1997 and ending on November 12, 2002.
During this period, six of the Directors on the CCI Board of Directors must be
direct descendants (or the spouse of a direct descendant) of W.W. Clyde and two
of the Directors must be direct descendants (or the spouse of a direct
descendant) of Edward Clyde. The CCI Bylaws require that there be between eight
and eleven Directors on the CCI Board of Directors. The effect of the foregoing
restrictions on CCI Board membership is that, during the five year period
described above, the W.W. Clyde family will have effective control of the CCI
Board. Such control will give the W.W. Clyde family the ability to determine all
matters that come before the CCI Board, such as the amount which will be made
available by CCI to fund the redemption of shares of CCI Common Stock and the
amount of dividends to be paid on CCI Common Stock. See "Comparison of the
Rights of Holders of CCI Common Stock and Clyde, Geneva Rock, Utah Service and
Beehive Insurance Common Stock--Provisions Relating to Directors".
The Original CCI Shareholders have entered into a 10-year Voting
Agreement for the purpose of controlling the voting of the 2,303,920 shares of
CCI Common Stock owned by the Original CCI Shareholders on the Record Date,
representing approximately 33.20% of the shares of CCI Common Stock to be
outstanding upon consummation of the Merger. So long as the Voting Agreement is
in place, such Original CCI Shareholders will have the ability (subject to the
restrictions in CCI's Bylaws relating to the configuration of its Board of
Directors) to substantially influence the composition of the Board of Directors
of CCI and the outcome of all matters involving a shareholder vote. Such
influence by the Original CCI Shareholders could make it more difficult for a
third party to acquire, or could discourage a third party from attempting to
acquire, control of CCI. See "Clyde Companies, Inc.--Voting Agreement."
DETERMINATION OF EXCHANGE RATIOS
In connection with the Merger, each outstanding share of Clyde, Geneva
Rock, Utah Service and Beehive Insurance Common Stock will be exchanged for
33.93, 239.27, 43.43 and 4.33 shares, respectively, of CCI Common Stock. In
anticipation of the Merger, in November 1997 each then outstanding share of CCI
Common Stock was converted into 40 shares of CCI Common Stock. The exchange
ratios were determined by the Task Force and approved by the Boards of Directors
of the Constituent Corporations in reliance upon valuation reports for each of
the Constituent Corporations, except CCI, prepared by Houlihan Valuation
Advisors. Since the only assets of CCI are cash and the shares of the other
Constituent Corporations which it owns, an independent valuation
17
<PAGE> 36
report was not obtained for CCI. For purposes of determining CCI's value in the
Merger, CCI was assigned a value equal to the value of the shares it owns in
each of the Operating Companies. Although in approving the recommendations of
the Task Force, the Boards of Directors of the Constituent Corporations have
used their best efforts to arrive at exchange ratios that are equitable to the
shareholders of each of the Constituent Corporations, there can be no assurance
that such exchange ratios are indicative of the consideration which the
shareholders of the Constituent Corporations would receive upon the sale or
liquidation of the Constituent Corporations in which they own shares. See
"Summary--Selected Financial Information--Comparative Per Share Data," "The
Merger--Valuation Reports for Operating Companies by Financial Advisor, Houlihan
Valuation Advisors" and Annex E--"Summary of Valuation Methods of Houlihan
Valuation Advisors." Shareholders of the Constituent Corporations should be
aware that certain members of the Task Force and certain Directors of the
Constituent Corporations may be subject to conflicts of interest in determining
the exchange ratios. See "The Merger--Task Force, Interest of Certain Persons in
the Merger."
LACK OF SEPARATE LEGAL REPRESENTATION
The law firm of Van Cott, Bagley, Cornwall & McCarthy ("Van Cott")
previously has represented each of the Constituent Corporations, as well as
certain individual Task Force members, Directors, officers and shareholders of
the Constituent Corporations. Because each Constituent Corporation is affiliated
through family relationships, interconnected Boards of Directors and cross stock
ownership, and in an effort to reduce the costs of the Merger, the Boards of
Directors of each Constituent Corporation determined to use Van Cott to
represent all of the Constituent Corporations in connection with the Merger and
the transactions contemplated thereby, including the preparation of this Proxy
Statement/Prospectus. Van Cott did not represent any Constituent Corporation or
individual shareholder separately in negotiating the exchange ratios or any of
the other terms or provisions of the Merger Agreement, nor did Van Cott
undertake any due diligence investigation with respect to any Constituent
Corporation, such as an investigation of the validity of the outstanding shares
of the Constituent Corporations, or the status of legal agreements, pending
legal proceedings or other legal matters with respect to the Constituent
Corporations. Such representation by Van Cott involves a conflict of interest to
the extent that the interest of one Constituent Corporation in the Merger may be
separate from or opposed to the interest of the other Constituent Corporations
or individuals (mentioned above) who may also be clients of Van Cott. Because of
such conflicts of interest, Van Cott obtained a written waiver of such conflicts
from the Board of Directors of each Constituent Corporation and certain
individual shareholders, pursuant to which each corporation and individual
shareholder acknowledged the existence of the conflicts of interest, waived any
objection thereto and agreed to Van Cott's representation of all of the
Constituent Corporations. David E. Salisbury, who formerly was a shareholder of
Van Cott and who presently is of counsel to Van Cott, was a member of the Task
Force that negotiated the pertinent terms and provisions of the Merger
Agreement, including the exchange ratios. Mr. Salisbury participated on the Task
Force in his capacity as a Director of Clyde, and as a direct or indirect owner
of shares of common stock of the Constituent Corporations. See "The
Merger--Interests of Certain Persons in the Merger".
18
<PAGE> 37
CLYDE COMPANIES, INC.
OVERVIEW
CCI was incorporated in the state of Utah in 1961 under the name "W.W.
Clyde Investment Co." as a holding company for shares of stock of Clyde, Geneva
Rock, Utah Service and Beehive Insurance. In November 1997 the name of the
corporation was changed to "Clyde Companies, Inc." CCI has no operations of its
own and, prior to the consummation of the Merger, its assets consisted solely of
cash and shares of common stock of Clyde (31,935 shares or 33.78% of the
outstanding shares), Geneva Rock (4,725 shares or 21.67% of the outstanding
shares), Utah Service (1,698 shares or 31.37% of the outstanding shares) and
Beehive Insurance (3,700 shares or 17.22% of the outstanding shares). Upon the
consummation of the Merger, CCI will be a holding company with wholly owned
subsidiaries consisting of Clyde, Geneva Rock, Utah Service and Beehive
Insurance. At this time, it is anticipated that CCI will have no operations of
its own after the consummation of the Merger. As of the date hereof, CCI has no
employees. The principal executive offices of CCI are located at 1423 Devonshire
Drive, Salt Lake City, Utah 84108, and its telephone number is (801) 582-2783.
MARKET PRICE OF AND DIVIDENDS ON CCI COMMON STOCK
There is no public trading market for CCI's Common Stock and none is
expected to develop. The approximate number of shareholders of record as of the
Record Date was 56. Upon the consummation of the Merger, the approximate number
of shareholders of record (assuming that no shareholders of the Operating
Companies exercise their dissenters' rights) will be 174.
In 1996, CCI declared and paid cash dividends of $.16 per share of CCI
Common Stock to shareholders. In 1997, CCI paid cash dividends of $.19 per share
of CCI Common Stock to its shareholders. Management anticipates that all cash
held by CCI, other than an amount of cash sufficient to satisfy CCI's tax
obligations upon the consummation of the Merger, will be distributed as a
dividend to its shareholders prior to the consummation of the Merger, but the
amount of the dividend has yet to be determined. Because CCI is a holding
company, any dividends declared and paid to its shareholders is dependent upon
the dividends CCI receives from its subsidiaries. The amount, type and frequency
of dividends paid by CCI on CCI Common Stock after consummation of the Merger
will be determined by the Board of Directors of CCI based on the results of
operations, financial condition and liquidity needs of CCI. The amount, type and
frequency of dividends paid by CCI to its shareholders after the Merger will not
be equivalent to the amount, type and frequency of dividends paid by CCI and the
Operating Companies prior to the Merger. See "Summary--Selected Financial
Information--Comparative Per Share Data".
CCI MANAGEMENT PRIOR TO CONSUMMATION OF THE MERGER
DIRECTORS
The names and ages of CCI's Directors prior to the consummation of the
Merger are as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION(S) WITH CCI (PRIOR TO THE MERGER) SINCE
--- ------------------------------------------ -----
<S> <C> <C> <C>
Carol C. Salisbury..................70 Director, President 1961
Ila C. Cook.........................77 Director, Vice President 1972
William R. Clyde....................79 Director, Vice President 1961
Louise C. Gammell...................73 Director, Secretary and Treasurer 1961
Paul B Clyde........................56 Director 1988
Richard C. Clyde....................62 Director 1997
</TABLE>
19
<PAGE> 38
Carol C. Salisbury has served as the Secretary and Treasurer of Beehive
Insurance since 1988. Ms. Salisbury has served on the Board of Directors of
Beehive Insurance since 1971 and on the Executive Committee of the Board of
Beehive Insurance since 1988. She holds a Bachelors degree in economics from the
University of Utah. Prior to becoming President of CCI, Ms. Salisbury was
Secretary and Treasurer of CCI for twenty-two years. Carol C. Salisbury is the
wife of David E. Salisbury, who is currently a Director of Clyde; a sister of
William R. Clyde, Ila C. Cook and Louise C. Gammell; and an aunt of Richard C.
Clyde, Paul B. Clyde, Wilford W. Clyde, Steven L. Clyde, David O. Cook, A. Ray
Gammell and B. Clyde Gammell.
Ila C. Cook has served as Vice President of CCI since 1988. She holds a
Bachelors degree from the University of Utah and a Masters degree from New York
University. Ila C. Cook is the wife of Vernon O. Cook, who is currently the
Chairman of the Board of Utah Service, the mother of David O. Cook, who is
currently the President, Chief Executive Officer and a Director of Utah Service;
the sister of William R. Clyde, Louise C. Gammell and Carol C. Salisbury; and an
aunt of Richard C. Clyde, Paul B. Clyde, Wilford W. Clyde, Steven L. Clyde, A.
Ray Gammell and B. Clyde Gammell.
William R. Clyde has served as Vice President of CCI since 1997. Mr.
Clyde retired from employment with Clyde in 1983 after working for over 45 years
as a superintendent, project manager and equipment manager for Clyde. Mr. Clyde
has served as the Secretary of Geneva Rock since 1969 and on the Boards of
Directors of Utah Service and Geneva Rock since 1954. William R. Clyde is the
father of Steven L. Clyde, who is currently the Project Superintendent and a
Director of Clyde, and the brother of Ila C. Cook, Louise C. Gammell and Carol
C. Salisbury; and an uncle of Richard C. Clyde, Paul B. Clyde, Wilford W. Clyde,
David O. Cook, A. Ray Gammell and B. Clyde Gammell.
Louise C. Gammell holds a Bachelors degree from the University of Utah.
Ms. Gammell has served on the Board of Directors of Utah Service since 1968.
Louise C. Gammell is the mother of A. Ray Gammell, who is currently a Director
of Geneva Rock, and of B. Clyde Gammell, who is currently the Vice President and
a Director of Beehive Insurance; the sister of William R. Clyde, Ila C. Cook and
Carol C. Salisbury; and an aunt of Richard C. Clyde, Paul B. Clyde, Wilford W.
Clyde, Steven L. Clyde and David O. Cook.
Paul B. Clyde has served as Vice President of Construction of Clyde
since 1992. Prior to that, he was Vice President of Marketing, Estimating and
Safety of Clyde from 1986 to 1992; Vice President of Marketing and Estimating
from 1983 to 1992; Chief Estimator from 1982 to 1983; and Project
Manager/Superintendent from 1969 to 1982. Mr. Clyde holds a B.S. degree in
construction engineering and management from Arizona State University. He is
responsible for field construction, estimating and bidding of all projects
performed by Clyde. Mr. Clyde has served on the Boards of Directors of Clyde and
Geneva Rock since 1971 and on the Board of Directors of Utah Service since 1987.
Paul B. Clyde is the brother of Wilford W. Clyde, who will become the Vice
President and Chief Operating Officer of CCI after the Merger, the President and
a Director of Geneva Rock, and a Director of Clyde and Beehive Insurance; and a
nephew of William R. Clyde, Ila C. Cook, Louise C. Gammell and Carol C.
Salisbury.
Richard C. Clyde is the third generation of the Clyde family to be
President and General Manager of Clyde, being named to that position in 1986.
Prior to that time, he was Vice President and Treasurer of Clyde from 1982 to
1986, and Project Manager/Superintendent from 1976 to 1982. Mr. Clyde holds a
B.S. degree from
20
<PAGE> 39
Brigham Young University. He serves on the National Board of Directors of the
American Road and Transportation Builders Association and is Director of the
Utah Highway Users Federation. Mr. Clyde has served on the Board of Directors of
Clyde since 1970, on the Board of Directors of Geneva Rock since 1971 and on the
Board of Directors of Beehive Insurance since 1987. Richard C. Clyde is the
father of Jeffrey R. Clyde, who is currently the Contracts Manager and a
Director of Clyde; and a nephew of William R. Clyde, Ila C. Cook, Louise C.
Gammell and Carol C. Salisbury.
EXECUTIVE OFFICERS
The names, ages and positions of CCI's executive officers prior to the
consummation of the Merger are as follows:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION(S) WITH CCI SINCE
--- ---------------------------- -----
<S> <C> <C> <C>
Carol C. Salisbury................................70 President 1997
Ila C. Cook.......................................77 Vice President 1988
William R. Clyde..................................79 Vice President 1997
Louise C. Gammell.................................73 Secretary and Treasurer 1997
</TABLE>
For a description of the business backgrounds of Carol C. Salisbury,
Ila C. Cook, William R. Clyde and Louise C. Gammell, see "CCI Management Prior
to Consummation of the Merger--Directors" above.
CCI MANAGEMENT UPON CONSUMMATION OF THE MERGER
DIRECTORS
The names and ages of CCI's Directors upon the consummation of the
Merger will be as follows:
<TABLE>
<CAPTION>
POSITION(S) WITH CCI DIRECTOR
NAME AGE (UPON CONSUMMATION OF MERGER) SINCE
- ---- --- ----------------------------- -----
<S> <C> <C>
Carol C. Salisbury..................70 Director, Secretary and Treasurer 1961
Ila C. Cook.........................77 Director 1972
William R. Clyde....................79 Director 1961
Louise C. Gammell...................73 Director 1961
Paul B. Clyde.......................56 Director 1988
Richard C. Clyde....................62 Director, President and Chief Executive Officer 1997
H. Michael Clyde....................47 Director (1)
Tawna Clyde Smith...................41 Director (1)
</TABLE>
- ------------------------
(1) H. Michael Clyde and Tawna Clyde Smith have agreed to serve as Directors
upon the consummation of the Merger.
For a description of the business backgrounds of Carol C. Salisbury,
Ila C. Cook, Louise C. Gammell, Paul B. Clyde and Richard C. Clyde, see "CCI
Management Prior to Consummation of the Merger--Directors" above.
H. Michael Clyde has agreed to become a Director of CCI upon
consummation of the Merger. Since 1984, Mr. Clyde has been a lawyer with the law
firm of Brown & Bain, P.A. ("Brown & Bain") in Phoenix, Arizona, where he is a
general litigator practicing primarily in the areas of securities, antitrust and
professional liability. Neither Mr. Clyde nor Brown & Bain has provided legal
services to CCI or to any other Constituent Corporation, nor has Mr. Clyde or
Brown & Bain provided any advice or services in connection with any of the
transactions discussed in, or contemplated by, this Proxy Statement/Prospectus.
Mr. Clyde received a J.D. degree from the University of Utah. H. Michael Clyde
is son of Hal M. Clyde, who is currently a Director of Utah Service and Beehive
Insurance; and a nephew of Norman D. Clyde, who is currently a Director of Utah
Service, Clyde, Geneva Rock, and Beehive Insurance.
Tawna Clyde Smith has agreed to become a Director of CCI upon
consummation of the Merger. Ms. Smith has not been involved in business during
the last five years. Ms. Smith earned an R.N. degree from Brigham Young
University. She worked as a secretary and bookkeeper for Geneva Rock from 1974
to 1976 and as an office manager at a medical clinic from 1982 to 1985. Tawna
Clyde Smith is the daughter of Norman D Clyde, who is currently a Director of
Utah Service, Clyde, Geneva Rock, and Beehive Insurance; and a niece of Hal M.
Clyde, who is currently a Director of Utah Service and Beehive Insurance.
21
<PAGE> 40
EXECUTIVE OFFICERS
The names, ages and positions of CCI's executive officers upon the
consummation of the Merger will be as follows:
<TABLE>
<CAPTION>
POSITION(S) WITH CCI
NAME AGE (UPON CONSUMMATION OF MERGER)
- ---- --- ------------------------------
<S> <C>
Richard C. Clyde..................................62 President and Chief Executive Officer
Wilford W. Clyde..................................45 Vice President and Chief Operating Officer
Carol C. Salisbury................................70 Secretary and Treasurer
</TABLE>
For a description of the business backgrounds of Richard C. Clyde and
Carol C. Salisbury, see "CCI Management Prior to Consummation of the
Merger--Directors" above.
Wilford W. Clyde has been the President and General Manager of Geneva
Rock since 1988. He has also been the Chairman of the Board (since 1996) and
President (since 1997) of Geneva Rock's wholly owned subsidiary, J & J Building
Supply, Inc. Mr. Clyde graduated form Brigham Young University. Mr. Clyde also
has served on the Board of Directors of Clyde since 1994, on the Board of
Directors of Geneva Rock since 1978 and on the Board of Directors of Beehive
Insurance since 1988. Wilford W. Clyde is the brother of Paul B. Clyde, who is
currently Vice President of Construction of Clyde and a Director of Clyde, CCI,
Geneva Rock and Utah Service; and a nephew of William R. Clyde, Ila C. Cook,
Louise C. Gammell and Carol C. Salisbury.
COMMITTEES OF CCI BOARD
The Board of Directors of CCI currently has no committee and no plans
to establish any committee.
ATTENDANCE AT CCI BOARD MEETINGS
The Board of Directors held one meeting in 1997, and all of the
Directors attended this meeting.
CCI EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
Previously, none of the executive officers of CCI have received any
compensation for their services as such. It is anticipated that after the
consummation of the Merger, none of the executive officers of CCI will receive
compensation that exceeds $100,000 per year except for Richard C. Clyde, who
will be the President and Chief Executive Officer of CCI, and Wilford W. Clyde,
who will be the Vice President and Chief Operating Officer of CCI. Richard C.
Clyde will receive an aggregate of $110,000 salary per year, plus such bonus as
may be determined by the Board of Directors of CCI, in accordance with the
provisions of an employment agreement to be entered into between CCI and Richard
C. Clyde. See "Clyde Companies, Inc.--Employment Agreement" and "Interests of
Certain Persons in the Merger - Employment Agreement". Wilford W. Clyde will
receive aggregate compensation of $110,000 (including amounts paid to him by
subsidiaries of CCI) plus such bonus as may be determined by the Board of
Directors of CCI.
COMPENSATION OF DIRECTORS OF CCI
Prior to the consummation of the Merger, CCI Directors have received
annual cash compensation of $1,000 for serving on the Board of Directors of CCI.
It is anticipated that after the consummation of the Merger, Directors will
continue to receive annual cash compensation of $1,000 for serving on the Board
of Directors of CCI.
22
<PAGE> 41
DEFINED BENEFIT RETIREMENT PLAN
Clyde, Geneva and Beehive Insurance have a defined benefit pension
plan, the Retirement Plan for Employees of W.W. Clyde & Co., Geneva Rock
Products, Inc. and Beehive Insurance Agency (the "Plan"), which is qualified
under Section 401 of the Internal Revenue Code (the "Code") and that will
continue in force after the Merger. The Plan became effective on April 1, 1965.
The annual pension benefit under the plan is determined by the number of years
of employment multiplied by a percentage of the participant's average monthly
compensation for the five highest consecutive years of participation. Each of
the executive officers listed under the heading "Summary of Cash and Certain
Other Compensation" above is a participant in the Plan. The annual benefits
payable at retirement under the Plan are calculated as 1.800% of the
participant's average monthly compensation multiplied by the participant's total
years of employment with the applicable company.
The table below may be used to calculate the approximate annual
benefits payable at retirement at age 65 under the Plan to individuals in the
specified average annual compensation and years of service classifications:
PENSION TABLE
Years of Service
<TABLE>
<CAPTION>
Average
Compensation 10 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C>
$60,000 $10,800 $16,200 $21,600 $27,000 $32,400 $37,800
70,000 12,600 18,900 25,200 31,500 37,800 44,100
80,000 14,400 21,600 28,800 36,000 43,200 50,400
90,000 16,200 24,300 32,400 40,500 48,600 56,700
100,000 18,000 27,000 36,000 45,000 54,000 63,000
110,000 19,800 29,700 39,600 49,500 59,400 69,300
120,000 21,600 32,400 43,200 54,000 64,800 75,600
130,000 23,400 35,100 46,800 58,500 70,200 81,900
140,000 25,200 37,800 50,400 63,000 75,600 88,200
</TABLE>
The salary amounts listed under the heading "Summary of Cash and
Certain Other Compensation" above qualify under the Plan. The present credited
years of service for the officers listed under the heading "Summary of Cash and
Certain Other Compensation" above are as follows: Richard C. Clyde, 33 years;
and Wilford W. Clyde, 21 years.
STOCK REDEMPTION PLAN
The Board of Directors of CCI has adopted a Stock Redemption Plan, a
copy of which is attached as Annex B hereto, pursuant to which it is anticipated
that CCI will make funds available for the redemption of a limited number of
shares of CCI Common Stock each year beginning in 1999, on a date to be
established each year by the Board of Directors (the "Redemption Date"). Each
year commencing in 1999, as soon as practicable following the issuance by CCI's
independent auditors of their report regarding the consolidated financial
statements of CCI and its subsidiaries for the prior year, the Board of
Directors will (i) cause an appraisal (or an update of a prior appraisal) of CCI
to be completed by an independent individual or firm selected by the Board of
Directors which will set forth a determination of the total fair market value of
CCI as of the last day of the prior year (the "Appraisal Value"), and (ii)
determine the amount which shall be made available, if any, by CCI on the
Redemption Date to fund the redemption of shares of CCI Common Stock (the
"Redemption Fund"). The price to be paid to shareholders for each share of
redeemed CCI Common Stock (the "Redemption Price") will be an amount equal to
the Appraisal Value divided by the number of shares of CCI Common Stock
outstanding on the last day of the prior year, discounted by 25% (reflecting a
lack of marketability and minority interest). The Redemption Fund (a) for the
years 1999 through 2003 will be an amount which is greater than or equal to 7%
and less than or equal to 15% of the net earnings of CCI (after taxes) for the
prior year, and (b) for the years 2004 and thereafter will be an amount which is
greater than or equal to 5% and less than or equal to 10% of the net earnings of
CCI (after taxes) for the prior year. All shares of CCI Common Stock will be
eligible for redemption subject to and in accordance
23
<PAGE> 42
with the terms of the Stock Redemption Plan. In the event that the number of
shares offered for redemption by shareholders is greater than the number of
shares that can be redeemed from the Redemption Fund, such shares will be
redeemed on a pro rata basis. Unused portions of the Redemption Fund will not be
carried forward to increase the Redemption Fund in future years. The Stock
Redemption Plan will be administered and interpreted by the Board of Directors
of CCI in its sole and absolute discretion, and the Stock Redemption Plan may be
amended or terminated, and/or the Redemption for any particular year may be
canceled, upon a vote of more than 75% of the Directors of CCI.
VOTING AGREEMENT
In anticipation of the Merger, the current shareholders of CCI (the
"Original CCI Shareholders") entered into a Voting Agreement dated as of
November 14, 1997 (the "Voting Agreement") for the purpose of controlling the
voting of the 2,303,920 shares of CCI Common Stock owned by the Original CCI
Shareholders on the Record Date, representing approximately 33.20% of the shares
of CCI Common Stock to be outstanding upon consummation of the Merger (the
"Voting Agreement Shares"). Pursuant to the Voting Agreement, William R. Clyde,
Ila C. Cook, Louise C. Gammell, Carol C. Salisbury, Richard C. Clyde and Paul B.
Clyde (the "Voting Committee Members") have been appointed to act as a committee
(the "Voting Committee") to determine how the Voting Agreement Shares will be
voted on each matter to be voted upon by the shareholders of CCI. Each Voting
Committee Member represents the other members of his or her family who are
Original CCI Shareholders.
Pursuant to the Voting Agreement, each Original CCI Shareholder has
granted to the Voting Committee an irrevocable proxy, for a period of 10 years
from November 13, 1997 (or until such time as the Voting Agreement is
terminated), authorizing the Voting Committee to vote such Shareholder's Voting
Agreement Shares in accordance with the Voting Agreement. However, under the
Voting Agreement, the Original CCI Shareholders retain their right to vote any
shares of CCI Common Stock which they own, other than the Voting Agreement
Shares, as they wish. The Voting Agreement will remain in effect for 10 years,
unless earlier terminated because (i) the Voting Committee Members unanimously
agree in writing to terminate the Voting Agreement, (ii) CCI is in bankruptcy or
receivership or is dissolved, (iii) CCI ceases it business, (iv) CCI enters into
an underwriting agreement with respect to a public offering of CCI Common Stock
in excess of $30,000,000, (v) CCI sells all or substantially all of its assets
or is the non-surviving corporation in a merger, or (vi) there is only one CCI
Shareholder bound by the terms of the Voting Agreement.
The Voting Agreement provides that an Original CCI Shareholder may not
sell, transfer or otherwise dispose of any Voting Agreement Shares, except to
(i) a spouse of such Original CCI Shareholder, (ii) a child of such Original CCI
Shareholder or such spouse, (iii) a trustee in trust for the benefit of such
Original CCI Shareholder, such spouse or such child, (iv) CCI in the event such
Original CCI Shareholder owns no CCI Common Stock other than such Voting
Agreement Shares and (v) a third party upon obtaining the prior written consent
of the Committee Members. All transferees of the Voting Agreement Shares will be
required to enter into the Voting Agreement and to receive and hold the Voting
Agreement Shares subject to the terms and provisions of the Voting Agreement.
EMPLOYMENT AGREEMENT
It is contemplated that upon consummation of the Merger, CCI will enter
into an employment agreement with Richard C. Clyde pursuant to which Richard C.
Clyde will be employed as President and Chief Executive Officer for a term of
three years from and after the 1998 annual shareholders meeting of CCI. The
employment agreement will provide for a minimum annual base salary of $110,000
for Richard C. Clyde and a discretionary annual incentive bonus in an amount as
the Board of Directors of CCI may determine. The employment agreement will also
provide that if Richard C. Clyde is terminated by CCI prior to the end of the
term of employment, other than for cause, death or disability, CCI will pay
Richard C. Clyde an amount equal to his annual salary multiplied by the number
of years remaining under the term of the employment agreement. See also "The
Merger--Interests of Certain Persons in the Merger--Employment Agreement".
24
<PAGE> 43
PRINCIPAL SHAREHOLDERS OF CCI PRIOR TO CONSUMMATION OF THE MERGER
The following table sets forth certain information regarding the
beneficial ownership of CCI Common Stock as of the Record Date, after giving
effect to the 40:1 split shares of CCI Common Stock which occurred in November
1997, as to (i) each person who is known by CCI to own beneficially 5% or more
of the outstanding shares of Common Stock, (ii) each Director of CCI, (iii) each
executive officer and (iv) all Directors and executive officers as a group.
Except as otherwise noted, CCI believes the persons listed below have sole
investment and voting power with respect to the CCI Common Stock that they are
deemed to beneficially own.
<TABLE>
<CAPTION>
COMMON STOCK
------------
SHARES APPROXIMATE
BENEFICIALLY PERCENTAGE
------------ ----------
NAME AND ADDRESS OWNED(1) OWNED(1)
<S> <C> <C>
Louise C. Gammell (2)...................................................................269,120 11.68%
1100 E. 400 S.
Springville, UT 84663
Kenneth L. and Carma C. Russell (3).....................................................215,600 9.36%
1869 East Michigan Avenue
Salt Lake City, UT 84108
William R. Clyde(4).....................................................................180,160 7.82%
2000 Canyon Road
Springville, UT 84663
INVO, L.C.(5)...........................................................................135,480 5.88%
2711 Sherwood Dr.
Salt Lake City, UT 84108
Carol C. Salisbury......................................................................122,360 5.31%
1423 Devonshire Drive
Salt Lake City, UT 84108
Richard C. and Patricia Clyde(6)........................................................115,200 5.00%
776 South 600 West
Orem, UT 84057
Paul B. Clyde(7).........................................................................72,320 3.14%
3308 N. 350 E.
Provo, UT 84601
Ila C. Cook..................................................................................0 *
2711 Sherwood Dr.
Salt Lake City, UT 84108
All Directors and executive officers as a group (6 people)..............................759,160 32.95%
</TABLE>
* Less than 1%
(1) Applicable percentage of ownership is based on 2,303,920 shares of
Common Stock outstanding as of the Record Date, after giving effect to the
40:1 stock split in November 1997. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission (the
"Commission"), and includes voting and investment power with respect to
such shares.
(2) Includes 222,720 shares owned directly by Louise C. Gammell and 46,400
shares owned indirectly by Ms. Gammell as custodian for her son, John Scott
Gammell.
(3) Includes 54,400 shares owned directly by Carma C. Russell and 161,200
shares jointly owned by Kenneth L. and Carma C. Russell (husband and wife).
25
<PAGE> 44
(4) Includes 1,080 shares owned indirectly by William R. Clyde through the
William R. Clyde Family Trust and 179,080 shares owned indirectly by Mr.
Clyde through the Reklaw & Co. Trust. Mr. Clyde does not own any shares of
CCI Common Stock directly.
(5) The following individuals are shareholders, Directors and/or officers
of INVO, L.C. and, therefore, may each be deemed to beneficially own the
135,480 shares of CCI that are owned by INVO, L.C.: Bruce V. Cook, Glen C.
Cook, David O. Cook (Director, President and Chief Executive Officer of
Utah Service), Nan A. Oblad, J. Phillip Cook, Catherine C. Rasband and E.
Christine Christensen.
(6) Includes 8,000 shares owned directly by Richard C. Clyde, 81,600 shares
jointly owned by Richard C. and Patricia Clyde (husband and wife), 12,800
shares owned indirectly by Richard C. Clyde through the Richard C. Clyde
Trust and 12,800 shares owned indirectly by Patricia Clyde through the
Patricia Clyde Trust.
(7) Includes 40,000 shares owned directly by Paul B. Clyde and 35,200
shares jointly owned by Paul B. and Jeanette P. Clyde (husband and wife).
PRINCIPAL SHAREHOLDERS OF CCI UPON CONSUMMATION OF THE MERGER
The following table sets forth certain information regarding the
beneficial ownership of CCI Common Stock after giving effect to the Merger for
(i) each person who will own beneficially 5% or more of the outstanding shares
of CCI Common Stock, (ii) each person to become a Director of CCI, (iii) each
person to become an executive officer of CCI and (iv) all persons described in
clauses (ii) and (iii) above as a group. Except as otherwise noted, CCI believes
the persons listed below have sole investment and voting power with respect to
the CCI Common Stock that they are deemed to beneficially own.
<TABLE>
<CAPTION>
COMMON STOCK
------------
SHARES APPROXIMATE
BENEFICIALLY PERCENTAGE
OWNED(1) OWNED(1)
-------- --------
NAME AND ADDRESS
<S> <C> <C>
Louise C. Gammell (2).................................................................2,673,412 38.53%
1100 E. 400 S.
Springville, UT 84663
Richard C. Clyde(3)...................................................................2,524,814 36.39%
776 South 600 West
Orem, UT 84057
Carol C. Salisbury(4).................................................................2,519,909 36.32%
1423 Devonshire Drive
Salt Lake City, UT 84108
William R. Clyde(5)...................................................................2,496,505 35.98%
2000 Canyon Road
Springville, UT 84663
Paul B. Clyde(6)......................................................................2,481,924 35.77%
3308 N. 350 E.
Provo, UT 84601
Ila C. Cook(7)........................................................................2,321,319 33.45%
2711 Sherwood Dr.
Salt Lake City, UT 84108
</TABLE>
26
<PAGE> 45
(7) Includes 2,303,920 shares controlled by the Voting Committee, which
shares Ms. Cook may be deemed to beneficially own as a result of her
membership on the Voting Committee, 479 shares owned directly by Ila C.
Cook, 11,318 shares owned indirectly by Ila C. Cook through the Ila C. Cook
Family Trust and 5,602 shares owned indirectly by Ms. Cook's husband,
Vernon O. Cook, through the Vernon O. Cook Family Trust.
(8) Includes 120,640 shares owned directly by Wilford W. Clyde and 63,033
shares owned jointly by Wilford W. and Natalie Clyde (husband and wife).
(9) Pursuant to the Voting Agreement among the Original CCI Shareholders,
each Original CCI Shareholder has granted to the Voting Committee,
comprised of William R. Clyde, Ila C. Cook, Louise C. Gammell, Carol C.
Salisbury, Richard C. Clyde and Paul B. Clyde, the right to vote such
shares on each matter to be voted upon by the shareholders of CCI. See
"Clyde Companies, Inc.--Voting Agreement."
(10) In computing the aggregate number of shares owned by officers and
Directors as a group, the shares controlled by the Voting Committee, which
shares certain of the officers and Directors may be deemed to beneficially
own, are counted only once.
SELECTED FINANCIAL INFORMATION FOR CCI
The following selected statement of earnings and balance sheet data as
of and for each of the periods in the three year period ended December 31, 1997
are derived from the financial statements of CCI which have been audited by
Grant Thornton. The selected financial data as of and for each of the periods in
the two year period ended December 31, 1994 are unaudited, but, in the opinion
of management, the unaudited financial statements reflect all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of the information included therein. The financial data for CCI should be read
in conjunction with the Financial Statements and Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of CCI"
included elsewhere herein.
27
<PAGE> 46
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of earnings data:
Revenue $ 487 $ 404 $ 530 $ 508 $ 492
General and administrative 8 6 7 8 7
---------- ---------- ---------- ---------- ----------
Operating income 479 398 523 500 485
Other income (expense), net 2,377 2,504 3,414 2,472 2,153
Income taxes 928 967 1,321 963 998
---------- ---------- ---------- ---------- ----------
Net earnings $ 1,928 $ 1,935 $ 2,616 $ 2,009 $ 1,640
========== ========== ========== ========== ==========
*Earnings per common share-basic $ 0.84 $ 0.84 $ 1.14 $ 0.87 $ 0.71
*Weighted average shares 2,303,920 2,303,920 2,303,920 2,303,920 2,303,920
outstanding
Balance sheet data:
Current assets $ 25 $ 31 $ 40 $ 39 $ 39
Current liabilities 338 5 20 19 16
Total assets 27,797 25,088 22,593 19,180 16,725
Total liabilities 10,377 9,158 8,240 6,949 6,047
Stockholders' equity 17,417 15,930 14,353 12,213 10,678
Dividends per common share 0.19 0.16 0.21 0.21 0.20
</TABLE>
* Earnings per common share - basic and dividends per common share are based
upon the weighted average number of common shares outstanding during the
period presented after giving retroactive effect to all periods presented
for the subsequent 40:1 stock split effected November 13, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF CCI
CCI is a holding company for shares of stock of Clyde, Geneva Rock,
Utah Service and Beehive Insurance and it has no operations of its own. Its
assets consist solely of cash and shares of common stock of Clyde (31,935 shares
or 33.78% of the outstanding shares), Geneva Rock (4,725 shares or 21.67% of the
outstanding shares), Utah Service (1,698 shares or 31.37% of the outstanding
shares), and Beehive Insurance (3,700 shares or 17.22% of the outstanding
shares). CCI's income consists of the dividends it receives from such companies,
and the interest it receives on its cash deposits. All cash held by CCI, other
than an amount of cash sufficient to pay for the expenses of the Merger and to
allow CCI to satisfy its tax obligations upon the consummation of the Merger,
will be distributed as a dividend to its shareholders prior to the consummation
of the Merger. It is anticipated that upon the
28
<PAGE> 47
consummation of the Merger, CCI will continue to be a holding company with no
operations of its own, and that business operations will be conducted by its
wholly owned subsidiaries, Clyde, Geneva Rock, Utah Service and Beehive
Insurance. Based on the December 31, 1997 pro forma financial statements,
management believes the consolidated company will have adequate cash and cash
equivalents to meet CCI's capital needs in the foreseeable future.
Commencing in 1999, CCI will make funds available for the redemption of
a limited number of shares of CCI Common Stock pursuant to the Stock Redemption
Plan described above under "Clyde Companies, Inc.--Stock Redemption Plan". The
Redemption Fund (a) for the years 1999 through 2003 will be an amount which is
greater than or equal to 7% and less than or equal to 15% of the net earnings of
CCI (after taxes) for the prior year, and (b) for the years 2004 and thereafter
will be an amount which is greater than or equal to 5% and less than or equal to
10% of the net earnings of CCI (after taxes) for the prior year. Management
believes the limitation of the Redemption Fund to an amount not greater than
15%, for the years 1999 through 2003, and 10%, for the years 2004 and
thereafter, of the net earnings of CCI (after taxes) for the prior year is a
limitation sufficient to protect the liquidity requirements of CCI. For example,
pro forma net earnings for the year ended December 31, 1997 (after income
taxes), as set forth on the CCI Unaudited Pro Forma Combined Statement of
Earnings, are $1,928,000. If the Merger had been consummated prior to 1997, the
Redemption Fund to be established in the year 1998, based upon such pro forma
1997 net earnings (after income taxes), would have been a minimum of $134,960
and a maximum of $289,200. Management believes a Stock Redemption Fund that is
so limited would not adversely impact CCI's liquidity.
CCI PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma combined financial information gives
pro forma effect to the Merger, giving effect to the pro forma adjustments
described in "Notes to Unaudited Combined Financial Statements" below. The Pro
Forma Combined Financial Information (Unaudited) and related notes are provided
for informational purposes only. The CCI Unaudited Pro Forma Combined Balance
Sheet and the CCI Unaudited Pro Forma Combined Statements of Earnings included
below are not necessarily indicative of the financial position or results that
would have occurred had the events referred to above been consummated on the
dates for which the consummation of such events is being given effect, nor is it
necessarily indicative of the future financial position or results of the
proposed entity. The Pro Forma Financial Information should be read in
conjunction with the historical financial statements of CCI, Clyde, Geneva Rock,
Utah Service and Beehive Insurance, and the related notes thereto, which are
included elsewhere in this Proxy Statement/Prospectus. See "Index to Financial
Statements."
29
<PAGE> 48
CCI Unaudited Pro Forma Combined Balance Sheet
December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Geneva Utah Beehive Eliminating
CCI Clyde Rock Service Insurance Combined Entries
------- ------- ------- ------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 14 $ 3,805 $ 7,205 $ 277 $ 425 $ 11,726 $ --
Interest bearing deposits in banks -- 7,230 -- -- -- 7,230 --
Receivables - -- 5,700 25,026 1,138 172 32,036 (536)(2)
Costs and estimated earnings in
excess of billings, contracts in
progress - -- 843 -- -- -- 843 --
Inventories - -- 169 7,024 1,705 -- 8,898 (19)(3)
Other current assets 9 14 298 10 -- 331 --
------- ------- ------- ------- --------- -------- --------
Total current assets 23 17,761 39,553 3,130 597 61,064 (555)
------- ------- ------- ------- --------- -------- --------
Property, plant, and equipment, net -- 8,672 39,882 1,211 55 49,820 --
Investments - affiliates 27,433 22,513 -- -- -- 49,946 (49,946)(1)
Intangible assets -- -- 2,257 -- -- 2,257 --
Other assets 338 93 555 200 46 1,232 --
------- ------- ------- ------- --------- -------- --------
$27,794 $49,039 $82,247 $ 4,541 $ 698 $164,319 $(50,501)
======= ======= ======= ======= ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Combined
Before Purchase
Purchase Adjust- Combined
Adjustments ments(5) Pro Forma
----------- ------- --------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 11,726 $ -- $ 11,726
Interest bearing deposits in banks 7,230 7,230
Receivables - 31,500 -- 31,500
Costs and estimated earnings in
excess of billings, contracts in
progress - 843 -- 843
Inventories - 8,879 -- 8,879
Other current assets 331 -- 331
-------- ------- --------
Total current assets 60,509 -- 60,509
-------- ------- --------
Property, plant, and equipment, net 49,820 24,078 73,898
Investments - affiliates -- -- --
Intangible assets 2,257 14,885 17,142
Other assets 1,232 -- 1,232
-------- ------- --------
$113,818 $38,963 $152,781
======== ======= ========
</TABLE>
30
<PAGE> 49
CCI Unaudited Pro Forma Combined Balance Sheet - Continued
December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Geneva Utah Beehive Eliminating
CCI Clyde Rock Service Insurance Combined Entries
------- ------- -------- ------- --------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term
obligations $ -- $ -- $ 2,498 $ -- $ -- $ 2,498 $ --
Accounts payable -- 1,338 4,279 380 -- 5,997 (198)(2)
Billings in excess of costs and
estimated earnings on contracts
in progress -- 137 -- -- -- 137 --
Income taxes payable -- 306 -- -- 21 327 (121)(1)
Accrued liabilities -- 283 2,092 135 281 2,791 --
------- ------- ------- ------ ------- -------- ---------
Total current liabilities -- 2,064 8,869 515 302 11,750 (319)
------- ------- ------- ------ ------- -------- ---------
Long-term obligations 338 -- 5,486 -- -- 5,824 (338)(2)
Accrued pension expense -- 170 234 114 -- 518 --
Deferred income taxes 10,039 9,775 2,912 -- -- 22,726 (18,545)(1)
------- ------- ------- ------ ------- -------- ---------
10,377 9,945 8,632 114 -- 29,068 (18,883)
EQUITY
Common stock, at par 707 1,000 218 54 22 2,001 73,518 (1)(4)
Less: treasury stock -- (538) -- -- -- (538) 538 (1)(4)
Additional paid-in capital -- -- 29 533 3 565 (565)(1)(4)
Retained earnings 16,710 36,568 64,499 3,352 371 121,500 (104,790)(1)
Equity minimum pension -- -- (27) -- (27) --
------- ------- ------- ------ ------- -------- ---------
17,417 37,030 64,746 3,912 396 123,501 (31,299)
------- ------- ------- ------ ------- -------- ---------
$27,794 $49,039 $82,247 $4,541 $ 698 $164,319 $ (50,501)
======= ======= ======= ====== ======= ======== =========
</TABLE>
<TABLE>
<CAPTION>
Combined
Before Purchase
Purchase Adjust- Combined
Adjustments ments(5) Pro Forma
----------- ------- ---------
<S> <C> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term
obligations $ 2,498 $ -- $ 2,498
Accounts payable 5,799 -- 5,799
Billings in excess of costs and
estimated earnings on contracts
in progress 137 -- 137
Income taxes payable 206 -- 206
Accrued liabilities 2,791 -- 2,791
-------- ------- --------
Total current liabilities 11,431 -- 11,431
-------- ------- --------
Long-term obligations 5,486 -- 5,486
Accrued pension expense 518 -- 518
Deferred income taxes 4,181 10,523 14,704
-------- ------- --------
10,185 10,523 20,708
EQUITY
Common stock, at par 75,519 28,440 103,959
Less: treasury stock -- -- --
Additional paid-in capital -- -- --
Retained earnings 16,710 -- 16,710
Equity minimum pension (27) -- (27)
-------- ------- --------
92,202 28,440 120,642
-------- ------- --------
$113,818 $38,963 $152,781
======== ======= ========
</TABLE>
31
<PAGE> 50
CCI Unaudited Pro Forma Combined Statement of Earnings
Year Ended December 31, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Geneva Utah Beehive Eliminating
CCI Clyde Rock Service Insurance Combined Entries
------- ------- -------- ------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $ 487 $16,906 $131,107 $12,045 $ 607 $ 161,152 $(2,679)(3)
Cost of goods sold -- 15,002 109,172 9,858 -- 134,032 (1,795)(3)
------ ------- -------- ------- ------ --------- -------
Gross margin 487 1,904 21,935 2,187 607 27,120 (884)(2)
General and administrative expenses 8 1,488 9,546 1,709 262 13,013 (300)(3)
------ ------- -------- ------- ------ --------- -------
Earnings from operations 479 416 12,389 478 345 14,107 (584)
------ ------- -------- ------- ------ --------- -------
Other income (expense)
Income from long-term
investment -- -- 89 -- -- 89 --
Interest income, net 2 607 -- (10) 23 622 --
Equity in net earnings of
affiliate 2,375 2,859 -- -- -- 5,234 (5,234)
Other, net -- 294 703 193 1 1,191 -- (1)
------ ------- -------- ------- ------ --------- -------
2,377 3,760 792 183 24 7,136 (5,234)
------ ------- -------- ------- ------ --------- -------
Earnings before income taxes 2,856 4,176 13,181 661 369 21,243 (5,818)
Income taxes 928 1,498 4,959 227 137 7,749 (1,896)
------ ------- -------- ------- ------ --------- -------
Net earnings $1,928 $ 2,678 $ 8,222 $ 434 $ 232 $ 13,494 $(3,922)
====== ======= ======== ======= ====== ========= =======
</TABLE>
<TABLE>
<CAPTION>
Combined
Before Purchase
Purchase Adjust- Combined
Adjustments ments(5) Pro Forma
----------- ------- ---------
<S> <C> <C> <C>
Operating revenues $158,473 $ -- $158,473
Cost of goods sold 132,237 3,359 135,596
-------- ------- --------
Gross margin 26,236 3,359 22,877
General and administrative expenses 12,713 1,090 13,803
-------- ------- --------
Earnings from operations 13,523 (4,449) 9,074
-------- ------- --------
Other income (expense)
Income from long-term
investment 89 -- 89
Interest income, net 622 -- 622
Equity in net earnings of
affiliate -- -- --
Other, net 1,191 -- 1,191
-------- ------- --------
1,902 -- 1,902
-------- ------- --------
Earnings before income taxes 15,425 (4,449) 10,976
Income taxes 5,853 (1,386) 4,467
-------- ------- --------
Net earnings $ 9,572 $(3,063) $ 6,509
======== ======= ========
</TABLE>
32
<PAGE> 51
CCI Unaudited Pro Forma Combined Statement of Earnings
Year Ended December 31, 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
Geneva Utah Beehive Eliminating
CCI Clyde Rock Service Insurance Combined Entries
------- ------- -------- ------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $ 404 $19,056 $116,349 $ 13,108 $ 578 $ 149,495 $ (2,192)(3)
Cost of goods sold -- 17,116 98,908 10,915 -- 126,939 (1,788)(3)
------ ------- -------- -------- ------ --------- --------
Gross margin 404 1,940 17,441 2,193 578 22,556 (404)
General and administrative expenses 6 1,443 4,979 1,628 244 8,300 --
------ ------- -------- -------- ------ --------- --------
Earnings from operations 398 497 12,462 565 334 14,256 (404)
Other income (expense)
Income from long-term
investment -- -- 29 -- -- 29 --
Interest income, net 1 641 -- (28) 24 638 --
Equity in net earnings of
affiliate 2,503 2,932 -- -- -- 5,435 (5,435)(1)
Other, net -- 127 752 142 5 1,026 --
------ ------- -------- -------- ------ --------- --------
2,504 3,700 781 114 29 7,128 (5,435)
------ ------- -------- -------- ------ --------- --------
Earnings before income taxes 2,902 4,197 13,243 679 363 21,384 (5,839)
------ ------- -------- -------- ------ --------- --------
Income taxes 967 1,510 4,809 258 129 7,673 (2,006)(1)
------ ------- -------- -------- ------ --------- --------
Net earnings $1,935 $ 2,687 $ 8,434 $ 421 $ 234 $ 13,711 $ (3,833)
====== ======= ======== ======== ====== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Combined
Before Purchase
Purchase Adjust- Combined
Adjustments ments(5) Pro Forma
----------- ------- ---------
<S> <C> <C> <C>
Operating revenues $147,303 $ -- $147,303
Cost of goods sold 125,151 4,599 129,750
-------- ------- --------
Gross margin 22,152 4,599 17,553
General and administrative expenses 8,300 1,141 9,441
-------- ------- --------
Earnings from operations 13,852 (5,740) 8,112
Other income (expense)
Income from long-term
investment 29 -- 29
Interest income, net 638 -- 638
Equity in net earnings of
affiliate -- -- --
Other, net 1,026 -- 1,026
-------- ------- --------
1,693 -- 1,693
-------- ------- --------
Earnings before income taxes 15,545 (5,740) 9,805
-------- ------- --------
Income taxes 5,667 (1,855) 3,812
-------- ------- --------
Net earnings $ 9,878 $(3,885) $ 5,993
======== ======= ========
</TABLE>
33
<PAGE> 52
Notes to Unaudited Pro Forma Combined Financial Statements
1. Represents the elimination of Clyde's investment in Geneva Rock (34.77%)
and the elimination of CCI's investment in Clyde (33.78%), Geneva Rock
(21.67%), Utah Service (31.37%) and Beehive Insurance (17.22%), including
related deferred income taxes.
2. Represents the elimination of affiliate receivables/payables.
3. Represents the elimination of affiliate revenue/expenses.
4. Represents the recapitalization of CCI incorporating the change from $10
par value Common Stock to no par Common Stock.
5. The Merger will be accounted for using the "purchase" method of accounting
with CCI as the acquiror. The "purchase" method requires that the shares
CCI acquires be recorded at fair market value. Fair market value was
determined by HVA, as discussed under "The Merger - Valuation Reports for
Operating Companies by Financial Advisor, Houlihan-Valuation Advisors". The
difference between the carrying basis and the fair value of the assets and
liabilities are adjusted for in the column titled "Purchase Adjustments".
The portion of the carrying value versus book value that was adjusted for
each Operating Company is as disclosed in the following tables.
The net equity allocation from the purchase adjustments effect of the
Merger relates to each Operating Company at December 31, 1997, as follows:
<TABLE>
<CAPTION>
Percent of Net
Company shares acquired equity
<S> <C> <C>
Clyde 66.2% $ 3,639
Geneva Rock 66.6% 33,079
Utah Service 68.6% 652
Beehive Insurance 82.8% 1,593
---------
Net equity effect $ 38,963
=========
</TABLE>
The net earnings allocation from the purchase adjustments effect of the
merger relates to each company for the year ended December 31, 1997, as follows:
<TABLE>
<CAPTION>
Percent of Net
Company shares acquired earnings
<S> <C> <C>
Clyde 66.2 $ 399
Geneva Rock 66.6 2,511
Utah Service 68.6 51
Beehive Insurance 82.8 102
-------
1997 Net Earnings effect $ 3,063
=======
</TABLE>
The net earnings allocation from the purchase adjustments effect of the
merger relates to each company for the year ended December 31, 1996, as follows:
<TABLE>
<CAPTION>
Percent of Net
Company shares acquired earnings
<S> <C> <C>
Clyde 66.2 $ 422
Geneva Rock 66.6 3,307
Utah Service 68.6 64
Beehive Insurance 82.8 92
------
1996 Net Earnings effect $3,885
======
</TABLE>
34
<PAGE> 53
CLYDE
BACKGROUND
Clyde was founded in approximately 1926 by W. W. Clyde and was
incorporated in Utah in 1933. Since that time, Clyde has been involved in the
construction of interstate highways, bridges, dams, airports, mines, golf
courses, environmental reclamation projects, large site work/site preparation,
and other types of large construction projects in the Intermountain region
requiring massive earth moving and professional management. Clyde has completed
more than $400 million of construction projects throughout the Intermountain
West.
SERVICES AND MARKET
Examples of recent projects completed by Clyde include a $6.7 million
contract for the Wolf Creek Forest Road in Wasatch County; a $2.4 million
contract for the reconstruction of the Brown's Park Road in Daggett County,
including grading, drainage and paving; a $8.5 million contract for the South
Mountain Planned Community in Draper, Utah, including the construction of the
four lane Highland Drive highway extension, 18 hole golf course, all site storm
drainage, 1,000,000 gallon water storage tank, residential roads, ball fields,
and amphitheater; a $5 million contract for grading a pipeline corridor at
Kennecott Copper; and the construction of a $2.8 million hazardous waste cell at
the Laidlaw Environmental Grassy Mountain Facility.
Other projects in which Clyde is currently involved include a $10.3
million contract for environmental reclamation and site service work at Bingham
Canyon Mine for Kennecott Copper; a $3.2 million contract for the Eagle Mountain
Planned Community in Cedar Valley, Utah, including construction of Eagle
Mountain Boulevard, a concrete water tank and related water system, and the
Waste Water Lagoons; a $2 million contract for construction of the access road,
and phases 1 and 2 residential areas of the Sun River Ranch Planned Community
Project at Bloomington, Utah; a $1 million contract for the reconstruction of
the Holmes Irrigation Dam in Layton, Utah; a $1.2 million contract for closure
of cells 1, 2 and Y at Laidlaw Environmental Grassy Mountain Facility; and a
$1.6 million contract for a grading, drainage and paving project for UDOT in
Grand County, Utah. Except for the $10.3 million Kennecott Copper contract,
which may be terminated without cause by either party upon thirty days' notice,
none of the Clyde contracts mentioned above can be terminated prior to
completion without cause.
Clyde has clients in both the public and private sector, including the
Federal Highway Administration, UDOT, the U.S. Bureau of Reclamation, Laidlaw
Environmental Co., Utah Power & Light (Pacificorp), Kennecott Corporation, the
Wyoming Department of Transportation, Brush Wellman, Burns McDonnell, and many
others. In 1995, the revenue mix between the public and private sectors was
approximately 30% public and 70% private; however, this mix can change
significantly from year to year. For example, public projects for UDOT generated
between 70% and 80% of Clyde's total revenue during the mid-1980s. Clyde
performs construction work throughout the Intermountain Area, primarily in Utah,
Wyoming, Arizona, and Nevada. Most of the projects that Clyde bids on are
competitive bid projects.
Clyde has historically been most successful in bidding and working on
projects in the $15 million to $30 million range, which require the moving of
large amounts of dirt, such as the Jordanelle Highway Relocation Project
completed in 1992. With the completion of construction of the federal Interstate
Highway System in 1992, which provided a large volume of this type of work,
Clyde and the industry in general has seen a significant decline in large earth
work contracts. The market in Utah and surrounding states for highway work has
changed from building new roads to refurbishing existing roads. The most recent
trend in Utah is to enter into design/build contracts, as exhibited by Utah's
massive Interstate 15 ("I-15") re-construction project currently underway in
Salt Lake County. This single contract worth $1.5 billion has drastically
changed the road construction market in Utah. In the past, UDOT would have
divided a project of this magnitude into ten to fifteen smaller projects. Clyde
participated in the bidding process earlier this year for the I-15
re-construction project as a team member on one of the three teams competing for
this project. The Clyde team was not successful in obtaining this work, but
Clyde intends to bid on future UDOT projects.
35
<PAGE> 54
In addition to bidding on design/build projects, Clyde has moved into
private sector projects, which generally provide better margins than public
projects. In the mid-1980s Clyde's work on projects for the transportation
departments of Utah, Wyoming and Idaho accounted for approximately 70% to 80% of
Clyde's revenues. In 1997, however, these projects accounted for approximately
12.4% of Clyde's revenues. The private sector requires more marketing
activities, including early and constant contact and involvement with
prospective customers. Clyde has focused on securing work in the private sector
by working with private-sector customers during the design stage and providing
constant input. Clyde is currently working with owners whose projects are still
one to two years away from commencement. Most of these projects involve
residential sub-division and planned community development. Clyde has also
focused on securing repeat private-sector customers by developing relationships
with customers throughout the construction project. Quality, safety and
performance all play an important part in getting repeat work from the customer.
RAW MATERIALS, EQUIPMENT AND SUPPLIERS
Raw materials and components necessary for the rendering of Clyde's
construction projects are generally available from a variety of sources. Clyde
purchases most of its concrete and other materials used for construction
projects from Geneva Rock, in which Clyde owns a 34.77% equity interest before
giving effect to the Merger. Clyde also produces a limited supply of its own
aggregates through thirteen portable crushers, two asphalt plants and three
concrete batch plants, that can be moved throughout the region to supply Clyde's
needs when local commercial sources are unavailable.
INDUSTRY AND COMPETITION
Clyde's primary competitors are Gibbons & Reed, Gilbert Western,
LeGrande Johnson, Harpers Excavating and Ames Construction, some of which are
larger and have greater capital resources than Clyde. Since these firms are
similar in terms of performing high quality work, bid awards are usually granted
to the low cost bidder. Other factors influencing competitiveness include
reputation for quality, the availability of materials, machinery and equipment,
financial strength, knowledge of the local markets and conditions and estimating
abilities. Clyde believes that its competitive strengths include its excellent
reputation as a heavy contractor which has been in business for over 60 years;
its financial strength; its large, modern equipment fleet; its experienced and
dedicated employee base (field and office supervisors average over 20 years of
experience); its excellent safety record; and its commitment to quality work and
environmental sensitivity. Based on these factors, Clyde believes that it is
well positioned to compete effectively. There can be no assurance, however, that
Clyde will compete effectively.
SEASONALITY OF CLYDE BUSINESS
Clyde's business is seasonal, slowing down significantly during the
winter months due to adverse weather conditions. Historically, Clyde has
experienced a major curtailment in the amount and types of construction work
that can be accomplished in the months of December, January and February due to
the extreme temperatures and the frost in the ground.
REGULATION AND INSURANCE
Clyde's operations are subject to compliance with the regulatory
requirements of federal, state and county agencies and authorities, including
regulations covering safety, labor relations, affirmative action, and the
protection of the environment.
Clyde maintains a full time safety Director, to assure its compliance
with all safety regulations and performs monthly safety audits on each of its
projects to assure that it is meeting the safety requirements of the project.
All of Clyde's employees are covered by workers compensation insurance. Because
of Clyde's focus on safety, it enjoys competitive insurance rates. Clyde also
carries general, auto and pollution liability insurance for all operations.
Management believes that each of these insurance policies have limits which are
equal to or greater than the industry norm.
36
<PAGE> 55
Clyde maintains an affirmative action program and policy for assuring
equal opportunity in the workplace, which program has passed the periodic
reviews of state and federal regulatory agencies. Clyde also holds air quality
permits for its general operations and its asphalt plants and periodically
undergoes independent, pollution control testing and certification of its
facilities in accordance with applicable environmental regulations.
Clyde management believes that Clyde currently has all material
licenses, permits and approvals necessary for its current operations and is in
material compliance with all applicable government regulations.
EMPLOYEES
At December 31, 1997, Clyde had a total of 79 employees. This number
varies substantially depending on workload and seasonality, increasing to over
200 at times during the summer, but averaging between 50 and 60 during the
winter months. Clyde has contracts with several unions, including the Operating
Engineers Union, the Teamsters Union, the Laborers Union, the Cement Masons
Union and the Carpenters Union. These labor agreements were re-negotiated during
the summer of 1997 and run through June 30, 2000. All of these contracts contain
"no strike" provisions and enable Clyde to obtain trained workers to meet any
schedule that may be required. Clyde considers its relationship with its
employees to be generally good.
CUSTOMERS
Because of the large size of Clyde's infrastructure projects, a
relatively small number of projects may provide a significant percentage of the
Clyde's revenue in a given year. Construction revenue for the year ended
December 31, 1997 from Clyde's three largest customers, namely, Kennecott
Copper, Eagle Mountain and Utah Department of Transportation, accounted for
approximately 25%, 19% and 12%, respectively, of Clyde's total 1997 revenues.
Kennecott Copper accounted for approximately 38% of total 1996 revenues,
approximately 33% of total 1995 revenues and approximately 32% of total revenues
over the last seven years. The loss of Kennecott Copper's business could have a
material adverse effect on Clyde.
BACKLOG
Backlog of work as of December 31, 1997 was an estimated $4,655,244,
compared to an estimated $827,998 as of December 31, 1996. The lower backlog in
1996 was primarily attributable to a curtailment in work under Clyde's service
contract with Kennecott Copper and the softening in the Utah housing market,
which delayed projects that were intended to be started during the fourth
quarter of 1996, but that did not materialize until the second quarter of 1997.
These delays resulted in the lower 1996 backlog, as well as lower construction
revenues during 1996. Kennecott Copper's cut back on Clyde's service contract
work in 1996 was due to problems with Kennecott Copper's new smelter. Work on
this project did not begin to pick up until late summer of 1997. Backlog of work
began showing improvement by August 1997.
PROPERTIES
Clyde owns approximately 10.8 acres of land located at 1375 North Main
Street, Springville, Utah, which includes one office building, an equipment
shed, repair shop and warehouse. Clyde also owns an approximately 20 acre parcel
of land located at 1455 North Main Street, Springville, Utah, which is used to
store Clyde equipment, and an approximately 18 acre parcel of land located at
2600 North 300 West, Lehi, Utah, which is currently being developed into
residential building lots.
EQUIPMENT
Clyde purchases and maintains a large fleet of construction equipment,
including bulldozers, scrapers, graders, loaders, trucks, pavers, rollers and
construction materials processing equipment. As of December 31, 1997, Clyde's
fleet included 20 crawler tractors, 15 rubber tired scrapers, 16 rubber tired
front end loaders, 10 off highway end dump trucks, 11 motor graders, 13
hydraulic track hoes, 30 belly dump semi trucks, 12 - 4,000 gallon water trucks,
3 - 10,000 gallon water trucks, 10 vibrating rollers and 4 asphalt pavers.
Clyde generally replaces and replenishes its equipment from revenues
generated from operations. As of December 31, 1997, Clyde did not have any
long-term debt. Purchases of equipment amounted to $2,206,168 in 1997 and
$2,220,046 in 1996. Clyde believes that owning most of its own equipment assures
it of the availability of
37
<PAGE> 56
equipment when needed, thereby making Clyde more competitive. Clyde does rent or
lease equipment to meet high demand periods or to acquire the use of specialty
equipment. Clyde maintains a 27,000 square foot maintenance shop, with the
ability to completely rebuild or overhaul any of its equipment to assure
availability on the job-site.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Clyde is a
party. From time to time, Clyde becomes involved in ordinary, routine legal
proceedings which are incidental to its business but which do not have a
material adverse impact on its business or operations.
MARKET PRICE OF AND DIVIDENDS ON CLYDE COMMON STOCK
There is no public trading market for Clyde Common Stock. The
approximate number of shareholders of record on the Record Date was 98.
In 1996, Clyde paid cash dividends of $6.00 per share of Clyde Common
Stock to shareholders. In 1997, Clyde paid cash dividends of $8.00 per share of
Clyde Common Stock to shareholders. After the Merger, dividends will be paid by
CCI in such amounts and at such times as the CCI Board of Directors deems to be
appropriate based on the results of operations, financial condition and
liquidity needs of CCI. The amount, type and frequency of dividends paid by CCI
to its shareholders will not be equivalent to the amount, type and frequency of
dividends paid by Clyde prior to the Merger. See "Summary--Selected Financial
Information--Comparative Per Share Data".
CLYDE MANAGEMENT
DIRECTORS
The names and ages of Clyde's Directors are currently as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION(S) WITH CLYDE SINCE
<S> <C> <C> <C>
Richard C. Clyde ................... 62 Director, President and General Manager 1970
Paul B. Clyde ...................... 56 Director, Vice President of Construction 1971
Norman D. Clyde..................... 67 Director 1961
Wilford W. Clyde ................... 45 Director 1994
William R. Clyde ................... 79 Director 1955
Steven L. Clyde .................... 42 Director, Project Superintendent 1986
Jeffrey R. Clyde ................... 37 Director, Contracts Manager 1994
David E. Salisbury.................. 70 Director 1961
</TABLE>
For a description of the business backgrounds of Richard C. Clyde, Paul
B. Clyde, and William R. Clyde, see "Clyde Companies, Inc.--CCI Management
Prior to Consummation of the Merger," and of Wilford W. Clyde, see "Clyde
Companies, Inc.--CCI Management Upon Consummation of the Merger."
Norman D. Clyde has been a Director since 1961. Mr. Clyde served as
Vice President of Clyde from 1982 to 1996. He retired from management of Clyde
in 1996 after working over forty years for Clyde. Mr. Clyde graduated from the
University of Utah. Mr. Clyde has also served on the Board of Directors of
Beehive Insurance since 1970, on the Board of Directors of Geneva Rock since
1959 and on the Board of Directors of Utah Service since 1964. Norman D. Clyde
is the brother of Hal M. Clyde, who is currently a Director of Utah Service and
Beehive Insurance; the father of Tawna Clyde Smith, who will be a Director of
CCI upon consummation of the Merger; and an uncle of H. Michael Clyde, who will
be a Director of CCI upon consummation of the Merger.
Steven L. Clyde has been a Director since 1986. Mr. Clyde graduated
from Brigham Young University. He began working for Clyde in 1981 and is
currently employed as a Project Superintendent of Clyde, a position he has held
since 1986. Steven L. Clyde is the son of William R. Clyde; and a nephew of Ila
C. Cook, Louise C. Gammell and Carol C. Salisbury.
38
<PAGE> 57
Jeffrey R. Clyde has been a Director since 1994. Mr. Clyde is a
graduate of Arizona State University. He began working for Clyde in 1986 and is
currently employed as Contracts Manager of Clyde, a position he has held since
1997. Jeffrey R. Clyde is the son of Richard C. Clyde.
David E. Salisbury has been a Director since 1961. Mr. Salisbury is a
senior member and past President of the law firm of Van Cott, Bagley, Cornwall &
McCarthy where he has been an attorney for over 45 years. Mr. Salisbury received
a B.S. degree from the University of Utah and a J.D. degree from Stanford
University. David E. Salisbury is the husband of Carol C. Salisbury, who is
currently the President and a Director of CCI, and the Secretary, Treasurer and
a Director of Beehive Insurance.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The names, ages and positions of Clyde's executive officers and
significant employees are currently as follows:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION(S) WITH CLYDE SINCE
<S> <C> <C> <C>
Richard C. Clyde.................................. 62 President and General Manager 1986
Paul B. Clyde..................................... 56 Vice President of Construction 1992
Keith M. Nelson................................... 37 Secretary and Treasurer 1991
Jeffrey R. Clyde.................................. 38 Contracts Manager 1996
Steven L. Clyde................................... 42 Project Superintendent 1990
</TABLE>
For a description of the business backgrounds of Richard C. Clyde and
Paul B. Clyde, see "Clyde Companies, Inc.--CCI Management Prior to Consummation
of the Merger," and of Jeffrey R. Clyde and Steven L. Clyde, see "Clyde--Clyde
Management-Directors".
Keith M. Nelson has worked for Clyde since 1985 and has been the Office
Manager since 1991. He has served as Secretary and Treasurer of Clyde since
1991. He graduated from Brigham Young University and is a Certified Management
Accountant.
COMMITTEES OF CLYDE BOARD
The Board of Directors of Clyde currently has no committee and no plans
to establish any committee.
ATTENDANCE AT CLYDE BOARD MEETINGS
The Board of Directors met three times in 1997, and no Director
attended fewer than 75% of these meetings, except Norman Clyde who is currently
on a leave of absence for church service for a period of approximately three
years.
COMPENSATION OF DIRECTORS OF CLYDE
Non-employee Directors of Clyde receive an annual cash compensation of
$1,500 for serving on the Board of Directors of Clyde.
39
<PAGE> 58
PRINCIPAL SHAREHOLDERS OF CLYDE
The following table sets forth certain information regarding the
beneficial ownership of Clyde Common Stock as of the Record Date as to (i) each
person who is known by Clyde to own beneficially 5% or more of the outstanding
shares of Common Stock, (ii) each Director of Clyde, (iii) each executive
officer and (iv) all Directors and executive officers as a group. Except as
otherwise noted, Clyde believes the persons listed below have sole investment
and voting power with respect to the Clyde Common Stock that they are deemed to
beneficially own.
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------
SHARES APPROXIMATE
BENEFICIALLY PERCENTAGE
OWNED(1) OWNED(1)
<S> <C> <C>
Richard C. Clyde(2)...................................................................... 34,535 36.53%
776 South 600 West
Orem, UT 84057
David E. and Carol C. Salisbury(3)....................................................... 34,275 36.25%
1423 Devonshire Drive
Salt Lake City, UT 84108
Louise C. Gammell(4)..................................................................... 34,255 36.23%
1100 E. 400 S.
Springville, UT 84663
Paul B. Clyde(5)......................................................................... 33,660 35.60%
3308 N. 350 E.
Provo, UT 84601
William R. Clyde(6)...................................................................... 32,040 33.89%
2000 Canyon Road
Springville, UT 84663
Clyde Companies, Inc..................................................................... 31,935 33.78%
1423 Devonshire Drive
Salt Lake City, UT 84108
Ila C. Cook(7)........................................................................... 31,935 33.78%
2711 Sherwood Dr.
Salt Lake City, UT 84108
Norman D. Clyde(8)....................................................................... 3,150 3.33%
3223 Apache Lane
Provo, UT 84604
Wilford W. Clyde(9)...................................................................... 1,675 1.77%
1324 East 950 South
Springville, UT 84663
Steven L. Clyde(10)...................................................................... 1,035 1.09%
8604 South Woodland Hills Drive
Spanish Fork, UT 84660
</TABLE>
40
<PAGE> 59
<TABLE>
<S> <C> <C>
Jeffrey R. Clyde......................................................................... 100 *
4753 West Wasatch
Highland, Utah 84003
All Directors and executive officers as a group (8 people)(11)........................... 44,615 47.19%
</TABLE>
- ---------------------------------------------------
* Less than 1%
(1) Applicable percentage of ownership is based on 94,544 shares of Common
Stock outstanding as of the Record Date. Beneficial ownership is determined
in accordance with the rules of the Commission, and includes voting and
investment power with respect to such shares.
(2) Includes 1,375 shares owned directly by Richard C. Clyde, 925 shares
owned jointly by Richard C. and Patricia Clyde (husband and wife), 150
shares owned indirectly by Richard C. Clyde through the Richard Cornell
Clyde Trust, 150 shares owned indirectly by Patricia Clyde through the
Patricia Clyde Trust and 31,935 shares owned by CCI, which shares Mr. Clyde
may be deemed to beneficially own as a result of his position as a Director
of CCI.
(3) Includes 250 shares owned directly by David E. Salisbury, 2,090 shares
owned directly by Carol C. Salisbury and 31,935 shares owned by CCI, which
shares the Salisburys may be deemed to beneficially own as a result of
Carol C. Salisbury's position as President and a Director of CCI.
(4) Includes 2,320 shares owned directly by Louise C. Gammell and 31,935
shares owned by CCI, which shares Ms. Gammell may be deemed to beneficially
own as a result of her position as Secretary, Treasurer and a Director of
CCI.
(5) Includes 1,115 shares owned directly by Paul B. Clyde, 610 shares owned
jointly by Paul B. and Jeanette P. Clyde (husband and wife) and 31,935
shares owned by CCI, which shares Mr. Clyde may be deemed to beneficially
own as a result of his position as a Director of CCI.
(6) Includes 75 shares owned indirectly by William R. Clyde through the
William R. Clyde Family Trust, 30 shares owned indirectly by Mr. Clyde
through the Reklaw & Co. Trust and 31,935 shares owned by CCI, which shares
Mr. Clyde may be deemed to beneficially own as a result of his position as
Vice President and a Director of CCI.
(7) Ila C. Cook may be deemed to be the beneficial owner of all of the
31,935 shares owned by CCI as a result of her position as Vice President
and a Director of CCI. Ms. Cook does not own any shares of Clyde Common
Stock directly.
(8) Includes 50 shares owned directly by Norman D. Clyde and 3,100 shares
owned indirectly by Norman D. Clyde through the Norman D. Clyde Family
Inter Vivos Revocable Trust.
(9) Includes 1,065 shares owned directly by Wilford W. Clyde and 610 shares
jointly owned by Wilford W. and Natalie Clyde (husband and wife).
(10) Includes 885 shares owned directly by Steven L. Clyde and 150 shares
owned jointly by Steven L. and Pamela Clyde (husband and wife).
(11) In computing the aggregate number of shares owned by officers and
Directors as a group, the shares owned by CCI, which shares certain of the
officers and Directors may be deemed to beneficially own, are counted only
once.
SELECTED FINANCIAL INFORMATION FOR CLYDE
The following selected statement of earnings and balance sheet data as
of and for each of the periods in the five year period ended December 31, 1997
are derived from the financial statements of Clyde which have been audited by
Grant Thornton. The financial data for Clyde should be read in conjunction with
the Financial Statements and Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Clyde" included
elsewhere herein.
41
<PAGE> 60
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of earnings data:
Construction revenue $16,906 $19,056 $21,325 $20,222 $26,911
Cost of construction 15,002 17,116 18,199 18,590 23,139
General and administrative 1,488 1,443 1,255 1,321 1,267
------- ------- ------- ------- -------
Operating income 416 497 1,871 311 2,505
Other income (expense), net 3,760 3,700 4,796 3,723 3,009
Income taxes 1,498 1,510 2,431 1,449 2,377
------- ------- ------- ------- -------
Net earnings $ 2,678 $ 2,687 $ 4,236 $ 2,585 $ 3,137
======= ======= ======= ======= =======
Earnings per common share - basic 28.32 $ 28.42 $ 44.81 $ 27.34 $ 33.18
Weighted average shares outstanding 94,544 94,544 94,544 94,544 94,544
Balance sheet data (at period end):
Current assets 17,761 $16,357 $16,320 $18,008 $18,175
Current liabilities 2,064 1,092 1,297 1,225 1,599
Total assets 49,039 44,916 41,825 37,114 34,888
Total liabilities 12,009 9,969 8,836 7,415 6,829
Stockholders' equity 37,030 34,947 32,990 29,699 28,059
Dividends per common share 8.00 10.00 10.00 10.00 10.00
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF CLYDE
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Management's Discussion and
Analysis of Financial Condition and Results of Operations of Clyde and other
sections of this Proxy Statement/Prospectus, including without limitation
statements containing the words "believes," "anticipates," "intends," "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Constituent Corporations to be materially different from any future results,
performance or achievements expressed or implied by such forward looking
statements. Such factors include, among other things, the following: (1)
expected cost savings from the Merger may not be realized; (2) costs or
difficulties related to the integration of the businesses of Clyde, Geneva Rock,
Utah Service and Beehive Insurance may be greater than expected; (3) an increase
of competitive pressure in the industries of Clyde, Geneva Rock, Utah Service
and Beehive Insurance may adversely affect the businesses of those companies;
and (4) general economic conditions, either nationally or in the states in which
Clyde, Geneva Rock, Utah Service and Beehive Insurance do business, may be less
favorable than expected. CCI disclaims any obligation to update such factors or
to publicly announce the result of any revisions to any forward-looking
statements included or incorporated by reference herein to reflect future events
or developments.
GENERAL
With the completion of the construction of the federal Interstate
Highway System in 1992, Clyde and the industry in general have seen a
significant decline in large earth work contracts. As discussed below, this
decline has had an adverse impact on Clyde's results of operations, but it has
not had a material adverse impact on Clyde's liquidity and capital resources. As
a consequence of the decline in large earth work contracts, the market in Utah
and surrounding states for highway work has changed from building new roads to
refurbishing existing roads. The most recent trend in Utah is to enter into
design/build contracts, such as Utah's massive Interstate 15 ("I-15")
reconstruction project currently underway in Salt Lake County. While Clyde was
not successful in its bid to participate in the I-15 project, it intends to bid
on future Utah Department of Transportation projects. In addition to bidding on
design/build projects, Clyde has increased its participation in private sector
projects, which generally provide better profit margins than public projects.
The following discussion addresses these changes in Clyde's business.
RESULTS OF OPERATIONS
42
<PAGE> 61
The following discussions should be read in conjunction with the
financial statements and related notes of Clyde included elsewhere in this Proxy
Statement/Prospectus.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Construction revenue for the year ended December 31, 1997, totaled
$16,906,071, which represented a 11.3% decrease from $19,055,543 for the year
ended December 31, 1996. The decrease in construction revenue resulted in an
operating profit of $415,626 for 1997, as compared to an operating profit of
$496,820 in 1996. The decrease in 1997 construction revenue was primarily
attributable to a 42% decrease in Clyde's work under its service contract with
Kennecott Copper. Kennecott Copper experienced difficulties in bringing a new
smelter on line, resulting in a material reduction in revenue to Kennecott
Copper on its copper operations. This reduction in revenue prompted Kennecott
Copper to make cutbacks on environmental work which was the subject of Clyde's
work under its service contract with Kennecott Copper. During the third quarter
of 1997, Kennecott Copper was successful in commencing operations at its new
smelter, and Kennecott Copper now appears to be gradually increasing Clyde's
work under the service contract. Recent declines in the price of copper and
gold, however, may impede the ability of Kennecott Copper to increase work under
the service contract to the levels experienced in 1995 and early 1996. There can
be no assurance that Clyde's work at Kennecott Copper will return to the levels
of 1995 and early 1996.
The decline in construction revenue over the 1995-1997 period has
caused the gross profit margin on construction revenue to decline over the same
period. The gross profit margin was 11.3%, 10.2% and 14.7% in 1997, 1996 and
1995, respectively. This decrease in the gross profit margin has been caused in
substantial part by Clyde's fixed costs. The cost of equipment and machinery
owned and maintained by Clyde is a fixed cost which is a major component of
Clyde's cost of construction. This fixed cost is an expense which diminishes
gross profits regardless of whether Clyde is fully utilizing such equipment and
machinery during the reported period. If Clyde is able to increase construction
revenues under the Kennecott Copper contract and under other projects, it would
be able to recover a greater percentage of its fixed costs and thereby increase
its gross profits as a percentage of sales. However, there can be no assurance
that Clyde will be able to increase construction revenues.
Other income of Clyde in 1997 included gain on the sale of property and
equipment in the amount of $247,827, compared to a gain on the sale of property
and equipment in 1996 in the amount of $63,541.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Construction revenue for the year ended December 31, 1996 totaled
$19,055,543, which represented a 10.6% decrease from $21,325,495 in construction
revenue for the year ended December 31, 1995. The decrease in 1996 construction
revenue was attributable to a decrease in Clyde's work under its service
contract at Kennecott Copper and the softening in the housing market. In
addition, the management of Clyde was significantly involved during 1996 in
submitting a bid for the work on the I-15 project. The bid process consumed
considerable management resources and had a material adverse effect on
construction revenue for 1996.
Earnings before income taxes for 1996 were $4,197,191, compared with
earnings before income taxes of $6,667,604 for 1995, resulting in a 37.1%
decrease. A 10.6% reduction in construction revenue in 1996 contributed
materially to the reduction in earnings before income taxes. Additionally, the
gross profit margin on construction revenue for 1996 declined to 10.2%, from
14.7% in 1995. The lower gross profit margin for 1996 stemmed from increased
competition for construction work in the Utah market and lower construction work
volume. For the reasons explained above, a 10.6% reduction in construction
revenue for the year 1996 as compared to 1995 is the primary reason for a
decline in the gross profit margin to 10.2% in 1996 as compared to 14.7% in
1995. Again, Clyde's significant investment in equipment and machinery
represents a fixed cost which reduces gross profits as percentage of sales
during periods of lower construction revenue. Also, general and administrative
expenses for 1996 increased to $1,443,165 from $1,254,961 in 1995. This increase
was largely a result of a non-cash accrual to pension expense of $111,715 in
1996 compared to no accrual for pension expense in 1995. Earnings before income
taxes for 1996 were also materially affected by a 23.2% decrease in the net
income of Geneva Rock, in which Clyde has a 34.77% ownership interest (discussed
below).
Other income of Clyde in 1996 included gain on the sale of property and
equipment in the amount of $63,541, compared to a gain on the sale of property
and equipment in 1995 in the amount of $196,165. The gain on sale of property in
1995 was from Clyde's sale of 15 acres of land in Lehi, Utah, to the Alpine
School District. Interest income to Clyde for 1996 was $640,667, a decrease from
interest income in 1995 in the amount of $697,056.
43
<PAGE> 62
GENEVA ROCK
Clyde owns 34.77% of Geneva Rock Common Stock. Clyde's investment in
Geneva Rock is shown on an equity basis on Clyde's 1997 balance sheet as an
investment in an affiliate having a value of $22,513,324. Clyde's investment in
Geneva Rock as of December 31, 1996 was shown as $19,881,754. Net earnings of
Geneva Rock for 1997 was $8,221,624, resulting in approximately $2,859,000 of
additional income to Clyde. In 1996, Geneva Rock had net earnings of
approximately $8,433,996, resulting in $2,932,500 of additional income to Clyde.
LIQUIDITY AND CAPITAL RESOURCES
Clyde's primary sources of liquidity have been funds generated by
operations and dividends received from Geneva Rock, in which Clyde has a 34.77%
interest. Net cash provided by operating activities was approximately
$1,490,548, $1,163,408, and $3,321,364, during 1997, 1996 and 1995,
respectively. Net cash provided by operating activities is primarily
attributable to Clyde's income before depreciation and amortization expense.
Geneva Rock declared and paid dividends of $30 per share for each of the years
1997, 1996 and 1995. Net cash provided by such dividends received from Geneva
Rock was approximately $227,430 for each of the years 1997, 1996 and 1995.
Clyde has historically had little or no long term debt. This has
continued to be the case through the years 1995, 1996 and 1997. In addition to
substantial cash investments on December 31, 1997, Clyde had other substantial
current assets in contracts receivable in the sum of $4,834,962 (current) and
$526,574 (in retention). This compares to contracts receivable in 1996 in the
sum of $2,191,928 (current) and $545,982 (in retention) as of December 31,1996.
INFLATION
Inflation in the U.S. economy has been relatively moderate during the
last few years. Price increases for labor and materials kept pace with inflation
for 1995 and 1996. The low unemployment rate in Utah and the rapid increase in
the number of workers required in the construction industry in the state has put
increased pressure on the cost of labor. Labor contracts negotiated in 1997
provide for increases in the 5% to 6% range per year through the year 2000.
Clyde expects that inflation will increase over the next few years,
making it more difficult to pass the increases on in the form of higher prices.
This could lead to lower margins in the work or a decrease in the work for which
Clyde successfully competes.
44
<PAGE> 63
SEASONALITY
Because Clyde conducts its business in the Intermountain West, Clyde
experiences lower sales during the winter months due to adverse weather
conditions. Historically, the months of December, January and February see a
major curtailment in the amount and types of construction work that can be
accomplished due to the extreme temperatures and frost in the ground. Clyde
anticipates that seasonal variations will continue. Clyde has, however,
established adequate reserves and, therefore, seasonal variations do not pose a
threat to Clyde.
THE YEAR 2000 ISSUE
Clyde utilizes computer hardware and software in its operations.
Certain computer applications could fail or create erroneous results due to the
upcoming change in the century (the "Year 2000 Issue"). Clyde regularly upgrades
its computer hardware and believes that it will not incur any additional
expenses to modify computer hardware due to the Year 2000 Issue. Clyde does not
expect that its expenditures related to the Year 2000 Issue will have a material
adverse effect on the results of operations or financial condition of Clyde
CERTAIN TRANSACTIONS
The following is a summary of related party transactions that occurred
during the years ended December 31, 1997 and 1996. Clyde provided construction
services and materials to Geneva Rock totaling approximately $635,000 and
$519,000 for the years ended December 31, 1997 and 1996, respectively. Clyde
paid $690,000 and $353,000 for the years ended December 31, 1997 and 1996,
respectively, for construction services and materials provided by Geneva Rock,
and $180,000 and $304,000 for the years ended December 31, 1997 and 1996,
respectively, for construction materials provided by Utah Service. Beehive
Insurance received $58,000 and $51,000 in commission revenue for insurance
purchased by Clyde in 1997 and 1996, respectively. Transactions with related
parties were not effected at below market prices.
45
<PAGE> 64
GENEVA ROCK
BACKGROUND
Geneva Rock, which was incorporated in Utah in 1954, was founded as a
ready-mix concrete business by W.W. Clyde and his associates. Geneva Rock is
engaged in the construction business through its Northern and Southern Utah
divisions. Geneva Rock's construction products consist primarily of ready-mix
concrete, asphalt, sand, gravel and other building materials, and its
construction services consist primarily of road and site construction. Geneva
Rock does business primarily in the Northern Utah area including Utah, Salt
Lake, Davis, Weber, Summit and Wasatch Counties, and the Southern Utah area
surrounding St. George, Utah. Geneva Rock's client base is diversified, with no
one client generating more than 10% of Geneva Rock's total sales. Geneva Rock
has furnished much of the concrete for many of the large commercial office
buildings in downtown Salt Lake City. Geneva Rock's Northern and Southern Utah
divisions are more fully described below.
PRODUCTS AND SERVICES
NORTHERN DIVISION
Utah has experienced a strong economy during the past four years. The
construction industry in the metropolitan areas of Utah, Salt Lake, Davis,
Weber, Summit and Wasatch Counties has benefited from Utah's strong economy. The
award of the 2002 Olympics to Salt Lake City has sparked plans of improvements
of highways, airports, lodging and ski areas. Construction of a light rail
system and a massive Interstate 15 ("I-15") freeway expansion project are
currently under way in the Salt Lake Valley. Geneva Rock was a team member of
one of the three consortiums that bid on the large I-15 freeway expansion
project. Although that consortium was not awarded the bid, Geneva Rock is
presently providing concrete for a portion of the I-15 bridge work and
anticipates receiving other portions of the materials work on the project
because of the convenient location of its plants along the I-15 freeway.
Geneva Rock produces many types of gravel for use in making asphalt,
drain rock, chips, screened sand, bank run sand, and gravel to make ready-mix
concrete, including washed sand and washed rock. Geneva Rock makes various
grades of asphalt to be used by its own construction crews or sold to other
contractors. The types of asphalt produced include 1/2" and 3/4" asphalt and
many special UDOT mixes, such as rubberized and friction course asphalts.
Because it does not wish to compete with its customers, Geneva Rock supplies,
but does not place, concrete. Geneva Rock's construction services consist of
excavation, utility and pipe work, site preparation, curb, gutter, and sidewalk
(placed by subcontractors), asphalt paving and other road building and site work
activities.
Geneva Rock has spent approximately $14,200,000 since January 1, 1993
updating its trucking fleets. Ninety percent of Geneva Rock's mixer trucks for
the ready-mix concrete business are front discharge trucks with capacities of
nine cubic yards per load. Geneva Rock's belly dump fleet of trucks has not been
significantly updated or expanded since many outside trucking firms are
available to perform these services. Savage Industries and Larsen Trucking, Inc.
are the two main haulers that Geneva Rock uses to transport aggregates to Geneva
Rock's plants. Geneva Rock's Construction Division is currently updating its 14
ton capacity dump trucks to 24 ton capacity trucks. With the constriction on
roads along the Salt Lake Valley region caused by the recent reconstruction of
the I-15 freeway, transporting Geneva Rock's products has become a more
complicated process. Upgrading to larger trucks has decreased the number of
trucks needed to transport product to a job site. In addition, Geneva Rock has
nearly completed the installation of new metal bins at its downtown Salt Lake
City plant that will enable Geneva Rock to produce 1200 to 1400 cubic yards of
concrete without hauling any aggregates into the downtown area during the busy
daylight hours. Aggregates can be hauled to the downtown bins during the night
while traffic is light so that Geneva Rock's trucks will not have to negotiate
I-15 traffic during the day. Since 1990 all cement powder used by Geneva Rock
has been hauled by Savage Industries.
Several Utah construction and material supply companies have recently
been acquired by national and international companies. Within the last two
years, Gibbons & Reed was acquired by Granite Construction, located in
Watsonville, California; Staker Paving and Jack B. Parsons Co. were acquired by
Old Castle, a U.S. subsidiary of CRH, an Ireland company; and Valley Asphalt,
Cox Rock Products, and Western Rock were acquired by U.S.
46
<PAGE> 65
Aggregates. There has also been an influx of new large construction companies
into Utah, such as Ames, Industrial, Morrison Knudsen, and Peter Kewitt. Geneva
Rock and Clyde are two of only a few large, locally owned and operated highway
contractors and gravel, asphalt, and ready-mix concrete suppliers along the
Wasatch front. The increase in competitors and equipment have resulted in
generally lower prices in the industry along the Wasatch Front and operating and
profit margins have decreased. Despite increasing competition and decreased
margins, the management of Geneva Rock believes that it can continue to compete
effectively in the Utah market.
Geneva Rock has made several acquisitions in Northern Utah during the
1990's, including Ajax, a Tooele company acquired in 1990 and later divested;
Ideal Concrete, also acquired in 1990; the Price ready-mix concrete operation,
acquired in 1993; and Pioneer Sand and Gravel, a West Valley company acquired in
1995. Although Geneva Rock does not currently have any plans to acquire other
companies, it intends to continue to seek out other acquisitions to round out
its product lines in its existing market areas.
SOUTHERN DIVISION
In 1996, Geneva Rock formed J & J Building Supply, Inc. ("J & J") which
acquired the assets of J & J Mill & Lumber Supply Co. (now known as Jennings
Management, Inc.) of St. George, Utah. Geneva Rock's acquisition of J & J Mill &
Lumber Supply Co. also included the operations of Quality Concrete, a ready-mix
cement producer located in Cedar City, Utah. J & J is headquartered in St.
George, Utah and also has operations in Cedar City, Utah and Mesquite, Nevada. J
& J's primary construction products consist of rock products, including sand,
gravel and ready mix concrete; concrete block products, which it produces
through its concrete block plant in St. George; and other building materials,
such as lumber, paint, sheet rock, roofing, plumbing, electrical supplies and
hardware products, which it sells through its stores in St. George and Cedar
City. J & J sells its product primarily in St. George and Cedar City, Utah areas
and in Mesquite, Nevada. Construction in Southwestern Utah and Southeastern
Nevada has in the past few years been strong, although growth has experienced
some recent slowdown, making it more difficult for J & J to maintain past
volumes. This region, however, continues to hold significant potential growth as
a preferred retirement community, especially as more people move out of the
increasingly congested Southern California, Las Vegas, Nevada and Phoenix,
Arizona regions.
RAW MATERIALS AND SUPPLIERS
NORTHERN DIVISION
Sand and gravel are the most basic raw materials required by Geneva
Rock. Presently Geneva Rock owns or leases gravel pits in Mapleton, Provo
Canyon, Draper and Bluffdale (Point of the Mountain), West Valley, South Weber,
and Morgan (all located in Utah). For a description of these properties, see
"Geneva Rock--Properties--Northern Division" below. Current sources in Davis and
Weber counties are sufficient, based on Geneva Rock's present requirements, to
supply Geneva Rock with sand and gravel for approximately ten years. Geneva Rock
is presently negotiating with certain property owners in the Salt Lake, Davis
and Juab regions for the purchase or lease of new sites. New sources are
becoming harder to come by along the Wasatch Front due to increased property
development and more difficult permitting requirements.
Geneva Rock obtains other major raw materials from outside vendors.
Cement powder is purchased from three main suppliers in the area: Ashgrove
Cement, which owns a plant in Lemmington, Utah (approximately 90 miles south of
Salt Lake City) and a plant in southern Idaho near Inkom; Holnam Cement, which
is modernizing its plant in Weber Canyon at Devils Slide and will soon be able
to double production capacity; and Mountain Cement, which transports its cement
by train from a plant in Wyoming. These suppliers also import cement from other
plants and cement producers to meet customer demand. Geneva Rock is the largest
customer in Utah for Ashgrove and Holnam. Geneva Rock purchases most of its
concrete additives from Grace Construction Products. Geneva Rock also purchases
asphalt oil for the production of asphalt. Geneva Rock's major suppliers of
asphalt oil are Sinclair Oil, Crysen Refining, and Koch Asphalt Materials.
Geneva Rock prices diesel fuel daily and is currently purchasing most of its
diesel fuel requirements from Kellerstraus and Flying J. Management anticipates
that with a new cement plant coming on line, Geneva Rock will not experience any
significant shortages in cement products. Although the Wasatch Front region has
a limited number of suppliers of asphalt oil, management believes that the
47
<PAGE> 66
supply is sufficient to meet the needs of Geneva Rock. Management also believes
that the supply of diesel fuel in the region is sufficient to meet the needs of
Geneva Rock.
SOUTHERN DIVISION
J & J has various leases for sand and gravel in St. George and Cedar
City, Utah. For a description of these and other J & J properties, see "Geneva
Rock--Properties--Southern Division" below. J & J also has many suppliers of its
building and hardware products. J & J belongs to a buying cooperative named
TrueServe. Much of J & J's lumber products are purchased direct. Georgia Pacific
is one of J & J's largest suppliers of lumber. Cement products are purchased
from Ashgrove, Holnam, and Southdown. Management believes that because of the
availability of a large number of suppliers, J & J will not experience any
significant shortages in raw materials or goods.
COMPETITION
NORTHERN DIVISION
Geneva Rock has a number of competitors in Northern Utah, some of which
are larger and have greater financial resources. Management believes that with
an increasing number of new competitors entering the construction business and
the increase in the capabilities of existing competitors that have been sold to
larger firms, the opportunities for business and expansion will be more limited
than they have been in the last five years. Geneva Rock's primary ready-mix
concrete competitors currently include Westroc, Metro, Parsons, Monroc, CPC,
Valley Materials, Valley Ready Mix, Alta View/All American, and Fife Rock
Products. Construction, sand and gravel competitors include Valley Asphalt,
Staker Paving, Savage Asphalt, Miller Paving, Gibbons & Reed, Parsons, Harper
Excavating, Western Quality Concrete, H.E. Davis & Sons, and a number of smaller
competitors.
Competition is based on price, product quality and service, and
availability. Geneva Rock management believes that Geneva Rock is well
positioned to compete with its competitors because it has high-quality products
and services and key strategic locations of its operations.
SOUTHERN DIVISION
J & J's primary competitors for building materials include Anderson
Lumber, Burton Lumber, which concentrates on catering to the needs of
contractors, and a number of smaller competitors in the St. George area. J & J
has the only concrete block plant in the St. George area, and its primary
competitors for concrete block products are producers in Las Vegas, Nevada and
Southern California that ship into Southern Utah. J & J's primary competitors in
the sand, gravel, and ready-mix concrete business are Western Rock and, to a
lesser extent, Interstate Rock. Prices in this business are very competitive.
Competition is based on prices, product quality, service and availability.
SEASONALITY OF BUSINESS
NORTHERN DIVISION
The business of Geneva Rock in Northern Utah is seasonal, slowing
during December through February due to the winter weather. Geneva Rock
typically lays off a number of employees during this slow period (depending on
the severity of the weather), and/or as workload varies. During this period, the
ready-mix concrete and aggregate businesses continue to operate, but on a scaled
back basis. Geneva Rock's road construction business almost totally shuts down
during December, January, and February because its work consists largely of
asphalt paving which cannot be performed in the cold winter months.
SOUTHERN DIVISION
Southern Utah experiences two different seasonal weather conditions. In
St. George, Utah and Mesquite, Nevada, work can be performed year round because
the winters generally are mild. The summer months, however,
48
<PAGE> 67
are extremely hot which results in a slight slowdown in business since concrete
is harder to finish in extreme heat and many residents go on vacations during
this time. Cedar City, Utah has a climate similar to Northern Utah and must deal
with similar cold winter weather as the Northern Utah division.
REGULATION
Geneva Rock and J & J's operations are subject to a variety of federal,
state, and local laws and regulations, including environmental regulations.
Geneva Rock is continually upgrading its facilities in an effort to ensure
compliance with these regulations. Management believes that Geneva Rock and J &
J are in substantial compliance with all applicable government regulations and
have all material licenses, permits, and approvals from local, state and federal
governing bodies which are required to mine sand and gravel and to conduct
business at Geneva Rock's various locations.
EMPLOYEES
NORTHERN DIVISION
As of December 31, 1997, Geneva Rock's Northern Utah division had
approximately 700 employees, 55 of which were salaried employees and the
remainder of which were hourly employees. Geneva Rock has bargaining agreements
with the Operating Engineers Union and the Teamsters Union. Approximately 250
employees belong to the Operating Engineers Union, 275 belong to the Teamsters
Union and 175 are non-bargaining employees. The two union groups have benefit
programs that are funded by Geneva Rock. Benefit programs for the non-bargaining
unit employees are sponsored by Geneva Rock and, in the case of the health
insurance and retirement plans, are part of a combined plan with other Clyde
affiliated companies. Because of the seasonal nature of Geneva Rock's Northern
Utah business, an average of approximately 50% of its employees are laid off
during the winter months. Geneva Rock also experiences a turnover of about
10-15% of its employees each year. Geneva Rock believes that its employee
relations are satisfactory.
SOUTHERN DIVISION
As of December 31, 1997, J & J had approximately 200 employees, 36 of
which were salaried employees and the remainder of which were hourly employees.
J & J has no affiliation with any labor unions. J & J experiences a turnover of
about 5-10% of it's employees each year. J & J experiences less turnover than
Geneva Rock in Northern Utah because of the limited amount of good paying jobs
in J & J's market area in Southern Utah. Geneva Rock believes that its employee
relations are satisfactory.
CUSTOMERS
Geneva Rock and J & J have a customer base of approximately 5,000
customers. There are a few key customers that do a large volume of business with
Geneva Rock each year, but none that account for more than 10% of the business
of Geneva Rock. UDOT has consistently been Geneva Rock's largest customer.
UDOT's projects are typically awarded to the low bid. Most other customers are
either cities or private construction companies.
PROPERTIES
NORTHERN DIVISION
Geneva Rock has a number of operating facilities and sand and gravel
pits throughout Northern Utah, including sand and gravel pits in Mapleton, Provo
Canyon, Cedar Hills, Draper, Bluffdale, West Valley, Morgan and South Weber.
Geneva Rock has concrete plants in Ogden, Layton, Salt Lake City, South Salt
Lake, West Valley, Sandy, Draper, Orem, Park City and Helper. Geneva Rock also
has two asphalt plants, one at Geneva Rock's gravel pit in Draper at the Point
of the Mountain and the other in Orem, Utah. Geneva Rock's corporate offices and
Construction Division headquarters are located in Orem, Utah. The Ready Mix
Concrete headquarters is located in Murray, Utah and the Gravel and Asphalt
Materials Division is in Draper, Utah. Geneva Rock also has
49
<PAGE> 68
offices in Layton, West Valley, Park City and Helper, Utah. The following is a
description of Geneva Rock's primary properties in Northern Utah.
OREM. Geneva Rock's Orem property is the original and present location
of Geneva Rock's corporate office where all accounting functions take place. It
is also the headquarters for Geneva Rock's Construction Division. The property
is situated on 38 acres of industrial property which is owned by Geneva Rock.
The site also has a 300 ton- per-hour asphalt plant, 200 yard-per-hour pre-mix
concrete plant, nine bay shop with paint room and three bay weld shop. The site
is located in the heart of the Utah County, which currently has a population of
over 300,000. This area has experienced significant growth recently, especially
in the high tech industry. Major employers in the area include Brigham Young
University, Utah Valley State College, Geneva Steel, Novell and Nuskin
International.
DRAPER AND BLUFFDALE (POINT OF THE MOUNTAIN). These locations service
both Utah and Salt Lake Counties, Utah's two most populous counties, and are
Geneva Rock's two most important gravel pits. The pit in Bluffdale is leased by
Geneva Rock and contains a gravel washing operation and other miscellaneous
screening plants. The pit is a major source for sand throughout the area. See
"Geneva Rock--Future Land Development" for more information regarding the
Bluffdale pit. The Draper pit is owned by Geneva Rock and contains a washing
operation, road base and asphalt plant material crushing plant, dry mix concrete
batch plant, and 500 ton-per-hour state-of-the-art asphalt plant. Geneva Rock
has also just completed a new combination shop/office at the Draper site. This
will be the new headquarters for Geneva Rock's Gravel and Asphalt Materials
Division. This shop/office facility, with 10 bays, will be Geneva Rock's largest
and will be used to service crushing equipment, large front end loaders and
trucks.
SANDY. This location is owned by Geneva Rock and contains a pre-mix
concrete batch plant and small shop located at the south end of the Salt Lake
Valley, which is currently undergoing a major commercial expansion. The city of
Sandy, however, has restricted this site's operating hours.
MURRAY. In 1997, Geneva Rock purchased a 25,000 square foot office
building in Murray, Utah. One-fourth of the building is currently being used as
Geneva Rock's Salt Lake Sales and Dispatch Office and the remaining space is
being leased to other tenants, including Beehive Insurance. The office, which is
situated at the center of the Salt Lake Valley, is in an excellent location to
conduct business and is the headquarters for Geneva Rock's Ready-Mix Concrete
Division.
WEST VALLEY CITY. Geneva Rock has three gravel pits with gravel
crushers in West Valley City. The Pioneer property is leased from West Valley
City with two years remaining on the lease. Geneva Rock owns the 150 acre West
Valley Pit and leases the Bacchus property adjacent to the West Valley Pit from
the Property Reserve, Inc. These sites are critical sources of material to
service the west side of the Salt Lake Valley including Kennecott. Geneva Rock
also has a dry mix concrete batch plant at the West Valley Pit.
SOUTH SALT LAKE. This property is owned by Geneva Rock, is Geneva
Rock's first location in the Salt Lake Valley and is located in the middle of
the valley. The site contains a premix concrete batch plant and 8 bay truck
shop. This plant is strategically located to service any location throughout the
Salt Lake Valley.
DOWNTOWN SALT LAKE CITY. This location is owned by Geneva Rock and
contains a premix concrete batch plant and a small truck shop. This plant is
being upgraded to be able to batch 1200 to 1400 cubic yards of concrete without
any aggregate being hauled during daylight hours. It is located in the downtown
area and is key to supplying some of the largest projects in the area.
LAYTON. This location is owned by Geneva Rock and includes a sales
office, premix concrete batch plant and small truck shop. The office services
the Davis and Weber County areas.
PARK CITY. This location is owned by Geneva Rock and includes a sales
office, small batch plant and small shop to service the Park City area, a high
growth resort area located approximately 30 miles from Salt Lake City.
50
<PAGE> 69
PRICE. This location is owned by Geneva Rock and includes a sales
office and small dry-mix concrete batch plant to service the Carbon and Emery
County area. This site is situated approximately 90 miles from the corporate
office in Orem and services the low production levels required by surrounding
rural communities.
SOUTHERN DIVISION
ST. GEORGE STORE. This store is leased from the prior owners of J & J
under a 5 year lease with four 5 year options to renew. The store contains J &
J's corporate offices, a hardware store built in 1995 and a lumber yard. It is
located one block away from one of St. George's primary streets, St. George
Boulevard. This has been the original location of J & J for nearly fifty years.
ST. GEORGE CONCRETE PLANT. This plant, located on Bluff Street in the
center of town, is a leased property comprising a small shop and a dry-mix
concrete batch plant. Aggregates from J & J's gravel pit must be hauled through
town to this location. J & J is considering a move of the concrete plant to the
gravel pit. This will save J & J transportation costs and the $180,000 annual
lease currently paid for the St. George plant.
ST. GEORGE CONCRETE BLOCK PLANT. The block plant is owned by J & J and
is located in the Bloomington Hills area of St George. This location has two
block plants: a plant built in 1987 and a new state of the art plant built in
1996. The older plant employs a 3 block machine, while the new plant employs a 5
block machine. The location also includes a masonry store and a sales office.
FORT PIERCE GRAVEL PITS. The Fort Pierce gravel pits are located near
the St. George block plant. J & J is leasing one of the two pits for a term of
25 years and the other gravel pit from the State of Utah for a 5 year term which
began in September 1996. These pits are the two main sources of gravel in the
area. Management believes that these pits hold an adequate supply of gravel to
meet J & J's needs for the next twenty years.
MESQUITE, NEVADA. This location is owned by J & J and includes a small
concrete dry batch plant with a small gravel reserve. The property is surrounded
by a large tract of BLM property that could be a good source for future gravel
reserves, provided that the necessary permits could be obtained. There can be no
assurance, however, that such permits can be obtained.
CEDAR CITY, UTAH. There are two sites in Cedar City. One site includes
a small 6,000 square foot store, which is leased by J & J and stocks building
and masonry products, and the second site, which is owned by J & J, includes a
ready-mix concrete plant and a gravel pit. The second site has approximately 60
acres held in reserve for future gravel production. Although Cedar City is
currently a small community of approximately 20,000 people, it has recently
experienced strong growth.
FUTURE LAND DEVELOPMENT
One of Geneva Rock's most important land development needs is the
acquisition of future gravel reserves. The Davis and Weber County areas have
relatively few gravel reserves compared to other areas. Geneva Rock's current
reserves in the Davis and Weber County areas are expected to last approximately
ten years based on current requirements. Geneva Rock intends to seek the
purchase or lease of additional gravel reserves in this area. Geneva Rock
believes its reserves in Salt Lake and Utah Counties and the St. George, Utah
area will last at least twenty years based on current requirements.
51
<PAGE> 70
Geneva Rock leases the pit in Bluffdale from Mt. Jordan Limited
Partnership, a Utah limited partnership. Geneva Rock is a general and limited
partner in Mt. Jordan Limited Partnership, owning approximately 15.2% of Mt.
Jordan Limited Partnership. Geneva Rock is presently negotiating with Mt. Jordan
Limited Partnership to acquire the Bluffdale pit and surrounding property.
Although Geneva Rock is hopeful that Mt. Jordan Limited Partnership and Geneva
Rock will be successful in negotiating mutually agreeable terms for Geneva
Rock's acquisition of the Bluffdale pit, there can be no assurance that this
will occur.
TRADE NAMES
Geneva Rock uses the "Geneva Rock Products" and "Red Rock Construction"
names as service marks in connection with its business operations. J & J uses
the "J & J Building Supply" name as a service mark in connection with its
business operations.
BACKLOG
Neither Geneva Rock nor J & J has a significant backlog of projects.
Most projects are completed in the year they are begun. Geneva Rock's Ready-Mix
Concrete Division, however, will start two large projects in 1998 that will
extend into 1999. The first project is for the supply of about 100,000 cubic
yards of concrete to the new Little America Grand Hotel in downtown Salt Lake
City, and the other project is for the supply of about 150,000 cubic yards of
concrete to Wasatch Constructors over the next four years in connection with the
I-15 freeway reconstruction. All other Geneva Rock projects were substantially
completed in 1997.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Geneva Rock is
a party. From time to time, Geneva Rock is involved in ordinary, routine legal
proceedings which are incidental to its business, but which do not have a
material adverse impact on its business or operations.
MARKET PRICE OF AND DIVIDENDS ON GENEVA ROCK COMMON STOCK
There is no public trading market for Geneva Rock Common Stock. The
approximate number of Geneva Rock shareholders of record as of the Record Date
was 81.
In 1996, Geneva Rock paid cash dividends of $30.00 per share of Geneva
Rock Common Stock to shareholders. In 1997, Geneva Rock paid cash dividends of
$30.00 per share of Geneva Rock Common Stock to shareholders. After the Merger,
dividends will be paid by CCI in such amounts and at such times as the CCI Board
of Directors deems to be appropriate based on the results of operations,
financial condition and liquidity needs of CCI. The amount, type and frequency
of dividends paid by CCI to its shareholders after the Merger will not be
equivalent to the amount, type and frequency of dividends paid by Geneva Rock
prior to the Merger. See "Summary--Selected Financial Information--Comparative
Per Share Data".
GENEVA ROCK MANAGEMENT
DIRECTORS
The names and ages of Geneva Rock's Directors are currently as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION(S) WITH GENEVA ROCK SINCE
- ---- --- ---------------------------- -----
<S> <C> <C> <C>
William R. Clyde.................... 79 Director, Secretary 1954
Norman D. Clyde..................... 67 Director 1959
Richard C. Clyde.................... 62 Director 1971
Paul B. Clyde....................... 56 Director 1971
</TABLE>
52
<PAGE> 71
<TABLE>
<S> <C> <C> <C>
Wilford W. Clyde.................... 45 Director, President 1978
Albert T. Schellenberg.............. 51 Director, Vice President 1984
John R. Young....................... 55 Director, Concrete Division Manager 1987
A. Ray Gammell...................... 39 Director, Equipment and Facilities Manager 1987
</TABLE>
For a description of the business backgrounds of Richard C. Clyde, Paul
B. Clyde, and William R. Clyde, see "Clyde Companies, Inc.--CCI Management Prior
to Consummation of the Merger," of Wilford W. Clyde, see "Clyde Companies,
Inc.--CCI Management Upon Consummation of the Merger," and of Norman D. Clyde,
see "Clyde--Clyde Management."
Albert T. Schellenberg has been a Director since 1984. He has also been
Vice President since 1988, with responsibility for construction, human
resources, property management, safety, and assisting the President where
needed. Mr. Schellenberg is professional engineer and has worked at Geneva Rock
as project manager, construction division manager, assistant
secretary/treasurer, and now as vice president. He has been involved with road
construction and design for 25 years, with previous employment at Kennecott
Copper Mine in Utah. Mr. Schellenberg has also served on the Board of Directors
of J & J since 1997.
John R. Young has been a Director since 1987. He has also been the
Concrete Division Manager for Geneva Rock since 1973. He has worked at Geneva
Rock for over 30 years in the concrete sales and production area. He has been a
salesman, plant manager and now division manager.
A. Ray Gammell has been a Director since 1987. He has been the
Equipment and Facilities Manager for Geneva Rock since 1985. He has worked at
Geneva Rock for 17 years in the equipment and asphalt construction divisions. He
is currently responsible for all ordering, repair and implementation of all
equipment at Geneva Rock. Mr. Gammell has also served on the Board of Directors
of J & J since 1996, on the Board of Directors of Utah Service since 1995 and as
the Vice President of Utah Service since 1997. A. Ray Gammell is the son of
Louise C. Gammell, who is currently the Secretary and Treasurer of CCI, a
Director of CCI and Utah Service; and the brother of B. Clyde Gammell, who is
currently the Vice President and a Director of Beehive Insurance.
Members of the Board of Directors of J & J includes Wilford W. Clyde,
Albert T. Schellenberg, William R. Clyde, Richard C. Clyde, Paul B. Clyde,
Norman D. Clyde, A. Ray Gammell and David O. Cook. For a description of the
business background of David O. Cook, see "Utah Service--Utah Service
Management" below.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The names, ages and positions of Geneva Rock's executive officers and
significant employees are currently as follows:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION(S) SINCE
- ---- --- WITH GENEVA ROCK -----
----------------
<S> <C> <C> <C>
Wilford W. Clyde.................................. 45 President 1988
Albert T. Schellenberg............................ 51 Vice President 1988
William R. Clyde.................................. 79 Secretary 1969
Don C. McGee...................................... 44 Assistant Secretary, Treasurer 1988
John R. Young..................................... 55 Concrete Division Manager 1983
A. Ray Gammell.................................... 39 Equipment and Facilities Division Manager 1983
</TABLE>
For a description of the business backgrounds of Wilford W. Clyde, see
"Clyde Companies, Inc.--CCI Management Upon Consummation of the Merger," of
William R. Clyde, see "Clyde Companies, Inc.--CCI Management Prior to
Consummation of the Merger," and of Albert T. Schellenberg, John R. Young and A.
Ray Gammell, see "Geneva Rock--Geneva Rock Management--Directors".
Don C. McGee has served as Assistant Secretary and Treasurer of Geneva
Rock since 1988, with responsibility for all of the accounting functions and tax
reporting requirements. Don has a B.S. in accounting and
53
<PAGE> 72
has been employed as Credit Manager, Accounting Manager, Controller and
currently is Assistant Secretary and Treasurer. He has been involved with
accounting for 20 years with previous employment at Exxon Oil Company as an
internal auditor from 1976 to 1979. Mr. McGee has also served as Secretary and
Treasurer of J & J since 1996.
COMMITTEES OF GENEVA ROCK BOARD
The Board of Directors of Geneva Rock does not have any committee and
no plans to establish any committee.
ATTENDANCE AT GENEVA ROCK BOARD MEETINGS
The Board of Directors met three times in 1997, and no Director
attended fewer than 75% of these meetings, except Norman Clyde who is currently
on a leave of absence for church service for a period of approximately three
years.
COMPENSATION OF DIRECTORS OF GENEVA ROCK
Directors that are not full time employees of Geneva Rock received
$1,500 in 1995, 1996, and 1997 for serving on the Geneva Rock Board of
Directors. Members of the Board of Directors that were full time employees
(i.e., Wilford W. Clyde, Albert T. Schellenberg, John R. Young and A. Ray
Gammell) received no compensation for serving as Directors.
PRINCIPAL SHAREHOLDERS OF GENEVA ROCK
The following table sets forth certain information regarding the
beneficial ownership of Geneva Rock Common Stock as of the Record Date as to (i)
each person who is known by Geneva Rock to own beneficially 5% or more of the
outstanding shares of Common Stock, (ii) each Director of Geneva Rock, (iii)
each executive officer and (iv) all Directors and executive officers as a group.
Except as otherwise noted, Geneva Rock believes the persons listed below have
sole investment and voting power with respect to the Geneva Rock Common Stock
that they are deemed to beneficially own.
<TABLE>
<CAPTION>
COMMON STOCK
------------
SHARES APPROXIMATE
BENEFICIALLY PERCENTAGE
OWNED(1) OWNED(1)
-------- --------
<S> <C> <C>
Paul B. Clyde (2) ............................................ 12,831 58.85%
3308 N 350 E
Provo, Utah 84601
Richard C. Clyde(3) .......................................... 12,366 56.72%
776 South 600 West
Orem, Utah 84057
William R. Clyde(4) .......................................... 12,335 56.58%
2000 Canyon Road
Springville, Utah 84663
David E. and Carol C. Salisbury(5) ........................... 12,308 56.45%
1423 Devonshire Drive
Salt Lake City, UT ........................................... 84108
Norman D. Clyde(6) ........................................... 8,535 39.15%
3223 Apache Lane
</TABLE>
54
<PAGE> 73
<TABLE>
<S> <C> <C>
Provo, Utah 84604
Wilford W. Clyde(7) .......................................... 7,804 35.79%
1324 E 950 S
Springville, Utah 84663
Steven L. Clyde(8) ........................................... 7,768 35.63%
8604 South Woodland Hills Drive
Spanish Fork, UT 84660
W.W. Clyde & Co. ............................................. 7,581 34.77%
P. O. Box 350
Springville, Utah 84663
Jeffrey R. Clyde(9) .......................................... 7,581 34.77%
4753 West Wasatch
Highland, UT 84003
Ila C. Cook(10) .............................................. 4,727 21.68%
2711 Sherwood Dr.
Salt Lake City, UT 84108
Louise C. Gammell(11) ........................................ 4,726 21.68%
1100 E. 400 S
Springville, UT 84663
Clyde Companies, Inc. ........................................ 4,725 21.67%
1423 Devonshire Drive
Salt Lake City, Utah 84108
Albert T. Schellenberg ....................................... 10 *
11089 N 5020 W
Highland, Utah 84003
John R. Young ................................................ 10 *
1404 Cherry Canyon Way
Draper, Utah 84020
A. Ray Gammell ............................................... 1 *
1294 N 1000 W
Mapleton, Utah 84663
All Directors and Executive Officers as a group (8 people)(12) 14,118 64.76%
</TABLE>
- -----------------------------------------------------------
* Less than 1%.
(1) Applicable percentage of ownership is based on 21,802 shares of Common
Stock outstanding as of the Record Date. Beneficial ownership is determined
in accordance with the rules of the Commission, and includes voting and
investment power with respect to such shares.
(2) Includes 143 shares owned directly by Paul B. Clyde, 37 shares owned
jointly by Paul B. and Jeanette Clyde (husband and wife), 7,581 shares
owned by Clyde, which shares Mr. Clyde may be deemed to beneficially own as
a result of his position as a Director and Vice President of Clyde, and
4,725 shares owned by CCI, which shares Mr. Clyde may be deemed to
beneficially own as a result of his position as a Director of CCI.
(3) Includes 60 shares owned directly by Richard C. Clyde, 7,581 shares
owned by Clyde, which shares Mr. Clyde may be deemed to beneficially own as
a result of his position as a Director, President and General Manager of
Clyde, and 4,725 shares owned by CCI, which shares Mr. Clyde may be deemed
to beneficially own as a result of his position as a Director of CCI.
55
<PAGE> 74
(4) Includes 26 shares owned indirectly by William R. Clyde through the
William R. Clyde Trust, 3 shares owned indirectly by Mr. Clyde through the
Reklaw & Co. Trust, 7,581 shares owned by Clyde, which shares Mr. Clyde may
be deemed to beneficially own as a result of his position as a Director of
Clyde, and 4,725 shares owned by CCI, which shares Mr. Clyde may be deemed
to beneficially own as a result of his position as a Director of CCI.
(5) David E. and Carol C. Salisbury (husband and wife) may be deemed to be
the beneficial owners of two shares owned directly by Carol C. Salisbury,
all of the 7,581 shares owned by Clyde as a result of Mr. Salisbury's
position as a Director of Clyde and all of the 4,725 shares owned by CCI as
a result of Ms.
Salisbury's position as President and Director of CCI.
(6) Includes 304 shares owned directly by Norman D. Clyde, 650 shares owned
jointly by Norman D. and Phyllis Clyde (husband and wife) and 7,581 shares
owned by Clyde, which shares Mr. Clyde may be deemed to beneficially own as
a result of his position as a Director of Clyde.
(7) Includes 186 shares owned directly by Wilford W. Clyde, 37 shares owned
jointly by Wilford W. and Natalie Clyde (husband and wife) and 7,581 shares
owned by Clyde, which shares Mr. Clyde may be deemed to beneficially own as
a result of his position as a Director of Clyde.
(8) Includes 187 shares owned directly by Steven L. Clyde and 7,581 shares
owned by Clyde, which shares Mr. Clyde may be deemed to beneficially own as
a result of his position as a Director of Clyde.
(9) Jeffrey R. Clyde may be deemed to be the beneficial owners of all of
the 7,581 shares owned by Clyde as a result of his position as a Director
of Clyde. Mr. Clyde does not own any shares of Geneva Rock Common Stock
directly.
(10) Includes two shares owned directly by Ila C. Cook and 4,725 shares
owned by CCI, which shares Ms. Cook may be deemed to beneficially own as a
result of her position as Vice President and Director of CCI.
(11) Includes one share owned directly by Louise C. Gammell and 4,725
shares owned by CCI, which shares Ms. Gammell may be deemed to beneficially
own as a result of her position as Secretary, Treasurer and Director of
CCI.
(12) In computing the aggregate number of shares owned by officers and
Directors as a group, the shares owned by CCI and Clyde, which shares
certain of the officers and Directors may be deemed to beneficially own,
are counted only once.
SELECTED FINANCIAL INFORMATION FOR GENEVA ROCK
The following selected statement of earnings and balance sheet data as
of and for the year ended December 31, 1997 are derived from the financial
statements of Geneva Rock which have been audited by Grant Thornton. The
selected statement of earnings and balance sheet data as of and for each of the
periods in the four year period ended December 31, 1996 are derived from the
financial statements of Geneva Rock which have been audited by Squire. The
financial data for Geneva Rock should be read in conjunction with the Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Geneva Rock" included elsewhere
herein.
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of earnings data:
Net sales and contract
income $131,107 $116,349 $100,422 $80,526 $70,556
Cost of sales and contracts 109,114 98,908 80,811 65,205 58,133
General and administrative 9,546 4,979 3,173 2,655 2,905
-------- -------- -------- ------- -------
</TABLE>
56
<PAGE> 75
<TABLE>
<S> <C> <C> <C> <C> <C>
Operating income 12,447 12,462 16,438 12,666 9,518
Other income (expense), net 734 781 918 1,201 430
Income taxes 4,959 4,809 6,378 5,062 3,321
-------- -------- -------- ------- -------
Net earnings $ 8,222 $ 8,434 $ 10,978 $ 8,805 $ 6,627
======== ======== ======== ======= =======
Earnings per common share - basic 377.10 $ 386.85 $ 503.54 $403.85 $304.01
Weighted average shares
outstanding 21,802 21,802 21,802 21,802 21,802
Balance sheet data:
Current assets 39,553 $ 35,240 $ 31,230 $25,373 $19,346
Current liabilities 8,869 8,036 5,289 4,307 3,964
Total assets 82,247 74,848 56,702 45,294 35,919
Total liabilities 17,501 17,669 7,303 6,219 5,060
Stockholders' equity 64,746 57,179 49,399 39,075 30,859
Dividends per common share 30.00 30.00 30.00 27.00 22.00
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF GENEVA ROCK
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Management's Discussion and
Analysis of Financial Condition and Results of Operations of Geneva Rock and
other sections of this Proxy Statement/Prospectus, including without limitation
statements containing the words "believes," "anticipates," "intends," "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Constituent Corporations to be materially different from any future results,
performance or achievements expressed or implied by such forward looking
statements. Such factors include, among other things, the following: (1)
expected cost savings from the Merger may not be realized; (2) costs or
difficulties related to the integration of the businesses of Clyde, Geneva Rock,
Utah Service and Beehive Insurance may be greater than expected; (3) an increase
of competitive pressure in the industries of Clyde, Geneva Rock, Utah Service
and Beehive Insurance may adversely affect the businesses of those companies;
and (4) general economic conditions, either nationally or in the states in which
Clyde, Geneva Rock, Utah Service and Beehive Insurance do business, may be less
favorable than expected. CCI disclaims any obligation to update such factors or
to publicly announce the result of any revisions to any forward-looking
statements included or incorporated by reference herein to reflect future events
or developments.
RESULTS OF OPERATIONS
The following discussions should be read in conjunction with the
financial statements and related notes of Geneva Rock included elsewhere in this
Proxy Statement/Prospectus.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net sales and contract income increased to $131,106,945 for the year
ended December 31, 1997, which represented a 12.7% increase over net sales and
contract income of $116,348,692 for the year ended December 31, 1996. This
increase was primarily due to the acquisition of J & J on June 28, 1996
resulting in only six months of comparable sales figures for 1996 compared
57
<PAGE> 76
to twelve months in 1997. However, net earnings decreased by $212,372 or 2.5%
primarily due to losses experienced by J & J because of lower prices and
increased competition in Southern Utah.
General and administrative expenses increased to $9,545,901 for the
year ended December 31, 1997 as compared to $4,979,299 for the year ended
December 31, 1996. Part of this increase in general and administrative expenses
was due to the acquisition of J & J on June 28, 1996, resulting in the
incurrence of only six months of general and administrative expenses of J & J
during 1996 compared to a full year of such expenses in 1997. In addition, the
general and administrative expenses of Geneva Rock itself (not including J & J)
increased due to the hiring of more professional employees to handle an
increased amount of work and substantially increased costs for computer support
and services, legal and auditing services, and insurance and taxes. These areas
increased because of management's direction to prepare for future competition
and to maintain and expand current market share. While J & J operated at a loss
for 1997, management believes that changes made in late 1997, including changes
in the local management of J & J and changes in production, will result in
improvements in operating performance for J & J in 1998. However, there can be
no assurance that J & J's operating performance will improve.
Accounts receivable for the year ended December 31, 1997 were
$23,540,072 compared to $18,545,642 as of December 31, 1996. Most of the
increase in accounts receivable is attributable to the fact that the last
quarter of 1997 was much warmer and dryer than the comparable period in 1996 and
Geneva Rock was able to continue working later in the year in 1997 as compared
to 1996. Buildings owned by Geneva Rock increased in 1997 to $5,724,854 from
$2,623,128 in 1996 primarily because of the $1,300,000 purchase of a building
located in Murray, Utah, the construction of a building costing approximately
$1,400,000 at Point of the Mountain, Utah, and additions to a building costing
approximately $250,000 in Orem, Utah. Machinery and equipment increased to
$26,080,727 in 1997 from $23,031,549 in 1996 as a result of purchases of
additional machinery and equipment. Transportation equipment increased in 1997
to $22,119,671 from $20,382,107 in 1996 as a result of purchases of additional
transportation equipment.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net sales and contract income for the year ended December 31, 1996
totaled $116,348,692, which represented a 15.9% increase from $100,422,149 in
sales for the year ended December 31, 1995. Sales increased 10.9% primarily
because of Geneva Rock's acquisition of J & J. The remaining 5% increase in
sales was attributable to the strong construction market in Utah.
Net earnings for 1996 were $8,433,996 compared with net earnings of
$10,978,104 for 1995, a 23.2% decrease. This decline in net earnings was
attributable primarily to lower gross profit margins. The lower gross profit
margin for 1996 stemmed from increased competition in the Utah market resulting
in static pricing or, in some instances, lower pricing of Geneva Rock's
products. 1995 was a year with a long autumn of fair weather which made it
possible to continue construction work later in the year and contributed to
increased net earnings. In contrast, construction work ceased earlier in the
year during 1996 which contributed to a decrease in net earnings as compared to
1995. Additionally, the cost of producing Geneva Rock's products (i.e., labor
costs, equipment costs, and the cost of raw materials) saw significant increases
in 1996. Also contributing to the reduction in net income in 1996 were losses
attributable to Geneva Rock's investment in J & J, which has not realized a
profit because of the construction slowdown in the St. George, Utah, Cedar City,
Utah and Mesquite, Nevada areas and the revaluing of J & J's assets which
increased the amount of depreciation. General and administrative expenses for
1996 increased to $4,979,299 from $3,172,944 in 1995. Increased cost of
producing products and increased overhead resulted from increased sales volumes
in 1995 and 1996 which created the need for more equipment and personnel to
service the increasing sales. Total other income for the year ended 1996
declined by $136,502 from 1995. This decrease in other income resulted primarily
from Geneva Rock's investment of approximately $12,700,000 to form J & J. Geneva
Rock's investment in J & J was comprised of $6,000,000 cash and a promissory
note payable to Jenning's Management, Inc. in the amount of $6,700,000. If the
$6,000,000 cash component of the investment in J & J had been invested in
certificates of deposit or other cash equivalents, it would have generated other
income. Also, interest was accrued and expensed on the promissory note given to
Jennings Management, Inc. in partial payment of the purchase price for the J & J
assets.
OTHER INCOME
Geneva Rock's other income account is comprised of income received from
sources other than the sale of Geneva Rock's standard products. The most
significant components of other income are: (i) distributions of partnership
income to Geneva Rock as a partner in Mt. Jordan Limited Partners; (ii) proceeds
from the sale of equipment in excess of book value; (iii) interest income (net
of interest expense and bank charges); (iv) sign rental income; (v) payments
received by Geneva Rock in consideration for a covenant not to compete granted
in connection with the sale of Geneva Rock's Tooele County facility; and (vi)
proceeds from the sale of scrap materials. Other income for the year ended
December 31, 1997 was $733,855 as compared to $781,270 for the year ended
December 31, 1996 and $917,772 for the year ended December 31, 1995. The decline
in other income for the year ended December 31, 1997 from the year ended
December 31, 1995 resulted primarily from an increase in interest expense during
1996 and 1997 prompted by Geneva Rock's capital expenditures in the formation
and capitalization of J & J.
LIQUIDITY AND CAPITAL RESOURCES
Geneva Rock's primary sources of liquidity have been funds generated by
operations. Net cash provided by operating activities was approximately
58
<PAGE> 77
$11,856,924, $12,774,190 and $12,673,418 during 1997, 1996 and 1995,
respectively. The cash position of Geneva Rock dropped to a December 31, 1997
balance of $7,204,539 from a December 31, 1996 balance of $7,752,630. This
reduction of cash assets of Geneva Rock, notwithstanding net earnings in 1997 of
$8,221,624, resulted from normal operating expenditures and an increase in
accounts receivable due to the longer construction period resulting from
favorable weather in November and December of 1997 and the first annual payment
on the note to Jennings Management, Inc. The decrease in notes payable to
$5,486,329 in 1997 from $7,496,531 in 1996 is in large part due to the annual
installment payment in the amount of $1,297,908 made during 1997 on the
promissory note from Geneva Rock payable to Jennings Management, Inc. as
described above.
The cash held by Geneva Rock decreased to a December 31, 1996 balance
of $7,752,630 from a December 31, 1995 balance of $11,924,153. This reduction of
cash assets of Geneva Rock, notwithstanding net earnings in 1996 of $8,433,996,
resulted from a cash contribution for the stock of J & J in the amount of
$12,130,000. Non-cash current assets increased from 1995 to 1996 by the amount
of $8,180,909. Geneva Rock has historically had little or no long term debt. In
connection with J & J's acquisition of assets from J & J Mill and Lumber Company
(now known as Jennings Management, Inc.); however, Geneva Rock incurred debt of
$6,700,000. This debt, evidenced by a promissory note in the original principal
amount of $6,700,000, is payable with interest at the rate of 8 1/4% per annum
in seven
59
<PAGE> 78
consecutive equal annual payments of $1,297,908.
In addition to substantial cash assets on December 31, 1997 and
December 31, 1996, Geneva Rock has established a line of credit with First
Security Bank of Utah, N.A. Geneva Rock's unsecured line of credit with First
Security was $1,000,000 in 1996 and was increased to $2,000,000 for the year
1997. J & J's unsecured line of credit with First Security was $1,000,000 in
1996 and was increased to $1,500,000 for the year 1997. As of December 31, 1997,
Geneva Rock had not drawn on its line of credit, but J & J had drawn $1,000,000
on its line of credit. Geneva Rock has also extended a line of credit to J & J
of $1,500,000 of which J & J has used $1,000,000.
Management of Geneva Rock has determined that to maintain and increase
market share Geneva Rock needs to continually modernize and update its fleet and
equipment. Geneva Rock intends to purchase and/or lease equipment that will be
delivered in the first two quarters of 1998 in a total amount of $11,290,000,
and Geneva Rock had placed firm orders for $5,280,000 as of December 31, 1997.
Management of Geneva Rock believes that the Company's current cash reserves and
future sales revenues will be adequate to service Geneva Rock's commitments for
the purchase and lease payments to be made on this equipment, without impairing
Geneva Rock's liquidity requirements.
INFLATION
Inflation in the U.S. economy has been relatively moderate during the
last few years. Price increases for labor and materials kept pace with inflation
for 1995. In 1996, although price increases were introduced, increased
competition in the Utah market from outside vendors precluded Geneva Rock from
passing on to its customers all increases in the cost of producing its products.
Geneva Rock expects that inflation will affect the cost of wages and materials
to Geneva Rock in 1998 and that the current competitive circumstance of the Utah
market will preclude Geneva Rock from passing all of such increases on to its
customers. This circumstance may result in lower profit margins for Geneva Rock
in 1998.
SEASONALITY
Because of the location of Geneva Rock's operations primarily in
central and northern Utah, Geneva Rock experiences significantly lower sales
during the winter months due to adverse weather conditions. Historically, the
months of November through March have shown losses for Geneva Rock, with Geneva
Rock's profitable months being April through October. Geneva Rock has
historically dealt well with these seasonal variations in sales and has
established adequate reserves to address the liquidity requirements of Geneva
Rock in the winter months. Also, the acquisition of J & J in southern Utah may
reduce the losses historically experienced in the winter months, although it
will not eliminate losses in the winter months.
THE YEAR 2000 ISSUE
Geneva Rock utilizes computer hardware and software in its operations.
Certain computer applications could fail or create erroneous results due to the
upcoming change in the century (the "Year 2000 Issue"). In December of 1997,
Geneva Rock purchased and began to install new computer hardware and software to
address the Year 2000 Issue. The software was purchased from Dexter and Chaney
of Seattle, Washington, and carries assurances that the software will not fail
or cause erroneous results due to the Year 2000 Issue. Geneva Rock anticipates,
however, that it will incur expenses of approximately $300,000 over the next two
years to upgrade certain proprietary software developed for Geneva Rock. Geneva
Rock does not expect that its expenditures related to the Year 2000 Issue will
have a material adverse effect on the results of operations or financial
condition of Geneva Rock.
CERTAIN TRANSACTIONS
The following is a summary of related party transactions that occurred
during the years ended December 31, 1997 and 1996. Geneva Rock provided
construction services and materials to Clyde totaling approximately $690,000 and
$353,000 for the years ended December 31, 1997 and 1996, respectively. Geneva
Rock paid $635,000 and $519,000 for the years ended December 31, 1997 and 1996,
respectively, for construction services and materials provided by Clyde, and
$610,000 and $638,000 for the years ended December 31, 1997 and 1996,
respectively, for construction materials provided by Utah Service. Beehive
Insurance received $199,000 and $193,000 in commission revenue for insurance
purchased by Geneva Rock in 1997 and 1996, respectively. Geneva Rock also leases
part of its office building in Murray, Utah to Beehive Insurance. Transactions
with related parties were not effected at below market prices.
60
<PAGE> 79
UTAH SERVICE
BACKGROUND
Utah Service was founded in 1937 by W.W. Clyde to service Clyde. Utah
Service owns and operates a hardware store and lumber yard and an adjacent
gasoline station/convenience store, all located at 400 South Main Street in
Springville, Utah. Utah Service's customer base is well diversified, with none
of its customers generating more than 10% of total sales. The products and
services offered by Utah Service are described below.
PRODUCTS AND SERVICES
BUILDING MATERIALS AND LUMBER
Utah Service is a retailer of lumber and building materials. Utah
Service stocks a wide range of building materials and lumber to provide
customers with quality products needed to build, repair or remodel residential
or commercial property. Wood products include lumber, plywood, roof trusses,
floor trusses, treated lumber, sheathing, wood siding and specialty lumber.
Building materials include roofing, vinyl siding, doors, windows, molding,
drywall, insulation, cement and nails.
Utah Service sells its products to general contractors, such as
residential and commercial building professionals, repair contractors and
remodeling contractors, and to the general public, such as retail customers
involved in home improvement and remodeling projects. Utah Service concentrates
its efforts on service, product assortment, specialist advice, convenient
location, scheduled on time job-site delivery and competitive prices. Utah
Service's retail building materials and lumber market is largely confined to the
Springville/Mapleton area. Utah Service's customer base is well diversified,
with no customers accounting for more than 10% of total sales. Most of Utah
Service's advertising is in the form of direct mail and advertisements in the
local newspaper. These marketing efforts are generally targeted at the general
public which includes individual homeowners, students, and other retail
customers.
Utah Service is formulating plans for moving to a new, fully operational
building material and lumber contractor yard by the fall of 1998 on a 7.3 acre
site owned by Utah Service and located one-half mile west of Utah Service's
current location. The yard will be surfaced and comprised of lumber sheds and a
contractor's office. Utah Service estimates that the cost of this new facility
will be approximately $825,000.
HARDWARE
Utah Service is also a retailer in the home improvement industry. Utah
Service sells an assortment of building materials, home improvement, lawn and
garden supplies, housewares, appliances and seasonal items, such as plumbing,
heating, lighting, electrical, hardware, tools and paint. The hardware store
stocks approximately 42,000 product items ranging in color and size with a
variety of quality and nationally advertised brand names, such as "Ace". Utah
Service's retail hardware sales are largely confined to the
Springville/Mapleton, Utah area.
Utah Service plans to open a new full service hardware and garden store
at an existing site in Spanish Fork, a city adjacent to Springville, by the fall
of 1998. The leased store will be 24,500 square feet and stocked with everything
currently sold at the Springville store, other than lumber packages which will
be supplied by the Springville store. The location of the new store will help
maintain customer satisfaction by reducing delays in shopping, increasing
utilization by existing customers and attracting new customers to a more
convenient location. The hardware department will also continue to offer a broad
assortment of high quality merchandise at competitive prices. Utah Service
estimates that the cost of this new facility will be approximately $725,000.
CHEVRON GAS STATION/CONVENIENCE STORE
Utah Service also owns and operates a Chevron gas station/convenience
retail store. The gas station/convenience store sells Chevron gasoline and
diesel products exclusively under an independent dealership arrangement with
Chevron. The store also offers a wide variety of products, such as milk, ice
cream, groceries,
61
<PAGE> 80
beverages, snack foods, candy, deli products, hot dogs, chili, soup, nachos,
baked goods, other food items, tobacco products and health and beauty aids. The
store also supplies various automotive supplies, such as oil, brake fluid,
windshield wipers, fix-a-flat and air fresheners. Utah Service's retail service
station/convenience store market is largely confined to the
Springville/Mapleton, Utah area.
Utah Service plans to upgrade and remodel its Chevron gas
station/convenience store on its existing location in late 1998 or early 1999
once the lumber yard is moved to its new site. These remodeling plans include
modernizing and changing the store's appearance, upgrading the gasoline
facilities, increasing the number of gas pumps from 4 to 8 and installing modern
environmental protection equipment. Utah Service estimates that the cost of
upgrading and remodeling this facility will be approximately $250,000.
AUTOMOTIVE AND INDUSTRIAL SUPPLIES
Utah Service is also an automotive specialty retailer in the automotive
aftermarket. The automotive aftermarket refers to products and services
purchased for vehicles after the original sale, such as accessories, maintenance
and repairs, replacement parts, including brake shoes, brake pads, belts, hoses,
starters, alternators, batteries, shocks, struts, CV boots, carburetors,
transmission parts, clutches, electrical components, suspension and engine
parts. Other automotive products sold include batteries, oil, antifreeze, brake
and power steering fluid, engine additives, wax and protectants, floor mats,
seat covers, and more. Utah Service is not in the business of selling tires or
performing automotive repairs. Utah Service's retail automotive supply market is
largely confined to the automotive repair shops and retail customers in the
Springville/Mapleton, Utah area. The department also sells industrial supplies,
including crusher bowls, conveyor belting, and fasteners for industrial use.
SUPPLIERS
Utah Service purchases its products for each department from numerous
vendors. The majority of its building materials, lumber, automotive and
industrial supplies are purchased directly from manufacturers, while the
remaining products are purchased from combination manufacturers/wholesalers. Its
main hardware vendor is Ace Hardware. The hardware department purchases
approximately 62% of its hardware items from Ace. Utah Service purchase all of
its gasoline and diesel products through Chevron's local wholesaler. Convenience
store items are purchased through various vendors. Utah Service is not fully
dependent on any single vendor and management believes that alternative sources
of products and supplies are available for all of its products.
COMPETITION
Utah Service's business is highly competitive. Utah Service's building
materials and lumber business competes primarily with national or regional
building centers, warehouses, and home center retailing, such as Anderson
Lumber, Burton Lumber and BMC West. Utah Service's hardware business competes
primarily with chains of building supply houses, home improvement stores,
national hardware stores and warehouse clubs, such as Anderson Lumber, Eagle
Hardware and Home Base. Utah Service's gas station/convenience store business
currently competes with other convenience stores, large, nationally recognized
gas stations, supermarket chains, independent gasoline stations, fast food
operations and other similar retail stores. As of December 31, 1997, Springville
had seven other gasoline stations and/or convenience stores which competed with
Utah Service's Chevron station. Automotive products similar or identical to
those sold at the Utah Service store are generally available from a variety of
different competitors in and around Springville. Key competitive factors include
location, quality service, product selection, pricing, hours of operation,
expertise of sales staff and product promotions. Management believes that Utah
Service competes favorably on each of these factors.
SEASONALITY OF BUSINESS
Utah Service's businesses are generally adversely affected by cold
weather patterns in the first and fourth quarters when sales tend to decline by
approximately 35% to 40% from average annual sales. Hardware sales usually rise,
however, during the fourth quarter due to holiday shopping. Utah Service
generally experiences higher revenues and profit margins during the warmer
months in the second and third quarters. For example, gas sales
62
<PAGE> 81
during this period tend to increase by approximately 25% from average annual
sales as a result of an increase in vacation traveling and the use of
recreational vehicles, boats, jet skis and motorcycles.
EMPLOYEES
As of December 31, 1997, Utah Service had a total of 57 employees, 32
which were full time and 25 which were part time. None are unionized. Utah
Service considers its employee relations to be satisfactory.
INFORMATION SYSTEMS
Utah Service employs "point of sale" computer terminals with an
electronic bar code scanning system in every department. These systems provide
efficient customer check-out, which decreases transaction time, reduces register
lines and eliminates the time previously spent on price labeling every item. The
systems also provide management with current, valuable sales and marketing
information to help in the future planning of each store and monitor inventory
levels thereby reducing the frequency of physical inventories to only once or
twice a year.
Utah Service also makes use of the Internet to help expand its
business. Utah Service maintains a World Wide Web site at http://www.ACELB.com,
which contains valuable product and service information relating to their
hardware, lumber and building materials needs. Utah Service also has access to
detailed and up-to-date information on Ace through Ace Net.
REGULATION
Utah Service is subject to a variety of federal, state, and local laws
and regulations. Utah Service management believes that Utah Service currently
has all licenses, permits and approvals necessary for its current operations and
is in substantial compliance with all applicable government regulations.
PROPERTIES
Utah Service merged with an affiliated company, Utah Valley Industrial
Supply, on December 31, 1994. Prior to that date, the two companies operated out
of two separate facilities, Utah Service out of a 7,000 square foot building and
Utah Valley Industrial Supply out of a 4,000 square foot building, both located
where the present facilities are located. The present hardware store facility
was completed in April 1995 at a total cost of $825,000 (excluding approximately
$148,000 in new equipment purchased to equip the new facility). The facility has
a total of 23,500 square feet of space on the main (retail) floor, with an
additional 2,000 square feet of corporate office space located on the second
floor.
Utah Service's hardware store, gasoline station/convenience store, and
lumber yard are all located on a 2.75 acre parcel of land. In addition to these
facilities, Utah Service also owns a 2.67 acre parcel of land located west of
Center Street in Springville, which is used by Utah Service primarily for lumber
storage. In October 1997, Utah Service sold two retail buildings located on Main
Street in Springville to help fund Utah Service's expansion plans. These plans
include building a new, fully operational building material and lumber
contractor yard on land that it owns in Springville, opening a new full service
hardware and garden store and expanding its gas station/convenience store in
late 1998 or early 1999. See "Utah Service -- Products and Services" above.
TRADE NAMES
Utah Service uses the "Chevron", "Ace Hardware" and "Parts Plus" names
as service marks in connection with its business operations. Utah Service owns
the "Utah Service, Inc." mark and currently licenses the other marks. It does
not sell any goods under any brand name owned by Utah Service.
63
<PAGE> 82
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Utah Service
was a party. From time to time, Utah Service becomes involved in ordinary,
routine legal proceedings incidental to the business of Utah Service which do
not have an adverse impact on its business or operations.
MARKET PRICE OF AND DIVIDENDS ON UTAH SERVICE COMMON STOCK
There is no public trading market for Utah Service Common Stock. The
approximate number of shareholders of record as of the Record Date was 52.
In 1996, Utah Service paid cash dividends of $20.00 per share of Utah
Service Common Stock to shareholders. In 1997, Utah Service paid cash dividends
of $20.00 per share of Utah Service Common Stock to shareholders. After the
Merger, dividends will be paid by CCI in such amounts and at such times as the
CCI Board of Directors deems to be appropriate based on the results of
operations, financial condition and liquidity needs of CCI. The amount, type and
frequency of dividends paid by CCI to its shareholders will not be equivalent to
the amount, type and frequency of dividends paid by Utah Service prior to the
Merger. See "Summary--Selected Financial Information--Comparative Per Share
Data".
UTAH SERVICE MANAGEMENT
DIRECTORS
The names and ages of Utah Service's Directors are currently as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH UTAH SERVICE DIRECTOR SINCE
<S> <C> <C> <C>
Vernon O. Cook ................... 76 Chairman of the Board 1949
Hal M. Clyde ..................... 71 Director 1970
Norman D. Clyde .................. 67 Director 1964
Paul B. Clyde .................... 56 Director 1987
William R. Clyde ................. 79 Director 1948
A. Ray Gammell.................... 39 Director , Vice President 1995
Louise C. Gammell................. 73 Director 1968
David O. Cook..................... 47 Director, President and Chief Executive Officer 1982
</TABLE>
For a description of the business backgrounds of Paul B. Clyde, William R.
Clyde, and Louise C. Gammell, see "Clyde Companies, Inc.--CCI Management Prior
to Consummation of the Merger," of Norman D. Clyde, see "Clyde--Clyde
Management," and of A. Ray Gammell, see "Geneva Rock--Geneva Rock Management."
Vernon O. Cook has served as a Director since 1949 and as Chairman of
the Board since April 1997. He served as the President of Utah Service from 1975
to 1997. He is now retired from work in the retail and real estate industries
and from management of Utah Service. Mr. Cook graduated from the University of
California in 1949 with a degree in Physics. From 1949-1962, he was Manager of
Operations and Director of Utah Service. From 1962-1971, he was General Manager
and Executive Vice President of IRECO Chemicals, Mesabi Blasting Agents, Inc.
and Intermountain Research and Engineering Co., Inc. Since the early 1970s, Mr.
Cook has purchased and operated income property and has formed a private
corporation called Vernon O. Cook & Co., Inc. for real estate sales and
operations. Vernon O. Cook is the husband of Ila C. Cook, who is currently Vice
President and a Director of CCI; and the father of David O. Cook, who is
currently President, CEO and a Director of Utah Service.
Hal M. Clyde has served as a Director since 1970. He retired in 1992 after
44 years of employment with Clyde. Mr. Clyde currently serves as a Commissioner
on the UDOT Commission. He has also served on the Board of Directors of Beehive
Insurance since 1963. Hal M. Clyde is the brother of Norman D. Clyde, who is
currently a Director of Utah Service, Clyde, Geneva Rock, and Beehive Insurance;
the father of H. Michael Clyde, who has agreed to become a Director
64
<PAGE> 83
of CCI upon consummation of the Merger; and an uncle of Tawna Clyde Smith, who
has agreed to become a Director of CCI upon consummation of the Merger.
Louise C. Gammell has been a Director since 1968. She has a Bachelors
degree from the University of Utah. Ms. Gammell has been a Director of CCI since
1961. Louise C. Gammell is the mother of A. Ray Gammell, who is currently the
Vice President and a Director of Utah Service and a Director of Geneva Rock, and
B. Clyde Gammell, who is currently the Vice President and a Director of Beehive
Insurance; the sister of William R. Clyde, Ila C. Cook and Carol C. Salisbury;
and an aunt of Richard C. Clyde, Paul B. Clyde, Wilford W. Clyde, Steven L.
Clyde and David O. Cook.
David O. Cook has been a Director since 1982. He was elected President and
Chief Executive Officer of Utah Service in April 1997. He has served as the
General Manager of Utah Service since 1980. He was Vice President of Utah
Service from 1991 to 1997. He graduated from BYU, Hawaii with a Bachelors degree
in Accounting and Business Administration. Mr. Cook is a Certified Public
Accountant and a member of the American Institute of Certified Public
Accountants and Utah Association of Certified Public Accountants. Prior to
joining Utah Service, Mr. Cook was Assistant Controller for NRP, Staff
Accountant and Supervisor for Robinson, Hill and Co. from 1973 to 1975. David O.
Cook is the son of Vernon O. Cook, who is currently Chairman of the Board of
Utah Service, and of Ila C. Cook who is currently the Vice President and a
Director of CCI.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The names, ages and positions of Utah Service's executive officers and
significant employees are currently as follows:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION(S) SINCE
WITH UTAH SERVICE
<S> <C> <C> <C>
Vernon O. Cook.................................. 76 Chairman of Board 1997
David O. Cook................................... 47 President and Chief Executive Officer 1997
A. Ray Gammell.................................. 39 Vice President 1997
Lawrence Kosmuch................................ 45 Accounting Manager, Secretary and Treasurer 1979
</TABLE>
For a description of the business backgrounds of A. Ray Gammell, see
"Geneva Rock -- Geneva Rock Management," and of Vernon O. Cook and David O.
Cook, see "Utah Service -- Utah Service Management--Directors" above.
Lawrence Kosmuch has been the Accounting Manager, Secretary and Treasurer
of Utah Service since 1979.
COMMITTEES OF UTAH SERVICE BOARD
The Board of Directors of Utah Service does not have any committee and no
plans to establish any committees.
ATTENDANCE AT UTAH SERVICE BOARD MEETINGS
The Board of Directors met four times in 1997, and no Director attended
fewer than 75% of these meetings, except Norman Clyde who is currently on a
leave of absence for church service for a period of approximately three years.
COMPENSATION OF DIRECTORS OF UTAH SERVICE
Vernon O. Cook receives $2,000 annually for his services as Chairman of the
Board of Directors of Utah Service. Directors who are not employed by Utah
Service, including Hal M. Clyde, Norman D. Clyde, Paul B.
65
<PAGE> 84
Clyde, William R. Clyde, A. Ray Gammell and Louise Clyde Gammell, receive $750
per year for their services as Directors.
PRINCIPAL SHAREHOLDERS OF UTAH SERVICE
The following table sets forth certain information regarding the beneficial
ownership of Utah Service Common Stock as of the Record Date as to (i) each
person who is known by Utah Service to own beneficially 5% or more of the
outstanding shares of Common Stock, (ii) each Director of Utah Service, (iii)
each executive officer and (iv) all Directors and executive officers as a group.
Except as otherwise noted, Utah Service believes the persons listed below have
sole investment and voting power with respect to the Utah Service Common Stock
that they are deemed to beneficially own.
<TABLE>
<CAPTION>
COMMON STOCK
SHARES APPROXIMATE
BENEFICIALLY PERCENTAGE
OWNED(1) OWNED(1)
<S> <C> <C>
Louise C. Gammell(2).................................................. 2,084 38.50%
1100 E. 400 S.
Springville, UT 84663
Vernon O. Cook and Ila C. Cook(3)..................................... 2,019 37.30%
2711 Sherwood Dr.
Salt Lake City, UT 84108
Carol Clyde Salisbury(4).............................................. 1,946 35.95%
1423 Devonshire Dr.
Salt Lake City, UT 84108
Richard C. Clyde(5)................................................... 1,720 31.78%
776 South 600 West
Orem, UT 84057
Paul B. Clyde(6)...................................................... 1,719 31.76%
3308 N. 350 E.
Provo, UT 84601
William. R. Clyde(7).................................................. 1,712 31.63%
2000 Canyon Rd.
Springville, UT 84663
Clyde Companies, Inc.................................................. 1,698 31.37%
1423 Devonshire Drive
Salt Lake City, UT 84108
David O. Cook(8)...................................................... 568 10.49%
1498 E. Center St.
Springville, UT 84663
Hal M. Clyde(9)....................................................... 192 3.55%
908 Hillcrest Dr.
Springville, UT 84663
</TABLE>
66
<PAGE> 85
<TABLE>
<S> <C> <C>
Norman D. Clyde....................................................... 191 3.53%
3223 Apache Lane
Provo, UT 84604
A. Ray Gammell........................................................ 5 *
1294 N. 1000 W.
Mapleton , UT 84664
All Directors and executive officers as a group (8 people)(10)........ 3,396 62.27%
- ---------------------------------------------------
</TABLE>
* Less than 1%.
(1) Applicable percentage of ownership is based on 5,413 shares of Common
Stock outstanding as of the Record Date. Beneficial ownership is determined
in accordance with the rules of the Commission, and includes voting and
investment power with respect to such shares.
(2) Includes 300 shares owned directly by Louise C. Gammell, 86 shares
owned directly by Ms. Gammell's husband, Blake Gammell, which shares Ms.
Gammell may be deemed to beneficially own, and 1,698 shares owned by CCI,
which shares Ms. Gammell may be deemed to beneficially own as a result of
her position as Secretary, Treasurer and a Director of CCI.
(3) Includes 129 shares owned indirectly by Vernon O. Cook through the
Vernon O. Cook Family Trust, 192 shares owned indirectly by Ila C. Cook
through the Ila C. Cook Family Trust, and 1,698 shares owned by CCI, which
shares Ila C. Cook may be deemed to beneficially own as a result of her
position as Vice President and a Director of CCI.
(4) Includes 248 shares owned directly by Carol C. Salisbury and 1,698
shares owned by CCI, which shares Ms. Salisbury may be deemed to
beneficially own as a result of her position as President and a Director of
CCI.
(5) Includes 22 shares owned directly by Richard C. Clyde and 1,698 shares
owned by CCI, which shares Mr. Clyde may be deemed to beneficially own as a
result of his position as a Director of CCI.
(6) Includes 21 shares jointly owned by Paul B. and Jeanette Clyde (husband
and wife) and 1,698 shares owned by CCI, which shares Mr. Clyde may be
deemed to beneficially own as a result of his position as a Director of
CCI.
(7) Includes 14 shares owned directly by William R. Clyde and 1,698 shares
owned by CCI, which shares Mr. Clyde may be deemed to beneficially own as a
result of his position as Vice President and a Director of CCI.
(8) Includes 379 shares owned directly by David O. Cook and 189 shares
owned by INVO, L.C., which shares Mr. Cook may be deemed to beneficially
own as a result of his position as an officer, Director and shareholder of
INVO, L.C.
(9) Includes 192 shares owned indirectly by Hal M. Clyde through the Hal M.
Clyde Trust.
(10) In computing the aggregate number of shares owned by officers and
Directors as a group, the shares owned by CCI, which shares certain of the
officers and Directors may be deemed to beneficially own, are counted only
once.
SELECTED FINANCIAL INFORMATION FOR UTAH SERVICE
67
<PAGE> 86
The following selected statement of earnings and balance sheet data as
of and for the year ended December 31, 1997 are derived from the financial
statements of Utah Service which have been audited by Grant Thornton. The
selected statement of earnings and balance sheet data as of and for each of the
periods in the four year period ended December 31, 1996 are unaudited, but, in
the opinion of management, the unaudited financial statements reflect all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the information included therein. The financial data for Utah
Service should be read in conjunction with the Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Utah Service" included elsewhere herein.
68
<PAGE> 87
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995 1994 1993
------ ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of earnings data:
Operating revenues $12,045 $13,108 $13,580 $10,690 $ 8,252
Cost of goods sold 9,858 10,915 11,633 9,159 7,053
General and administrative 1,709 1,628 1,498 915 800
------- ------- ------- ------- -------
Operating income 478 565 449 616 399
Other income (expense), net 183 114 101 95 165
Income taxes 227 258 199 265 217
------ ------- ------- ------- -------
Net earnings $ 433 $ 421 $ 351 $ 446 $ 347
===== ======= ======= ======= =======
Earnings per common share - basic 80.05 $ 77.78 $ 64.77 $ 91.56 $ 71.24
Weighted average shares outstanding 5,413 5,413 5,413 4,871 4,871
Balance sheet data (at period end):
Current assets 3,129 $ 3,057 $ 2,911 $ 2,339 $ 2,098
Current liabilities 515 626 608 359 489
Total assets 4,541 4,387 4,278 2,857 2,618
Total liabilities 629 853 977 359 489
Stockholders' equity 3,912 3,534 3,301 2,498 2,130
Dividends per common share 20.00 20.00 20.00 16.00 20.00
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF UTAH SERVICE
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Management's Discussion and
Analysis of Financial Condition and Results of Operations of Utah Service and
other sections of this Proxy Statement/Prospectus, including without limitation
statements containing the words "believes," "anticipates," "intends," "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Constituent Corporations to be materially different from any future results,
performance or achievements expressed or implied by such forward looking
statements. Such factors include, among other things, the following: (1)
expected cost savings from the Merger may not be realized; (2) costs or
difficulties related to the integration of the businesses of Clyde, Geneva Rock,
Utah Service and Beehive Insurance may be greater than expected; (3) an increase
of competitive pressure in the industries of Clyde, Geneva Rock, Utah Service
and Beehive Insurance may adversely affect the businesses of those companies;
and (4) general economic conditions, either nationally or in the states in which
Clyde, Geneva Rock, Utah Service and Beehive Insurance do business, may be less
favorable than expected. CCI disclaims any obligation to update such factors or
to publicly announce the result of any revisions to any forward-looking
statements included or incorporated by reference herein to reflect future events
or developments.
RESULTS OF OPERATIONS
The following discussions should be read in conjunction with the
financial statements and related notes of Utah Service included elsewhere in
this Proxy Statement/Prospectus.
69
<PAGE> 88
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Operating revenues for the year ended December 31, 1997 totaled
$12,044,736, which represented a 8.1% decrease from $13,107,947 in operating
revenues from the comparable period in 1996. This decline resulted from a
decrease in lumber sales attributable primarily to a decline in sales of lumber
to commercial construction projects in 1997. Management believes that this
decline in commercial project lumber sales will not adversely affect the
operations or liquidity of Utah Service. The majority of Utah Service's lumber
sales are for residential projects. Commercial project lumber sales are
generally low margin sales, causing some volatility in lumber sales, but little
impact upon the profitability of operations or upon liquidity. Management is
unable to predict future levels of commercial project lumber sales or their
margins because they are obtained through competitive bidding. Hardware sales in
1997 increased by more than 20% over hardware sales for the comparable period in
1996. Operating expenses for 1997 increased by approximately 5% over operating
expenses for the comparable period in 1996. The increase in operating expenses
in 1997 resulted primarily from increased costs of labor. Labor costs are
increasing as a result of a very low unemployment rate in Utah, making it
difficult to attract the required labor force at historical labor rates.
Service charge income in 1997 decreased to $46,269 from $98,350 in 1996
because of better collections and the resulting lower finance charges. Other
income (net) increased to $147,334 in 1997 from $43,788 in 1996 due in large
part to the appreciation in the value of the Ace Hardware stock held by Utah
Service.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Operating revenues for the year ended December 31, 1996 totaled
$13,107,947, which represented a 3.5% decrease from $13,580,133 in operating
revenues for the year ended December 31, 1995. Approximately one million dollars
of the operating revenues in 1995 were attributable solely to a single sale of
lumber in connection with the Pinehurst/Orchard Park project.
Earnings before income taxes for 1996 were $679,336 compared with
earnings before income taxes of $550,083 for 1995, a 23.5% increase. This
increase in earnings before income taxes was attributable in part to the 4.2%
increase in sales (excluding the Pinehurst/Orchard Park sale) and to an improved
gross profit margin. The improved gross profit margin for 1996 was the result of
a greater volume of sales in the hardware area, as opposed to lumber sales which
typically have a lower gross profit margin. Also, total operating expenses for
1996 experienced a 8.7% increase over 1995. Most of this increase was
attributable to additional payroll expense resulting from a tight labor market
in Utah which required Utah Service to pay higher salaries and wages to attract
and retain qualified employees.
LIQUIDITY AND CAPITAL RESOURCES
Utah Service's primary sources of liquidity have been funds generated
by operations. Net cash provided by (used in) operating activities was
approximately $169,598, $569,020 and $(227,602) during 1997, 1996 and 1995,
respectively.
The cash position of Utah Service decreased as of December 31, 1997 to
$276,678 from $479,954 as of December 31, 1996. The decrease in the cash
position of Utah Service was primarily due to the fact that management increased
the purchase of inventories during 1997 to take advantage of lower market prices
for lumber and building materials. The result was that inventories increased by
$407,251 to $1,705,351 in 1997 from $1,298,100 in 1996. In addition, receivables
decreased by 10.5% to $1,137,963 in 1997 from $1,271,202 in 1996. This decrease
was mainly due to lower sales during the month of December 1997. Total current
assets increased slightly as of December 31,1997 to a level of $3,129,323 from
the December 31, 1996 level of $3,057,394.
Other assets increased to $192,387 in 1997 from $39,967 in 1996 as a
result of an increase in the value of certain pension plan assets and an
increase in the value of the Ace Hardware stock held by Utah Service.
The remaining balance of the First Security Bank of Utah, N.A.
Promissory Note, which was $369,257 on December 31, 1995 and $198,081 on
December 31, 1996, had been paid off in its entirety as of December 31, 1997. As
a result of elimination of this obligation, both long term obligations and
current maturities of long-term obligations were reduced to $0 as of December
31, 1997 from a balance of $98,817 and $99,264, respectively, as of December 31,
1996 and December 31, 1995.
70
<PAGE> 89
Management believes that cash on hand and other current assets are
consistent with historical levels and that they provide sufficient liquidity to
meet the needs of Utah Service's business obligations.
INFLATION
Inflation in the U.S. economy has been relatively moderate during the
last few years. Price increases for Utah Service's products have kept pace with
inflation for both 1996 and 1997. Utah Service expects that inflation will
affect the cost of wages for its employees in 1998 and Utah Service expects that
it will be able to pass such increases on by increasing its prices for Utah
Service's products. Fuel and lumber prices typically fluctuate upward and
downward and do not typically track consumer inflation indices. As a result of
these factors, Utah Service anticipates that it will be in a position to
maintain essentially the same profit margin in 1998 that it has experienced in
1996 and 1997.
SEASONALITY
Because of the location of Utah Service's operations in Utah County,
Utah, Utah Service experiences lower sales during the winter months due to
adverse weather conditions. Historically, the months of December through
February have shown decreased sales, with Utah Service's more profitable months
being March through November. Utah Service has historically dealt well with
these seasonal variations in sales and has established adequate reserves to
address the liquidity requirements of Utah Service in the winter months.
THE YEAR 2000 ISSUE
Utah Service utilizes computer hardware and software in its operations.
Certain computer applications could fail or create erroneous results due to the
upcoming change in the century (the "Year 2000 Issue"). Utah Service regularly
upgrades its computer hardware and believes that it will not incur any
additional expenses to modify computer hardware due to the Year 2000 Issue. In
addition, Utah Service has received commitments from software vendors that will
allow Utah Service to upgrade third-party software programs with minimal expense
to Utah Service. Utah Service anticipates, however, that it will incur expenses
of approximately $30,000 over the next two years to upgrade certain proprietary
software developed for Utah Service. Utah Service does not expect that its
expenditures related to the Year 2000 Issue will have a material adverse effect
on the results of operations or financial condition of Utah Service.
CERTAIN TRANSACTIONS
During the years ended December 31, 1997 and 1996, Utah Service sold
construction materials to Clyde totaling approximately $180,000 and $304,000,
respectively, and to Geneva Rock totaling approximately $610,000 and $638,000,
respectively. Beehive Insurance received $8,000 and $7,000 in commission revenue
for insurance purchased by Utah Service in 1997 and 1996, respectively.
Transactions with related parties were not effected at below market prices.
71
<PAGE> 90
BEEHIVE INSURANCE
BACKGROUND
Beehive Insurance was incorporated in the State of Utah in 1961 by W.W.
Clyde for the purpose of operating as an independent insurance agency for the
sale of insurance coverage to Clyde and the general public. These coverages
include personal automobile and homeowners policies as well as commercial,
property, liability, automobile, surety bonds and other related or companion
commercial insurance coverages. Beehive Insurance's operations have gradually
evolved into the sale of primarily commercial property insurance policies,
casualty insurance policies and surety bonds. Businesses owned by the W.W. Clyde
family (particularly Clyde and Geneva Rock, which collectively generated
approximately 56% of Beehive Insurance's commission revenue in 1997) comprise a
significant portion of Beehive Insurance's client base. The loss of business
from Clyde and Geneva would have a material adverse effect on the business of
Beehive Insurance. Other unaffiliated customers, however, are also serviced by
Beehive Insurance. Revenue for Beehive Insurance is derived from commissions on
the sale of insurance policies to customers, interest income and insurance
company profit sharing revenues received from insurance companies which Beehive
Insurance represents.
THE INDUSTRY AND MARKET
As an independent insurance agency, Beehive Insurance represents
several large national insurance companies and markets their insurance policies
and services to customers. Some insurance companies require certain production
requirements. Such insurance companies monitor Beehive Insurance's production
and loss ratios on insurance placed annually to determine whether to continue
their agency relationship with Beehive Insurance.
The majority of Beehive Insurance's customers are located along the
Wasatch Front (primarily Weber, Davis, Salt Lake and Utah Counties) in the state
of Utah. Beehive Insurance acquires new customers primarily by referral from
existing customers. Some advertising is done, mainly in contractor trade
journals and other publications. Beehive Insurance markets insurance policies to
its customers primarily through commissioned sales associates.
INSURANCE CARRIERS
Insurance policies rendered to customers are provided through a variety
of highly rated national and local insurance companies. The financial strengths
of the insurance companies are monitored through an industry rating service
known as A.M. Best. Beehive Insurance generally markets through insurance
companies bearing ratings of A- or better from A.M. Best. One of the challenges
associated with marketing insurance policies is to have the right insurance
company available to meet the customer's need when it arises. Beehive Insurance
believes that it has been successful in attracting and retaining representation
of insurance companies suited to its customer base with stable financial
resources.
The primary carriers currently represented by Beehive Insurance include
St. Paul Fire & Marine and Reliance Insurance Co., which provides coverage and
surety bonds for Clyde, and Royal Insurance Co. and USF&G which insures Geneva
Rock. Other carriers represented by Beehive Insurance in smaller amounts include
Ohio Casualty and Unigard Insurance.
Because of Beehive Insurance's relatively small size, Beehive Insurance
relies on the insurance companies for development of policies, programs and
services that can be offered to customers.
COMPETITION
Beehive Insurance encounters strong competition in the insurance
services business from other insurance brokerages or agencies, many of which are
larger and have greater financial and other resources than Beehive Insurance. In
addition, certain insureds or groups of insureds establish programs of self
insurance as a supplement or alternative to third party insurance, thereby
reducing in some cases, the need for insurance placement services. Some of
Beehive Insurance's strongest competition has come from specialized insurance
companies providing a
72
<PAGE> 91
certain niche or specialized type of insurance coverage suited to a specific
industry such as equipment dealers, roofing contractors and metal fabrication,
etc. In many cases these specialized programs are not accessible to Beehive
Insurance in traditional distribution channels.
SEASONALITY OF BUSINESS
The business activity of Beehive Insurance remains fairly constant
throughout the year. There are periods of seasonal activity relative to the time
certain customer accounts renew during the year. Beehive Insurance experiences
particularly heavy activity for January 1 renewals. Such renewals constitute
approximately 67% of Beehive's annual premium production on customer insurance
policies.
REGULATION
While the laws and regulations vary among jurisdictions, each state
requires an insurance agent, broker, consultant or solicitor to have an
individual and/or company license from a governmental agency or self regulatory
organization. If Beehive Insurance transacts insurance coverage for a customer
located in a state other than Utah, Beehive Insurance must obtain a non-resident
license from that state. Insurance policies transacted under the non-residence
license must be countersigned (in most cases) by a resident agent of the
particular state. In the states of Nevada and Wyoming, a portion of the
commission must be shared with the resident countersigning agent. In most cases,
the insurance company providing the coverage arranges for countersignature.
Beehive Insurance is currently licensed as a resident agent in the state of Utah
and as a non-resident agent in Idaho, Wyoming, Colorado, New Mexico, Arizona,
Montana, Nevada, Oregon, Indiana, Kansas and Connecticut. Beehive Insurance's
non-resident agent license is pending in California. An insurance company doing
business in the foregoing states must undergo a prequalification process for
admission to the state. An insurance company meeting the state qualifications is
known as an admitted carrier. Not all insurance companies doing business in the
state of Utah are admitted carriers. Beehive insurance currently provides
insurance coverage, in some cases in Utah, to customers through non-admitted
carriers. These carriers are not regulated by the State Insurance Department in
the same way or to the extent admitted carriers are. Non-admitted carriers are
also known as surplus lines carriers. In order for Beehive Insurance to provide
policies to customers through surplus lines carriers, a surplus lines broker
license is required. Beehive Insurance holds a surplus lines broker license for
Utah. The surplus lines broker is obligated to collect from the customer surplus
lines taxes and remit the taxes to the Surplus Lines Association of Utah.
The business of Beehive Insurance may be subject to more restrictive
regulations as a result of the Merger because the Utah Insurance Code restricts
the amount of premiums an insurance agency may receive for placing insurance
upon "controlled business" to less than 50% of the insurance agency's total
premiums during the preceding 12 months. "Controlled business" is defined in the
Utah Insurance Code to include insurance procured by an insurance agent upon the
property of its shareholders. Beehive Insurance's business with the other
Operating Companies during the 12 months preceding December 31, 1997 accounted
for approximately 56% of Beehive Insurance's total premiums. Upon consummation
of the Merger, CCI will be the sole shareholder of Beehive Insurance and the
other Operating Companies. As a result of CCI's common ownership of the
Operating Companies, the insurance that Beehive Insurance places upon the
property of other Operating Companies might be deemed to be placed upon
"controlled business" for purposes of the Utah Insurance Code. If so, Beehive
Insurance may have to restrict or reduce such coverage.
EMPLOYEES
As of December 31, 1997, Beehive Insurance had four full-time employees
providing management and production, customer service, accounting/record keeping
and clerical functions.
PROPERTIES
Beehive Insurance leases from Geneva Rock approximately 1,200 square
feet of office space at 302 West 5400 South, Suite 109, Murray, Utah. Beehive
Insurance owns a single story brick office building situated at 227 West 600
South, Salt Lake City, Utah . The building is approximately 2,500 square feet
and is situated on a 1/3 acre lot that is also owned by Beehive Insurance.
73
<PAGE> 92
TRADE NAMES
Beehive Insurance uses the "Beehive Insurance Agency" name as a service
mark in connection with its business operations. Beehive Insurance has
registered "Beehive Insurance Agency, Inc." with the states of Utah and Nevada,
but has no federal registration.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Beehive
Insurance was a party. From time to time, Beehive Insurance becomes involved in
ordinary, routine legal proceedings incidental to the business of Beehive
Insurance which do not have a material adverse effect on its business or
operations.
MARKET PRICE OF AND DIVIDENDS ON BEEHIVE INSURANCE COMMON STOCK
There is no public trading market for Beehive Insurance Common Stock.
The approximate number of shareholders of record on the Record Date was 52.
In 1996, Beehive Insurance paid cash dividends of $10.00 per share of
Beehive Insurance Common Stock to shareholders. In 1997, Beehive Insurance paid
cash dividends of $15.00 per share of Beehive Insurance Common Stock to
shareholders. After the Merger, dividends will be paid by CCI in such amounts
and at such times as the CCI Board of Directors deems to be appropriate based on
the results of operations, financial condition and liquidity needs of CCI. The
amount, type and frequency of dividends paid by CCI to its shareholders after
the Merger will not be equivalent to the amount, type and frequency of dividends
paid by Beehive Insurance prior to the Merger. See "Summary--Selected Financial
Information--Comparative Per Share Data".
BEEHIVE INSURANCE MANAGEMENT
DIRECTORS
The names and ages of Beehive Insurance's Directors are currently as
follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION(S) WITH BEEHIVE INSURANCE SINCE
<S> <C> <C> <C>
W. Douglas Snow................... 41 Director, President, General Manager 1987
B. Clyde Gammell.................. 49 Director, Vice President 1971
Carol C. Salisbury................ 70 Director, Secretary, Treasurer 1971
J. Richard Walton................. 73 Director 1961
Richard C. Clyde.................. 62 Director 1987
Wilford W. Clyde.................. 45 Director 1988
Norman D. Clyde................... 67 Director 1970
Hal M. Clyde...................... 71 Director 1963
</TABLE>
For a description of the business backgrounds of Carol C. Salisbury and
Richard C. Clyde, see "Clyde Companies, Inc.--CCI Management Prior to
Consummation of the Merger," of Wilford W. Clyde, see "Clyde Companies,
Inc.--CCI Management Upon Consummation of the Merger," of Norman D. Clyde, see
"Clyde--Clyde Management," and of Hal M. Clyde, see "Utah Service--Utah Service
Management."
W. Douglas Snow has been a Director since 1987. He joined Beehive Insurance
in July of 1979 following a brief period of employment with Fireman's Fund
Insurance Company in the commercial underwriting department. Mr. Snow was
appointed as President and General Manager of Beehive Insurance in 1991.
B. Clyde Gammell has been a Director since 1971. He has also been Vice
President of Beehive Insurance since 1997 and the owner and operator of Clydeco
Building Supplies, Inc. since 1975. B. Clyde Gammell is the
74
<PAGE> 93
son of Louise C. Gammell, who is currently the Secretary, Treasurer and a
Director of CCI and a Director of Utah Service; the brother of A. Ray Gammell
who is currently Vice President and a Director of Utah Service and a Director of
Geneva Rock; and a nephew of William R. Clyde, Ila C. Cook, and Carol C.
Salisbury.
J. Richard Walton has been a Director since 1961 and is one of the founders
of Beehive Insurance. He served as President and General Manager of Beehive
Insurance from its inception in 1961 to 1991.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The names, ages and positions of Beehive Insurance's executive officers and
significant employees are currently as follows:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION(S) SINCE
- ---- --- ------------------- -----
WITH BEEHIVE INSURANCE
----------------------
<S> <C> <C> <C>
W. Douglas Snow ................................ 41 President and General Manager 1991
B. Clyde Gammell................................ 49 Vice President 1997
Carol C. Salisbury.............................. 70 Secretary, Treasurer 1988
</TABLE>
For a description of the business backgrounds of Carol C. Salisbury, see
"Clyde Companies, Inc.--CCI Management Prior to Consummation of the Merger," and
of W. Douglas Snow and B. Clyde Gammel, see "Beehive Insurance--Beehive
Insurance Management--Directors."
COMMITTEES OF BEEHIVE INSURANCE BOARD
Currently, there is an Executive Committee of the Board of Directors of
Beehive Insurance consisting of W. Douglas Snow, B. Clyde Gammell and Carol C.
Salisbury. The executive committee meets regularly with Douglas Snow to review
progress of the agency and review the agendas prior to Board of Directors
meetings and shareholders meetings.
ATTENDANCE AT BEEHIVE INSURANCE BOARD MEETINGS
The Board of Directors met three times in 1997, and no Director attended
fewer than 75% of these meetings, except Norman Clyde who is currently on a
leave of absence for church service for a period of
approximately three years.
COMPENSATION OF DIRECTORS OF BEEHIVE INSURANCE
Each Director receives an annual Director fee of $500. In addition, B.
Clyde Gammell and Carol C. Salisbury receive an additional $1,000 for serving on
the Executive Committee.
PRINCIPAL SHAREHOLDERS OF BEEHIVE INSURANCE
The following table sets forth certain information regarding the beneficial
ownership of Beehive Insurance Common Stock as of the Record Date as to (i) each
person who is known by Beehive Insurance to own beneficially 5% or more of the
outstanding shares of Common Stock, (ii) each Director of Beehive Insurance,
(iii) each executive officer and (iv) all Directors and executive officers as a
group. Except as otherwise noted, Beehive Insurance believes the persons listed
below have sole investment and voting power with respect to the Beehive
Insurance Common Stock that they are deemed to beneficially own.
75
<PAGE> 94
<TABLE>
<CAPTION>
COMMON STOCK
SHARES APPROXIMATE
BENEFICIALLY PERCENTAGE
OWNED(1) OWNED(1)
<S> <C> <C>
Louise C. Gammell(2) ............................................... 4,774 22.22%
1100 E. 400 S.
Springville, UT 84663
Carol C. Salisbury(3) .............................................. 4,389 20.43%
1423 Devonshire Drive
Salt Lake City, UT 84108
Ila C. Cook(4) ..................................................... 4,388 20.42%
2711 Sherwood Dr.
Salt Lake City, UT 84108
Richard C. Clyde(5) ................................................ 4,200 19.55%
776 South 600 West
Orem, UT 84057
William R. Clyde(6) ................................................ 4,004 18.63%
2000 Canyon Road
Springville, UT 84663
Paul B. Clyde(7) ................................................... 3,768 17.54%
3308 N. 350 E.
Provo, UT 84601
Clyde Companies, Inc ............................................... 3,700 17.22%
1423 Devonshire Drive
Salt Lake City, UT 84108
J. Richard Walton(8) ............................................... 3,000 13.96%
2370 Logan Way
Salt Lake City, UT 84108
Edna T. Clyde ...................................................... 1,788 8.32%
380 East 200 South
Springville, UT 84663
Louise C. Clyde .................................................... 1,690 7.87%
240 East Center Street
Springville, UT 84663
Norman D. Clyde .................................................... 1,366 6.36%
3223 Apache Lane
Provo, UT 84604
Hal M. Clyde ....................................................... 916 4.26%
908 Hillcrest Dr.
Springville, UT 84663
</TABLE>
76
<PAGE> 95
<TABLE>
<CAPTION>
<S> <C> <C>
W. Douglas Snow ........................................................ 200 *
640 East 1400 South
Kaysville, UT 84037
Wilford W. Clyde ....................................................... 58 *
1324 East 950 South1
Springville, UT 84663
B. Clyde Gammell ....................................................... 5 *
1045 West 1200 North
Mapleton, UT 84664
All Directors and Executive Officers as a group (8 People)(9) .......... 10,834 50.42%
- ------------------------------------------------
</TABLE>
* Less than 1%.
(1) Applicable percentage of ownership is based on 21,487 shares of Common
Stock outstanding as of the Record Date. Beneficial ownership is determined
in accordance with the rules of the Commission, and includes voting and
investment power with respect to such shares.
(2) Includes 669 shares owned directly by Louise C. Gammell, 5 shares owned
directly by her husband, Blake Gammell, 400 shares owned jointly by Louise
and Blake Gammell, and 3,700 shares owned by CCI, which shares Ms. Gammell
may be deemed to beneficially own as a result of her position as Secretary,
Treasurer and as Director of CCI.
(3) Includes 689 shares owned directly by Carol C. Salisbury and 3,700
shares owned by CCI, which shares Ms. Salisbury may be deemed to
beneficially own as a result of her position as President and as Director
of CCI.
(4) Includes 688 shares owned indirectly by Ila C. Cook through the Ila C.
Cook Family Trust and 3,700 shares owned by CCI, which shares Ms. Cook may
be deemed to beneficially own as a result of her position as Vice President
and a Director of CCI.
(5) Includes 10 shares owned indirectly by Richard C. Clyde through the
Richard C. Clyde Trust, 490 shares owned indirectly by Patricia Clyde,
through the Patricia Clyde Trust and 3,700 shares owned by CCI, which
shares Mr. Clyde may be deemed to beneficially own as a result of his
position as a Director of CCI.
(6) Includes 16 shares owned indirectly by William R. Clyde through the
William R. Clyde Trust, 288 shares owned indirectly by Mr. Clyde through
the Reklaw and Co. Trust and 3,700 shares owned by CCI, which shares
William R. Clyde may be deemed to beneficially own as a result of his
position as Vice President and as Director of CCI.
(7) Includes 10 shares owned directly by Paul B. Clyde, 58 shares jointly
owned by Paul B. and Jeanette Clyde (husband and wife) and 3,700 shares of
owned by CCI, which shares Paul B. Clyde may be deemed to beneficially own
as a result of his position as a Director of CCI.
(8) Includes 3,000 shares owned indirectly by Mr. Walton through the J.
Richard Walton Revocable Trust.
(9) In computing the aggregate number of shares owned by officers and
Directors as a group, the shares owned by CCI, which shares certain of the
officers and Directors may be deemed to beneficially own, are counted only
once.
SELECTED FINANCIAL INFORMATION FOR BEEHIVE INSURANCE
The following selected statement of earnings and balance sheet data as
of and for the year ended December 31, 1997 are derived from the financial
statement of Beehive Insurance which have been audited by Grant Thornton. The
following selected statement of earnings and balance sheet data as of and for
each of the periods in the four year period ended December 31, 1996 are derived
from the financial statements of Beehive Insurance which have been audited by
Daines. The financial data for Beehive Insurance should be read in conjunction
with the Financial Statements and Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Beehive Insurance"
included elsewhere herein.
77
<PAGE> 96
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of earnings data:
Commission revenue $ 607 $ 578 $ 538 $ 598 $ 507
General and administrative 262 244 357 254 239
------- ------- ------- ------- -------
Operating income 345 334 181 344 268
Other income (expense), net 24 29 38 27 21
Income taxes 137 129 88 129 100
------- ------- ------- ------- -------
Net earnings $ 232 $ 234 $ 131 $ 242 $ 189
======= ======= ======= ======= =======
Earnings per common share - basic $ 10.79 $ 10.88 $ 6.10 $ 11.26 $ 8.76
Weighted average shares
outstanding 21,487 21,487 21,487 21,487 21,487
Balance sheet data:
Current assets $ 597 $ 679 $ 827 $ 960 $ 846
Current liabilities 302 377 554 555 473
Total assets 698 756 914 988 879
Total liabilities 302 377 554 555 473
Stockholders' equity 396 379 360 433 406
Dividends per common share 10.00 10.00 9.50 10.00 9.00
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF BEEHIVE INSURANCE
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Management's Discussion and
Analysis of Financial Condition and Results of Operations of Beehive Insurance
and other sections of this Proxy Statement/Prospectus, including without
limitation statements containing the words "believes," "anticipates," "intends,"
"expects" and words of similar import, constitute forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Constituent Corporations to be materially different from any future
results, performance or achievements expressed or implied by such forward
looking statements. Such factors include, among other things, the following: (1)
expected cost savings from the Merger may not be realized; (2) costs or
difficulties related to the integration of the businesses of Clyde, Geneva Rock,
Utah Service and Beehive Insurance may be greater than expected; (3) an increase
of competitive pressure in the industries of Clyde, Geneva Rock, Utah Service
and Beehive Insurance may adversely affect the businesses of those companies;
and (4) general economic conditions, either nationally or in the states in which
Clyde, Geneva Rock, Utah Service and Beehive Insurance do business, may be less
favorable than expected. CCI disclaims any obligation to update such factors or
to publicly announce the result of any revisions to any forward-looking
statements included or incorporated by reference herein to reflect future events
or developments.
RESULTS OF OPERATIONS
78
<PAGE> 97
The following discussions should be read in conjunction with the
financial statements and related notes of Beehive Insurance included elsewhere
in this Proxy Statement/Prospectus.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Total revenue for the year ended December 31, 1997 was $607,248, which
represented a 5.1% increase from $577,562 in total revenue for the year ended
December 31, 1996. The increase in 1997 total revenue resulted in part from an
increase in insurance commissions in 1997 to $538,040, which represented a 4%
increase over 1996 insurance commissions in the amount of $517,497. Insurance
commissions in 1997 increased due to the traditional growth of Beehive
Insurance's existing client base plus the addition of a few new customers.
The increase in total revenue for 1997 also reflected an increase in
1997 profit sharing commissions from $60,065 in 1996 to $69,208 in 1997,
representing a 15.2% increase. Profit sharing commissions are paid by insurance
carriers to insurance agencies based on the level of insurance premium
production during the preceding year and the profitability of the insurance
agency to the insurance carrier. Profit sharing commissions increased in 1997
primarily because the insurance premium production of Beehive Insurance in 1996
was more than the insurance premium production in 1995. In addition, the lower
cost of claims to the insurance carriers from Beehive Insurance's policyholders
resulted in increased profitability of Beehive Insurance's business to the
insurance carriers during 1996. Accordingly, profit sharing income increased in
1997 as a result of both higher insurance premium production and lower claims in
1996.
The increase in total revenue discussed above was largely offset by
increased operating expenses in 1997. At December 31, 1997 operating expenses
totaled $262,330 as compared with $243,504 at December 31, 1996, representing a
7.7% increase. The increase in operating expenses resulted from an increase in
expenses for salaries, wages and benefits to $149,090 in 1997 from $141,282 in
1996, as well as an increase in selling, general and administrative expenses to
$89,068 in 1997 from $80,823 in 1996. Part of the increase in general and
administrative expenses was an extraordinary expense incurred in connection with
the relocation of Beehive Insurance's offices to a 1,200 square foot space owned
by Geneva Rock and situated at 302 West 5400 South in Murray, Utah. Beehive
Insurance also incurred significant legal and accounting fees in connection with
the proposed Merger and experienced an increase in the fees paid to the
administrator of Beehive Insurance's group retirement program.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Total revenue for the year ended December 31, 1996 was $577,562, which
represented a 7.4% increase from $537,792 in total revenue for the year ended
December 31, 1995. The increase in 1996 of total revenue resulted from an
increase in insurance commissions in 1996 to $517,497, which were up 14.5% from
1995 insurance commissions in the amount of $451,940. Insurance commissions in
1996 increased due to the addition of several new customers and an increase in
surety bond business, which pays a higher commission rate.
The increase of insurance commissions for 1996 was not fully reflected
in total revenue for 1996 because of a 30% decline in 1996 profit sharing
commissions to $60,065 in 1996 from $85,852 in 1995. Profit sharing commissions
are paid by insurance carriers to insurance agencies based on the level of
insurance premium production during the preceding year and the profitability of
the insurance agency to the insurance carrier. Profit sharing commissions
declined in 1996 primarily because the insurance premium production of Beehive
Insurance in 1995 was less than the insurance premium production in 1994. In
addition, the increased cost of claims to the insurance carriers from Beehive
Insurance's policyholders resulted in a decline in the profitability of Beehive
Insurance's business to its insurance carriers. Accordingly, profit sharing
income was less in 1996 due to both lower insurance premium production and
higher claims during 1995.
Net earnings for 1996 were $233,783, compared with net earnings of
$131,007 for 1995, resulting in a 78.5% increase. This increase in net earnings
was attributable in large part to a reduction of pension expenses to $12,641 in
1996, down from $104,487 in 1995. The increase in pension expenses in 1995 was
caused by an actuarial adjustment. The increase in total revenue discussed above
also had a material impact on net earnings for 1996. Additionally, income during
1996 benefited from a decline in selling, general and administrative expenses to
$80,823 in 1996 from $105,947 in 1995, a reduction of $25,124. The decline in
selling, general and administrative expenses was attributable to the manner of
presentation of Beehive Insurance's state corporation franchise tax payments on
the 1996 Statement of Income and Retained Earnings. In 1996 the State Income Tax
was reported with Beehive Insurance's income tax. In 1995 the State Income Tax
was reported in Beehive Insurance's account for selling, general and
administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
79
<PAGE> 98
Beehive Insurance's primary sources of liquidity have been funds
generated by operations. As of December 31, 1997, Beehive Insurance had cash and
cash equivalents of $424,919 as compared to cash and cash equivalents of
$558,642 as of December 31, 1996. This decrease in cash and cash equivalents was
primarily due to the dividend of $5 per share that was declared in 1996 and paid
in 1997 in addition to the dividend of $10 per share that was declared and paid
in 1997 and the purchase of computer equipment and office furniture during 1997.
Management believes that the decrease in cash and cash equivalents during the
year ended December 31, 1997 does not jeopardize the liquidity or cash
requirement of Beehive Insurance.
INFLATION
Inflation in the U.S. economy has been relatively moderate during the
last few years. The impact of inflation on Beehive Insurance has been mainly the
increase in employee salaries and the cost of health insurance coverage for
employees.
SEASONALITY
The business activity of Beehive Insurance remains fairly consistent
through each year. There may be periods of seasonal activity relative to the
time certain customers' accounts renew during each year. Beehive Insurance
experiences particularly heavy activity for January 1 renewals. Such renewals
account for approximately 67% of Beehive Insurance's annual production on
customer insurance policies.
THE YEAR 2000 ISSUE
Beehive Insurance utilizes computer hardware and software in its
operations. Certain computer applications could fail or create erroneous results
due to the upcoming change in the century (the "Year 2000 Issue"). Beehive
Insurance has not regularly upgraded its computer hardware and software in the
past and anticipates that it will incur expenses of approximately $25,000 over
the next two years to upgrade its computer hardware and proprietary software
developed for the insurance agency business. The management of Beehive Insurance
believes that such upgrades will prevent the Year 2000 Issue from having a
material adverse effect on the business and operations of Beehive Insurance.
CERTAIN TRANSACTIONS
During the years ended December 31, 1997 and 1996, Clyde, Geneva Rock
and Utah Service each purchased substantially all of their insurance coverages
through Beehive Insurance, and together they accounted for approximately 56% of
Beehive Insurance's total commission revenue. As of December 31, 1997, Clyde,
Geneva Rock and Utah Service generated approximately $58,000 or 10.69%, $234,000
or 43.52% and $8,000 or 1.45%, respectively, of the total commission revenue
received by Beehive Insurance during the preceding 12 months. As of December 31,
1996 Clyde, Geneva Rock and Utah Service generated approximately $51,000 or
9.91%, $212,000 or 41.01%, and $7,000 or 1.29%, respectively, of the total
commission revenue received by Beehive Insurance during the preceding 12 months.
Beehive Insurance leases from Geneva Rock approximately 1,200 square
feet of office space owned by Geneva Rock and situated at 302 West 5400 South in
Murray, Utah. The monthly rental amount paid by Beehive Insurance to Geneva Rock
for the leased space is $1,614.17. Transactions with related parties were not
effected at below market prices.
80
<PAGE> 99
THE SPECIAL MEETINGS
TIME, DATE AND PLACE OF THE SPECIAL MEETINGS
The Special Meetings of CCI, Clyde, Geneva Rock, Utah Service and
Beehive Insurance will be held at 11:30, 8:00, 9:30, 10:30 and 11:00 a.m.,
respectively, on Friday, June 19, 1998, at the offices of Geneva Rock located at
1565 West 400 North, Orem, Utah.
PURPOSES OF THE SPECIAL MEETINGS
At the Special Meetings, the shareholders of each of CCI, Clyde, Geneva
Rock, Utah Service and Beehive Insurance will consider and vote upon a proposal
to approve the Merger Agreement and the transactions contemplated thereby. A
copy of each of the Merger Agreement is attached to this Proxy
Statement/Prospectus as Annex A.
VOTE REQUIRED; RECORD DATE
CCI
CCI shareholders of record at the close of business on April 24, 1998
(the "Record Date") will be entitled to notice of and to vote at the CCI Special
Meeting and at any adjournment or postponement thereof. There were issued and
outstanding 2,303,920 shares of CCI Common Stock as of the Record Date, held by
approximately 56 shareholders of record.
The Utah Revised Business Corporation Act ("URBCA") does not require
that the Merger be approved by the CCI shareholders since only CCI, as the sole
shareholder of its subsidiaries, will vote on the merger of its subsidiaries
with Clyde, Geneva Rock, Utah Service and Beehive Insurance. However, the Board
of Directors of CCI has determined that it is in the best interest of CCI and
its shareholders for CCI to submit the Merger to its shareholders for approval.
Under the terms of the Merger Agreement, the affirmative vote of holders of at
least a majority of the outstanding shares of CCI is required to approve the
Merger. In determining whether the approval of the Merger has received the
requisite number of affirmative votes, abstentions and shares not represented at
the CCI Special Meeting will have the same effect as a vote against any such
proposal. Holders of a majority of the shares entitled to vote at the CCI
Special Meeting, represented in person or by proxy, will constitute a quorum.
Each holder will be entitled to cast one vote for each share of CCI Common Stock
held.
As of the Record Date, the Directors and officers of CCI and their
affiliates owned 759,160 shares, representing approximately 32.95% of the
outstanding shares of CCI Common Stock. Such persons have indicated that they
intend to vote their shares FOR approval of the Merger.
CLYDE
Clyde shareholders of record at the close of business on the Record
Date will be entitled to notice of and to vote at the Clyde Special Meeting and
at any adjournment or postponement thereof. There were issued and outstanding
94,544 shares of Clyde Common Stock as of the Record Date, held by approximately
98 shareholders of record.
Under the URBCA, the approval of the Merger by the Clyde shareholders
requires the affirmative vote of the holders of at least a majority of the
outstanding shares of Clyde Common Stock. In determining whether the approval of
the Merger has received the requisite number of affirmative votes, abstentions,
and shares not represented at the Special Meeting will have the same effect as a
vote against any such proposal. Holders of a majority of the shares entitled to
vote at the Clyde Special Meeting, represented in person or by proxy, will
constitute a quorum. Each holder will be entitled to cast one vote for each
share of Clyde Common Stock held.
As of the Record Date, the Directors and officers of Clyde and their
affiliates owned 12,680 shares, representing approximately 13.41% of the
outstanding shares of Clyde Common Stock, and CCI owned 31,935
81
<PAGE> 100
shares, representing approximately 33.78% of the outstanding shares of Clyde
Common Stock. Such persons have indicated that they intend to vote their shares
FOR approval of the Merger.
GENEVA ROCK
Shareholders of record at the close of business on the Record Date will
be entitled to notice of and to vote at the Geneva Rock Special Meeting and at
any adjournment or postponement thereof. There were issued and outstanding
21,802 shares of Geneva Rock Common Stock as of the Record Date, held by
approximately 81 shareholders of record.
Under the URBCA, the approval of the Merger by the Geneva Rock
shareholders requires the affirmative vote of the holders of at least a majority
of the outstanding shares of Geneva Rock Common Stock. In determining whether
the approval of the Merger has received the requisite number of affirmative
votes, abstentions, and shares not represented at the Special Meeting will have
the same effect as a vote against any such proposal. Holders of a majority of
the shares entitled to vote at the Geneva Rock Special Meeting, represented in
person or by proxy, will constitute a quorum. Each holder will be entitled to
cast one vote for each share of Geneva Rock Common Stock held.
As of the Record Date, the Directors and officers of Geneva Rock and
their affiliates owned 1,812 shares, representing approximately 8.31% of the
outstanding shares of Geneva Common Stock, Clyde owned 7,581 shares,
representing approximately 34.77% of the outstanding shares of Geneva Rock
Common Stock, and CCI owned 4,725 shares, representing approximately 21.67% of
the outstanding shares of Geneva Rock Common Stock. Such persons have indicated
that they intend to vote their shares FOR approval of the Merger, thereby
assuring approval of the Merger by the Geneva Rock shareholders.
UTAH SERVICE
Utah Service shareholders of record at the close of business on the
Record Date will be entitled to notice of and to vote at the Utah Service
Special Meeting and at any adjournment or postponement thereof. There were
issued and outstanding 5,413 shares of Utah Service Common Stock as of the
Record Date, held by approximately 52 shareholders of record.
Under the URBCA, the approval of the Merger by the Utah Service
shareholders requires the affirmative vote of the holders of at least a majority
of the outstanding shares of Utah Service Common Stock. In determining whether
the approval of the Merger has received the requisite number of affirmative
votes, abstentions, and shares not represented at the Special Meeting will have
the same effect as a vote against any such proposal. Holders of a majority of
the shares entitled to vote at the Utah Service Special Meeting, represented in
person or by proxy, will constitute a quorum. Each holder will be entitled to
cast one vote for each share of Utah Service Common Stock held.
As of the Record Date, the Directors and officers of Utah Service and
their affiliates owned 1,423 shares, representing approximately 26.89% of the
outstanding shares of Utah Services Common Stock, and CCI owned 1,698 shares,
representing approximately 31.37% of the outstanding shares of Utah Service
Common Stock. Such persons have indicated that they intend to vote their shares
FOR approval of the Merger, thereby assuring approval of the Merger by the Utah
Service shareholders.
BEEHIVE INSURANCE
Shareholders of record at the close of business on the Record Date will
be entitled to notice of and to vote at the Beehive Insurance Special Meeting
and at any adjournment or postponement thereof. There were issued and
outstanding 21,487 shares of Beehive Insurance Common Stock as of the Record
Date, held by approximately 50 shareholders of record.
Under the URBCA, the approval of the Merger by the Beehive Insurance
shareholders requires the affirmative vote of the holders of at least a majority
of the outstanding shares of Beehive Insurance Common Stock.
82
<PAGE> 101
In determining whether the approval of the Merger has received the requisite
number of affirmative votes, abstentions, and shares not represented at the
Special Meeting will have the same effect as a vote against any such proposal.
Holders of a majority of the shares entitled to vote at the Beehive Insurance
Special Meeting, represented in person or by proxy, will constitute a quorum.
Each holder will be entitled to cast one vote for each share of Beehive
Insurance Common Stock held.
As of the Record Date, the Directors and officers of Beehive Insurance
and their affiliates owned 6,734 shares, representing approximately 31.34% of
the outstanding shares of Beehive Insurance Common Stock, and CCI owned 3,700
shares of Beehive Insurance Common Stock, representing approximately 17.2% of
the outstanding shares of Beehive Insurance Common Stock. All such persons
except J. Richard Walton have indicated that they intend to vote their shares
FOR approval of the Merger. Although J. Richard Walton, a Director of Beehive
Insurance, believes that the Merger is in the best interest of Beehive Insurance
and its shareholders and, therefore, voted in favor of the Merger as a Director
of Beehive Insurance, he has advised CCI that, because of personal financial
considerations, he intends to vote his shares AGAINST approval of the Merger at
the Beehive Insurance Special Meeting and exercise his dissenter's rights. See
"Dissenters' Rights."
If the Merger Agreement is not approved by the requisite number of
votes at the Special Meetings, the Merger Agreement will be terminated and each
Constituent Corporation will bear its pro-rata share of the expenses that have
been incurred in connection with the Merger Agreement. See "The Merger Agreement
- -- Fees and Expenses." In such case, it is anticipated that CCI will continue to
be a holding company for the shares of the Operating Companies which it owns,
and that the Operating Companies will continue to operate their respective
businesses.
PROXIES; REVOCATION OF PROXIES
Shares of CCI Common Stock, Clyde Common Stock, Geneva Rock Common
Stock, Utah Service Common Stock and Beehive Insurance Common Stock represented
by properly executed and unrevoked proxies will be voted at the CCI Special
Meeting, Clyde Special Meeting, Geneva Rock Special Meeting, Utah Service
Special Meeting and Beehive Insurance Special Meeting, respectively, in
accordance with the directions contained therein. If no direction is made in a
properly executed and unrevoked proxy, the shares of Clyde Common Stock, CCI
Common Stock, Geneva Rock Common Stock, Utah Service Common Stock and Beehive
Insurance Common Stock represented by such proxy will be voted FOR the adoption
and approval of the Merger, and the transactions contemplated thereby.
Any CCI, Clyde, Geneva Rock, Utah Service or Beehive Insurance
shareholder is empowered to revoke a proxy at any time before its exercise. A
proxy may be revoked by filing with the Secretary of the respective company a
written revocation or a duly executed proxy bearing a later date. Any written
notice revoking a proxy should be sent to (i) in the case of CCI, Clyde
Companies, Inc., 1423 Devonshire Drive, Salt Lake City, Utah, 84108, Attention:
Secretary, or hand delivered to the Secretary at or before the taking of the
vote at the CCI Special Meeting; (ii) in the case of Clyde, W.W. Clyde & Co.,
1375 North Main Street, Springville, Utah, 84663, Attention: Secretary, or hand
delivered to the Secretary at or before the taking of the vote at the Clyde
Special Meeting; (iii) in the case of Geneva Rock, Geneva Rock Products, Inc.,
1565 West 400 North, Orem, Utah, 84057, Attention: Secretary, or hand delivered
to the Secretary at or before the taking of the vote at the Geneva Rock Special
Meeting; (iv) in the case of Utah Service, Utah Service, Inc., 35 East 400
South, Springville, Utah, 84663, Attention: Secretary, or hand delivered to the
Secretary at or before the taking of the vote at the Utah Service Special
Meeting; or (v) in the case of Beehive Insurance, Beehive Insurance Agency,
Inc., 302 West 5400 South, Suite 109, Murray, Utah, 84107, Attention: Secretary,
or hand delivered to the Secretary at or before the taking of the vote at the
Beehive Insurance Special Meeting.
CCI, Clyde, Geneva Rock, Utah Service and Beehive Insurance will bear
the costs of soliciting proxies from their respective shareholders. In addition
to soliciting proxies by mail, Directors, officers and employees of each of CCI,
Clyde, Geneva Rock, Utah Service and Beehive Insurance may solicit proxies by
telephone, by courier service, by telegram or in person. Such Directors,
officers and employees will not be additionally compensated for such
solicitation but may be reimbursed for their out-of-pocket expenses incurred in
connection therewith. Arrangements may also be made with banks, brokerage houses
and other custodians, nominees and fiduciaries for
83
<PAGE> 102
the forwarding of solicitation material to the beneficial owners of common stock
held of record by such persons, and upon request, CCI, Clyde, Geneva Rock, Utah
Service or Beehive Insurance will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
84
<PAGE> 103
THE MERGER
GENERAL
The following is a brief summary of all material aspects of the Merger.
This summary does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, a copy of which is attached to this Proxy
Statement/Prospectus as Annex A and is incorporated herein by reference.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF CCI,
CLYDE, GENEVA ROCK, UTAH SERVICE AND
BEEHIVE INSURANCE
In accepting the recommendation of the Task Force to approve the
Merger, the Boards of Directors of CCI, Clyde, Geneva Rock, Utah Service and
Beehive Insurance considered a number of factors in evaluating the Merger, most
of which were positive, but some of which were negative. After carefully
weighing all of these factors, the Boards of Directors concurred with the Task
Force that, on balance, the Merger is fair and in the best interest of each
Constituent Corporation and its respective shareholders. Accordingly, the Boards
of Directors of each Constituent Corporation unanimously approved the Merger
Agreement and recommends that their respective shareholders vote FOR approval of
the Merger Agreement and the transactions contemplated thereby. IN CONSIDERING
WHETHER TO VOTE FOR APPROVAL OF THE MERGER AGREEMENT, SHAREHOLDERS SHOULD BE
AWARE THAT CERTAIN MEMBERS OF THE TASK FORCE AND CERTAIN DIRECTORS OF THE
CONSTITUENT CORPORATIONS MAY BE SUBJECT TO CONFLICTS OF INTEREST IN RECOMMENDING
THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT, AND THAT THE
CONSTITUENT CORPORATIONS DID NOT HAVE SEPARATE LEGAL REPRESENTATION IN
CONNECTION WITH NEGOTIATING THE TERMS AND PROVISIONS OF THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY. SEE "THE MERGER -- TASK FORCE" AND
"--INTERESTS OF CERTAIN PERSONS IN THE MERGER."
Among the negative factors considered by the Boards of Directors of the
Constituent Corporations were the following. As a result of the Merger, some
shareholders will have a smaller equity interest in CCI then they had in the
Constituent Corporation(s) in which they owned shares and, therefore, they will
have less voice in the business and affairs of CCI than they had with respect to
the business and affairs of such Constituent Corporation(s). Also, it is
anticipated that the dividends to be paid by CCI on its Common Stock will be
less than the dividends previously paid on the Common Stock of Utah Service and
Beehive Insurance (see "Summary -- Selected Financial Information -- Comparative
Per Share Data") and that Beehive Insurance may lose some of the premiums it
receives from insurance placed with CCI and Clyde - see "Beehive
Insurance--Regulation." In addition, the Merger will result in a consolidation
of management, which may result in a loss of autonomy for the Constituent
Corporations.
Set forth below are the positive factors considered by the Task Force
and the Boards of Directors of the Constituent Corporations in reaching their
conclusion that the Merger Agreement and the transactions contemplated thereby
are in the best interest of each Constituent Corporation and their respective
shareholders. NO ATTEMPT HAS YET BEEN MADE TO QUANTIFY ANY OF THE FOLLOWING
POTENTIAL COST SAVINGS OR POTENTIAL INCREASES IN RETURN ON CAPITAL DESCRIBED
BELOW. THERE CAN BE NO ASSURANCE THAT ANY OF THE FACTORS DESCRIBED BELOW WILL
ACTUALLY RESULT IN COST SAVINGS OR INCREASED RETURNS.
INCREASED FINANCIAL AND COMPETITIVE STRENGTH
The Boards of Directors of the Constituent Corporations believe that
the Merger will combine the financial strength of Clyde and Geneva and increase
their respective competitive positions, placing Clyde in a better competitive
position to bid on larger design/build projects with increased bonding
capability. This is particularly important due to the general consolidation
which has taken place in the construction industry, resulting in larger and
better financed players coming into the regional construction market in which
Clyde operates.
85
<PAGE> 104
PROFESSIONAL MANAGEMENT TEAM
After the Merger, the benefits of a professional management team will
be made available to each of the Constituent Corporations to help them move
forward and grow their businesses. Under the current management structure, each
of the Constituent Corporations draws on its own independent management
personnel. The Merger will make the management personnel of the Constituent
Corporations available to each of the other Constituent Corporations. Management
believes that the consolidated professional management team will help the
consolidated company to identify and take advantage of future opportunities and
investments.
SPIN-OFFS OR SALES OF OPERATIONS
While management does not have any present plans to sell any of the
Operating Companies, management believes that the Merger will increase
shareholder value by creating a unified ownership structure that will make it
easier to sell one or more of the Operating Companies should CCI decide to do so
at some point in the future. From time to time, certain of the Constituent
Corporations have received offers from buyers interested in purchasing
operations or entire businesses of the Constituent Corporations (no such offers
have been received in the last two years). The diffused and overlapping
shareholder structure has made it difficult to respond effectively to such
offers. The simplified shareholder structure resulting from the Merger will
allow the management of CCI to more effectively engage in negotiations with
potential buyers and consider attractive offers that have the potential to
increase shareholder value.
INCREASED PURCHASING POWER
The combination of entities resulting from the Merger will potentially
create greater purchasing power due to increased volume and will eliminate some
duplicative purchasing that currently occurs among the Operating Companies. The
increased volume of purchasing will potentially reduce the cost of obtaining
such items as fuel, construction materials and equipment. Currently, the
Operating Companies negotiate, order and purchase on an independent basis. This
has resulted in a certain amount of duplication which can be eliminated in part
through the Merger.
CONSOLIDATION OF OPERATIONS
After the Merger, the management of CCI will be in a better position to
combine divisions of the Operating Companies that now have similar or identical
operations. In particular, the Merger will make it possible to combine the road
construction operations of Clyde and Geneva Rock. After the consummation of the
Merger, the Board of Directors of CCI will consider combining other operations
of the Operating Companies with a view to realizing overall cost savings.
CONSOLIDATION OF ADMINISTRATIVE FUNCTIONS
It is anticipated that the Merger will result in cost savings to each
of the Constituent Corporations generated by the elimination of certain
duplicative management and administrative functions now being carried out
separately by each of the Constituent Corporations. In particular, the Merger
will make it possible to explore the consolidation of the various separate
financial accounting systems now used by the Constituent Corporations, resulting
in potential cost savings. Also, the Merger will allow Utah Service and Beehive
Insurance to enjoy the benefits of the human resource departments that have been
developed by Clyde and Geneva Rock. Utah Service and Beehive Insurance have not
had the financial capacity to invest in a large and well-developed human
resources department to the extent of Clyde and Geneva Rock. The Merger will
make it possible to spread these and other administrative benefits to all the
employees of the various Constituent Corporations.
POTENTIAL TAX SAVINGS
As a consequence of the Merger, taxable dividends to CCI and Clyde from the
other Constituent Corporations will be eliminated, resulting in tax savings to
CCI and Clyde. It is anticipated that the Merger will produce some tax savings
for the Constituent Corporations as a whole. This is primarily due to the
elimination of sales tax on certain intercompany transactions and the fact that,
after the consummation of the Merger, CCI will file consolidated tax returns for
federal and state tax purposes on behalf of itself and all of the Constituent
Corporations, eliminating the necessity for each Operating Company to pay a
separate corporate tax on earnings.
86
<PAGE> 105
TASK FORCE
In order to facilitate the Merger, an informal working group of
shareholders of the Constituent Corporations (the "Task Force") was formed for
the purpose of considering and making recommendations to the Boards of Directors
of each Constituent Corporation with respect to the economic and other terms of
the Merger. The Task Force is comprised of (i) David E. Salisbury, who is a
Director of Clyde and the husband of Carol C. Salisbury, who is the President
and a Director of CCI and the Secretary, Treasurer and a Director of Beehive
Insurance, (ii) Hal M. Clyde, who is a Director of Utah Service and Beehive
Insurance, (iii) Wilford W. Clyde, who is the President and General Manager of
Geneva Rock and a Director of Clyde, Geneva Rock and Beehive Insurance, (iv)
Richard C. Clyde, who is the President and General Manager of Clyde and a
Director of CCI, Clyde, Geneva Rock and Beehive Insurance, (v) Paul B. Clyde,
who is a Vice President of Clyde and a Director of CCI, Clyde, Geneva Rock and
Utah Service, (vi) David O. Cook, who is the President and a Director of Utah
Service, (vii) James C. Gramoll, who is a grandson of Harry S. Clyde, (viii)
Steven L. Clyde, who is the Project Superintendent and a Director of Clyde, (ix)
A. Ray Gammell, who is a Director of Geneva Rock and Utah Service and (x) Norman
D. Clyde, who is a Director of Clyde, Geneva Rock, Utah Service and Beehive
Insurance.
A majority of the Task Force recommended that the Boards of Directors
of the Constituent Corporations approve the material terms of the Merger
Agreement and the transactions contemplated thereby as set forth in the Proxy
Statement/Prospectus, including: (i) the adoption of the Second HVA Reports for
each Constituent Corporation and the exchange ratios which were based on the
valuations set forth in such reports; (ii) the composition of and the
compensation to be received by the Board of Directors and executive officers of
CCI and the Operating Companies following the Merger; (iii) the Stock Redemption
Plan; (iv) the Employment Agreement for Richard C. Clyde; (v) the Voting
Agreement; (vi) the Bylaws of CCI; (vii) the allocation among the Constituent
Corporations of the fees and expenses incurred in connection with the Merger
Agreement; and (viii) the terms and provisions of the Merger Agreement. All of
the members of the Task Force, except James Gramoll, concurred in such
recommendations. As more fully explained below under "The Merger -- Valuation
Reports for Operating Companies by Financial Advisors, Houlihan Financial
Advisors -- Recommendation of Task Force," it was the position of Mr. Gramoll
that the First HVA Report with respect to Clyde should be used for the purpose
of determining the exchange ratios in the Merger. The Board of Directors of each
of the Constituent Corporations has considered and approved the recommendations
of the majority of the Task Force with respect to the Merger .
87
<PAGE> 106
VALUATION REPORTS FOR OPERATING COMPANIES BY FINANCIAL ADVISOR, HOULIHAN
VALUATION ADVISORS
BACKGROUND
The Task Force requested Houlihan Valuation Advisors ("HVA") to prepare
valuation reports with respect to Clyde, Geneva Rock, Utah Service and Beehive
Insurance. HVA provides professional services relative to business valuations,
fairness and solvency opinions, economic loss analyses and other valuation and
economic issues. Other than the instructions by the Task Force that each
Constituent Corporation should be valued as a stand alone entity and with the
assumption that they would be combining in a tax free transaction as described
below, no limitations were placed on HVA with respect to the result of the
valuation reports described below or the scope of HVA's investigations of Clyde,
Geneva Rock, Utah Service and Beehive Insurance. HVA prepared two separate
valuation reports for these companies as of June 30, 1997, the first dated
September 12, 1997 (the "First HVA Report") and the second dated October 23,
1997 (the "Second HVA Report"). Both the First HVA Report and the Second HVA
Report resulted in the same valuations for each of Geneva Rock, Utah Service and
Beehive Insurance. The Second HVA Report resulted in a different valuation for
Clyde, as explained below. These reports were submitted to the Board of
Directors of Clyde, Geneva Rock, Utah Service and Beehive Insurance.
In preparing its valuation reports, HVA employed the following four
methods that are widely recognized in estimating the fair market enterprise
value of a business entity: (i) book value, (ii) liquidation value, (iii) market
value and (iv) income value. Book value consists of the carrying balances of the
equity accounts on a company's financial records. Liquidation value is the
difference between the realizable value of all assets and the realizable value
of all liabilities of a company, assuming an orderly liquidation of the company.
The market value approach attempts to determine the value of a company as if its
shares were traded on an exchange in an active, public market. This is
accomplished by determining a comparative price-earnings ratio, which is the
ratio of the market price of a share of stock to the earnings per share; a
comparative price to cash flow ratio, which is the ratio of the market price of
a share of stock to the operating cash flow (net income plus depreciation) per
share; a comparative price to revenue ratio, which is the ratio of the market
price of a share of stock to the dollar sales per share; and a comparative price
to book ratio, which is the ratio of the market price of a share of stock to the
book value per share. Appropriate ratios for companies like Clyde, Geneva Rock,
Utah Service and Beehive Insurance can be determined by comparing the respective
company with others in the same industry and inferring market value ratios based
on ratios in the industry. The income value method estimates the worth of a
company's stock by determining the present value of the future income stream
expected to accrue to holder of the company's stock. This is accomplished by
forecasting the company's future income stream and the disposition of that
income stream and then discounting the income stream at a rate commensurate with
the risk to which the income stream is exposed. HVA has prepared income
statement projections for the five year period from 1997 to 2001 for each of
Clyde, Geneva Rock, Utah Service and Beehive Insurance. These projections, which
were prepared based on an analysis of each company's historical operating
results and conversations between HVA and the respective companies, yielded the
following earnings per share estimates for the years 1997 through 2001: (i) for
Clyde (excluding its equity in net earnings of Geneva Rock), $12.03 for 1997,
$12.57 for 1998, $13.14 for 1999, $13.75 for 2000, and $14.40 for 2001, based on
94,544 shares outstanding; (ii) for Geneva Rock, $444.00 for 1997, $490.00 for
1998, $541.00 for 1999, $598.00 for 2000, and $661.00 for 2001, based on 21,802
shares outstanding; (iii) for Utah Service, $74.32 for 1997, $80.10 for 1998,
$86.31 for 1999, $93.02 for 2000, and $100.22 for 2001, based on 5,413 shares
outstanding; and (iv) for Beehive Insurance, $11.38 for 1997, $11.70 for 1998,
$12.02 for 1999, $12.35 for 2000, and $12.69 for 2001, based on 21,487 shares
outstanding.
For a more detailed description of the valuation methods set forth
above and the analysis employed by HVA in the calculation of the fair market
enterprise value of each of the Operating Companies, see Annex E attached to
this Proxy Statement/Prospectus - "Summary of Valuation Methods of Houlihan
Valuation Advisors."
After applying the valuation methods described above to each of the
Operating Companies, HVA arrived at a final valuation by assigning a particular
weight to the estimates provided by each valuation method. The weights assigned
were based on HVA's professional judgment and its experience in valuing
companies similar to the Operating Companies. The particular assumptions used by
HVA in performing its valuations of the Constituent Companies are described in
its valuation reports. The full text of the Second HVA Report with respect to
any Operating Company can be obtained by sending a written request to the
Secretary of such Operating Company.
At the request of the Task Force, the First HVA Report was prepared
valuing each of Clyde, Geneva Rock, Utah Service and Beehive Insurance as a
stand alone entity. This approach took into account certain tax liabilities that
would be incurred by Clyde with respect to Geneva Rock Common Stock owned by
Clyde in the event Clyde and its assets were to be liquidated. Pursuant to this
valuation approach, HVA estimated the fair market enterprise value of Clyde
Common Stock as follows: (i) book value was estimated at $370 per share for a
total value of $34,947,000 and assigned a weight of 0% in the final calculation;
(ii) liquidation value was estimated at $533 per share for a total value of
$50,400,000 and assigned a weight of 40% in the final calculation; (iii) the
price-earnings method yielded a value of $546 per share for a total value of
$51,604,000 and was assigned a weight of 10% in the final calculation; (iv) the
price to cash flow method yielded a value of $544 per share for a total value of
$51,417,000 and was assigned a weight of 10% in the final calculation; (v) the
price to revenue method yielded a value of $429 per share for a total value of
$40,561,000 and was assigned a weight of 0% in the final calculation; (vi) the
price to book value method yielded a value of $545 per share for a total value
of $51,554,000 was assigned a weight of 10% in the final calculation; and (vii)
income value was estimated at $479 per share for a total value of $45,332,000
and was assigned a weight of 30% in the final calculation. As set forth above,
HVA determined that the book value and price to revenue methods were, in its
judgment, not applicable and should be assigned a weight of 0% in calculating
the fair market enterprise value of Clyde pursuant to the First HVA Report.
Based on the foregoing estimated values and weights, the fair market enterprise
value of the Clyde Common Stock as of June 30, 1997 was estimated to be $520 per
share for a total value of $49,200,000.
At the request of the Task Force, the Second HVA Report was prepared
valuing each of Clyde, Geneva Rock, Utah Service and Beehive Insurance based on
the assumption that they would be combining in a tax free transaction where
Clyde would incur no tax liabilities with respect to its Geneva Rock Common
Stock. In this second valuation of Clyde, all the various valuation methods were
considered, but HVA gave the liquidation method 100% weight because this method
resulted in a significantly higher value than the other methods which assume a
going concern. Based on this second approach the fair market enterprise value of
Clyde as of June 30, 1997 was estimated to be $657 per share for a total value
of $62,100,000.
VALUATIONS OF OPERATING COMPANIES
The valuation of each Operating Company is described below.
CLYDE. As explained above, the Second HVA Report for Clyde estimated
the fair market enterprise value of Clyde Common Stock as of June 30, 1997 to be
$657 per share for a total value of $62,100,000.
GENEVA ROCK. Both the First HVA Report and the Second HVA Report
estimated the fair market enterprise value of Geneva Rock Common Stock as
follows: (i) book value was estimated at $2,623 per share for a total value of
$57,179,000 and assigned a weight of 0% in the final calculation; (ii)
liquidation value was estimated at $4,162 per share for a total value of
$90,730,000 and assigned a weight of 10% in the final calculation; (iii) the
price-earnings method yielded a value of $4,963 per share for a total value of
$108,203,000 and was assigned a weight of 10% in the final calculation; (iv) the
price to cash flow method yielded a value of $4,666 per share for a total value
of $101,732,000 and was assigned a weight of 10% in the final calculation; (v)
the price to revenue method yielded a value of $4,626 per share for a total
value of $100,865,000 and was assigned a weight of 10% in the final calculation;
(vi) the price to book value method yielded a value of $4,304 per share for a
total value of $93,831,000 and was assigned a weight of 10% in the final
calculation; and (vii) income value was estimated at $4,740 per share for a
total value of $103,339,000 and was assigned a weight of 50% in the final
calculation. As set forth above, HVA determined that the book value method was,
in its judgment, not applicable and should be assigned a weight of 0% in
calculating the fair market enterprise value of Geneva Rock. Based on the
foregoing estimated values and weights, the fair market enterprise value of the
Geneva Rock Common Stock as of June 30, 1997 was estimated to be $4,633 per
share for a total value of $101,206,000 and rounded to $101,000,000.
88
<PAGE> 107
UTAH SERVICE. Both the First HVA Report and the Second HVA Report
estimated the fair market enterprise value of Utah Service Common Stock as
follows: (i) book value was estimated at $668 per share for a total value of
$3,614,500 and assigned a weight of 0% in the final calculation; (ii)
liquidation value was estimated at $756 per share for a total value of
$4,090,000 and assigned a weight of 10% in the final calculation; (iii) the
price-earnings method yielded a value of $1,009 per share for a total value of
$5,459,500 and was assigned a weight of 10% in the final calculation; (iv) the
price to cash flow method yielded a value of $653 per share for a total value of
$3,533,000 and was assigned a weight of 10% in the final calculation; (v) the
price to revenue method yielded a value of $676 per share for a total value of
$3,658,100 and was assigned a weight of 10% in the final calculation; (vi) the
price to book value method yielded a value of $856 per share for a total value
of $4,635,600 and was assigned a weight of 10% in the final calculation; and
(vii) income value was estimated at $892 per share for a total value of
$4,830,100 and was assigned a weight of 50% in the final calculation. As set
forth above, HVA determined that the book value method was, in its judgment, not
applicable and should be assigned a weight of 0% in calculating the fair market
enterprise value of Utah Service. Based on the foregoing estimated values and
weights, the fair market enterprise value of the Utah Service Common Stock as of
June 30, 1997 was estimated to be $841 per share for a total value of $4,552,800
and rounded to $4,550,000.
BEEHIVE INSURANCE. Both the First HVA Report and the Second HVA Report
estimated the fair market enterprise value of Beehive Insurance Common Stock as
follows: (i) book value was estimated at $17.63 per share for a total value of
$378,900 and assigned a weight of 0% in the final calculation; (ii) the
price-earnings method yielded a value of $88.14 per share for a total value of
$1,893,800 and was assigned a weight of 20% in the final calculation; (iii) the
price to cash flow method yielded a value of $68.87 per share for a total value
of $1,479,900 and was assigned a weight of 20% in the final calculation; (iv)
the price to revenue method yielded a value of $23.71 per share for a total
value of $509,400 and was assigned a weight of 0% in the final calculation; (v)
the price to book value method yielded a value of $25.89 per share for a total
value of $556,200 and was assigned a weight of 0% in the final calculation; and
(vi) income value was estimated at $86.95 per share for a total value of
$1,868,200 and was assigned a weight of 60% in the final calculation. As set
forth above, HVA determined that the book value method was, in its judgment, not
applicable and should be assigned a weight of 0% in calculating the fair market
enterprise value of Utah Service. In addition HVA determined that the price to
revenue and price to book figures materially understate the fair market value of
Beehive Insurance and should not be considered in arriving at a final estimate
of the fair market enterprise value of Beehive Insurance. Based on the foregoing
estimated values and weights, the fair market enterprise value of Beehive
Insurance Common Stock as of June 30, 1997 was estimated to be $83.77 per share
for a total value of $1,795,700 and rounded to $1,800,000.
VALUATION OF CCI BY TASK FORCE
Since CCI's only assets are cash and the shares of common stock it owns
in the Operating Companies, the Task Force did not request HVA to prepare a
valuation report for CCI. It is anticipated that the cash held by CCI will be
used to pay the tax liabilities and other expenses that CCI will incur in
connection with the Merger. Accordingly, the Task Force determined the value of
CCI Common Stock to be equal to the total value of the shares of the Operating
Companies owned by CCI. Based on the HVA valuations described above, the Task
Force determined that the total value of the shares of the Operating Companies
owned by CCI is approximately $44,610,187, which results in a valuation of
approximately $19.36 per share of CCI Common Stock. For the purpose of
establishing the exchange ratios in the Merger, the Task Force discounted the
above per share valuation for CCI by 25% to $14.52 per share to reflect the
value of minority shareholder interest. Based on this valuation and in
anticipation of the Merger, in November 1997 each outstanding share of CCI
Common Stock was converted into 40 shares, and presently there are 2,303,920
outstanding shares of CCI Common Stock.
RECOMMENDATION OF TASK FORCE
All members of the Task Force, except James C. Gramoll, recommended to
the Board of Directors of each of CCI, Clyde, Geneva Rock, Utah Service and
Beehive Insurance that the Second HVA Report be accepted for the purpose of
determining the exchange ratios in the Merger. It is the position of James C.
Gramoll that the First HVA Report with respect to Clyde (reflecting the tax
liability which would be incurred by Clyde with respect to its
89
<PAGE> 108
Geneva Rock Common Stock in the event Clyde were to be liquidated) should be the
basis for calculating the exchange ratios in the Merger. In Mr. Gramoll's view,
by using the higher valuation for Clyde, reflected in the Second HVA Report,
Clyde was unfairly receiving the benefit of tax savings from a tax free
reorganization, and he believed that such tax savings should be spread among all
of the Constituent Corporations. However, the Task Force and the Boards of
Directors of the Constituent Corporations concluded that since there are no
plans to sell Clyde separately, the hypothetical tax savings should not be a
factor to be considered in valuing Clyde in the Merger, which is a tax free
reorganization. Accordingly, the Task Force and Boards of Directors decided to
use the Second HVA Report rather than the First HVA Report for the purpose of
establishing the exchange ratios in the Merger. Shareholders of the Constituent
Corporations should be aware that certain members of the Task Force and the
Boards of Directors are subject to conflicts of interest in recommending that
shareholders vote for approval of the Merger Agreement. See "The Merger -- Task
Force" and "The Merger -- Interests of Certain Persons in the Merger."
Each of the valuation reports was prepared by HVA on the assumption
the HVA was valuing a controlling interest in each corporation; that is, each
corporation was valued on a stand-alone basis as if the entire enterprise were
being sold. In determining the exchange ratios, the Task Force applied a
discount to HVA's valuation for each corporation. The Task Force and the Boards
of Directors determined to apply a 25% discount, because this is the discount
that will be used in setting the price for shares to be redeemed under the Stock
Redemption Plan. See "Clyde Companies, Inc. -- Stock Redemption Plan." This
minority discount reflects the inability of a minority shareholder to sell or
liquidate his or her shares, to mandate the payment of dividends, or to
otherwise influence corporate policies. Although HVA recommended that a 30%
discount be used for this purpose, the Task Force and the Boards of Directors
decided to use only a 25% discount in order to provide shareholders with a
higher valuation for their shares. It should be noted that the application of
the same discount to each Constituent Corporation does not have any effect on
the exchange ratios and does not in any way affect the consideration to be
received in the Merger by the shareholders of the Constituent Corporations. HVA
has orally advised the Constituent Corporations that a 25% discount would be in
the range of reasonableness for an appropriate minority discount. Based on this
discount, for the purpose of establishing the exchange ratios in the Merger, the
per share valuation of a share of CCI, Clyde, Geneva Rock, Utah Service and
Beehive Insurance Common Stock would be $14.52, $492.63, $3,474.45, $630.43 and
$62.83, respectively.
LIMITATIONS ON HVA VALUATIONS
HVA did not express any opinion as to what the value of CCI Common
Stock will be when issued to the shareholders of CCI, Clyde, Geneva Rock, Utah
Service and Beehive Insurance pursuant to the Merger or the prices at which CCI
Common Stock will actually trade at any time (there is no trading market for
such shares and it is not anticipated that a trading market will develop). The
full text of the Second HVA Report with respect to any Operating Company can be
obtained by sending a written request to the Secretary of such Operating
Company.
In preparing its valuations, HVA used information provided by each of
Clyde, Geneva Rock, Utah Service and Beehive Insurance, respectively. The
management of each of the foregoing companies represented to HVA that the
information provided was reasonably complete and accurate. HVA did not make
independent examinations of any financial statements or other information
prepared by the management of any of the foregoing companies which was relied
upon and, accordingly, HVA made no representations or warranties and did not
express any opinion regarding the accuracy or reasonableness of such financial
statements and other information. All of the information made available to HVA
was carefully analyzed and reasonable attempts were made by HVA to find
additional information which would be helpful in the valuation study.
Financial projections utilized in the First and Second HVA Reports were
prepared based on analysis of each respective company's historical operating
results and conversations with the management of each respective company.
FORECASTING THE FUTURE IS AT BEST A DIFFICULT AND TENUOUS PROCESS. THERE WILL
UNDOUBTEDLY BE DISPARITIES BETWEEN THE PROJECTED FIGURES AND ACTUAL RESULTS,
SINCE EVENTS AND CIRCUMSTANCES FREQUENTLY DO NOT OCCUR AS EXPECTED, AND THOSE
DISPARITIES MAY BE MATERIAL. THE HVA VALUATION REPORTS DO NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER OF ANY OF THE CONSTITUENT CORPORATIONS AS TO
HOW SUCH SHAREHOLDER SHOULD VOTE AT ANY OF THE SPECIAL MEETINGS OF ANY
CONSTITUENT CORPORATION.
Both the First HVA Report and the Second HVA Report were prepared for
the specific purpose of valuing the common stock of Clyde, Geneva Rock, Utah
Service and Beehive Insurance on an enterprise value basis pursuant to the
proposed Merger. In arriving at its valuations of the fair market enterprise
value (assuming controlling interest) of the common stock of each of Clyde,
Geneva Rock, Utah Service and Beehive Insurance, HVA defined "fair market value"
as that value at which a willing buyer and willing seller, neither being
compelled to act and both being well informed of the relevant facts and
conditions which might be anticipated, would effect a sale of an asset at "arm's
length" on a given date. HVA's valuation study was undertaken using widely
accepted principles of financial analysis and valuation. In particular, the book
value, liquidation value, market value, and income value methods of valuation
were utilized in arriving at an estimate of the fair market enterprise value of
the common stock of Clyde, Geneva Rock, Utah Service and Beehive Insurance.
Valuation is an imprecise science, and HVA has not purported to be a
guarantor of the valuations set forth in the Valuation Reports. Value is a
question of informed judgment, and reasonable persons can differ in their
estimates of value. HVA has certified that the First HVA Report and the Second
HVA Report were conducted and the conclusions arrived at independently using
conceptually sound and commonly accepted methods of valuation.
The Task Force selected HVA because HVA has experience valuing hundreds
of privately held companies and businesses and has been involved in a wide array
of other financial analysis and consulting activities since 1986. Neither HVA or
its principals have any present or intended interest in any of the Constituent
Corporations. There is no material relationship or affiliation between HVA and
its affiliates and any of the Constituent Corporations and their respective
affiliates. HVA's fees for providing the Valuation Reports are based on
professional time charges, and are in no way contingent upon the final valuation
figures. The actual fees paid to HVA for the performance of the valuations
amounted to approximately $20,000.
EXCHANGE RATIOS
The exchange ratios at which shares of common stock of Clyde, Geneva
Rock, Utah Service and Beehive Insurance will be exchanged for shares of CCI
Common Stock were determined by the Task Force and approved by the Board of
Directors of each Constituent Corporation. The exchange ratios were determined
by dividing the discounted value determined by HVA for each share of common
stock of Clyde, Geneva Rock, Utah Service and Beehive Insurance, respectively,
by $14.52, the amount which the Task Force determined to be the discounted per
share value of CCI Common Stock. This resulted in an exchange ratio of (i) 33.93
shares of CCI Common Stock for each outstanding share of Clyde Common Stock,
(ii) 239.27 shares of CCI Common Stock for each outstanding share of Geneva Rock
Common Stock, (iii) 43.43 shares of CCI Common Stock for each outstanding share
of Utah Service Common Stock and (iv) 4.33 shares of CCI Common Stock for each
outstanding share of Beehive Insurance Common Stock, respectively.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Shareholders of CCI, Clyde, Geneva Rock, Utah Service and Beehive
Insurance should be aware that certain members of the Task Force and certain
Directors and executive officers of each of CCI, Clyde, Geneva Rock, Utah
Service and Beehive Insurance have interests in the Merger that are in addition
to the interests as shareholders generally and which may create conflicts of
interest. These interests include, among other things, the following: (i)
certain Task Force members and Directors and executive officers of CCI, Clyde,
Geneva Rock, Utah Service and Beehive Insurance are related family members; (ii)
certain Task Force members and Directors and executive officers of each of CCI,
Clyde, Geneva Rock, Utah Service and Beehive Insurance will be Directors and/or
executive officers of CCI; (iii) certain members of the Task Force and Directors
and executive officers of CCI may be deemed to be principal shareholders of CCI,
Clyde, Geneva Rock, Utah Service and Beehive Insurance Common Stock; (iv) as a
consequence of the Merger, taxable dividends to CCI and Clyde from the other
Constituent Companies will be eliminated, resulting in significant savings to
CCI and Clyde; (v) Richard C. Clyde will enter into an employment agreement with
CCI; (vi) the shareholders of CCI as constituted prior to the Merger will enter
into a ten year Voting Agreement with respect to the election of CCI Directors
and certain other matters; (vii) as a result of certain provisions in the CCI
Bylaws, the W.W. Clyde family will have effective control of the Board of
Directors of CCI following the Merger; and (viii) David E. Salisbury, a Director
of Clyde, is a shareholder of the law firm of Van Cott, Bagley, Cornwall &
McCarthy, which has represented each of CCI, Clyde, Geneva Rock, Utah Service
and Beehive Insurance in connection with the Merger. These interests are more
fully described below.
CLYDE FAMILY TREE
For ease of reference, the following sets forth the family
relationships among members of the W.W. Clyde family that are currently serving
on the Task Force or as officers or Directors of the Constituent Corporations.
The three brothers involved in the founding of the Constituent Corporations were
W.W. Clyde, Edward Clyde and Harry S. Clyde.
W.W. CLYDE FAMILY. The children of W.W. Clyde whose names or whose
children's names appear elsewhere in this Proxy Statement/Prospectus are Cornell
Clyde (deceased), Blaine Clyde (deceased), William R. Clyde, Ila C. Cook, Louise
C. Gammell and Carol C. Salisbury. The spouses, children and grandchildren of
the foregoing whose names appear elsewhere in this Proxy Statement/Prospectus
are as follows:
(i) CORNELL CLYDE. Richard C. Clyde is the son of Cornell Clyde; Jeffrey R.
Clyde is the son of Richard C. Clyde.
(ii) BLAINE CLYDE. Paul B. Clyde and Wilford W. Clyde are each sons of
Blaine Clyde.
(iii) WILLIAM R. CLYDE. Steven L. Clyde is the son of William R. Clyde.
(iv) ILA C. COOK. David O. Cook is the son of Vernon O. and Ila C. Cook.
90
<PAGE> 109
(v) LOUISE C. GAMMELL. B. Clyde Gammell and A. Ray Gammell are each sons of
Louise C. Gammell.
(vi) CAROL C. SALISBURY. David E. Salisbury is the husband of Carol C.
Salisbury.
EDWARD CLYDE FAMILY. The children of Edward Clyde whose names appear
elsewhere in this Proxy Statement/Prospectus are Hal M. Clyde and Norman D.
Clyde. The children of the foregoing whose names appear elsewhere in this Proxy
Statement/Prospectus are as follows:
(i) HAL M. CLYDE. H. Michael Clyde is the son of Hal M. Clyde.
(ii) NORMAN D. CLYDE. Tawna Clyde Smith is the daughter of Norman D. Clyde.
HARRY S. CLYDE FAMILY. The only descendant of Harry S. Clyde whose name
appears elsewhere in this Proxy Statement/Prospectus is James C. Gramoll, who is
a grandson of Harry S. Clyde.
FAMILY RELATIONSHIPS; INTERRELATED MANAGEMENT AND STOCK OWNERSHIP
Carol C. Salisbury is the President and a Director of CCI and the Secretary
and Treasurer and a Director of Beehive Insurance. After the consummation of the
Merger, Ms. Salisbury will become the Secretary and Treasurer of CCI. Ms.
Salisbury is the wife of David E. Salisbury, who is currently a member of the
Task Force and a Director of Clyde; a sister of William R. Clyde, Ila C. Cook
and Louise C. Gammell; and an aunt of Richard C. Clyde, Paul B. Clyde, Wilford
W. Clyde, Steven L. Clyde, David O. Cook, A. Ray Gammell and B. Clyde Gammell.
As of the Record Date, Ms. Salisbury may be deemed to beneficially own or
control (i) 122,360 shares or approximately 5.31% of the outstanding CCI Common
Stock; (ii) 34,275 shares or approximately 36.25% of the outstanding Clyde
Common Stock; (iii) 12,308 shares or approximately 56.45% of the outstanding
Geneva Rock Common Stock; (iv) 1,946 shares or approximately 35.95% of the
outstanding Utah Service Common Stock; and (v) 4,389 shares or approximately
20.43% of the outstanding Beehive Insurance Common Stock. Upon the consummation
of the Merger, Ms. Salisbury may be deemed to beneficially own or control
2,519,909 shares or approximately 36.32% of the outstanding CCI Common Stock.
See "Clyde Companies, Inc. -- Principal Shareholders of CCI Prior to
Consummation of the Merger", "Clyde Companies, Inc. -- Principal Shareholders of
CCI Upon Consummation of the Merger", "Clyde -- Principal Shareholders of
Clyde", "Geneva Rock -- Principal Shareholders of Geneva Rock", "Utah Service --
Principal Shareholders of Utah Service" and "Beehive Insurance -- Principal
Shareholders of Beehive Insurance".
Ila C. Cook is Vice President and a Director of CCI. Ms. Cook is the wife
of Vernon O. Cook, who is currently the Chairman of the Board of Utah Service,
the mother of David O. Cook, who is currently a member of the Task Force and the
President, Chief Executive Officer and a Director of Utah Service; the sister of
William R. Clyde, Louise C. Gammell and Carol C. Salisbury; and an aunt of
Richard C. Clyde, Paul B. Clyde, Wilford W. Clyde, Steven L. Clyde, A. Ray
Gammell and B. Clyde Gammell. As of the Record Date, Ms. Cook may be deemed to
beneficially own or control (i) 31,935 shares or approximately 33.78% of the
outstanding Clyde Common Stock; (ii) 4,727 shares or approximately 21.68% of the
outstanding Geneva Rock Common Stock; (iii) 2,019 shares or approximately 37.30%
of the outstanding Utah Service Common Stock; and (iv) 4,388 shares or
approximately 20.42% of the outstanding Beehive Insurance Common Stock. Upon the
consummation of the Merger, Ms. Cook may be deemed to beneficially own or
control 2,321,319 shares or approximately 33.45% of the outstanding CCI Common
Stock. See "Clyde -- Principal Shareholders of Clyde", "Geneva Rock -- Principal
Shareholders of Geneva Rock", "Utah Service -- Principal Shareholders of Utah
Service" and "Beehive Insurance -- Principal Shareholders of Beehive Insurance".
William R. Clyde is Vice President of CCI and a Director of CCI, Clyde,
Geneva Rock and Utah Service. William R. Clyde is the father of Steven L. Clyde,
who is currently a member of the Task Force and the Project Superintendent and a
Director of Clyde, and the brother of Ila C. Cook, Louise C. Gammell and Carol
C. Salisbury; and an uncle of Richard C.
91
<PAGE> 110
Clyde, Paul B. Clyde, Wilford W. Clyde, David O. Cook, A. Ray Gammell and B.
Clyde Gammell. As of the record Date, Mr. Clyde may be deemed to beneficially
own or control (i) 180,160 shares or approximately 7.82% of the outstanding CCI
Common Stock; (ii) 32,040 shares or approximately 33.89% of the outstanding
Clyde Common Stock; (iii) 12,335 shares or approximately 56.58% of the
outstanding Geneva Rock Common Stock; (iv) 1,712 shares or approximately 31.63%
of the outstanding Utah Service Common Stock; and (v) 4,004 shares or
approximately 18.63% of the outstanding Beehive Insurance Common Stock. Upon the
consummation of the Merger, Mr. Clyde may be deemed to beneficially own or
control 2,496,505 shares or approximately 35.98% of the outstanding CCI Common
Stock. See "Clyde Companies, Inc. -- Principal Shareholders of CCI Prior to
Consummation of the Merger", "Clyde Companies, Inc. -- Principal Shareholders of
CCI Upon Consummation of the Merger", "Clyde -- Principal Shareholders of
Clyde", "Geneva Rock -- Principal Shareholders of Geneva Rock", "Utah Service --
Principal Shareholders of Utah Service" and "Beehive Insurance -- Principal
Shareholders of Beehive Insurance".
Louise C. Gammell is currently Secretary and Treasurer of CCI and a
Director of CCI and Utah Service. Ms. Gammell is the mother of A. Ray Gammell,
who is currently a member of the Task Force, the Vice President and a Director
of Utah Service and a Director of Geneva Rock; the mother of B. Clyde Gammell,
who is currently the Vice President and a Director of Beehive Insurance; the
sister of William R. Clyde, Ila C. Cook and Carol C. Salisbury; and an aunt of
Richard C. Clyde, Paul B. Clyde, Wilford W. Clyde, Steven L. Clyde and David O.
Cook. As of the Record Date, Ms. Gammell may be deemed to beneficially own or
control (i) 269,120 shares or approximately 11.68% of the outstanding CCI Common
Stock; (ii) 34,255 shares or approximately 36.25% of the outstanding Clyde
Common Stock; (iii) 4,726 shares or approximately 21.68% of the outstanding
Geneva Rock Common Stock; (iv) 300 shares or approximately 5.54% of the
outstanding Utah Service Common Stock; and (v) 3,969 shares or approximately
18.47% of the outstanding Beehive Insurance Common Stock. Upon the consummation
of the Merger, Ms. Gammell may be deemed to beneficially own or control
2,673,412 shares or approximately 38.53% of the outstanding CCI Common Stock.
See "Clyde Companies, Inc. -- Principal Shareholders of CCI Prior to
Consummation of the Merger", "Clyde Companies, Inc. -- Principal Shareholders of
CCI Upon Consummation of the Merger", "Clyde -- Principal Shareholders of
Clyde", "Geneva Rock -- Principal Shareholders of Geneva Rock", "Utah Service --
Principal Shareholders of Utah Service" and "Beehive Insurance -- Principal
Shareholders of Beehive Insurance".
Paul B. Clyde is a member of the Task Force, the Vice President of
Construction of Clyde and a Director of CCI, Clyde, Geneva Rock and Utah
Services. Mr. Clyde is the brother of Wilford W. Clyde, who will become the Vice
President and Chief Operating Officer of CCI after consummation of the Merger,
the President and a Director of Geneva Rock, a Director of Clyde and Beehive
Insurance, and a member of the Task Force; and a nephew of William R. Clyde, Ila
C. Cook, Louise C. Gammell and Carol C. Salisbury. As of the Record Date, Mr.
Clyde may be deemed to beneficially own or control (i) 72,320 shares or
approximately 3.14% of the outstanding CCI Common Stock; (ii) 33,660 shares or
approximately 35.60% of the outstanding Clyde Common Stock; (iii) 12,831 shares
or approximately 58.85% of the outstanding Geneva Rock Common Stock; (iv) 1,719
shares or approximately 31.76% of the outstanding Utah Service Common Stock; and
(v) 3,768 shares or approximately 17.54% of the outstanding Beehive Insurance
Common Stock. Upon the consummation of the Merger, Mr. Clyde may be deemed to
beneficially own or control 2,481,924 shares or approximately 35.77% of the
outstanding CCI Common Stock. See "Clyde Companies, Inc. -- Principal
Shareholders of CCI Prior to Consummation of the Merger", "Clyde Companies, Inc.
- -- Principal Shareholders of CCI Upon Consummation of the Merger", "Clyde --
Principal Shareholders of Clyde", "Geneva Rock -- Principal Shareholders of
Geneva Rock", "Utah Service -- Principal Shareholders of Utah Service" and
"Beehive Insurance -- Principal Shareholders of Beehive Insurance".
Richard C. Clyde is a member of the Task Force, a Director of CCI and after
the consummation of the Merger will become the President and Chief Executive
Officer of CCI. Mr. Clyde is also the President and General Manager of Clyde and
a Director of Clyde, Geneva Rock and Beehive Insurance. Mr. Clyde is the father
of Jeffrey R. Clyde, who is currently the Contracts Manager and a Director of
Clyde; and a nephew of William R. Clyde, Ila C. Cook, Louise C. Gammell and
Carol C. Salisbury. As of the Record Date, Mr. Clyde may be deemed to
beneficially own or control (i) 115,200 shares or approximately 5.00% of the
outstanding CCI Common Stock; (ii) 34,535 shares or approximately 36.53% of the
outstanding Clyde Common Stock; (iii) 12,366 shares or approximately 56.72% of
the outstanding Geneva Rock Common Stock; (iv) 1,720 shares or approximately
31.78% of the outstanding Utah Service Common Stock; and (v) 4,200 shares or
approximately 19.55% of the outstanding Beehive Insurance Common Stock. Upon the
consummation of the Merger, Mr. Clyde may be deemed to beneficially own or
control 2,524,814 shares or
92
<PAGE> 111
approximately 36.39% of the outstanding CCI Common Stock. See "Clyde
Companies, Inc. -- Principal Shareholders of CCI Prior to Consummation of the
Merger", "Clyde Companies, Inc. -- Principal Shareholders of CCI Upon
Consummation of the Merger", "Clyde -- Principal Shareholders of Clyde", "Geneva
Rock -- Principal Shareholders of Geneva Rock", "Utah Service -- Principal
Shareholders of Utah Service" and "Beehive Insurance -- Principal Shareholders
of Beehive Insurance".
Wilford W. Clyde will become the Chief Operating Officer of CCI after
the consummation of the Merger. Mr. Clyde is currently a member of the Task
Force, the President of Geneva Rock and a Director of Clyde, Geneva Rock and
Beehive Insurance. Mr. Clyde is the brother of Paul B. Clyde, who is currently a
member of the Task Force, the Vice President of Construction of Clyde and a
Director of Clyde, CCI, Geneva Rock and Utah Service; and a nephew of William R.
Clyde, Ila C. Cook, Louise C. Gammell and Carol C. Salisbury. As of the Record
Date, Mr. Clyde may be deemed to beneficially own or control (i) 72,320 shares
or approximately 3.14% of the outstanding CCI Common Stock; (ii) 1,675 shares or
approximately 1.77% of the outstanding Clyde Common Stock; (iii) 7,804 shares or
approximately 35.79% of the outstanding Geneva Rock Common Stock; (iv) 21 shares
or approximately 0.39% of the outstanding Utah Service Common Stock; and (v) 58
shares or approximately 0.27% of the outstanding Beehive Insurance Common Stock.
Upon the consummation of the Merger, Mr. Clyde may be deemed to beneficially own
or control 183,673 shares or approximately 2.65% of the outstanding CCI Common
Stock. See "Clyde Companies, Inc. -- Principal Shareholders of CCI Upon
Consummation of the Merger", "Clyde -- Principal Shareholders of Clyde", "Geneva
Rock -- Principal Shareholders of Geneva Rock" and "Beehive Insurance --
Principal Shareholders of Beehive Insurance".
H. Michael Clyde has agreed to become a Director of CCI upon
consummation of the Merger. Mr. Clyde is the son of Hal M. Clyde, who is
currently a member of the Task Force and a Director of Utah Service and Beehive
Insurance; and a nephew of Norman D. Clyde, who is currently a member of the
Task Force and a Director of Utah Service, Clyde, Geneva Rock, and Beehive
Insurance. As of the Record Date, Mr. Clyde may be deemed to beneficially own or
control (i) 500 shares or approximately 0.53% of the outstanding Clyde Common
Stock and (ii) 25 shares or approximately 0.11% of the outstanding Geneva Rock
Common Stock. Upon the consummation of the Merger, Mr. Clyde may be deemed to
beneficially own or control 22,946 shares or less than 1% of the outstanding CCI
Common Stock.
Tawna Clyde Smith has agreed to become a Director of CCI upon
consummation of the Merger. Ms. Smith is the daughter of Norman D Clyde, who is
currently a member of the Task Force and a Director of Utah Service, Clyde,
Geneva Rock, and Beehive Insurance; and a niece of Hal M. Clyde, who is
currently a member of the Task Force and a Director of Utah Service and Beehive
Insurance. As of the Record Date, Ms. Smith may be deemed to beneficially own or
control (i) 500 shares or approximately 0.53% of the outstanding Clyde Common
Stock and (ii) 100 shares or approximately 0.47% of the outstanding Beehive
Insurance Common Stock. Upon the consummation of the Merger, Ms. Smith may be
deemed to beneficially own or control 17,398 shares or less than 1% of the
outstanding CCI Common Stock.
TASK FORCE
As explained above, in order to facilitate the Merger, an informal
working group of shareholders of the Constituent Corporations (the "Task Force")
was formed for the purpose of considering and making recommendations to the
Board of Directors of each Constituent Corporation with respect to the economic
and other terms of the Merger. The Board of Directors of each of the Constituent
Corporations has considered and approved the recommendations of the majority of
the Task Force with respect to the Merger. See "The Merger -- The Task Force"
for a description of the members of the Task Force and their recommendations to
the Boards of Directors. Shareholders of the Constituent Corporations should be
aware that certain members of the Task Force have interests in the Merger that
are in addition to the interests of shareholders generally and which may create
conflicts of interest because, among other reasons, certain members of the Task
Force are principal shareholders, Directors and/or officers of the Constituent
Corporations and/or have family relationships with other Directors and officers,
certain members of the Task Force may be deemed to be principal shareholders of
one or more of the Constituent Corporations, certain members of the Task Force
are parties to the Voting Agreement, and certain members of the Task Force will
benefit from the provisions of CCI's Bylaws with respect to the election of
Directors.
TAX SAVINGS FOR CCI AND CLYDE
As a consequence of the Merger, taxable dividends paid to CCI and Clyde
by the other Constituent Corporations will be eliminated, resulting in
significant tax savings to CCI and Clyde. This tax savings does not apply to the
other Constituent Corporations, although it is anticipated that the Merger will
result in tax savings for the Constituent Corporations on a whole due to the
elimination of sales tax on certain intercompany transactions and the filing of
consolidated tax returns that will replace the current practice of each
Constituent Corporation filing a separate tax return.
EMPLOYMENT AGREEMENT
It is contemplated that upon consummation of the Merger, CCI will enter
into an employment agreement with Richard C. Clyde pursuant to which Richard C.
Clyde will be employed as President and Chief Executive Officer for a term of
three years from the 1998 annual shareholders meeting of CCI. The employment
agreement will provide for a minimum annual base salary of $110,000 for Richard
C. Clyde and a discretionary annual incentive bonus in an amount as the Board of
Directors of CCI may determine. The employment agreement will also provide that
if Richard C. Clyde is terminated by CCI prior to the end of the term of
employment, other than for cause, death or disability, CCI will pay Richard C.
Clyde an amount equal to his annual salary multiplied by the number of years
remaining under the term of the employment agreement. See also "Clyde Companies,
Inc.--Employment Agreement."
VOTING AGREEMENT
On all matters with respect to which CCI's shareholders have a right to
vote, including the election of Directors, each share of CCI Common Stock is
entitled to one vote. The Original CCI Shareholders have entered into a 10-year
Voting Agreement for the purpose of controlling the voting of the 2,303,920
shares of CCI Common Stock owned by the Original CCI Shareholders on the Record
Date, representing approximately 33.20% of the shares of CCI Common Stock to be
outstanding upon consummation of the Merger. So long as the Voting Agreement is
in place, the Original CCI shareholders may have the ability (subject to the
restrictions in CCI's Bylaws relating to the configuration of its Board of
Directors) to elect the entire Board of Directors of CCI and determine the
outcome of all matters involving a shareholder vote. Control of CCI by the
Original CCI shareholders could make it more difficult for a third party to
acquire, or could discourage a third party from attempting to acquire, control
of CCI. See "Clyde Companies, Inc.--Voting Agreement."
93
<PAGE> 112
BYLAWS OF CCI
Section 3.2( c) of the CCI Bylaws, which are attached as Annex C
hereto, restricts the configuration of the CCI Board of Directors during the
five year period beginning on November 12, 1997 and ending on November 12, 2002.
During this period, six of the Directors on the CCI Board of Directors must be
direct descendants (or the spouse of a direct descendant) of W.W. Clyde and two
of the Directors must be direct descendants (or the spouse of a direct
descendant) of Edward Clyde. The CCI Bylaws require that there be between eight
and eleven Directors on the CCI Board of Directors. There are currently eight
Directors on the CCI Board, and this number may be increased to include as many
as eleven Directors. The effect of the foregoing restriction on CCI Board
membership is that, during the five year period described above, the W.W. Clyde
family will have effective control of the CCI Board. Such control will give the
W.W. Clyde family the ability to determine all matters that come before the CCI
Board, such as the amount which will be made available by CCI to fund the
redemption of shares of CCI Common Stock and the amount of dividends to be paid
on CCI Common Stock. See "Comparison of the Rights of Holders of CCI Common
Stock and Clyde, Geneva Rock, Utah Service and Beehive Insurance Common Stock --
Provisions Relating to Directors".
LACK OF SEPARATE LEGAL REPRESENTATION
The law firm of Van Cott, Bagley, Cornwall & McCarthy ("Van Cott")
previously has represented each of the Constituent Corporations, as well as
certain individual Task Force members, Directors, officers and shareholders of
the Constituent Corporations. Because each Constituent Corporation is affiliated
through family relationships, interconnected Boards of Directors and cross stock
ownership, and in an effort to reduce the costs of the Merger, the Boards of
Directors of each Constituent Corporation determined to use Van Cott to
represent all of the Constituent Corporations in connection with the Merger and
the transactions contemplated thereby, including the preparation of this joint
Proxy Statement/Prospectus. Van Cott did not represent any Constituent
Corporation or individual separately in negotiating the exchange ratios or any
of the other terms or provisions of the Merger Agreement, nor did Van Cott
undertake any due diligence investigation with respect to any Constituent
Corporation, such as an investigation of the validity of the outstanding shares
of the Constituent Corporations, or the status of legal agreements, pending
legal proceedings or other legal matters with respect to the Constituent
Corporations. Such representation by Van Cott involves a conflict of interest to
the extent that the interest of one Constituent Corporation in the Merger may be
separate from or opposed to the interest of the other Constituent Corporations
or individuals (mentioned above) who may also be clients of Van Cott. Because of
such conflicts of interest, Van Cott obtained a written waiver of such conflicts
from the Boards of Directors of each Constituent Corporation and certain
individual shareholders, pursuant to which each corporation and individual
shareholder acknowledged the existence of the conflicts of interest, waived any
objection thereto and agreed to Van Cott's representation of all of the
Constituent Corporations. David E. Salisbury, who is a shareholder of Van Cott,
was a member of the Task Force that negotiated the pertinent terms and
provisions of the Merger Agreement, including the exchange ratios. Mr. Salisbury
participated on the Task Force in his capacity as a Director of Clyde, and as a
direct or indirect owner of shares of Common Stock of the Constituent
Corporations. See also "Risk Factors -- Lack of Separate Legal Representation".
ACCOUNTING TREATMENT
The Merger will be accounted for using the "purchase" method of
accounting with CCI as the acquirer. Under this method of accounting, the
aggregate consideration paid by CCI in the Merger (determined based upon the
number of new shares of CCI Common Stock issued in the Merger in excess of the
outstanding shares of CCI Common Stock as of the Record Date) will be allocated
to the net assets of the Operating Companies based on their fair values as
determined by HVA, and the results of operations of the Operating Companies will
be included in the results of operations of CCI only for periods subsequent to
the effective date of the Merger.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The firm of Grant Thornton, independent accountants, has rendered an
opinion to the Constituent Corporations and their shareholders regarding certain
federal income tax consequences of the Merger, as described below. The following
discussion summarizes the material federal income tax considerations associated
with the Merger under the Internal Revenue Code of 1986, as amended (the
"Code"), to holders who hold shares of CCI, Clyde, Geneva Rock, Utah Service or
Beehive Insurance Common Stock as capital assets. As it is not feasible to
describe all of the tax consequences associated with the Merger, each
shareholder should consult his or her tax advisor with respect to the tax
consequences of the Merger applicable to his or her specific circumstances. The
following summary is based on the Code, applicable Treasury Regulations,
judicial authority and administrative rulings and practice, all as of the date
hereof. There can be no assurance that future legislative, judicial or
administrative changes or interpretations will not adversely affect the
statements and conclusions set forth herein. Any such changes or interpretations
could be applied retroactively and could affect the tax consequences of the
Merger to CCI, Clyde, Geneva Rock, Utah Service or Beehive Insurance and their
respective shareholders. Furthermore, the following discussion addresses only
certain federal income tax matters and does not consider any state, local or
foreign tax consequences of the Merger.
94
<PAGE> 113
Neither CCI nor Clyde, Geneva Rock, Utah Service or Beehive Insurance
has requested or will request any ruling from the Internal Revenue Service
("IRS") in connection with the Merger. However, the Merger has been structured
with the intention that it qualify as (i) a transfer to a controlled corporation
described in Section 351 of the Code and/or as (ii) a reorganization under
Section 368(a)(1)(B) of the Code.
The Grant Thornton opinion indicates that the Merger qualifies under
Section 351 of the Code or the Merger will be treated as a reorganization under
the Code, and that the following federal income tax consequences, among others,
generally will apply to shareholders of CCI, Clyde, Geneva Rock, Utah Service
and Beehive Insurance:
(i) No gain or loss will be recognized by a holder of Clyde, Geneva Rock,
Utah Service or Beehive Insurance Common Stock with respect to the receipt
of CCI Common Stock in exchange for such Clyde, Geneva Rock, Utah Service
or Beehive Insurance Common Stock pursuant to the Merger (except with
respect to any cash received in lieu of fractional shares of CCI Common
Stock).
(ii) The aggregate tax basis of CCI Common Stock received by each holder of
Clyde, Geneva Rock, Utah Service or Beehive Insurance Common Stock will be
the same as the aggregate tax basis of the Clyde, Geneva Rock, Utah Service
or Beehive Insurance Common Stock received by such shareholder in the
Merger, decreased by the amount of any tax basis allocable to fractional
shares of CCI Common Stock in lieu of which cash will be paid.
(iii) The holding period of CCI Common Stock received by each holder of
Clyde, Geneva Rock, Utah Service or Beehive Insurance Common Stock will
include the period for which the Clyde, Geneva Rock, Utah Service or
Beehive Insurance Common Stock received in exchange therefor was considered
to be held, provided the Clyde, Geneva Rock, Utah Service or Beehive
Insurance Common Stock so received is held as a capital asset at the
effective time of the Merger.
(iv) Payment received by holders of Clyde, Geneva Rock, Utah Service or
Beehive Insurance Common Stock in lieu of fractional shares of CCI Common
Stock will be treated as payment in redemption of such fractional shares
and, provided that the redeemed interest is held as a capital asset at the
effective time of the Merger, will generally result in the recognition of
capital gain or loss by such holders measured by the difference between the
amount received and the tax basis allocable to such fractional shares.
Each holder of Clyde, Geneva Rock, Utah Service or Beehive Insurance
Common Stock who receives cash in lieu of a fractional interest will recognize
gain or loss as of the effective time of the Merger equal to the difference
between the amount of cash received and the portion of such holder's adjusted
tax basis in the shares of Clyde, Geneva Rock, Utah Service or Beehive Insurance
Common Stock allocable to such fractional share interest. Any gain or loss
generally will be capital gain or loss if such shareholder holds Clyde, Geneva
Rock, Utah Service or Beehive Insurance Common Stock as a capital asset at the
effective time of the Merger and will be long-term capital gain or loss if the
holding period (determined as described above) for the fractional share interest
deemed to be received and then redeemed is more than one year. Under recently
enacted legislation, an individual holder of Clyde, Geneva Rock, Utah Service or
Beehive Insurance Common Stock is generally subject to a maximum capital gains
rate of 28% for Clyde, Geneva Rock, Utah Service or Beehive Insurance Common
Stock held more than one year and a maximum capital gains rate of 20% for Clyde,
Geneva Rock, Utah Service or Beehive Insurance Common Stock held in excess of 18
months.
Holders of Clyde, Geneva Rock, Utah Service or Beehive Insurance Common
Stock who exercise their dissenters' rights and who receive cash in exchange for
their respective shares will be treated as having received such payment in
redemption of such shares. In general, if such shares are held as a capital
asset at the effective time of the Merger, the holder will recognize capital
gain or loss measured by the difference between the amount of cash received and
the holder's adjusted tax basis for the shares. If, however, the holder owns,
either actually or constructively, any Clyde, Geneva Rock, Utah Service or
Beehive Insurance Common Stock that is exchanged in the Merger for CCI Common
Stock, the payment for dissenting shares to such holder could, in certain
circumstances, be treated as dividend income. In general, under the constructive
ownership rules of the Code, a holder may be considered to own stock that is
owned, and in some cases constructively owned, by certain related
95
<PAGE> 114
individuals or entities, as well as stock that the holder (or related
individuals or entities) has the right to acquire by exercising an option or
converting a convertible security. Each holder who contemplates exercising
dissenters' rights should consult such holder's own tax advisor as to the
possibility that any payment to such holder will be treated as dividend income.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS NOT A COMPLETE
DESCRIPTION OF ALL POTENTIAL TAX CONSEQUENCES THAT MAY OCCUR AS A RESULT OF THE
MERGER. SHAREHOLDERS SHOULD THEREFORE CONSULT THEIR TAX ADVISORS REGARDING THE
FEDERAL TAX CONSEQUENCES OF THE MERGER, THE HOLDING AND DISPOSING OF CCI COMMON
STOCK RECEIVED IN THE MERGER, AND THE TAX CONSEQUENCES OF THE MERGER ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR OTHER JURISDICTION.
REGULATORY APPROVAL
CCI and Geneva Rock filed a notification with the Federal Trade
Commission ("FTC"), pursuant to the Hart Scott Rodino Antitrust Improvement Act
of 1976, requesting early termination of the waiting period required under that
Act. On November 21, 1997, the FTC granted CCI's and Geneva Rock's request for
early termination of the waiting period. See "The Merger Agreement--Conditions
to the Merger."
FEDERAL SECURITIES LAW CONSEQUENCES
The shares of CCI Common Stock to be received in the Merger by the
shareholders of Clyde, Geneva Rock, Utah Service and Beehive Insurance have been
registered under the Securities Act and will be freely transferable, except that
(i) shares of CCI Common Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Securities Act) of CCI, Clyde,
Geneva Rock, Utah Service and Beehive Insurance will be restricted and (ii)
shares of CCI Common Stock that are subject to the Voting Agreement described
above under "Clyde Companies, Inc. -- Voting Agreement" will be subject to
certain restrictions thereunder. Shareholders should understand that there is no
market for CCI Common Stock and it is not anticipated that a market will
develop. If there were a public market for such shares, resales by affiliates
would be subject to Rule 145 under the Securities Act. Generally, Rule 145 would
permit an affiliate to sell within any three month period a number of shares
that does not exceed the greater of 1% of the then outstanding shares of CCI
Common Stock or the average weekly trading volume reported on the national
securities exchanges during the four calendar weeks preceding such sale,
provided that CCI has filed certain reports with the Securities and Exchange
Commission and provided that such sales are "broker transactions" without the
solicitation of buy orders by the broker of such affiliates or in transactions,
directly with a "market maker."
96
<PAGE> 115
THE MERGER AGREEMENT
GENERAL
The description of the material terms and conditions of the Amended and
Restated Agreement and Plan of Merger dated as of November 13, 1997 (the "Merger
Agreement") and any related documents in this Proxy Statement/Prospectus is
qualified in its entirety by reference to the copy of the Merger Agreement
attached hereto as Annex A. Shareholders of CCI, Clyde, Geneva Rock, Utah
Service and Beehive Insurance are urged to read the Merger Agreement in their
entirety for a more complete description of the terms of such agreements.
CONVERSION OF SHARES
At the Effective Time, each outstanding share of the Operating
Companies except (i) those shares of the Operating Companies owned by CCI, (ii)
those shares of Geneva Rock owned by Clyde, which will be distributed as a
dividend to CCI and (iii) to the extent that the holders of shares of Clyde
Common Stock, Geneva Rock Common Stock, Utah Service Common Stock or Beehive
Insurance Common Stock duly elect to exercise their dissenters' rights under
Part 13 of the URBCA) will be converted into shares of CCI Common Stock equal to
(i) in the case of Clyde Common Stock, 33.93 shares of CCI Common Stock, (ii) in
the case of Geneva Rock Common Stock, 239.27 shares of CCI Common Stock, (iii)
in the case of Utah Service Common Stock, 43.43 shares of CCI Common Stock, and
(iv) in the case of Beehive Insurance Common Stock, 4.33 shares of CCI Common
Stock (the ratios set forth in clauses (i) through (iv) above are sometimes
referred to herein as the "Exchange Ratios"). Fractional shares of CCI Common
Stock will not be issued. In lieu of fractional shares, shareholders of Clyde,
Geneva Rock, Utah Service and Beehive Insurance will receive cash equal to the
product of (i) such fraction multiplied by (ii) $14.52.
CRC will merge with and into Clyde, GRRC will merge with and into
Geneva Rock, USRC will merge with and into Utah Service and BIRC will merge with
and into Beehive Insurance, with the Operating Companies being the surviving
corporations of such mergers. Each share of CRC, GRRC, USRC and BIRC Common
Stock issued and outstanding immediately prior to the Effective Time will be
converted into one share of common stock of the respective Operating Company.
CONDITIONS TO THE MERGER
Consummation of the Merger provided for in the Merger Agreement is
subject to the satisfaction of various conditions, including but not limited to
(i) the approval and adoption of the Merger Agreement by the requisite vote of
the shareholders of each of the Constituent Corporations; (ii) the aggregate
number of dissenting shares shall not be more than 5% of the total number of
shares of CCI that would be outstanding upon consummation of the Merger if no
dissenters' rights were exercised (there would be 6,938,709 outstanding CCI
shares and 5% of that number is 346,935); (iii) no governmental authority shall
have issued any order, and there shall not be any statute, rule, decree or
regulation restraining, prohibiting or making illegal the consummation of the
Merger; (iv) any waiting period applicable to the consummation of the Merger
under the Hart Scott Rodino Act shall have expired or been terminated (such
waiting period has been terminated); (v) the representations and warranties of
CCI contained in the Merger Agreement shall be true and correct in all material
respects when made and as of the closing date of the Merger (the "Closing Date")
(except for such matters which specifically address a particular date which need
only be true and correct as of such date); (vi) CCI shall have performed in all
material respects all of the obligations to be performed by it under the Merger
Agreement prior to the Closing Date; (vii) a responsible officer of CCI shall
have provided each of the Operating Companies with a certificate with respect to
the matters referred to in the Merger Agreement; (viii) the representations and
warranties of each of the Operating Companies contained in the Merger Agreement
shall be true and correct in all material respects when made and as of the
Closing Date (except for matters which specifically address a particular date
which need only be true and correct as of such date); (ix) each of the Operating
Companies shall have performed in all material respects all of the obligations
to be performed by it under the Merger Agreement prior to the Closing Date; (x)
a responsible officer of each of the Operating Companies shall have provided CCI
with a certificate with respect to the matters referred to in the Merger
Agreement; and (xi) the receipt of an opinion from Grant Thornton to the effect
that the Merger will qualify as a tax free reorganization.
97
<PAGE> 116
WAIVER AND AMENDMENT
Any of the provisions of the Merger Agreement subject to waiver may be
waived in writing by the Board of Directors of the respective company that is
entitled to the benefits of such provision. The Boards of Directors of the
Constituent Corporations are not required to obtain shareholder approval prior
to consenting to such waivers. The only provision of the Merger Agreement that
is not subject to waiver is the condition that the Merger Agreement be approved
by a majority of the outstanding Common Stock of each Constituent Corporation.
The Merger Agreement may be amended, modified or supplemented at any time prior
to the Closing Date by the written agreement of each of the parties thereto.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned
at any time prior to the Effective Time, whether before or after approval of the
shareholders of the Constituent Corporations, under the circumstances specified
therein, including (i) automatically, without any further actions by any of the
parties (except as may be otherwise required by the URBCA), (A) if the Merger of
each of the Constituent Corporations has not been consummated on or prior to
September 30, 1998 or (B) if any governmental authority shall have issued a
statute, order, decree or regulation or taken any other action permanently
restraining or enjoining or otherwise materially restricting the consummation of
the transactions contemplated by the Merger Agreement and such statute, order,
decree, regulation or other action shall have become final and non-appealable,
(ii) by the Boards of Directors of the Operating Companies, acting jointly, if
CCI breaches or fails in any material respect to perform or comply with any of
its covenants and agreements contained in the Merger Agreement or breaches its
representations and warranties therein in any material respect and fails to cure
such breach as provided for therein, or (iii) by the Board of Directors of CCI,
if any of the Operating Companies breaches or fails in any material respect to
perform or comply with any of its respective covenants and agreements contained
in the Merger Agreement or breaches its representations and warranties in any
material respect and fails to cure such breach as provided for therein.
FEES AND EXPENSES
If the Merger is consummated, CCI will pay all fees and expenses
incurred in connection with the Merger from the dividends CCI receives from the
Operating Companies. If the Merger is not consummated, each of the Constituent
Corporations will bear their pro-rata share of all such fees and expenses.
SURRENDER OF CERTIFICATES
Certificates nominally representing shares of the common stock of the
Operating Companies, other than any certificate representing dissenting shares,
if any, ("Operating Company Certificates"), as of the Effective Time, for all
purposes, shall be deemed to evidence the number of shares of CCI Common Stock
determined in accordance with the applicable Exchange Ratio. As soon as
practicable after the Effective Time, CCI shall mail to each record holder of an
outstanding Operating Company Certificate, as of the Effective Time, a form of
letter of transmittal (the "Transmittal Letter") that contains instructions for
use in effecting the surrender of each Operating Company Certificate in exchange
for a CCI Common Stock certificate ("CCI Certificate"). Upon surrender to CCI of
an Operating Company Certificate, together with a duly executed Transmittal
Letter (and any other documents which may be reasonably required by CCI, if
any), the holder of such Operating Company Certificate shall receive promptly in
exchange therefor a CCI Certificate for the number of shares of CCI Common Stock
evidenced thereby in accordance with the applicable Exchange Ratio. At that
time, the Operating Company Certificate shall be canceled. If a CCI Certificate
is to be issued to a person other than the person in whose name the surrendered
Operating Company Certificate is registered, it shall be a condition of issuance
of the CCI Certificate (x) that the Operating Company Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and (y)
that the person requesting such issuance shall pay any transfer or other taxes
required by reason of the issuance to a person other than the registered holder
of the Operating Company Certificate surrendered or establish to the
satisfaction of CCI that such tax has been paid or is not applicable. CCI shall
pay all charges and expenses, including those of the Operating Companies, in
connection with the distribution of CCI Certificates.
98
<PAGE> 117
CORPORATE STRUCTURE AND RELATED MATTERS AFTER THE MERGER
At the Effective Time, CRC will merge with and into Clyde, GRRC will
merge with and into Geneva Rock, USRC will merge with and into Utah Service and
BIRC will merge with and into Beehive Insurance, with the Operating Companies
being the surviving corporations of such mergers. Each share of CRC, GRRC, USRC
and BIRC Common Stock issued and outstanding immediately prior to the Effective
Time will be converted into one share of common stock of the respective
Operating Company and all of the issued and outstanding shares of the common
stock of each of the Operating Companies will be owned by CCI.
The Articles of Incorporation of each of the Operating Companies, as
amended, shall continue to be the Articles of Incorporation of such Operating
Company. The Bylaws of each of the Operating Companies, as amended, shall
continue to be the Bylaws of such Operating Company. The Directors and officers
of each Operating Company prior to the Merger shall continue to be the officers
and Directors of such Operating Company.
BUSINESS OF THE OPERATING COMPANIES PENDING THE MERGER
Prior to the Effective Time, each of the Operating Companies is
required to operate its businesses in accordance with sound business practices
and not engage in any transactions other than in the ordinary course of
business. In addition, neither CCI nor any of the Operating Companies is
permitted to issue any additional shares of its capital stock (except, CCI shall
issue shares of CCI Common Stock in accordance with the Merger Agreement).
99
<PAGE> 118
DISSENTERS' RIGHTS
If the Merger is consummated, holders of shares of Clyde Common Stock,
Geneva Rock Common Stock, Utah Service Common Stock and Beehive Insurance Common
Stock will be entitled to dissenters' rights under the Utah Revised Business
Corporation Act ("URBCA"), provided that they comply with the conditions of
Section s 16-10a-1301 through 16-10a-1331 of the URBCA.
SECTIONS 16-10a-1301 THROUGH 16-10a-1331 OF THE URBCA ARE REPRINTED IN
THEIR ENTIRETY AS ANNEX D TO THIS PROXY STATEMENT/PROSPECTUS. THE FOLLOWING
DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW RELATING TO DISSENTERS' RIGHTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ANNEX D. THIS DISCUSSION AND
APPENDIX SHOULD BE REVIEWED CAREFULLY BY ANY HOLDER OF CLYDE COMMON STOCK,
GENEVA ROCK COMMON STOCK, UTAH SERVICE COMMON STOCK OR BEEHIVE INSURANCE COMMON
STOCK WHO WISHES TO EXERCISE STATUTORY DISSENTERS' RIGHTS OR WHO WISHES TO
PRESERVE THE RIGHT TO DO SO. FAILURE TO COMPLY WITH THE PROCEDURES SET FORTH IN
SECTIONS 16-10a-1301 THROUGH 16-10a-1331 OF THE URBCA WILL RESULT IN THE LOSS OF
DISSENTERS' RIGHTS.
If the Merger is consummated, holders of record of shares of Clyde
Common Stock, Geneva Rock Common Stock, Utah Service Common Stock and Beehive
Insurance Common Stock who (a) deliver to Clyde, Geneva Rock, Utah Service and
Beehive Insurance, respectively, before the vote is taken written notice of
their intent to demand payment for such shares if the proposed Merger is
effectuated, (b) refrain from voting in favor of the Merger Agreement, by either
voting against the adoption of the Merger Agreement or abstaining from voting,
and (c) comply with the provisions of Section s 16-10a-1301 through 16-10a-1331
of the URBCA, will then be entitled to have paid to them the "fair value" of
their shares at the time of the Merger. The following is a brief summary of the
material provisions of Section s 16-10a-1301 through 16-10a-1331 of the URBCA,
which sets forth the procedures for demanding statutory dissenters' rights. This
summary is qualified in its entirety by reference to Section s 16-10a-1301
through 16-10a-1331 of the URBCA, the text of which is attached hereto in Annex
D.
If the Merger is approved and consummated, those shareholders of Clyde,
Geneva Rock, Utah Service and Beehive Insurance who elect to exercise their
dissenters' rights and who properly and timely perfect such rights will be
entitled to receive the "fair value" in cash for their shares of Geneva Rock
Common Stock, Utah Service Common Stock and Beehive Insurance Common Stock,
respectively. Pursuant to Section 16-10a-1301(4) of the URBCA, such "fair
value" means the value of the shares immediately before the effectuation of
the Merger, excluding any appreciation or depreciation in anticipation of the
Merger.
A shareholder who elects to exercise his or her dissenters' rights must
perfect such rights by delivering to Clyde, Geneva Rock, Utah Service and
Beehive Insurance, as the case may be, prior to the vote at the applicable
Special Meeting written notice of his or her intent to demand payment, and not
vote his or her shares in favor of the Merger Agreement, by either voting
against the adoption of the applicable Merger Agreement or abstaining from
voting.
If a shareholder fails to deliver written notice to Clyde, Geneva Rock,
Utah Service and Beehive Insurance, as the case may be, of the shareholder's
intent to demand payment prior to the vote at the applicable Special Meeting or
if the shareholder votes his or her shares in favor of the Merger Agreement,
such shareholder will lose the right to receive the fair value of his or her
shares.
If the Merger is approved, within ten days after the date on which the
Merger is consummated, Clyde, Geneva Rock, Utah Service and Beehive Insurance,
as the case may be, will deliver to those shareholders who deliver to Clyde,
Geneva Rock, Utah Service and Beehive Insurance, respectively, prior to the vote
written notice of their intent to demand payment and who refrain from voting in
favor of the Merger Agreement a written dissenters' notice (the "Dissenters'
Notice"). The Dissenters' Notice will state that the Merger was authorized and
the effective date or proposed effective date of the Merger. The Dissenters'
Notice will set forth the address to which the shareholder must send the payment
demand, where and when certificates for such shares must be deposited and the
100
<PAGE> 119
date by which Clyde, Geneva Rock, Utah Service and Beehive Insurance, as the
case may be, must receive the payment demand (which date must not be fewer than
30 days nor more that 70 days after the date on which the Dissenters' Notice is
delivered). In addition, the Dissenters' Notice must include (a) a form for
demanding payment which requests the dissenting shareholder to state the address
to which payment is to be made and which includes the date of the first
announcement to the shareholders of the terms of the Merger and requires the
shareholder to certify whether he or she acquired beneficial ownership of the
shares before that date, and (b) a copy of the sections of the URBCA pertaining
to dissenters' rights.
A shareholder who is sent a Dissenters' Notice must demand payment in
writing, certifying whether he or she acquired beneficial ownership of the
shares before the date specified in such notice and deposit his or her
certificates in accordance with the Dissenters' Notice. A shareholder who does
not demand payment by the date set in the Dissenters' Notice or who does not
deposit his or her certificates where required and by the date set in the
Dissenter's Notice is not entitled to a dissenters' right of payment for his or
her shares.
Upon the later of consummation of the Merger or receipt of the payment
demand, Clyde, Geneva Rock, Utah Service and Beehive Insurance, as the case may
be, shall pay each holder of their respective shares who has complied with the
requirements set forth above the amount that Clyde, Geneva Rock, Utah Service
and Beehive Insurance, as the case may be, estimates to be the fair value of
such shares, plus accrued interest. The payment must be accompanied by the
latest available financial statements of Clyde, Geneva Rock, Utah Service and
Beehive Insurance, as the case may be, a statement of the estimate of the fair
value of the respective shares and the amount of interest payable with respect
to such shares, a statement of the dissenters' rights if the dissenter is
dissatisfied with the payment and a copy of the sections of the URBCA pertaining
to dissenters' rights.
If (a) the dissenter believes that the amount paid by Clyde, Geneva
Rock, Utah Service and Beehive Insurance, as the case may be, is less than the
fair value of his or her shares or that the interest due is incorrectly
calculated, (b) Clyde, Geneva Rock, Utah Service or Beehive Insurance, as the
case may be, fail to make payment within 60 days after the date set in the
Dissenters' Notice for demanding payment, or (c) the Merger is not consummated
and Clyde, Geneva Rock, Utah Service or Beehive Insurance, as the case may be,
do not return to the dissenter the deposited certificates within 60 days after
the date set in the Dissenters' Notice for demanding payment, the dissenter may
notify Clyde, Geneva Rock, Utah Service or Beehive Insurance, as the case may
be, of his or her estimate of the fair value of his or her shares and the amount
of interest due and demand payment of his or her estimate, less any payment
previously received. The dissenter must notify Clyde, Geneva Rock, Utah Service
or Beehive Insurance, as the case may be, of his or her demand in writing within
30 days after Clyde, Geneva Rock, Utah Service and Beehive Insurance, as the
case may be, made or offered payment for the dissenters' shares. If, within 60
days after receipt by Clyde, Geneva Rock, Utah Service or Beehive Insurance, as
the case may be, of a demand described in this paragraph, the demand remains
unsettled, CCI, Clyde, Geneva Rock, Utah Service or Beehive Insurance, as the
case may be, shall commence a proceeding and shall petition the court to
determine the fair value of the shares and accrued interest thereon. If Clyde,
Geneva Rock, Utah Service or Beehive Insurance, as the case may be, do not bring
the respective proceeding within such 60-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded. If the respective proceeding
is brought within the 60-day period, the dissenter shall be entitled to judgment
for the amount by which the court finds the fair value of his or her shares plus
interest exceeds the amount paid by Clyde, Geneva Rock, Utah Service and Beehive
Insurance, as the case may be.
ONE OF THE CONDITIONS TO THE CONSUMMATION OF THE MERGER AGREEMENT IS
THAT THE AGGREGATE NUMBER OF DISSENTING SHARES SHALL NOT BE MORE THAN 5% OF THE
TOTAL NUMBER OF SHARES OF CCI COMMON STOCK THAT WOULD BE OUTSTANDING UPON
CONSUMMATION OF THE MERGER IF THERE WERE NO DISSENTING SHARES (THERE WOULD BE
6,938,709 OUTSTANDING CCI SHARES AND 5% OF THAT NUMBER IS 346,935).
101
<PAGE> 120
DESCRIPTION OF CCI CAPITAL STOCK
At the effective time of the Merger, the authorized capital stock of
CCI will consist of 10,000,000 shares of CCI Common Stock. For a discussion of
significant differences between CCI's Articles of Incorporation and Bylaws and
the Articles of Incorporation and Bylaws for Clyde, Geneva Rock, Utah Service
and Beehive Insurance, see "Comparison of the Rights of Holders of CCI Common
Stock and Clyde, Geneva Rock, Utah Service and Beehive Insurance Common Stock."
COMMON STOCK
Holders of shares of CCI Common Stock will be entitled to one vote per
share on all matters to be voted on by shareholders. Holders of CCI Common Stock
will be entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution, or winding up of CCI, the holders of CCI Common Stock
will be entitled to share ratably in all assets remaining after payment of
liabilities. Holders of CCI Common Stock will have no preemptive rights and will
have no rights to convert their CCI Common Stock into any other securities.
Holders of CCI Common Stock will have certain limited rights to have their
shares of CCI Common Stock redeemed for cash pursuant to the terms of the Stock
Redemption Plan. For a summary of such rights, see "Clyde Companies, Inc.--Stock
Redemption Plan." CCI Common Stock to be outstanding upon completion of the
offering will be validly issued, fully paid and non-assessable.
UTAH CONTROL SHARES ACQUISITION ACT
The Utah Control Shares Acquisition Act (the "Control Shares Act")
essentially provides that, when a person or group (the "Acquiror") acquires
shares (or the power to direct the voting of shares) of a corporation that is
subject to the Control Shares Act equal to or in excess of 20%, 33 1/3% or a
majority of the voting power of the corporation, the Acquiror is not permitted
to vote (or to direct the voting of) the shares unless a majority of the
corporation's shares (voting in voting groups, if applicable), excluding shares
held by the Acquiror or by the officers and employee-Directors of the
corporation, approve a resolution granting the Acquiror the right to vote the
shares. Shareholder approval may occur at the next meeting of the shareholders
or, if the Acquiror requests a special meeting and agrees to pay the associated
costs of the corporation for the requested special meeting, at the requested
special meeting of the shareholders (to be held within 50 days of the
corporation's receipt of the request by the Acquiror).
If authorized by the corporation's articles of incorporation or bylaws,
the corporation may redeem the Acquiror's shares at their fair market value if
the Acquiror does not file an "acquiring person statement." CCI's Articles of
Incorporation and Bylaws do not provide for redemption of an Acquiror's shares
in the event the Acquiror fails to file an "acquiring person statement." An
Acquiror's shares are not subject to redemption after an "acquiring person
statement" has been filed unless the shares are not accorded full voting rights
by the shareholders.
If the Acquiror obtains the right to vote, and if the Acquiror obtains
a majority of the voting power of the corporation, the shareholders may be
entitled to dissenters' rights.
The Control Shares Act does not apply if (a) a corporation's articles
of incorporation or bylaws provide that the Control Shares Act does not apply,
(b) the acquisition of shares of the corporation is consummated pursuant to a
merger (to which the corporation is a party) , or (c) under certain other
specified circumstances. In addition, the Control Shares Act applies only to
Utah corporations that (a) have 100 or more shareholders, (b) have their (i)
principal place of business, (ii) principal office, or (iii) substantial assets
in the State of Utah, and (c) have (i) more than 10% of their shareholders who
are residents of Utah, (ii) more than 10% of their shares owned by Utah
residents, or (iii) 10,000 or more shareholders who are residents of Utah.
102
<PAGE> 121
CCI's Articles of Incorporation and Bylaws contain no additional
provision restricting transactions with interested shareholders or other
takeover situations, nor do they contain provisions opting out of the Control
Shares Act.
CERTAIN PROVISIONS OF CCI'S ARTICLES OF INCORPORATION AND BY-LAWS
The description of certain provisions of the Articles of Incorporation
and the By-Laws set forth in "Comparison of the Rights of Holders of CCI Common
Stock and Clyde, Geneva Rock, Utah Service and Beehive Insurance Common Stock"
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, CCI's Articles of Incorporation and By-Laws.
103
<PAGE> 122
COMPARISON OF THE RIGHTS OF HOLDERS OF CCI COMMON STOCK AND CLYDE,
GENEVA ROCK, UTAH SERVICE AND BEEHIVE INSURANCE COMMON STOCK
As a consequence of the Merger, the shareholders of Clyde, Geneva Rock,
Utah Service and Beehive Insurance will become shareholders of CCI. The
following is a summary of material differences between the rights of holders of
CCI Common Stock and the rights of holders of Clyde, Geneva Rock, Utah Service
and Beehive Insurance Common Stock.
Shareholders of Clyde, Geneva Rock, Utah Service and Beehive Insurance,
whose rights as shareholders are currently governed by each of Clyde's, Geneva
Rock's, Utah Service's and Beehive Insurance's respective Articles of
Incorporation (the "Clyde Articles", "Geneva Rock Articles", "Utah Service
Articles" and "Beehive Insurance Articles") and each of Clyde's, Geneva Rock's,
Utah Service's and Beehive Insurance's respective By-laws (the "Clyde By-laws",
"Geneva Rock By-laws", "Utah Service By-laws" and "Beehive Insurance By-laws")
will, upon consummation of the Merger, automatically become shareholders of CCI,
and their rights will be governed by CCI's Articles of Incorporation (the "CCI
Articles") and CCI's By-laws (the "CCI By-laws"). The following is a discussion
of only those material similarities and differences between the rights of
shareholders of Clyde, Geneva Rock, Utah Service and Beehive Insurance under the
Clyde Articles and By-laws, Geneva Rock Articles and By-laws, Utah Service
Articles and By-laws and Beehive Insurance Articles and By-laws on the one hand
and shareholders of CCI under the CCI Articles and By-laws on the other hand.
This summary does not purport to be a complete discussion of, and is qualified
in its entirety by reference to the CCI Articles and By-laws, Clyde Articles and
By-laws, Geneva Rock Articles and By-laws, Utah Service Articles and By-laws and
Beehive Insurance Articles and By-laws.
AMENDMENTS TO ARTICLES AND BY-LAWS
The URBCA generally provides that in order for an amendment to the
articles of incorporation of a corporation to be adopted, the board of directors
of the corporation must recommend the amendment to the shareholders to be voted
on by the shareholders. In order for an amendment to a corporation's articles of
incorporation to be adopted, the amendment must be approved by a majority of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights or materially and adversely
affect other rights of shareholders and by every other voting group entitled to
vote on the amendment.
Under the URBCA, a corporation's board of directors may amend the
corporation's bylaws unless the corporation's articles of incorporation, the
by-laws or the URBCA reserves the power to amend the by-laws exclusively to the
shareholders in whole or in part. The URBCA also provides that a corporation's
shareholders may also amend or repeal the corporation's by-laws. The Clyde
By-laws, Geneva Rock By-laws and Beehive Insurance By-laws provide that no
by-law adopted by the shareholders can be altered by the board of directors. The
Clyde By-laws, Geneva Rock By-laws, Utah Service By-laws and Beehive Insurance
By-laws provide that they cannot be amended by the board of directors in a way
that would fix a greater quorum or voting requirement for shareholder votes. The
CCI By-laws provide that the board of directors may not adopt, amend or repeal a
by-law that fixes a greater quorum or voting requirement for shareholder votes.
The CCI By-Laws also provide that the provisions in the CCI By-Laws regarding
the qualifications of Directors (described below) can only be amended by the
approval of a 75% majority of the Directors or shareholders of CCI.
SPECIAL MEETINGS OF SHAREHOLDERS
The URBCA provides that a special meeting of shareholders may be called
by the board of directors or the holders of 10% or more of the votes entitled to
be cast on any issue proposed to be considered at the proposed special meeting,
or by such persons as are specified in the articles of incorporation or bylaws.
The Clyde and Beehive Insurance By-laws provide that special meetings may be
called by the chairman of the board of directors, the president or by the board
of directors, or in the absence or disability of the foregoing, by any vice
president. The Geneva Rock Articles and By-laws provide that a special meeting
may be called by the president, vice president or any two directors. The Beehive
Insurance Articles provide that a special meeting may be called by a majority of
the directors. The Utah Service Articles provide that the president, vice
president or any three directors may call a
104
<PAGE> 123
special meeting. The Utah Service Bylaws provide that a special meeting may be
called by the president or the board of directors. The CCI By-laws state that
special meetings of shareholders may be called by the president or the board of
directors and that the president is required to call a special meeting of
shareholders upon a request made by the holders of not less than 10% of CCI
Common Stock.
CORPORATE ACTION BY WRITTEN CONSENT OF SHAREHOLDERS
The URBCA permits corporate action by shareholders without a
shareholders meeting upon the written consent of all the shareholders entitled
to vote on the action with respect to any corporation, such as CCI, Clyde,
Geneva Rock, Utah Service or Beehive Insurance, formed prior to July 1, 1992.
The written consent of the holders of shares having not less than the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all the shares entitled to vote thereon were present and voted
is sufficient if all the shareholders entitled to vote have first approved a
resolution to that effect. As of the date hereof, no such shareholder resolution
has been approved by the shareholders of Clyde, Geneva Rock, Utah Service or
Beehive Insurance Common Stock. The shareholders of CCI Common Stock have,
however, approved such a resolution.
DIVIDENDS
Under the URBCA, the board of directors of a corporation may authorize
and the corporation may make distributions (including dividends) to shareholders
only if after giving effect to the distribution (i) the corporation would be
able to pay its debts as they become due in the usual course of business and
(ii) the corporation's total assets would at least equal the sum of its total
liabilities plus, unless the corporation's articles of incorporation permit
otherwise, the amount that would be needed if the corporation were to be
dissolved at the time of the distribution to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
CAPITAL STOCK
The authorized capital stock of CCI consists of 10,000,000 shares of
CCI Common Stock and no preferred stock. The authorized capital stock of Clyde
consists of 200,000 shares of Clyde Common Stock and no preferred stock. The
authorized capital stock of Geneva Rock consists of 50,000 shares of Geneva Rock
Common Stock and no preferred stock. The authorized capital stock of Utah
Service consists of 5,000 shares of Utah Service Common Stock and no preferred
stock. The authorized capital stock of Beehive Insurance consists of 50,000
shares of Beehive Insurance Common Stock and no preferred stock.
DISSENTERS' RIGHTS
Holders of common stock of any of Operating Companies are entitled
under the URBCA to certain dissenters' rights, as more fully described in
"Dissenters' Rights" above.
PROVISIONS RELATING TO DIRECTORS
Under the URBCA, a corporation must have a board of directors
consisting of at least three directors, unless the number of shareholders is
less than three, in which case the number of directors must be at least equal to
the number of shareholders. The Clyde Articles provide that the Clyde Board of
Directors shall consist of not less than three nor more than fifteen Directors.
The Clyde By-laws fix the number of Directors at nine. Only eight Directors are
currently serving, and the Clyde Board of Directors has not filled the remaining
vacancy. The Board of Directors, by a majority vote, or the shareholders, by a
three-fourths vote, may amend the Clyde By-laws to change from time to time the
number of Directors. The Geneva Rock By-laws provide that the Geneva Rock Board
of Directors shall consist of nine Directors. Only eight Directors are currently
serving, and the Geneva Rock Board of Directors has not filled the remaining
vacancy. The Board of Directors, by a majority vote, or the shareholders, by a
three-fourths vote, may amend the Geneva Rock By-laws to change from time to
time the number of Directors. The Utah Service Articles provide that the Utah
Service Board of Directors shall consist of not less than three nor more than
nine Directors. The Utah Service By-laws fix the number of Directors at nine.
The Board of Directors or shareholders may change from time to time the number
of Directors by approving an amendment to the Utah Service
105
<PAGE> 124
By-laws. The Beehive Insurance Articles provide that the Beehive Insurance Board
of Directors shall consist of not less than three nor more than thirteen
Directors. The Beehive Insurance By-laws fix the number of Directors at nine.
The Board of Directors or shareholders may change from time to time the number
of Directors by approving an amendment to the Beehive Insurance By-laws. Only
eight Directors are currently serving, and the Beehive Insurance Board of
Directors has not filled the remaining vacancy.
The CCI By-laws provide that the CCI Board of Directors shall consists
of not less than eight nor more than eleven Directors. Section 3.2( c) of the
CCI By-laws provides that Directors must have the following qualifications: (i)
for a period of five years after the date on which the CCI By-laws are adopted,
(a) six of the Directors must be direct descendants (or the spouse of a direct
descendant) of W.W. Clyde and (b) two of the Directors must be direct
descendants (or the spouse of a direct descendant) of Edward Clyde; and (ii) no
person over seventy-five years of age will be elected or appointed a Director of
CCI except for any Director elected within sixty days after the adoption of the
CCI By-laws and serving during the five year period described above.
The Clyde, Geneva Rock and Beehive Insurance By-laws provide that
vacancies in their respective boards of Directors may be filled by the vote of
the remaining Directors. The CCI and Utah Service By-laws provide that vacancies
in their respective boards of Directors may be filled by the vote of the
shareholders, the board of Directors or the affirmative vote of a majority of
the remaining Directors if less than a quorum.
The URBCA allows the articles of incorporation of a corporation to
provide for staggering the terms of Directors by dividing the total number of
Directors into two or three groups, with each group containing 1/2 or 1/3 of the
total, as near as may be. None of the Articles or By-laws of any of the
Constituent Corporations or CCI provide for staggering the terms of Directors.
Under the URBCA, one or more Directors may be removed with or without
cause by the shareholders of a corporation unless the articles of incorporation
provide that Directors may be removed only for cause. The CCI, Clyde, Geneva
Rock, Utah Service and Beehive Insurance Articles do not provide that the
Directors may be removed only for cause. If a Director is selected by a voting
group of shareholders, only the shareholders of that voting group may
participate in the vote to remove the Director. If cumulative voting is
authorized, a Director may not be removed if the number of votes sufficient to
elect the Director under cumulative voting is voted against the Director's
removal. If cumulative voting is not authorized, a Director may be removed only
if the number of votes cast to remove the Director exceeds the number of votes
cast not to remove the Director. A Director may be removed by the shareholders
only at a meeting called for the purpose of removing the Director and the
meeting notice must state that the purpose, or one of the purposes, of the
meeting is removal of the Director.
106
<PAGE> 125
VALIDITY OF CCI COMMON STOCK
The validity of the shares of CCI Common Stock to be issued in
connection with the Merger has been passed upon by Van Cott, Bagley, Cornwall &
McCarthy, Salt Lake City, Utah. See "Risk Factors -- Lack of Separate Legal
Representation" and "The Merger -- Interests of Certain Persons in the Merger --
Lack of Separate Legal Representation".
EXPERTS
The audited financial statements as of and for the year ended December
31, 1997 of CCI, Clyde, Geneva Rock, Beehive Insurance and Utah Service included
in this Proxy Statement/Prospectus have been so included in reliance on the
reports of Grant Thornton, given on the authority of said firm as experts in
auditing and accounting. The audited financial statements as of December 31,
1996 and for the year then ended of CCI and Clyde included in this Proxy
Statement/Prospectus have been so included in reliance on the reports of Grant
Thornton, given the authority of said firm as experts in auditing and
accounting. The audited financial statements of Geneva Rock as of December 31,
1996 and for the two years then ended included in this Proxy
Statement/Prospectus have been so included in reliance on the reports of Squire,
given on the authority of said firm as experts in auditing and accounting. The
audited financial statements of Beehive Insurance as of December 31, 1996 and
for the two years then ended included in this Proxy Statement/Prospectus have
been so included in reliance on the reports of Daines, given on the authority of
said firm as experts in auditing and accounting.
OTHER MATTERS
None of the Boards of Directors of CCI, Clyde, Geneva Rock, Utah
Service and Beehive Insurance intend to bring any matters before the Special
Meetings other than those specifically set forth in the Notices of Special
Meeting, nor do they know of any matters to be brought before the CCI, Clyde,
Geneva Rock, Utah Service and Beehive Insurance Special Meeting, respectively,
by others. If any other matters properly come before the CCI, Clyde, Geneva
Rock, Utah Service and Beehive Insurance Special Meeting, it is the intention of
the persons named in the accompanying proxies to vote such proxies in accordance
with the judgment of the Boards of Directors of CCI, Clyde, Geneva Rock, Utah
Service and Beehive Insurance, respectively.
SHAREHOLDER PROPOSALS
If the Merger is consummated, shareholder proposals must be received by
CCI by January 9, 1999 in order to be included in CCI's Proxy Statement for its
1999 Annual Meeting of Shareholders. Such shareholder proposals should be
submitted to Clyde Companies, Inc., 1423 Devonshire Drive, Salt Lake City, Utah,
84108, Attention: Secretary.
107
<PAGE> 126
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
CLYDE COMPANIES, INC.
Report of Independent Accountants F-2
Balance Sheets as of December 30, 1997 and December 31, 1996 F-3
Statements of Earnings and Retained Earnings for the years ended
December 31, 1997, December 31, 1996 and December 31, 1995 F-4
Statements of Cash Flows for the years ended December 31, 1997,
December 31, 1996 and December 31, 1995 F-5
Notes to Financial Statements F-6
W.W. CLYDE & CO.
Report of Independent Accountants F-16
Balance Sheets as of December 30, 1997 and December 31, 1996 F-17
Statements of Earnings and Retained Earnings for the years ended
December 31, 1997, December 31, 1996 and December 31, 1995 F-19
Statements of Cash Flows for the years ended December 31, 1997,
December 31, 1996 and December 31, 1995 F-20
Notes to Financial Statements F-22
GENEVA ROCK PRODUCTS, INC.
Reports of Independent Accountants F-33
Consolidated Balance Sheets as of December 30, 1997 and December 31, 1996 F-35
Consolidated Statements of Earnings and Retained Earnings
for the years ended December 31, 1997, December 31, 1996
and December 31, 1995 F-37
Consolidated Statement of Stockholder's Equity for the years ended
December 31, 1997, December 31, 1996 and December 31, 1995 F-38
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, December 31, 1996 and December 31, 1995 F-39
Notes to Financial Statements F-40
UTAH SERVICE, INC.
Report of Independent Accountants F-51
Balance Sheets as of December 30, 1997 and December 31, 1996 (unaudited) F-52
Statements of Earnings and Retained Earnings for the years ended
December 31, 1997, December 31, 1996 (unaudited)
and December 31, 1995 (unaudited) F-54
Statements of Stockholders' Equity for the years ended December 31, 1997,
December 31, 1996 (unaudited) and December 31, 1995 (unaudited) F-55
Statements of Cash Flows for the years ended December 31, 1997,
December 31, 1996 (unaudited) and December 31, 1995 (unaudited) F-56
Notes to Financial Statements F-58
BEEHIVE INSURANCE AGENCY, INC.
Reports of Independent Accountants F-65
Balance Sheets as of December 30, 1997 and December 31, 1996 F-67
Statements of Earnings and Retained Earnings for the years ended
December 31, 1997, December 31, 1996 and December 31, 1995 F-68
Statements of Cash Flows for the years ended December 31, 1997,
December 31, 1996 and December 31, 1995 F-69
Notes to Financial Statements F-71
</TABLE>
F-1
<PAGE> 127
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Clyde Companies, Inc.
We have audited the accompanying balance sheets of Clyde Companies, Inc.
(formerly W.W. Clyde Investment Co.) as of December 31, 1997 and 1996, and the
related statements of earnings and retained earnings, and cash flows for each of
the three years in the period ended December 31, 1997. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Clyde Companies, Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
GRANT THORNTON LLP
Provo, Utah
March 20, 1998
F-2
<PAGE> 128
Clyde Companies, Inc.
(formerly W. W. Clyde Investment Co.)
BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
ASSETS
1997 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 14,158 $ 27,264
Prepaid expenses 9,076 4,000
----------- -----------
Total current assets 23,234 31,264
INVESTMENT IN AFFILIATES (Note B) 27,432,351 25,056,938
OTHER ASSETS 338,362 --
----------- -----------
$27,793,947 $25,088,202
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ -- $ 5,385
Due to related party 338,362 --
----------- -----------
Total current liabilities 338,362 5,385
DEFERRED INCOME TAXES (Note C) 10,039,117 9,153,088
SHAREHOLDERS' EQUITY (Note D)
Common stock - no par value Authorized -
10,000,000 shares - Issued 2,303,920 shares 706,530 706,530
Retained earnings 16,709,938 15,223,199
----------- -----------
17,416,468 15,929,729
----------- -----------
$27,793,947 $25,088,202
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 129
Clyde Companies, Inc.
(formerly W. W. Clyde Investment Co.)
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
Year ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Operating expenses $ 8,235 $ 6,510 $ 6,582
Other income
Dividend income from affiliates 486,690 404,320 530,210
Equity in undistributed net earnings
of affiliates 2,375,413 2,503,424 3,412,424
Interest income 2,478 1,029 1,097
Other -- -- 418
------------ ------------ ------------
Total other income 2,864,581 2,908,773 3,944,149
------------ ------------ ------------
Earnings before income taxes 2,856,346 2,902,263 3,937,567
Income taxes (Note C) 928,234 967,484 1,321,488
------------ ------------ ------------
NET EARNINGS 1,928,112 1,934,779 2,616,079
Retained earnings at beginning of year 15,223,199 13,647,238 11,508,370
Cash dividends (Note E) (441,373) (358,818) (477,211)
------------ ------------ ------------
Retained earnings at end of period $ 16,709,938 $ 15,223,199 $ 13,647,238
============ ============ ============
Earning per common share - basic $ 0.84 $ 0.84 $ 1.14
------------ ------------ ------------
Weighted average shares outstanding 2,303,920 2,303,920 2,303,920
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 130
Clyde Companies, Inc.
(formerly W. W. Clyde Investment Co.)
STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Increase in cash and cash equivalents
Cash flows from operating activities
Net earnings $ 1,928,112 $ 1,934,779 $ 2,616,079
Adjustments to reconcile net earnings to net
cash provided by operating activities
Equity in net earnings of affiliates (2,375,413) (2,503,424) (3,412,424)
Deferred income taxes 886,029 933,777 1,272,835
Changes in assets and liabilities
Prepaid expenses (5,076) -- --
Other assets (338,362) -- --
Accrued federal income tax (5,385) (14,947) 1,385
Due to related party 338,362 -- --
----------- ----------- -----------
Total adjustments (1,499,845) (1,584,594) (2,138,204)
----------- ----------- -----------
Net cash provided by
operating activities 428,267 350,185 477,875
----------- ----------- -----------
Cash flows from financing activities -
dividends paid (441,373) (358,818) (477,211)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents (13,106) (8,633) 664
Cash and cash equivalents at beginning of year 27,264 35,897 35,233
----------- ----------- -----------
Cash and cash equivalents at end of year $ 14,158 $ 27,264 $ 35,897
=========== =========== ===========
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ -- $ -- $ --
Income taxes 33,707 40,021 47,902
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 131
Clyde Companies, Inc.
(formerly W.W. Clyde Investment Co.)
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows.
1. Organization
In connection with an "Amended and Restated Agreement and Plan of Merger"
adopted on November 13, 1997, Clyde Companies, Inc. (the Company) changed
its name from W. W. Clyde Investment Co. The Company is incorporated
under the laws of the State of Utah. The Company is located in Salt Lake
City, Utah and is an investment company which holds stock in four related
companies: W. W. Clyde & Co. (W.W. Clyde) (33.78%), Geneva Rock Products,
Inc. (Geneva Rock) (21.67%), Utah Service, Inc. (Utah Service) (31.37%)
and Beehive Insurance Agency, Inc. (Beehive Insurance) (17.22%) (See Note
D).
2. Cash and cash equivalents
For purposes of the financial statements, the Company considers all
short-term debt securities with an original maturity of three months or
less when purchased to be cash equivalents.
3. Income taxes
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred taxes are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. An allowance against deferred tax
assets is recorded when it is more likely than not that such tax benefits
will not be realized.
4. Use of estimates
In preparing the Company's financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues
and expenses during the reported period. Actual results could differ from
those estimates.
F-6
<PAGE> 132
Clyde Companies, Inc.
(formerly W.W. Clyde Investment Co.)
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
5. Fair value of financial instruments
The carrying value of the Company's cash and cash equivalents and
accounts payable approximate their fair values.
6. Investments
Investments in affiliates are accounted for on the equity method.
7. Earnings per share
Basic earnings per common share are based upon the weighted average
number of common shares outstanding during the period presented after
giving retroactive effect to all periods presented for the 40:1 stock
split as described in Note D. There are no potential common shares which
would cause dilution.
During 1997, the Company adopted, the Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings Per Share." SFAS 128 eliminates the presentation of
primary earnings per share (EPS) and requires the presentation of basic
EPS, which includes no common stock equivalents and thus no dilution. The
statement also eliminates the modified treasury stock method of computing
potential common shares.
8. Recently issued accounting statements not yet adopted
Comprehensive income
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 (SFAS 130), "Reporting Comprehensive Income." SFAS 130 requires
entities presenting a complete set of financial statements to include
details of comprehensive income that arise in the reporting period.
Comprehensive income consists of net income or loss for the current
period and other comprehensive income, which consists of revenue,
expenses, gains, and losses that bypass the income statement and are
reported directly in a separate component of equity. Other comprehensive
income includes, for example, foreign currency items, minimum pension
liability adjustments, and unrealized gains and losses on certain
investment securities. SFAS 130 requires that components of comprehensive
income be reported in a financial statement that is displayed with the
same prominence as other financial statements. This statement is
effective for fiscal years beginning after December 15, 1997, and
requires restatement of prior period financial statements presented for
comparative purposes.
F-7
<PAGE> 133
Clyde Companies, Inc.
(formerly W.W. Clyde Investment Co.)
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
8. Recently issued accounting statements not yet adopted - continued
Disclosure of segments
Also in June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 (SFAS 131), "Disclosures about Segments of an
Enterprise and Related Information." This statement requires an entity to
report financial and descriptive information about their reportable
operating segments. An operating segment is a component of an entity for
which financial information is developed and evaluated by the entity's
chief operating decision maker to assess performance and to make
decisions about resource allocation. Entities are required to report
segment profit or loss, certain specific revenue and expense items and
segment assets based on financial information used internally for
evaluating performance and allocating resources. This statement is
effective for fiscal years beginning after December 15, 1997, and
requires restatement of prior period financial statements presented for
comparative purposes.
The Company does not believe that the adoption of SFAS 130 and SFAS 131
will have a material effect on the Company's financial statements.
9. Certain reclassifications
Certain nonmaterial reclassifications have been made to the 1996
financial statements to conform to the 1997 presentation.
F-8
<PAGE> 134
Clyde Companies, Inc.
(formerly W.W. Clyde Investment Co.)
NOTES TO FINANCIAL STATEMENTS
NOTE B - INVESTMENT IN AFFILIATES
The Company owns 33.78% of the outstanding common stock of W. W. Clyde,
21.67% of the outstanding common stock of Geneva Rock, 31.37% of the
outstanding common stock of Utah Service, and 17.22% of the outstanding
common stock of Beehive Insurance. These investments are accounted for
under the equity method (See Note D).
The Company's investments in affiliates consist of the following:
<TABLE>
<CAPTION>
Geneva Utah Beehive
W. W. Clyde Rock Service Insurance Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Initial investment at cost $ 427,002 $ 63,178 $ 22,703 $ 4,947 $ 517,830
------------ ------------ ------------ ------------ ------------
Equity in investment at
January 1, 1995 9,448,724 8,351,830 752,672 70,034 18,623,260
Share of net earnings for
the year 1,430,881 2,379,210 109,984 22,559 3,942,634
Dividends received for the year (319,350) (141,750) (33,960) (35,150) (530,210)
------------ ------------ ------------ ------------ ------------
Equity in investment at
December 31, 1995 10,560,255 10,589,290 828,696 57,443 22,035,684
Share of net earnings for 1,827,843 2,907,744
the year 907,565 132,079 40,257
Dividends received for the year (191,610) (141,750) (33,960) (37,000) (404,320)
------------ ------------ ------------ ------------ ------------
Equity in investment at
December 31, 1996 11,276,210 12,275,383 926,815 60,700 24,539,108
Share of net earnings for the year
904,428 1,781,817 135,927 39,931 2,862,103
Dividends received for the year (255,480) (141,750) (33,960) (55,500) (486,690)
------------ ------------ ------------ ------------ ------------
Equity in investment at
December 31, 1997 11,925,158 13,915,450 1,028,782 45,131 26,914,521
------------ ------------ ------------ ------------ ------------
Total investment $ 12,352,160 $ 13,978,628 $ 1,051,485 $ 50,078 $ 27,432,351
============ ============ ============ ============ ============
Percent ownership 33.78% 21.67% 31.37% 17.22%
============ ============ ============ ============
</TABLE>
F-9
<PAGE> 135
Clyde Companies, Inc.
(formerly W.W. Clyde Investment Co.)
NOTES TO FINANCIAL STATEMENTS
NOTE B - INVESTMENT IN AFFILIATES - CONTINUED
Condensed balance sheets of W. W. Clyde consist of the following at
December 31,:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Assets
Current assets $17,760,000 $16,357,000
Property and equipment, net of depreciation 8,672,000 8,678,000
Other assets 22,607,000 19,881,000
=========== ===========
Total assets $49,039,000 $44,916,000
=========== ===========
Liabilities and stockholders' equity
Current liabilities $ 2,064,000 $ 1,092,000
Long-term liabilities 9,945,000 8,877,000
----------- -----------
Total liabilities
12,009,000 9,969,000
Stockholders' equity 37,030,000 34,947,000
=========== ===========
Total liabilities and stockholders' equity $49,039,000 $44,916,000
=========== ===========
</TABLE>
Condensed statements of earnings of W.W. Clyde are as follows as of
December 31,:
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Construction revenue $ 16,906,000 $ 19,056,000 $ 21,325,000
Cost of construction 15,002,000 17,116,000 18,199,000
-------------- -------------- -------------
Gross profit 1,904,000 1,940,000 3,126,000
Operating expenses 1,488,000 1,443,000 1,255,000
Other income, net 3,760,000 3,700,000 4,796,000
-------------- -------------- -------------
Earnings before income taxes 4,176,000 4,197,000 6,667,000
Income taxes 1,498,000 1,510,000 2,431,000
-------------- -------------- -------------
Net earnings 2,678,000 2,687,000 4,236,000
Ownership percentage 33.78% 33.78% 33.78%
-------------- -------------- ------------
Equity in net earnings of affiliate $ 905,00 $ 908,00 $ 1,431,000
============== ============== ============
</TABLE>
F-10
<PAGE> 136
Clyde Companies, Inc.
(formerly W.W. Clyde Investment Co.)
NOTES TO FINANCIAL STATEMENTS
NOTE B - INVESTMENT IN AFFILIATES - CONTINUED
Condensed balance sheets of Geneva Rock consist of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Assets
Current assets $39,553,000 $35,240,000
Property and equipment, net of depreciation 39,882,000 36,528,000
Other assets 2,812,000 3,080,000
----------- -----------
Total assets $82,247,000 $74,848,000
=========== ===========
Liabilities and stockholders' equity
Current liabilities $ 8,869,000 $ 8,036,000
Long-term liabilities 8,632,000 9,633,000
----------- -----------
Total liabilities 17,501,000 17,669,000
Stockholders' equity 64,746,000 57,179,000
----------- -----------
Total liabilities and stockholders' equity $82,247,000 $74,848,000
=========== ===========
</TABLE>
Condensed statements of earnings of Geneva Rock are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $131,107,000 $116,349,000 $100,422,000
Cost of sales 109,114,000 98,907,000 80,811,000
------------ ------------ ------------
Gross profit 21,993,000 17,442,000 19,611,000
Operating expenses 9,546,000 4,979,000 3,173,000
Other income, net 734,000 781,000 918,000
------------ ------------ ------------
Earnings before income taxes 13,181,000 13,244,000 17,356,000
Income taxes 4,959,000 4,810,000 6,378,000
------------ ------------ ------------
Net earnings 8,222,000 8,434,000 10,978,000
Ownership percentage 21.67% 21.67% 21.67%
------------ ------------ ------------
Equity in net earnings of affiliate $ 1,782,000 $ 1,828,000 $ 2,379,000
============ ============ ============
</TABLE>
F-11
<PAGE> 137
Clyde Companies, Inc.
(formerly W.W. Clyde Investment Co.)
NOTES TO FINANCIAL STATEMENTS
NOTE B - INVESTMENT IN AFFILIATES - CONTINUED
Condensed balance sheets of Utah Service consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Assets
Current assets $3,130,000 $3,057,000
Property and equipment, net of depreciation 1,211,000 1,255,000
Other assets 200,000 75,000
---------- ----------
Total assets $4,541,000 $4,387,000
========== ==========
Liabilities and stockholders' equity
Current liabilities $ 515,000 $ 626,000
Long-term liabilities 114,000 226,000
---------- ----------
Total liabilities 629,000 852,000
Stockholders' equity 3,912,000 3,535,000
---------- ----------
Total liabilities and stockholders' equity $4,541,000 $4,387,000
========== ==========
</TABLE>
Condensed statements of earnings of Utah Service are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $12,045,000 $13,108,000 $13,580,000
Operating expenses 9,858,000 10,915,000 11,633,000
----------- ----------- -----------
Gross profit 2,187,000 2,193,000 1,947,000
Operating expenses 1,709,000 1,628,000 1,498,000
Other income, net 183,000 114,000 101,000
----------- ----------- -----------
Earnings before income taxes 661,000 679,000 550,000
Income taxes 227,000 258,000 199,000
----------- ----------- -----------
Net earnings 434,000 421,000 351,000
Ownership percentage 31.37% 31.37% 31.37%
----------- ----------- -----------
Equity in net earnings of affiliate $ 136,000 $ 132,000 $ 110,000
=========== =========== ===========
</TABLE>
F-12
<PAGE> 138
Clyde Companies, Inc.
(formerly W.W. Clyde Investment Co.)
NOTES TO FINANCIAL STATEMENTS
NOTE B - INVESTMENT IN AFFILIATES - CONTINUED
Condensed balance sheets of Beehive Insurance consist of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Assets
Current assets $597,000 $679,000
Property and equipment, net of depreciation 55,000 41,000
Other assets 46,000 36,000
-------- --------
Total assets $698,000 $756,000
======== ========
Liabilities and stockholders' equity
Current liabilities $302,000 $377,000
Long-term liabilities -- --
-------- --------
Total liabilities 302,000 377,000
Stockholders' equity 396,000 379,000
-------- --------
Total liabilities and stockholders' equity $698,000 $756,000
======== ========
</TABLE>
Condensed statements of earnings of Beehive Insurance are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net revenues $607,000 $578,000 $538,000
Operating expenses 262,000 244,000 357,000
-------- -------- --------
Operating income 345,000 334,000 181,000
Other income, net 24,000 29,000 38,000
-------- -------- --------
Earnings before income taxes 369,000 363,000 219,000
Income taxes 137,000 129,000 88,000
-------- -------- --------
Net earnings 232,000 234,000 131,000
Ownership percentage 17.22% 17.22% 17.22%
-------- -------- --------
Equity in net earnings of affiliate $ 40,000 $ 40,000 $ 23,000
======== ======== ========
</TABLE>
F-13
<PAGE> 139
Clyde Companies, Inc.
(formerly W.W. Clyde Investment Co.)
NOTES TO FINANCIAL STATEMENTS
NOTE C - INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Current
Federal $ 18,158 $ 13,765 $ 22,397
State 24,047 19,942 26,256
---------- ---------- ----------
42,205 33,707 48,653
---------- ---------- ----------
Deferred
Federal 767,258 808,606 1,102,214
State 118,771 125,171 170,621
---------- ---------- ----------
886,029 933,777 1,272,835
---------- ---------- ----------
Total $ 928,234 $ 967,484 $1,321,488
========== ========== ==========
</TABLE>
The income tax provision reconciled to the tax computed at the federal
statutory rate of 34% is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Income taxes at statutory rate $ 971,158 $ 986,769 $ 1,338,773
State income taxes, net of federal tax benefit 94,259 95,775 129,940
Dividends received deduction (132,380) (109,975) (144,217)
All other (4,803) (5,085) (3,008)
----------- ----------- -----------
$ 928,234 $ 967,484 $ 1,321,488
=========== =========== ===========
</TABLE>
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
Long-term deferred tax liability
Investment in W. W. Clyde, Geneva Rock,
Utah Service and Beehive Insurance $ 10,039,117 $ 9,153,088
============ =============
</TABLE>
F-14
<PAGE> 140
Clyde Companies, Inc.
(formerly W.W. Clyde Investment Co.)
NOTES TO FINANCIAL STATEMENTS
NOTE D - SUBSEQUENT EVENTS
Agreement and Plan of Merger
On November 13, 1997, the Company adopted an "Amended and Restated
Agreement and Plan of Merger" whereby the following was effected:
1. The name of the Company was changed to Clyde Companies, Inc.
2. The Company changed its capital structure by authorizing ten million
shares of "no par value" common stock and declaring a 40:1 stock
split resulting in 2,303,920 shares outstanding.
3. Directors of the Company approved the merger of wholly-owned
subsidiaries of the Company with W.W. Clyde & Co., Geneva Rock
Products, Inc., Utah Service, Inc. and Beehive Insurance Agency,
Inc., all related companies through common shareholders and the
Company's equity investment in each entity (Note B).
4. The merger upon majority approval of the shareholders of each
respective company, will be effected by the exchange of shares of
the Company's common stock with the respective shares of common
stock held by the shareholders of each respective entity. The merger
transaction will be accounted for using the "purchase" method of
accounting. The exchange rates used in determining the number of
shares to be exchanged are based upon independent valuations
performed on each company to be acquired.
5. In connection with the transaction, the Company has filed a
registration statement (Form S-4) with the Securities Exchange
Commission for the purpose of registering the shares of common stock
of the Company to be issued in the merger.
Stock Redemption Plan
The Company has adopted a Stock Redemption Plan (the Plan) effective
January 1, 1999. The Plan provides for the creation of a "Redemption
Fund" (the Fund) which would be used to annually redeem shares of
outstanding common stock from willing shareholders. The Fund will have an
amount allocated to it annually by the Company (a) for the years 1999
through 2003, an amount which is greater than or equal to 7% and less
than or equal to 15% of consolidated net earnings for the prior year and
(b) for the years 2004 and thereafter, an amount which is greater than or
equal to 5% and less than or equal to 10% of consolidated net earnings
for the prior year. The per share price to be paid the shareholders will
be based on an annual valuation of the Company's common stock.
F-15
<PAGE> 141
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
W. W. Clyde & Co.
We have audited the accompanying balance sheets of W. W. Clyde & Co. as of
December 31, 1997 and 1996, and the related statements of earnings and retained
earnings and cash flows for each of the three years in the period ended December
31, 1997. 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 financial statements referred to above present fairly, in
all material respects, the financial position of W. W. Clyde & Co. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
GRANT THORNTON LLP
Provo, Utah
March 5, 1998
F-16
<PAGE> 142
W. W. Clyde & Co.
BALANCE SHEETS
ASSETS
December 31,
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Notes B and J) $ 3,805,033 $ 3,616,669
Interest-bearing deposits in banks (Note J) 7,230,509 8,218,785
Contracts receivable (Note J)
Current 4,834,962 2,191,928
Retention 526,574 545,982
Income taxes receivable -- 405,669
Due from related parties 338,362 --
Costs and estimated earnings in excess of billings:
Contracts in progress (Note C) 802,623 904,105
Contracts completed 40,153 268,945
Prepaid expenses and other assets 4,228 2,431
Inventories 168,636 176,727
Deferred income taxes (Note F) 9,829 25,487
----------- -----------
Total current assets 17,760,909 16,356,728
PROPERTY AND EQUIPMENT, AT COST
Buildings and improvements 328,338 328,338
Machinery and equipment 31,738,727 33,033,819
Transportation equipment 7,035,915 6,745,645
Furniture and fixtures 130,461 127,391
----------- -----------
39,233,441 40,235,193
Less accumulated depreciation and amortization 30,846,885 31,842,600
----------- -----------
8,386,556 8,392,593
Land 285,027 285,027
----------- -----------
8,671,583 8,677,620
Other assets 93,343 --
INVESTMENT IN AFFILIATE (Note D) 22,513,324 19,881,754
----------- -----------
$49,039,159 $44,916,102
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-17
<PAGE> 143
W.W. Clyde & Co.
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 870,341 $ 498,475
Subcontractors payable
Current 467,793 112,393
Retention -- 231,601
Accrued expenses (Note G) 282,757 152,964
Billings in excess of costs and estimated
earnings on contracts in progress (Note C) 137,240 96,481
Income taxes payable 305,998 --
------------ ------------
Total current liabilities 2,064,129 1,091,914
ACCRUED PENSION COSTS (Note I) 169,560 258,417
DEFERRED INCOME TAXES (Note F) 9,775,045 8,618,592
COMMITMENTS (Notes I and K) -- --
STOCKHOLDERS' EQUITY (Notes E, I and L)
Common stock, $10 par value;
authorized 200,000 shares;
issued 100,000 shares 1,000,000 1,000,000
Retained earnings 36,568,736 34,647,517
------------ ------------
37,568,736 35,647,517
Less cost of 5,456 shares of stock held
in treasury (538,311) (538,311)
Excess of additional pension cost over un-
recognized net pension obligation,
net of applicable income taxes -- (162,027)
------------ ------------
37,030,425 34,947,179
------------ ------------
$ 49,039,159 $ 44,916,102
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE> 144
W. W. Clyde & Co.
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
Year ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Earnings from construction (Notes H, J and K)
Construction revenue $ 16,906,071 $ 19,055,543 $ 21,325,495
Cost of construction 15,002,139 17,115,558 18,198,944
------------ ------------ ------------
Gross profit 1,903,932 1,939,985 3,126,551
General and administrative expenses 1,488,306 1,443,165 1,254,961
------------ ------------ ------------
Operating profit 415,626 496,820 1,871,590
Other income
Gain on sale of property and equipment 247,827 63,541 196,165
Interest income 607,174 640,667 697,056
Other income, net 46,269 63,663 85,693
Equity in net earnings of affiliate (Note D) 2,859,000 2,932,500 3,817,100
------------ ------------ ------------
3,760,270 3,700,371 4,796,014
------------ ------------ ------------
Earnings before income taxes 4,175,896 4,197,191 6,667,604
Income taxes (Note F) 1,498,325 1,510,333 2,431,461
------------ ------------ ------------
NET EARNINGS 2,677,571 2,686,858 4,236,143
Retained earnings at beginning of period 34,647,517 32,527,923 29,237,220
Cash dividends (Note E) (756,352) (567,264) (945,440)
------------ ------------ ------------
Retained earnings at end of period $ 36,568,736 $ 34,647,517 $ 32,527,923
============ ============ ============
Earnings per common share - basic $ 28.32 $ 28.42 $ 44.81
============ ============ ============
Weighted average shares outstanding 94,544 94,544 94,544
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-19
<PAGE> 145
W. W. Clyde & Co.
STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Increase in cash and cash equivalents
Cash flows from operating activities
Net earnings $ 2,677,571 $ 2,686,858 $ 4,236,143
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation 2,015,402 1,815,721 1,691,221
Gain on sale of property and
equipment (247,827) (63,541) (196,165)
Equity in net earnings of affiliate (2,859,000) (2,932,500) (3,817,100)
Deferred income taxes 1,075,719 1,142,062 1,297,225
Changes in assets and liabilities
Contracts receivable (2,623,626) (52,455) (730,840)
Costs and estimated earnings in
excess of billings on contracts
in progress and completed 330,274 (903,297) 367,850
Prepaid expenses and other assets (1,797) 1,751 298,565
Income taxes receivable 405,669 (398,886) 208,075
Other receivables -- 20,418 (20,418)
Inventories 8,091 43,793 (136,617)
Due from related parties (338,362) -- --
Other assets (93,343) -- --
Accounts payable 371,866 (111,525) 84,079
Subcontractors payable 123,799 283,644 (44,713)
Accrued expenses 241,508 (22,885) (76,292)
Income taxes payable 305,998 (246,594) 245,755
Accrued pension costs 57,847 -- --
Billings in excess of costs and
estimated earnings on
contracts in progress 40,759 (99,156) (85,404)
----------- ----------- -----------
Total adjustments (1,187,023) (1,523,450) (914,779)
----------- ----------- -----------
Net cash provided by
operating activities 1,490,548 1,163,408 3,321,364
----------- ----------- -----------
</TABLE>
(Continued)
The accompanying notes are an integral part of these statements.
F-20
<PAGE> 146
W. W. Clyde & Co.
STATEMENTS OF CASH FLOWS - CONTINUED
Year ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from investing activities
Purchases of property and equipment (2,206,168) (2,220,046) (4,551,214)
Proceeds from sale of property and
equipment 444,630 118,609 246,875
Net decrease (increase) in interest-bearing
deposits 988,276 (668,763) (2,857,022)
Proceeds from maturity of held-to-maturity
securities -- -- 4,976,979
Dividends received from affiliate 227,430 227,430 227,430
----------- ----------- -----------
Net cash used in
investing activities (545,832) (2,542,770) (1,956,952)
----------- ----------- -----------
Cash flows from financing activities -
dividends paid (756,352) (567,264) (945,440)
----------- ----------- -----------
Net increase (decrease)
in cash and cash
equivalents 188,364 (1,946,626) 418,972
Cash and cash equivalents at beginning
of period 3,616,669 5,563,295 5,144,323
----------- ----------- -----------
Cash and cash equivalents at end of period $ 3,805,033 $ 3,616,669 $ 5,563,295
=========== =========== ===========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ -- $ -- $ --
Income taxes 112,000 759,070 887,500
</TABLE>
Noncash investing and financing activities
At December 31, 1996, the Company had an excess of additional pension cost over
unrecognized net pension obligation of $162,027. As a result, deferred tax
assets were increased by $12,919.
The accompanying notes are an integral part of these statements.
F-21
<PAGE> 147
W.W. Clyde & Co.
NOTES TO THE FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows.
1. Financial Statement Presentation
The accounting and reporting policies of W. W. Clyde & Co. (the Company)
conform with generally accepted accounting principles and with general
practices in the construction industry. In preparing the financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of
the balance sheet and revenues and expenses for the period. Actual
results could differ significantly from those estimates.
2. Business activity
The Company is involved in the construction of highways, bridges, dams,
and other types of construction work involving the moving of large
quantities of earth.
3. Inventories
Inventories consisting of steel products, pipe, oil and grease, and tires
are recorded at the lower of cost or market, using the first-in,
first-out method.
4. Method of accounting for long-term contracts
The accompanying financial statements have been prepared using the
percentage-of-completion method of accounting and, therefore, take into
account the costs, estimated earnings, and revenue to date on contracts
not yet completed.
The amount of revenue recognized at statement date is that portion of the
total contract price that cost expended to date bears to anticipated
final total cost, based on current estimates of cost to complete. At the
time a loss on a contract becomes known, the entire amount of the
estimated ultimate loss is recognized in the financial statements.
Contract costs include all direct labor and benefits, materials unique to
or installed in the project, subcontractor costs and indirect cost
allocations, employee benefits, and construction equipment expense. As
long-term contracts extend over one or more years, revisions in cost and
earnings estimates during the course of the work are reflected in the
accounting period in which the facts that require the revision become
known.
The current assets, "costs and estimated earnings in excess of billings"
on contracts in progress and contracts completed, represent revenues
recognized in excess of amounts billed (underbillings), and the current
liability, "billings in excess of costs and estimated earnings on
contracts in progress," represents billings in excess of revenues
recognized (overbillings).
F-22
<PAGE> 148
W.W. Clyde & Co.
NOTES TO THE FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
5. Depreciation
Depreciation of property and equipment is provided principally on
accelerated methods for both financial and tax reporting purposes.
Estimated useful lives used in the computation of depreciation are as
follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings and improvements 5-30
Machinery and equipment 7
Transportation equipment 5-7
Furniture and fixtures 5-10
</TABLE>
6. Cash and cash equivalents
For purposes of the financial statements, the Company considers all
highly liquid investments purchased with a maturity of 90 days or less to
be cash equivalents. For those cash equivalents, the carrying amount is a
reasonable estimate of fair value.
7. Deferred income taxes
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred income tax assets and liabilities
are provided based on the difference between the financial statement and
tax bases of assets and liabilities as measured by the currently enacted
tax rates in effect for the years in which these differences are expected
to reverse. Deferred tax expense or benefit is the result of changes in
deferred tax assets and liabilities.
8. Earnings per share
Basic earnings per common share are based upon the weighted average
number of common shares outstanding during each period presented.
During 1997, the Company adopted Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards No. 128 (SFAS 128),
"Earnings Per Share." SFAS 128 eliminates the presentation of primary
earnings per share (EPS) and requires the presentation of basic EPS,
which includes no common stock equivalents and thus no dilution. The
statement also eliminates the modified treasury stock method of computing
potential common shares.
9. Fair value of financial instruments
The carrying value of the Company's cash and cash equivalents,
receivables, accounts payable and accrued liabilities approximate their
fair values due to the short-term maturity of the instruments.
F-23
<PAGE> 149
W.W. Clyde & Co.
NOTES TO THE FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
10. Recently issued accounting statements not yet adopted
Comprehensive income
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 (SFAS 130), "Reporting Comprehensive Income." SFAS 130 requires
entities presenting a complete set of financial statements to include
details of comprehensive income that arise in the reporting period.
Comprehensive income consists of net income or loss for the current
period and other comprehensive income, which consists of revenue,
expenses, gains, and losses that bypass the income statement and are
reported directly in a separate component of equity. Other comprehensive
income includes, for example, foreign currency items, minimum pension
liability adjustments, and unrealized gains and losses on certain
investment securities. SFAS 130 requires that components of comprehensive
income be reported in a financial statement that is displayed with the
same prominence as other financial statements. This statement is
effective for fiscal years beginning after December 15, 1997, and
requires restatement of prior period financial statements presented for
comparative purposes.
Disclosure of segments
Also in June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 (SFAS 131), "Disclosures about Segments of an
Enterprise and Related Information." This statement requires an entity to
report financial and descriptive information about their reportable
operating segments. An operating segment is a component of an entity for
which financial information is developed and evaluated by the entity's
chief operating decision maker to assess performance and to make
decisions about resource allocation. Entities are required to report
segment profit or loss, certain specific revenue and expense items and
segment assets based on financial information used internally for
evaluating performance and allocating resources. This statement is
effective for fiscal years beginning after December 15, 1997, and
requires restatement of prior period financial statements presented for
comparative purposes.
The Company does not believe that the adoption of SFAS 130 and SFAS 131
will have a material effect on the Company's financial statements.
11. Reclassifications - not material
Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform to the 1997 presentation.
F-24
<PAGE> 150
W.W. Clyde & Co.
NOTES TO THE FINANCIAL STATEMENTS
NOTE B - CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash and interest bearing deposits in banks $ 2,882,585 $1,992,328
Reverse repurchase agreements 922,448 1,624,341
----------- -----------
Total cash and cash equivalents $ 3,805,033 $3,616,669
=========== ==========
</TABLE>
NOTE C - CONTRACTS IN PROGRESS
Costs incurred to date, estimated earnings, and the related progress
billings to date on contracts in progress are as follows:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Costs incurred to date $ 14,498,528 $ 17,561,289
Estimated earnings 2,549,719 3,597,419
------------- -------------
Revenue recognized 17,048,247 21,158,708
Progress billings to date 16,382,864 20,351,084
------------- -------------
Net underbillings $ 665,383 $ 807,624
============= =============
</TABLE>
The following are included in the accompanying balance sheets under the
captions below:
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Costs and estimated earnings in excess
of billings on contracts in progress $ 802,623 $ 904,105
Billings in excess of costs and estimated
earnings on contracts in progress (137,240) (96,481)
--------- ----------
$ 665,383 $ 807,624
========= ==========
</TABLE>
F-25
<PAGE> 151
W.W. Clyde & Co.
NOTES TO THE FINANCIAL STATEMENTS
NOTE D - INVESTMENT IN AFFILIATE
The Company owns 34.77% of the outstanding common stock of Geneva Rock
Products, Inc. The investment is accounted for under the equity method.
The complete financial statements of Geneva Rock Products, Inc. are
included in the S-4 registration statement (Note L).
The investment in Geneva Rock Products, Inc., consists of the following:
<TABLE>
<CAPTION>
1997 1996
------------- --------------
<S> <C> <C>
Investment, at cost $ 94,410 $ 94,410
------------- --------------
Equity in unrealized increase in investment
Balance at beginning of period 19,787,344 17,082,274
Unrealized net income before deferred
income taxes of $981,576 in 1997 and
$1,578,791 in 1996 2,859,000 2,932,500
Less dividends received during the period 227,430 227,430
------------- --------------
Total equity in unrealized increase
in investment 22,418,914 19,787,344
------------- --------------
Total investment in Geneva Rock
Products, Inc. $ 22,513,324 $ 19,881,754
============= ==============
</TABLE>
F-26
<PAGE> 152
W.W. Clyde & Co.
NOTES TO THE FINANCIAL STATEMENTS
NOTE D - INVESTMENT IN AFFILIATE - CONTINUED
Summary balance sheets of Geneva Rock Products, Inc. consist of the
following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Assets
Current assets $39,553,000 $35,240,000
Property and equipment, net of
depreciation 39,882,000 36,528,000
Other assets 2,812,000 3,080,000
----------- -----------
Total assets $82,247,000 $74,848,000
=========== ===========
Liabilities and stockholders' equity
Current liabilities $ 8,869,000 $ 8,036,000
Long-term liabilities 8,632,000 9,633,000
----------- -----------
Total liabilities 17,501,000 17,669,000
Stockholders' equity 64,746,000 57,179,000
----------- -----------
Total liabilities and stock-
holders' equity $82,247,000 $74,848,000
=========== ===========
</TABLE>
Summary statements of earnings of Geneva Rock Products, Inc., are as
follows:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ --------------
<S> <C> <C> <C>
Net sales $131,107,000 $116,349,000 $ 100,422,000
Cost of sales 109,172,000 98,907,000 80,811,000
------------ ------------ --------------
Gross profit 21,935,000 17,442,000 19,611,000
Operating expenses 8,754,000 4,198,000 3,073,000
------------ ------------ --------------
Earnings before income taxes 13,181,000 13,244,000 16,538,000
Income taxes 4,959,000 4,809,000 5,560,000
------------ ------------ --------------
Net earnings 8,222,000 8,435,000 10,978,000
Ownership percentage 34.77% 34.77% 34.77%
------------ ------------ --------------
Equity in net earnings of affiliate $ 2,859,000 $ 2,932,500 $ 3,817,100
============ ============ ==============
</TABLE>
F-27
<PAGE> 153
W.W. Clyde & Co.
NOTES TO THE FINANCIAL STATEMENTS
NOTE E - DIVIDENDS
Dividends of $8, $6 and $10 per share for the years ending December 31,
1997, 1996 and 1995, respectively, were declared on 94,544 shares
outstanding.
NOTE F - INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Current
Federal $ 357,509 $ 318,905 $ 982,194
State 65,097 49,366 152,042
----------- ----------- -----------
422,606 368,271 1,134,236
----------- ----------- -----------
Deferred
Federal 931,520 988,971 1,123,334
State 144,199 153,091 173,891
----------- ----------- -----------
1,075,719 1,142,062 1,297,225
----------- ----------- -----------
$ 1,498,325 $ 1,510,333 $ 2,431,461
=========== =========== ===========
</TABLE>
The income tax provision reconciled to the tax computed at the federal
statutory rate of 34% is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Income taxes at statutory rate $ 1,419,805 $ 1,427,045 $ 2,266,985
Differences due to dividends received
deduction (65,261) (61,861) (61,861)
Nondeductible expense 2,345 -- --
State income taxes, net of federal
tax benefit 137,805 138,780 220,031
Other 3,631 6,369 6,306
----------- ----------- -----------
$ 1,498,325 $ 1,510,333 $ 2,431,461
=========== =========== ===========
</TABLE>
F-28
<PAGE> 154
W.W. Clyde & Co.
NOTES TO THE FINANCIAL STATEMENTS
NOTE F- INCOME TAXES - CONTINUED
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996
------------- ------------
<S> <C> <C>
Current deferred tax assets (liabilities)
Construction contracts $ (16,518) $ 25,487
Accrued vacation 26,347 --
------------- ------------
9,829 25,487
Long-term deferred tax assets (liabilities)
Accrued pension cost $ 63,246 $ 138,059
Equipment temporary differences (1,432,695) (1,332,631)
Investment in Geneva Rock Products,
Inc. (8,405,596) (7,424,020)
------------- ------------
(9,775,045) (8,618,592)
------------- ------------
$ (9,765,216) $ (8,593,105)
============= ============
</TABLE>
NOTE G - ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Accrued pension costs $ -- $111,715
Payroll and related expenses 71,001 40,809
Other 211,756 440
-------- --------
$282,757 $152,964
======== ========
</TABLE>
NOTE H - RELATED PARTY TRANSACTIONS
The following is a summary of related party transactions that occurred
during the years ended December 31, 1997, 1996 and 1995. Related parties
considered herein include Geneva Rock Products, Inc., Utah Service, Inc.
and Beehive Insurance Agency, Inc., which are under common control.
The Company performed construction work for and sold construction
materials to affiliates totaling approximately $635,000, $519,000 and
$1,700,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
The Company was charged $1,292,000, $1,246,000 and $351,000 for the years
ended December 31, 1997, 1996 and 1995, respectively, for construction
work, services, and construction materials provided by affiliates.
F-29
<PAGE> 155
W.W. Clyde & Co.
NOTES TO THE FINANCIAL STATEMENTS
NOTE I - PENSION PLAN
The Company has a noncontributory defined benefit pension plan covering
substantially all of its non-union employees. The benefits are based on
years of service and the employee's compensation during the last five
years of employment. The Company's funding policy is to contribute
annually the maximum amount that can be deducted for federal income tax
purposes. Contributions are intended to provide not only for benefits
attributed to services to date but also for those benefits expected to be
earned in the future. Employees vest 100% after five years.
Actuarial present value of benefit obligations are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Accumulated benefit obligation, including
vested benefits of $1,374,813 ($1,685,462 in 1996) $ 1,379,828 $ 1,715,688
=========== ===========
Projected benefit obligation for service
rendered to date $(1,759,102) $(2,461,007)
Plan assets at fair value, primarily listed stocks 1,472,029 1,345,556
----------- -----------
Plan assets in deficiency of projected
benefit obligation (287,073) (1,115,451)
Unrecognized net loss from past ex-
perience different from that assumed
and effects of changes in assumptions 340,754 1,264,184
Unrecognized net obligation at January 1,
1989, being recognized over 15 years (223,241) (260,448)
----------- -----------
Accrued pension cost $ (169,560) $ (111,715)
=========== ===========
</TABLE>
Net pension cost includes the following components:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1997 1996 1995
-------- -------- ----------
<S> <C> <C> <C>
Service cost--benefits earned during
the period $ 69,032 $ 92,218 $ 80,383
Interest cost on projected benefit
obligation 171,000 154,140 128,193
Actual return on plan assets (86,230) (83,527) (214,787)
Net amortization and deferral (12,549) 1,824 25,133
-------- -------- ----------
Net periodic pension cost $141,253 $164,655 $ 18,922
======== ======== ==========
</TABLE>
F-30
<PAGE> 156
W.W. Clyde & Co.
NOTES TO THE FINANCIAL STATEMENTS
NOTE I- PENSION PLAN - CONTINUED
In accordance with FASB Statement No. 87, the Company has recorded an
additional minimum pension liability for underfunded plans of $258,417 at
December 31, 1996, representing the excess of unfunded accumulated
benefit obligations over previously recorded pension cost liabilities. A
corresponding amount is recognized as an intangible asset except to the
extent that these additional liabilities exceed related unrecognized
prior service cost and net transition obligation, in which case the
increase in liabilities is charged directly to stockholders' equity. As
of December 31, 1996, $162,027 of the excess minimum pension liability
resulted in a charge to equity, net of income taxes, of $96,392. The
principal cause of the reduction in the underfunded pension liability
during 1997 is due to the actual return on plan assets in excess of the
assumed rate of return in 1997. (No charge to equity was required for
1997).
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of
the projected benefit obligation ranged from 7% to 7.5% and 4% to 3% for
each of the years ended December 31, 1997, 1996 and 1995. The expected
long-term rate of return on assets ranged from 7.5% to 6.5% for each of
the years ending December 31, 1997, 1996 and 1995.
NOTE J - CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
The Company maintains cash balances and interest-bearing deposits at
several financial institutions located in the United States. Accounts at
each institution are secured by the Federal Deposit Insurance Corporation
up to $100,000. Uninsured balances aggregate to approximately $7,662,000
and $8,900,000 as of December 31, 1997 and 1996, respectively.
The Company has billed and unbilled receivables of approximately
$6,217,000 and $3,911,000 as of December 31, 1997 and 1996, respectively,
from project owners in the private and governmental sector which relate
to work performed primarily in Wyoming and Utah. Total retained and
unbilled contract receivables are expected to be collected within one
year.
At December 31, 1997 and 1996, the Company had contracts receivable due
from its largest customer approximating $1,369,000 and $2,109,940,
respectively. Remaining contracts receivable at December 31, 1997 and
1996 were due from a variety of other customers under normal credit
terms.
Construction revenue for the year ended December 31, 1997 from the
Company's three largest customers (the only customers in excess of 10%)
represented approximately 25%, 19% and 12%, respectively. Construction
revenue for the year ended December 31, 1996 and 1995, from the Company's
largest customer (the only customer in excess of 10%) was 38% and 33%,
respectively.
F-31
<PAGE> 157
W.W. Clyde & Co.
NOTES TO THE FINANCIAL STATEMENTS
NOTE K - BACKLOG
The following schedule shows a reconciliation of backlog representing
signed contracts, excluding fees from management contracts, in existence
at December 31, 1997:
<TABLE>
<S> <C>
Balance, January 1, 1997 $ 827,998
Contract adjustments 5,873,968
New contracts, during the period 14,859,349
------------
21,561,315
Less contract revenue earned, during the period 16,906,071
------------
Balance, December 31, 1997 $ 4,655,244
============
</TABLE>
In addition, between December 31, 1997 and March 5, 1998, the Company
entered into additional construction contracts with revenues of $537,000.
NOTE L - SUBSEQUENT EVENTS
On November 13, 1997, Clyde Companies, Inc., which owns 33.78% of the
Company, adopted an "Amended and Restated Agreement and Plan of Merger"
which provides for the merger of Clyde Companies, Inc. with the Company
and certain other companies related through common stockholders.
The merger upon majority approval of the stockholders of each respective
company, will be effected by the exchange of shares of Clyde Companies,
Inc. common stock with the respective shares of common stock held by the
Company's stockholders. The merger transaction will be accounted for as a
purchase. The exchange rates used in determining the number of shares to
be exchanged are based upon independent valuations performed on each
company to be acquired by Clyde Companies, Inc.
In connection with the transaction, Clyde Companies, Inc. filed a
registration statement (Form S-4) with the Securities and Exchange
Commission for the purpose of registering the shares of Clyde Companies,
Inc. common stock to be issued in the merger.
F-32
<PAGE> 158
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Geneva Rock Products, Inc.
We have audited the accompanying consolidated balance sheet of Geneva Rock
Products, Inc. and Subsidiary as of December 31, 1997, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Geneva Rock
Products, Inc. and Subsidiary as of December 31, 1997 and the consolidated
results of their operations and their consolidated cash flows for the year then
ended, in conformity with generally accepted accounting principles.
GRANT THORNTON, LLP
Provo, Utah
February 20, 1998
F-33
<PAGE> 159
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
of Geneva Rock Products, Inc.
We have audited the accompanying consolidated balance sheet of Geneva Rock
Products, Inc. and Subsidiary as of December 31, 1996, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the years in the two year period ended December 31, 1996. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Geneva Rock
Products, Inc. and Subsidiary as of December 31, 1996 and the consolidated
results of their operations and their consolidated cash flows for each of the
years in the two-year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
SQUIRE & COMPANY, PC
Orem, Utah
February 15, 1997
F-34
<PAGE> 160
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1997 and 1996 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,204,539 $ 7,752,630
Accounts receivable 23,540,072 18,545,642
Inventories 7,024,337 6,844,977
Prepaid expenses 133,383 244,239
Federal and state income taxes receivable 1,485,395 1,830,825
Deferred tax asset 164,849 21,269
------------ ------------
Total current assets 39,552,575 35,239,582
PROPERTY, PLANT AND EQUIPMENT:
Land 11,727,896 11,286,396
Buildings 5,724,854 2,623,128
Office equipment 1,156,746 797,253
Machinery and equipment 26,080,727 23,031,549
Transportation equipment 22,119,671 20,382,107
Batch plant 10,439,169 9,095,766
Wells 120,764 120,764
------------ ------------
77,369,827 67,336,963
Accumulated depreciation and depletion (37,488,080) (30,809,018)
------------ ------------
Net property, plant and equipment 39,881,747 36,527,945
OTHER ASSETS:
Non-compete agreements, net of
accumulated amortization 69,000 153,154
Organizational costs, net of
accumulated amortization 91,000 117,000
Goodwill, net of accumulated amortization 2,097,273 2,259,730
Long-term investment 267,228 270,717
Other 288,222 279,538
------------ ------------
Total other assets 2,812,723 3,080,139
------------ ------------
Total assets $ 82,247,045 $ 74,847,666
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-35
<PAGE> 161
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - CONTINUED
<TABLE>
<CAPTION>
December 31, 1997 and 1996 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lines of credit $ 1,000,000 $ --
Current portion of notes and
capital leases payable 1,498,089 1,689,494
Accounts payable 4,279,015 4,450,178
Current portion pension payable 504,773 224,554
Accrued liabilities 1,586,667 1,671,899
----------- -----------
Total current liabilities 8,868,544 8,036,125
LONG-TERM LIABILITIES:
Notes and capital leases payable,
net of current portion 5,486,329 7,496,531
Long-term pension payable 233,936 168,330
Deferred tax liability 2,911,859 1,967,867
----------- -----------
Total long-term liabilities 8,632,124 9,632,728
----------- -----------
Total Liabilities 17,500,668 17,668,853
COMMITMENTS (Note 3 and 5) -- --
STOCKHOLDERS' EQUITY:
Common stock, $10 par value, 21,802 shares
issued and outstanding, 50,000
shares authorized 218,020 218,020
Paid-in-capital in excess of par value 28,456 28,456
Retained earnings 64,499,901 56,932,337
----------- -----------
Total stockholders' equity 64,746,377 57,178,813
----------- -----------
Total liabilities and stockholders' equity $82,247,045 $74,847,666
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-36
<PAGE> 162
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES AND CONTRACT INCOME $ 131,106,945 $ 116,348,692 $ 100,422,149
COST OF SALES AND CONTRACTS 109,113,996 98,907,330 80,811,164
------------- ------------- -------------
GROSS PROFIT ON SALES AND CONTRACTS 21,992,949 17,441,362 19,610,985
GENERAL AND ADMINISTRATIVE EXPENSES 9,545,901 4,979,299 3,172,944
------------- ------------- -------------
OPERATING PROFIT 12,447,048 12,462,063 16,438,041
OTHER INCOME (EXPENSE):
Income from long-term investment 31,383 28,600 52,454
Interest income 992,638 1,124,275 923,786
Interest expense (653,823) (357,317) (58,468)
Gain (loss) on disposal of property,
plant and equipment 363,657 (14,288) --
------------- ------------- -------------
Total other income 733,855 781,270 917,772
------------- ------------- -------------
EARNINGS BEFORE INCOME TAXES 13,180,903 13,243,333 17,355,813
INCOME TAXES:
Current 4,158,867 4,577,464 6,190,700
Deferred 800,412 231,873 187,009
------------- ------------- -------------
Total income taxes 4,959,279 4,809,337 6,377,709
------------- ------------- -------------
NET EARNINGS $ 8,221,624 $ 8,433,996 $ 10,978,104
============= ============= =============
EARNINGS PER COMMON SHARE - BASIC $ 377.10 $ 386.85 $ 503.54
============= ============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 21,802 21,802 21,802
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-37
<PAGE> 163
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
Paid-in-capital
Common in excess of Retained
stock par value earnings
------------ ------------ ------------
<S> <C> <C> <C>
Balance at January 1, 1995 $ 218,020 $ 28,456 $ 38,828,357
Net Earnings for 1995 -- -- 10,978,104
Cash Dividends Paid on Common Stock -- -- (654,060)
------------ ------------ ------------
Balance at December 31, 1995 218,020 28,456 49,152,401
Net Earnings for 1996 -- -- 8,433,996
Cash Dividends Paid on Common Stock -- -- (654,060)
------------ ------------ ------------
Balance at December 31, 1996 218,020 28,456 56,932,337
Net Earnings for 1997 -- -- 8,221,624
Cash Dividends Paid on Common Stock -- -- (654,060)
------------ ------------ ------------
Balance at December 31, 1997 $ 218,020 $ 28,456 $ 64,499,901
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-38
<PAGE> 164
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 8,221,624 $ 8,433,996 $ 10,978,104
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion, and amortization 7,864,411 7,422,456 6,556,760
Gain on investments (29,109) (26,375) (52,454)
Deferred income taxes 800,412 231,873 187,009
Absorbed loss on consolidation -- 367,807 --
Deferred pension payable 65,606 168,330 --
(Gain) loss on disposal of property,
plant and equipment (363,657) 14,288 --
Changes in assets and liabilities:
Accounts receivable (4,994,430) (3,107,710) (5,005,945)
Prepaid expenses 110,856 244,405 (434,261)
Inventories (179,360) (1,083,223) 267,015
Income taxes receivable 345,430 (963,411) (732,672)
Other assets (8,684) (80,224) (43,298)
Organization costs -- (130,000) --
Accounts payable (171,162) 803,234 454,622
Accrued liabilities and pension payable 194,987 478,744 505,659
Deferred revenue -- -- (7,121)
------------ ------------ ------------
Total adjustments 3,635,300 4,340,194 1,695,314
------------ ------------ ------------
Net cash provided by operating activities 11,856,924 12,774,190 12,673,418
CASH FLOW FROM INVESTING ACTIVITIES:
Cash payments for the purchase of property,
plant and equipment (11,022,946) (7,226,890) (11,908,065)
Cash payments for the purchase of
long-term investment -- (1,000) --
Cash received from long-term investment 32,598 58,676 35,723
Cash received from sale of assets 441,000 112,545 --
Cash payments for subsidiary acquisitions -- (8,851,072) --
------------ ------------ ------------
Net cash used in investing activities (10,549,348) (15,907,741) (11,872,342)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing on lines of credit 1,000,000 -- --
Repayment of long-term obligations (2,201,607) (383,912) (196,002)
Payment of dividends (654,060) (654,060) (654,060)
------------ ------------ ------------
Net cash used in financing activities (1,855,667) (1,037,972) (850,062)
------------ ------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (548,091) (4,171,523) (48,986)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 7,752,630 11,924,153 11,973,139
------------ ------------ ------------
CASH AND EQUIVALENTS, END OF PERIOD $ 7,204,539 $ 7,752,630 $ 11,924,153
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-39
<PAGE> 165
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of certain significant accounting
policies followed in the preparation of these financial
statements. The financial statements and notes are
representations of the Company's management, which is responsible
for their integrity and objectivity. The policies conform to
generally accepted accounting principles and have been
consistently applied.
Nature of Operations - Geneva Rock Products, Inc. (the Company)
was incorporated on August 8, 1954 as a Utah corporation. The
Company is engaged in the manufacturing of construction materials
consisting primarily of concrete, asphalt, sand, and gravel
products. Currently, the Company has manufacturing facilities in
Utah and Nevada. The Company also has a wholly-owned subsidiary,
J & J Building Supply, Inc. (J & J).
In 1996, Geneva Rock formed J & J, which acquired the assets and
selected liabilities of J & J Mill & Lumber Supply Co. of St.
George, Utah. Also during 1996, J & J acquired the assets and
selected liabilities of Quality Concrete, Inc., a ready-mix
concrete producer located in Cedar City, Utah. J & J is
headquartered in St. George, Utah and also has operations in
Cedar City, Utah and Mesquite, Nevada. J & J's primary
construction products consist of ready mix concrete, sand,
gravel, and concrete block products, which it produces through
its concrete block plant in St. George, and other building
materials, which it sells through its stores in St. George and
Cedar City.
Principles of Consolidation - The consolidated statements include
the accounts of the Company and its wholly-owned subsidiary. All
material intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates in 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 revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Accounts Receivable - Accounts receivable are shown net of an
allowance for uncollectible accounts of $100,000 for 1997 and
$154,536 for 1996.
F-40
<PAGE> 166
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories - Inventories consist of sand, gravel, cement,
additives, lumber and hardware, truck repair and maintenance
parts and office supplies. The sand and gravel as well as the
block and masonry components of inventory are stated at the lower
of cost or of market value using the full absorption method. The
truck repair parts are stated at lower of cost (first-in,
first-out), or market value. The purchased inventory is valued at
the lower of cost or market using the weighted average method.
The components of inventories are as follows:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Finished Goods $ 4,415,168 $ 4,880,023
Raw materials 1,516,148 1,243,879
Supplies 1,093,021 721,075
------------- -------------
Total $ 7,024,337 $ 6,844,977
============= =============
</TABLE>
Depreciation, Depletion and Amortization - Provisions for
depreciation of property, plant and equipment are computed on the
declining-balance and straight-line methods for financial
reporting purposes. Depreciation is based upon estimated useful
lives of individual units or classes of property as follows:
<TABLE>
<S> <C>
Buildings 10 to 33 Years
Office equipment 5 to 10 Years
Machinery and equipment 5 to 10 Years
Transportation equipment 5 to 8 Years
Batch plant 8 to 10 Years
Wells 20 Years
</TABLE>
Maintenance, repairs, and renewals which neither materially add
to the value of the property nor appreciably prolong its life are
charged to expense as incurred. Gains and losses from
dispositions of fixed assets are reflected in income.
Depletion of the Company's sand and gravel pits is computed by
the cost method, (i.e. - the pit's basis divided by total
recoverable tons, times tons removed during any given year.)
Non-compete agreements purchased by the Company are being
amortized using the straight-line method over the life of the
agreements. The amortization expense was $87,821, $267,286, and
$257,952 for 1997, 1996 and 1995, respectively.
F-41
<PAGE> 167
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation, depletion and amortization expense has been
allocated on the income statement to the following areas:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cost of sales and contracts $ 7,477,512 $ 6,951,817 $ 6,479,280
General and administrative 386,899 470,639 77,480
----------- ----------- -----------
Total $ 7,864,411 $ 7,422,456 $ 6,556,760
=========== =========== ===========
</TABLE>
Income Recognition - Income is recognized as products are sold or
contracts are completed. For those contracts not complete at year
end, income is recorded on the percentage-of- completion method.
Income being recognized is that percentage of estimated total
income that incurred costs to date bear to estimated total costs
after giving effect to estimates of costs to complete based upon
the most recent information.
As these long-term contracts extend over one or more years,
revisions in cost and profit estimates during the course of the
work are reflected in the accounting period in which the facts
which require the revision become known.
At the time a loss on a contract becomes known, the entire amount
of the estimated ultimate loss on both short and long-term
contracts is recognized.
Costs and estimated profits in excess of amounts billed were
$37,461 and $61,944, at December 31, 1997 and 1996, respectively.
These additional amounts billed are included in accounts
receivable. Accounts receivable also included retention due from
long-term contracts of $733,547 and $173,607 at December 31, 1997
and 1996, respectively. All retention is expected to be collected
within one year.
Income taxes - The Company provides for income taxes based on
income reported for financial statement purposes. Income tax
expense differs from amounts currently payable due to timing
differences in the recognition of certain income and expense
items for tax and financial statement purposes, primarily
depreciation of fixed assets. Tax accumulated depreciation
exceeded book accumulated depreciation by $1,804,176 and
$4,720,612 at December 31, 1997 and 1996, respectively.
Depletion of $428,742 in 1997, $510,333 in 1996, and $484,925 in
1995, are allowed as deductions for tax purposes but are not
recorded on the books.
Earnings per common share - During 1997, the Company adopted
Financial Accounting Standard No. 128 (SFAS 128), "Earnings per
share". SFAS 128 eliminates the presentation of primary earnings
per share (EPS) and requires the presentation of basic EPS, which
includes no common stock equivalents and, thus, no dilution.
Adoption of this standard had no effect on the Company's EPS.
Earnings per share are computed using the average number of
common shares outstanding of 21,802 shares in 1997, 1996, and
1995.
F-42
<PAGE> 168
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instrument - Calculation of estimates of fair
value of financial instruments is not presented because, in
management's opinion, the carrying value of the Company's financial
instruments approximate their fair values and this calculation would
not result in a material difference between carry amounts and estimated
fair value of financial instruments as presented on the accompanying
consolidated balance sheet.
Recently issued accounting statements not yet adopted - The following
two recently issued accounting statements have not yet been adopted and
in the opinion of the Company will not have a material effect on the
financial statements:
Comprehensive income - In June 1997, the FASB issued Statement of
Financial Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income." SFAS 130 requires entities presenting a
complete set of financial statements to include details of
comprehensive income that arise in the reporting period.
Comprehensive income consists of net income or loss for the current
period and other comprehensive income, which consists of revenue,
expenses, gains, and losses that bypass the income statement and are
reported directly in a separate component of equity. Other
comprehensive income includes, for example, foreign currency items,
minimum pension liability adjustments, and unrealized gains and
losses on certain investment securities. SFAS 130 requires that
components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements. This statement is effective for fiscal years
beginning after December 15, 1997, and requires restatement of prior
period financial statements presented for comparative purposes.
Disclosure of segments - Also in June 1997, the FASB issued
Statement of Financial Accounting Standards No. 131 (SFAS 131),
"Disclosure about Segments of an Enterprise and Related
Information." This statement requires an entity to report financial
and descriptive information about their reportable operating
segments. An operating segment is a component of an entity for which
financial information is developed and evaluated by the entity's
chief operating decision maker to assess performance and to make
decisions about resource allocation. Entities are required to report
segment profit or loss, certain specific revenue and expense items
and segment assets based on financial information used effective for
fiscal years beginning after December 15, 1997 and requires
restatement of prior period financial statements presented for
comparative purpose.
Cash and cash equivalents - For purpose of the financial statements,
cash equivalents include time deposits, money market funds, and
overnight repurchase agreements with original maturities of less than
90 days.
Supplemental cash flow information and non-cash investing and financing
activities - During the years ended December 31, 1997, 1996, and 1995
the Company's cash outlay for federal and state income tax was
$4,015,030, $5,321,611, and $6,240,220, respectively.
F-43
<PAGE> 169
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company disbursed cash for interest during the years ended December
31, 1997, 1996 and 1995 of $603,743, $357,317, and $58,468,
respectively.
On May 17, 1996, Geneva Rock formed J & J and on June 18, 1996 acquired
the assets and selected liabilities of J & J Mill & Lumber Supply Co.
of St. George, Utah.
The detailing of the acquisition is as follows:
<TABLE>
<S> <C>
Working capital $ 1,936,800
Equipment and land 8,711,206
Intangible and other assets 2,219,716
Long-term debt assumed (6,700,000)
Capital leases assumed (456,206)
-----------
Cash used to acquire J & J Mill &
Lumber Supply Co. $ 5,711,516
===========
</TABLE>
The details of the financial condition and results of operations of J &
J Mill and Lumber Supply Co. were never made available to Geneva Rock.
On October 23, 1996, J & J purchased the assets and selected
liabilities of Quality Concrete, Inc. The detail of the acquisition is
as follows:
<TABLE>
<S> <C>
Working capital $ 70,828
Equipment and land 3,192,979
Intangible and other assets 49,600
Long-term debt assumed (81,941)
Capital leases assumed (91,910)
-----------
Cash used to acquire Quality Concrete $ 3,139,556
===========
</TABLE>
NOTE 2. GOODWILL
The excess of the purchase price over the value of the assets purchased
is reported as goodwill. Goodwill is being amortized over fifteen
years. The accumulated amortization was $162,457 and $77,922 at
December 31, 1997 and 1996, respectively.
On an ongoing basis, management reviews the valuation and amortization
of intangible assets to determine possible impairment by comparing the
carrying value to the undiscounted estimated future cash flows of the
related assets. If the sum of the expected future cash flows is less
than the carrying amount of goodwill, an impairment loss is recognized.
Any necessary adjustment would reduce the goodwill and related assets
to their fair value. The resulting loss is reported as a component of
income from continuing operations before income taxes.
F-44
<PAGE> 170
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. OPERATING LEASE COMMITMENTS
The Company has entered into several long-term leases for real property
and has assumed leases of machinery and equipment, and trucks and
vehicles. The Company also leases trucks and other equipment under
non-cancelable operating leases. The following is a schedule by years
of future minimum lease payments:
<TABLE>
<CAPTION>
Machinery &
Equipment and
Trucks & Vehicles Real Property Total Leases
----------------- ------------- ------------
<S> <C> <C> <C>
1998 $ 2,932,100 $ 442,884 $ 3,374,984
1999 2,738,260 354,037 3,092,297
2000 2,567,513 309,600 2,877,113
2001 1,596,983 3,600 1,600,583
2002 359,752 3,600 363,352
Thereafter 120,257 10,800 131,057
----------- ----------- -----------
Total $10,314,865 $ 1,124,521 $11,439,386
=========== =========== ===========
</TABLE>
For the years ended December 31, 1997, 1996 and 1995, rental payments
for these operating leases amounted to $3,610,689, $1,417,484, and
$719,484, respectively.
NOTE 4. OBLIGATIONS UNDER CAPITAL LEASES
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
The Company leases trucks and other
equipment bearing various terms and
collateralized by specific equipment. $ 646,321 $1,122,817
Less current maturities (415,931) 464,295)
---------- -----------
Obligations under capital leases $ 230,390 $ 658,522
========= ===========
</TABLE>
Future minimum lease payments on capital lease obligations are as
follows:
<TABLE>
<CAPTION>
Years Ending
September 30 Amount
------------ ------
<S> <C>
1998 $415,931
1999 172,208
2000 58,182
2001 -
2002 -
--------
$646,321
</TABLE>
Machinery and construction equipment includes equipment that is held
under capital leases. At December 31, 1997 and 1996, the total
capitalized amount was $1,122,817 and the accumulated amortization on
this capitalized equipment was $233,133 and $75,954, respectively.
F-45
<PAGE> 171
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. COMMITTED COSTS
The Company has at December 31, 1997 committed to purchase machinery
and equipment in the amount of $5,282,000 that will be delivered early
in 1998.
NOTE 6 LINES OF CREDIT
The Company has lines of credit for $3,500,000 from a bank. The balance
drawn on these credit lines is $1,000,000 at December 31, 1997. The
agreement calls for monthly interest payments, computed at 8.25
percent, and the principal is due May 30, 1999. These lines are
unsecured, have no restrictive covenants and adjust the interest rate
based on the libor rate (European Money Market Certificate rate) by
adjusting the interest rate by one tenth of a percent for each 150
point change.
NOTE 7. NOTES PAYABLE
The Company's long-term debt obligation consists of the following:
<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
A note payable to a concrete company. Principal payments of
$16,334 plus interest at 2% below the commercial loan variable
rate at Zions Bank (8.5% at December 31,1997) are due monthly.
This note is collateralized by a Utah Deed of
Trust on land and buildings. $ 359,337 $ 555,339
Notes to two employees for a non-competition and
confidentiality agreements, payable at $28,000 a year,
unsecured. 69,000 112,000
A note payable to individuals. Payable in monthly payments
of $1,574, including interest at 10%. The note is
collateralized by a Utah Deed of Trust on land and
buildings. 67,004 81,941
A note payable to a Credit Union. This is a non-interest
bearing note that has been discounted for financial statement
purposes to reflect an interest rate of 8.25%.
Paid in full during 1997. - 220,000
A note payable to the Small Business Administration. This
note bears a 9.996% interest rate. Principal payments of
$5,054 plus interest and administrative fees of $182 are
due monthly. This note is collateralized by a Utah Deed of
Trust. Paid in full during 1997. - 393,928
A note payable for assumed debt in the purchase of J & J,
The note bears interest at 8.25% with annual payments of
$1,297,909, including interest, and matures on June 28, 2003.
The note is collateralized by a Utah Deed of Trust
on land and buildings. 5,842,756 6,700,000
--------- ---------
Total 6,338,097 8,063,208
Less Current Maturities (1,082,158) (1,225,199)
---------- ----------
Long-term Portion $5,255,939 $6,838,009
========== ==========
</TABLE>
F-46
<PAGE> 172
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. NOTES PAYABLE (Continued)
Future maturities of notes payable are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31 Amount
----------- -------
<S> <C>
1998 $ 1,082,158
1999 1,107,313
2000 1,013,944
2001 1,083,866
2002 1,162,175
Thereafter 888,641
-----------
$ 6,338,097
===========
</TABLE>
NOTE 8. PENSION PLAN
The Company has a defined benefit pension plan covering all
non-bargaining employees who meet age and length of service
requirements. The benefits are based on years of service and the
employee's compensation during the last five years of employment. The
Company's funding policy is to contribute annually an amount that can
be deducted for federal income tax purposes. Contributions are intended
to provide not only for benefits attributed to service to date but also
for those expected to be earned in the future. During the 1997, the
Company enrolled approximately 150 employees of J & J into the plan. At
December 31, 1997, these employees were credited with eighteen months
of past service accrued from the J & J purchase date June of 1996.
The following table sets forth the plan's funded status:
Actuarial present value of benefit obligations:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Accumulated benefit obligation, including
vested benefits of $2,054,077 and $1,456,792
for the periods ending December 31,
1997 and 1996, respectively $ 2,433,813 $ 1,493,778
=========== ===========
Projected benefit obligation for service rendered to
date $(3,391,043) $(2,543,566)
Plan assets at fair value 1,854,123 1,558,970
----------- -----------
Unfunded projected benefit obligation or plan assets in
excess of benefit obligation (1,536,920) (984,596)
Unrecognized net (gain) or loss from past experience different
from that assumed and effects of changes in
assumptions 731,587 709,653
Unrecognized net asset (obligation) at January 1, 1989
being recognized over 15 years 233,541 (117,941)
Prior service cost not yet recognized in net periodic
pension cost (166,917) --
----------- -----------
Accrued pension cost $ (738,709) $ (392,884)
=========== ===========
</TABLE>
F-47
<PAGE> 173
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. PENSION PLAN (Continued)
<TABLE>
<CAPTION>
Net pension cost included
the following components: 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 322,107 $ 152,503 $ 209,633
Interest cost on projected benefit obligation 190,271 145,955 100,308
Actual return on plan assets (139,138) (79,991) (115,382)
Net amortization (2,300) (3,018) (16,849)
Net asset gain (loss) during the year deferred
for later recognition 32,521 (23,009) 293
--------- --------- ---------
Net periodic cost $ 403,461 $ 192,440 $ 178,003
========= ========= =========
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of the projected
benefit obligation were 7.0% and 4.0% for 1997, 1996 and 1995. The
expected long-term rate of return on assets was 8.0% for 1997, 1996 and
1995.
NOTE 9. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash deposits and
trade accounts receivable. The Company places all but $194,888 at
December 31, 1997 and $1,616,320 at December 31, 1996 of its cash with
one federally insured institution, which has insurance that guarantees
the account up to $100,000. This other money is in a money market
account of a major brokerage company and is uninsured. Concentrations
of credit risk with respect to trade receivables are limited due to the
large number of customers comprising the Company's customer base.
However, customers are concentrated in the construction industry
primarily in northern and central Utah. Neither cash nor accounts
receivable are collateralized.
NOTE 10. RELATED PARTY TRANSACTIONS
The following is a summary of related party transactions that occurred
during the years ended December 31, 1997, 1996 and 1995. Related
parties considered herein include W.W. Clyde & Co., Utah Service, Inc.,
Beehive Insurance Agency, Inc. and Clyde Companies, Inc., which are
under common control.
The Company performed construction work for and sold construction
materials to affiliates totaling approximately $690,000, $353,000 and
$21,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
The Company was charged $1,599,000, $1,400,000, and $3,610,517 for the
years ended December 31, 1997, 1996 and 1995, respectively, for
construction work, services, and construction materials provided by
affiliates. The Company owed $101,260 to affiliates at December 31,
1997.
F-48
<PAGE> 174
GENEVA ROCK PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. PROVISION FOR INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Current - Federal $3,602,132 $3,928,829 $5,372,806
Current - State 556,735 648,635 817,894
Deferred - Federal 679,795 220,280 162,698
Deferred - State 120,617 11,593 24,311
---------- ---------- ----------
Total $4,959,279 $4,809,337 $6,377,709
========== ========== ==========
</TABLE>
The income tax provision reconciled to the tax computed at the federal
statutory rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Income taxes at statutory rate $ 4,513,316 $ 4,535,167 $ 5,974,534
Environmental tax -- -- 18,305
Difference due to depletion (150,060) (173,513) (164,875)
Nondeductible expense 9,161 60,633 2,263
State income taxes, net of
federal tax benefit 659,045 374,276 539,810
Other (72,183) 12,774 7,672
----------- ----------- -----------
Total $ 4,959,279 $ 4,809,337 $ 6,377,709
=========== =========== ===========
</TABLE>
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax assets (liabilities)
Equipment temporary differences $(2,911,859) $(1,967,867) $(1,346,917)
Allowance for doubtful accounts 164,849 21,269 --
----------- ----------- -----------
$(2,747,010) $(1,946,598) $(1,346,917)
=========== =========== ===========
</TABLE>
NOTE 12. SUBSEQUENT EVENTS
As of November 13, 1997, Clyde Companies, Inc., which owns 33.4% of the
Company, adopted an "Amended and Restated Agreement and Plan of Merger"
which provides for the merger of Clyde Companies, Inc. with the Company
and certain other companies related through common stockholders.
The merger upon majority approval of the stockholders of each
respective company, will be effected by the exchange of shares of Clyde
Companies, Inc. common stock with the respective shares of common stock
held by the Company's stockholders. The merger transaction will be
accounted for as a purchase. The exchange rates used in determining the
number of shares to be exchanged are based upon independent valuations
performed on each company to be acquired by Clyde Companies, Inc.
F-49
<PAGE> 175
NOTE 12. SUBSEQUENT EVENTS (Continued)
In connection with the transaction, Clyde Companies, Inc. filed a
registration statement (Form S-4) with the Securities and Exchange
Commission for the purpose of registering the shares of Clyde
Companies, Inc. to be issued in the merger.
F-50
<PAGE> 176
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Utah Service, Inc.
We have audited the accompanying balance sheet of Utah Service, Inc. as of
December 31, 1997, and the related statements of earnings, stockholders' equity,
and cash flows for the year then ended. 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 audit. We did not audit the
financial statements as of December 31, 1996 and for the years ended December
31, 1996 and 1995, and, accordingly, we do not express an opinion on them.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Utah Service, Inc. as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Provo, Utah
February 27, 1998
F-51
<PAGE> 177
Utah Service, Inc.
BALANCE SHEETS
ASSETS
December 31,
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note B) $ 276,678 $ 479,954
Receivables (Note B) 1,137,963 1,271,202
Prepaid expenses 9,331 8,138
Inventories (Note C) 1,705,351 1,298,100
---------- ----------
Total current assets 3,129,323 3,057,394
PROPERTY AND EQUIPMENT, AT COST (Note D)
Buildings 923,875 1,004,713
Furniture and equipment 405,066 392,330
Transportation equipment 340,230 321,328
Surfacing 112,910 112,910
---------- ----------
1,782,081 1,831,281
Less accumulated depreciation and amortization 778,143 754,446
---------- ----------
1,003,938 1,076,835
Land 207,491 178,419
---------- ----------
1,211,429 1,255,254
DEFERRED TAX ASSETS - LONG TERM (Note H) 7,586 34,575
OTHER ASSETS (Note E and I) 192,387 39,967
---------- ----------
$4,540,725 $4,387,190
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-52
<PAGE> 178
Utah Service, Inc.
BALANCE SHEETS - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term obligation (Note F) $ -- $ 99,264
Accounts payable 380,090 363,086
Accrued liabilities (Note G) 135,179 163,876
----------- -----------
Total current liabilities 515,269 626,226
LONG-TERM OBLIGATION (Note F) -- 98,817
ACCRUED PENSION COSTS (Note I) 113,574 127,660
COMMITMENTS (Notes D and I) -- --
STOCKHOLDERS' EQUITY (Notes I and J)
Common stock - $10 par value
Authorized - 50,000
Issued - 5,413 54,130 54,130
Additional paid-in capital 533,457 533,457
Retained earnings 3,352,001 3,026,943
Excess of additional pension cost over
unrecognized net pension obligation, net
of applicable income taxes (27,706) (80,043)
----------- -----------
Total stockholders' equity 3,911,882 3,534,487
----------- -----------
$ 4,540,725 $ 4,387,190
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-53
<PAGE> 179
Utah Service, Inc.
STATEMENTS OF EARNINGS
December 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Operating revenues (Note B) $ 12,044,736 $ 13,107,947 $ 13,580,133
Cost of goods sold 9,858,415 10,915,126 11,632,581
------------ ------------ ------------
Gross margin 2,186,321 2,192,821 1,947,552
Operating expenses
Salaries, wages and benefits 1,179,999 1,078,599 970,076
Operating supplies and expenses 356,618 377,311 343,607
Depreciation 110,359 128,036 130,014
Other 62,088 43,579 54,100
------------ ------------ ------------
Total operating expenses 1,709,064 1,627,525 1,497,797
------------ ------------ ------------
Other income (expense)
Interest expense (10,652) (28,098) (22,457)
Service charge income 46,269 98,350 92,333
Other, net 147,334 43,788 30,452
------------ ------------ ------------
182,951 114,040 100,328
------------ ------------ ------------
Earnings before income taxes 660,208 679,336 550,083
Income taxes (Note G) 226,890 258,286 199,468
------------ ------------ ------------
NET EARNINGS $ 433,318 $ 421,050 $ 350,615
============ ============ ============
Earnings per common share - basic $ 80.05 $ 77.78 $ 64.77
============ ========== ============
Weighted average shares outstanding 5,413 5,413 5,413
============ ========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-54
<PAGE> 180
UTAH SERVICE, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Year ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Common stock
------------ Additional Excess
Number paid-in pension Retained
of shares Amount capital obligation earnings Total
--------- ------- --------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 5,000 $50,000 $ -- $ -- $ 2,471,798 $ 2,521,798
Issuance of common stock 413 4,130 -- -- -- 4,130
Contributions from stockholders -- -- 556,628 -- -- 556,628
Retirement of treasury stock -- -- (24,220) -- -- (24,220)
Dividends paid ($20 per share) -- -- -- -- (108,260) (108,260)
Net earnings for the year -- -- -- -- 350,615 350,615
----- ------- --------- ------------ ----------- -----------
Balance at December 31, 1995 5,413 54,130 532,408 -- 2,714,153 3,300,691
Contributions from stockholders -- -- 1,049 -- -- 1,049
Dividends paid ($20 per share) -- -- -- -- (108,260) (108,260)
Excess of additional pension
costs over unrecognized net
pension obligation -- -- -- (80,043) -- (80,043)
Net earnings for the year -- -- -- -- 421,050 421,050
----- ------- --------- ------------ ----------- -----------
Balance at December 31, 1996 5,413 54,130 533,457 (80,043) 3,026,943 3,534,487
Dividends paid ($20 per share) -- -- -- -- (108,260) (108,260)
Adjustment of additional pension
costs over unrecognized net
pension obligation -- -- -- 52,337 -- 52,337
Net earnings for the year -- -- -- -- 433,318 433,318
----- ------- --------- ------------ ----------- -----------
Balance at December 31, 1997 5,413 $ 54,130 $ 533,457 $ (27,706) $ 3,352,001 $ 3,911,882
===== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-55
<PAGE> 181
Utah Service, Inc.
STATEMENTS OF CASH FLOWS
December 31,
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C>
Increase in cash and cash equivalents
Cash flows from operating activities
Net earnings $ 433,318 $ 421,050 $ 350,615
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation 110,358 130,873 132,852
Deferred income taxes 8,896 -- --
Changes in assets and liabilities
Receivables 133,239 682,974 (942,934)
Prepaid expenses (1,193) 63,243 (66,734)
Inventories (407,251) (627,752) 49,531
Other assets (126,190) 1,778 --
Accounts payable 17,004 (144,233) 251,173
Accrued pension costs 30,114 -- --
Accrued expenses (28,697) 41,087 (2,105)
--------- --------- ---------
Total adjustments (263,720) 147,970 (578,217)
--------- --------- ---------
Net cash provided by (used in)
operating activities 169,598 569,020 (227,602)
--------- --------- ---------
Cash flows from investing activities
Purchases of property and equipment (66,533) (26,062) (996,387)
--------- --------- ---------
</TABLE>
(Continued)
The accompanying notes are an integral part of these statements.
F-56
<PAGE> 182
Utah Service, Inc.
STATEMENTS OF CASH FLOWS - CONTINUED
December 31,
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from financing activities
Proceeds from issuance of long-term obligations -- -- 369,257
Principal payments on long-term obligations (198,081) (171,176) --
Contributions from stockholders -- 1,049 574,757
Dividends paid (108,260) (108,260) (108,260)
--------- --------- ---------
Net cash (used in) provided
by financing activities (306,341) (278,387) 835,754
--------- --------- ---------
Net increase (decrease)
in cash and cash
equivalents (203,276) 264,571 (388,235)
Cash and cash equivalents at beginning
of year 479,954 215,383 603,618
--------- --------- ---------
Cash and cash equivalents at end of year $ 276,678 $ 479,954 $ 215,383
========= ========= =========
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 10,652 $ 28,098 $ 22,457
Income taxes 239,566 258,286 199,468
</TABLE>
Noncash investing and financing activities
At December 31, 1997 and December 31, 1996, the Company had an excess of
additional pension cost over unrecognized net pension obligations of
$27,706 and $80,043, respectively. As a result, deferred tax assets were
decreased by $18,093 and $20,375, respectively.
The accompanying notes are an integral part of these statements.
F-57
<PAGE> 183
Utah Service, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statement follows. Insofar as
the notes refer to the years ended December 31, 1996 and 1995, they are not
audited. In the opinion of management, the unaudited financial statements
for the years ended December 31, 1996 and 1995 include all adjustments,
consisting of normal recurring accruals, necessary to present fairly the
Company's financial position, results of operations and cash flows.
1. Organization
Utah Service, Inc. (the Company), was incorporated under the laws of the
State of Utah. The Company is located in Springville, Utah and is a
retailer of hardware, home improvement and petroleum products.
2. Cash and cash equivalents
For purposes of the financial statements, the Company considers all
short-term debt securities with an original maturity of three months or
less when purchased to be cash equivalents.
3. Inventories
Inventories are valued at the lower of cost or market, with cost being
determined using the first-in, first-out method.
4. Property and equipment
Property and equipment is stated at cost. Expenditures for maintenance and
repairs are charged to operations as incurred, whereas major replacements
and improvements are capitalized and subsequently depreciated. Depreciation
is provided on a straight-line basis over the estimated useful lives of the
assets.
5. Income taxes
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred taxes are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. An allowance against deferred tax
assets is recorded when it is more likely than not that such tax benefits
will not be realized.
6. Use of estimates
In preparing the Company's financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
7. Fair value of financial instruments
The carrying value of the Company's cash and cash equivalents, receivables,
long-term obligations and accounts payable approximate their fair values.
F-58
<PAGE> 184
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
8. Earnings per share
Basic earnings per common share are based upon the weighted average number
of common shares outstanding during each period presented. There are no
potential common shares which would cause dilution.
During 1997, the Company adopted the Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards No. 128 (SFAS 128),
"Earnings Per Share." SFAS 128 eliminates the presentation of primary
earnings per share (EPS) and requires the presentation of basic EPS, which
includes no common stock equivalents and thus no dilution. The statement
also eliminates the modified treasury stock method of computing potential
common shares.
9. Recently issued accounting statements not yet adopted
Comprehensive income
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 (SFAS 130), "Reporting Comprehensive Income." SFAS 130 requires
entities presenting a complete set of financial statements to include
details of comprehensive income that arise in the reporting period.
Comprehensive income consists of net income or loss for the current period
and other comprehensive income, which consists of revenue, expenses, gains,
and losses that bypass the income statement and are reported directly in a
separate component of equity. Other comprehensive income includes, for
example, foreign currency items, minimum pension liability adjustments, and
unrealized gains and losses on certain investment securities. SFAS 130
requires that components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. This statement is effective for fiscal years beginning after
December 15, 1997, and requires restatement of prior period financial
statements presented for comparative purposes.
Disclosure of segments
Also in June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise
and Related Information." This statement requires an entity to report
financial and descriptive information about their reportable operating
segments. An operating segment is a component of an entity for which
financial information is developed and evaluated by the entity's chief
operating decision maker to assess performance and to make decisions about
resource allocation. Entities are required to report segment profit or
loss, certain specific revenue and expense items and segment assets based
on financial information used internally for evaluating performance and
allocating resources. This statement is effective for fiscal years
beginning after December 15, 1997 and requires restatement of prior period
financial statements presented for comparative purposes.
The Company does not believe that the adoption of SFAS 130 and SFAS 131
will have a material effect on the Company's financial statements.
10. Certain reclassifications
Certain nonmaterial reclassifications have been made to the 1996 financial
statements to conform to the 1997 presentation.
F-59
<PAGE> 185
NOTE B - CREDIT CONCENTRATION, MAJOR CUSTOMERS, AND RELATED PARTIES
1. Credit concentration
The Company maintains cash balances at several financial institutions
located in the United States. Accounts at each institution are secured by
the Federal Deposit Insurance Corporation up to $100,000. Uninsured
balances aggregate to approximately $308,517 and $329,000 as of December
31, 1997 and 1996, respectively.
Financial instruments which potentially subject the Company to credit risk
concentration consist primarily of trade accounts receivable. The Company
sells to customers in the home construction and improvement industry
throughout the Springville, Utah area. The Company sells substantially to
recurring customers wherein the customer's ability to pay has previously
been evaluated. The Company generally does not require collateral. The
majority of its trade receivables are unsecured. Allowances are
periodically evaluated by management for potential credit losses, and such
losses have been insignificant. Accordingly, no allowance for doubtful
accounts has been established as of December 31,1997 and 1996,
respectively.
2. Major customer
At December 31,1997 and 1996, the Company had accounts receivable due from
its largest customer approximating $221,000 and $62,600, respectively.
Remaining accounts receivable at December 31,1997 and December 31, 1996
were due from a variety of other customers under normal credit terms.
Revenue for the year ending December 31, 1997 from the Company's largest
customer represented approximately 12% of net revenues (6% for the years
ending December 31, 1996 and 1995, respectively).
3. Related parties
Related parties include Geneva Rock Products, Inc., W.W. Clyde & Co. and
Beehive Insurance Agency, Inc. which are under common control.
Accounts receivable from related parties were $96,584 and $113,335 for
December 31, 1997 and 1996, respectively
The Company sold materials to affiliates totaling approximately $790,100,
$941,500 and $959,100 for the years ended December 31, 1997, 1996 and 1995,
respectively.
NOTE C - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Lumber $ 601,724 $ 182,764
Hardware and housewares 741,080 756,306
Automotive 306,116 304,575
Other 56,431 54,455
---------- ----------
$1,705,351 $1,298,100
========== ==========
</TABLE>
F-60
<PAGE> 186
NOTE D - PROPERTY HELD FOR LEASE
The Company leased two buildings for nominal rent through October 1997.
Lease revenues from the buildings were $20,500, $17,400 and $14,851 for the
years ended December 31, 1997, 1996 and 1995, respectively. Both leases
were terminated in October 1997 when the Company exchanged the two
buildings for land.
NOTE E - OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Investment in ACE Hardware $ 79,500 $ 5,000
Prepared pension asset 61,197 34,967
Other 51,690 --
-------- --------
Total 192,387 39,967
</TABLE>
NOTE F - LONG-TERM OBLIGATION
The Company's long-term obligation consists of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
8.5% non-revolving note payable to a
bank, due in 2000, payable in monthly
installments of $8,272 plus interest
The note is unsecured $ -- $198,081
Less current maturities -- 99,264
-------- --------
$ -- $ 98,817
======== ========
</TABLE>
NOTE G - ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Payroll, payroll taxes and benefits $ 89,118 $ 72,318
Sales tax payable 33,238 49,403
Income tax payable 10,609 40,683
Other 2,214 1,472
-------- --------
$135,179 $163,876
======== ========
</TABLE>
F-61
<PAGE> 187
NOTE H- INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current
Federal $ 188,772 $ 226,720 $ 166,058
State 29,222 35,096 25,706
--------- --------- ---------
217,994 261,816 191,764
--------- --------- ---------
Deferred
Federal 7,703 (3,057) 6,671
State 1,193 (473) 1,033
--------- --------- ---------
8,896 (3,530) 7,704
--------- --------- ---------
Total $ 226,890 $ 258,286 $ 199,468
========= ========= =========
</TABLE>
The income tax provision reconciled to the tax computed at the statutory
Federal rate is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Income taxes (benefit) computed at:
Federal statutory rate $ 224,471 $ 230,974 $ 187,028
State income taxes, net of federal benefit 21,787 22,418 18,153
Dividends received deduction (18,921) -- --
All other (447) 4,894 (5,713)
--------- --------- ---------
$ 226,890 $ 258,286 $ 199,468
========= ========= =========
</TABLE>
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Long-term deferred tax assets (liabilities)
Accrued pension costs $ 16,482 $ 34,575
Stock dividends (8,896) --
-------- --------
$ 7,586 $ 34,575
======== ========
</TABLE>
F-62
<PAGE> 188
NOTE I- PENSION PLAN
The Company has a noncontributory defined benefit pension plan covering
substantially all of its non-union employees. The benefits are based on
years of service and the employee's compensation during the last five years
of employment. The Company's funding policy is to contribute annually the
maximum amount that can be deducted for federal income tax purposes.
Contributions are intended to provide not only for benefits attributed to
services to date but also for those benefits expected to be earned in the
future. Employees vest 100% after five years.
Actuarial present value of benefit obligations are as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Accumulated benefit obligation, including
vested benefits of $493,902 as of
December 31, 1997 and $488,773 and
$412,965 as of December 31, 1996 $ 525,805 $ 493,902
========= =========
Projected benefit obligation for service
rendered to date (525,805) (493,902)
Plan assets at fair value, primarily listed
stocks 473,428 401,209
--------- ---------
Plan assets in deficiency of projected
benefit obligation (52,377) (92,693)
Unrecognized net loss from past ex-
perience different from that assumed
and effects of changes in assumptions 118,527 133,163
Unrecognized net obligation at January 1,
1989, being recognized over 15 years (4,953) (5,503)
Additional minimum liability (113,574) (127,660)
--------- ---------
Prepaid (accrued) pension cost $ (52,377) $ (92,693)
========= =========
</TABLE>
Net pension cost includes the following components:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost--benefits earned during
the year $ 18,846 $ 21,954 $ 19,281
Interest cost on projected benefit
obligation 34,573 29,211 26,397
Actual return on plan assets (22,280) (18,233) (17,859)
Net amortization and deferral (6,794) (7,205) (5,019)
-------- -------- --------
Net periodic pension cost $ 24,345 $ 25,727 $ 22,800
======== ======== ========
</TABLE>
F-63
<PAGE> 189
NOTE I - PENSION PLAN - CONTINUED
In accordance with FASB Statement No. 87, the Company has recorded an
additional minimum pension liability for underfunded plans of $113,574 and
$127,660 at December 31, 1997 and 1996, respectively, representing the
excess of unfunded accumulated benefit obligations over previously recorded
pension cost liabilities. A corresponding amount is recognized as an
intangible asset except to the extent that these additional liabilities
exceed related unrecognized prior service cost and net transition
obligation, in which case the increase in liabilities is charged directly
to stockholder's equity. The principal cause of the reduction in
underfunded pension liability is actual return on plan assets in excess of
the assumed rate of return in 1997. As of December 31, 1997 and 1996,
$27,706 and $80,043 of the excess minimum pension liability were charged to
stockholder's equity, net of income taxes, of $16,482 and $47,617,
respectively.
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7% and 4%, respectively, in 1997 (7% and
3% in 1996 and 7.5% and 4% in 1995). The expected long-term rate of return
on assets was 7% (7.5% in 1996 and 6.5% in 1995).
NOTE J - SUBSEQUENT EVENTS
As of November 13, 1997, Clyde Companies, Inc., which owns 31.37% of the
Company, adopted an "Amended and Restated Agreement and Plan of Merger"
which provides for the merger of Clyde Companies, Inc. with the Company and
certain other companies related through common stockholders.
The merger upon majority approval of the stockholders of each respective
company, will be effected by the exchange of shares of Clyde Companies,
Inc. common stock with the respective shares of common stock held by the
Company's stockholders. The merger transaction will be accounted for as a
purchase. The exchange rates used in determining the number of shares to be
exchanged are based upon independent valuations performed on each company
to be acquired by Clyde Companies, Inc.
In connection with the transaction, Clyde Companies, Inc. filed a
registration statement (Form S-4) with the Securities and Exchange
Commission for the purpose of registering the shares of Clyde Companies,
Inc. to be issued in the merger.
F-64
<PAGE> 190
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Beehive Insurance Agency, Inc.
We have audited the accompanying balance sheet of Beehive Insurance Agency, Inc.
as of December 31, 1997, and the related statements of earnings and retained
earnings and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Beehive Insurance Agency, Inc.
as of December 31, 1997, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Salt Lake City, Utah
March 13, 1998
F-65
<PAGE> 191
INDEPENDENT ACCOUNTANTS AUDIT REPORT
To the Shareholders and Board of Directors of
Beehive Insurance Agency, Inc.
We have audited the accompanying balance sheet of Beehive Insurance Agency, Inc.
as of December 31, 1996, and related statements of income, retained earnings,
and cash flows for each of the years in the two year period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements, referred to above, present fairly, in
all material respects, the financial position of Beehive Insurance Agency, Inc.
as of December 31, 1996, and the results of its operations and its cash flows
for each of the years in the two year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
DAINES ASSOCIATES, LLC
October 21, 1997
Salt Lake City, Utah
F-66
<PAGE> 192
BEEHIVE INSURANCE AGENCY, INC.
BALANCE SHEETS
December 31,
ASSETS
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note H) $ 424,919 $ 558,642
Accounts receivable (Note H) 160,620 110,075
Commissions receivable 11,285 8,199
Income taxes receivable -- 1,585
--------- ---------
Total current assets 596,824 678,501
PROPERTY AND EQUIPMENT, AT COST (Note B) 130,519 132,170
Less accumulated depreciation (75,156) (90,820)
--------- ---------
55,363 41,350
DEFERRED TAX ASSET (Note D) 45,924 36,072
--------- ---------
$ 698,111 $ 755,923
========= =========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ -- $ 367
Commissions payable 134 83
Insurance premiums payable 157,943 123,764
Accrued pension expense (Note F) 123,121 144,779
Income taxes payable 20,970 571
Dividends payable (Note E) -- 107,435
--------- ---------
Total current liabilities 302,168 376,999
STOCKHOLDERS' EQUITY
Common stock, $1 par value; Authorized
50,000 shares; issued 21,500 shares 21,500 21,500
Paid in capital 3,447 3,447
Retained earnings 371,116 354,097
--------- ---------
396,063 379,044
Less cost of 13 shares held in treasury (120) (120)
--------- ---------
$ 698,111 $ 755,923
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-67
<PAGE> 193
BEEHIVE INSURANCE AGENCY, INC.
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
Year ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenues (Note H)
Insurance commissions $ 538,040 $ 517,497 $ 451,940
Profit sharing commissions 69,208 60,065 85,852
--------- --------- ---------
Total revenue 607,248 577,562 537,792
Operating expenses
Salaries, wages and benefits 149,090 141,282 136,928
Selling, general & administrative 89,068 80,823 105,947
Pension expenses 13,662 12,641 104,487
Depreciation 10,510 8,758 9,834
--------- --------- ---------
Total operating expenses 262,330 243,504 357,196
--------- --------- ---------
Earnings from operations 344,918 334,058 180,596
Other income
Interest income 22,876 24,017 32,806
Other, net 1,427 4,800 5,479
--------- --------- ---------
24,303 28,817 38,283
--------- --------- ---------
Earnings before income taxes 369,221 362,875 218,881
Income taxes (Note D) (137,332) (129,092) (87,874)
--------- --------- ---------
NET EARNINGS 231,889 233,783 131,007
Retained earnings at beginning of year 354,097 335,184 408,303
Cash dividends (Note E) (214,870) (214,870) (204,126)
--------- --------- ---------
Retained earnings at end of year $ 371,116 $ 354,097 $ 335,184
========= ========= =========
Earnings per common share - basic $ 10.79 $ 10.88 $ 6.10
========= ========= =========
Weighted-average shares outstanding 21,487 21,487 21,487
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-68
<PAGE> 194
BEEHIVE INSURANCE AGENCY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net earnings $ 231,889 $ 233,783 $ 131,007
--------- --------- ---------
Adjustments to reconcile net
earnings to net cash provided
by operating activities
Depreciation 10,510 8,758 9,834
Gain on disposition of
property and equipment -- -- (1,279)
Deferred income taxes (6,240) 2,902 (38,974)
Changes in assets and liabilities
Accounts receivable (50,545) 61,211 (13,597)
Commissions receivable (3,086) (2,796) 1,457
Prepaid Utah state franchise tax -- 2,616 13,144
Income taxes receivable 1,585 5,789 (7,374)
Accounts payable (367) (274) (330)
Commissions payable 51 83
Insurance premiums payable 34,179 (189,696) (76,206)
Accrued pension (21,658) 12,641 104,487
Income taxes payable 16,787 571 (29,585)
--------- --------- ---------
Net cash provided by
operating activities 213,105 135,588 92,584
--------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment (24,523) (2,745) (29,485)
Proceeds from disposition of property
and equipment -- -- 1,801
--------- --------- ---------
Net cash used in
investing activities (24,523) (2,745) (27,684)
--------- --------- ---------
</TABLE>
(Continued)
The accompanying notes are an integral part of these statements.
F-69
<PAGE> 195
BEEHIVE INSURANCE AGENCY, INC.
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from financing activities
Distributions to shareholders (322,305) (214,870) (204,126)
--------- --------- ---------
Net cash (used in)
financing activities (322,305) (214,870) (204,126)
--------- --------- ---------
Net (decrease) in
cash and cash equivalents (133,723) (82,027) (139,226)
Cash and cash equivalents at beginning of year 558,642 640,669 779,895
--------- --------- ---------
Cash and cash equivalents at end of year $ 424,919 $ 558,642 $ 640,669
========= ========= =========
Supplemental cash flow information
Cash paid during the year for
Income taxes $ 137,322 $ 129,092 $ 87,874
</TABLE>
The accompanying notes are an integral part of these statements.
F-70
<PAGE> 196
Beehive Insurance Agency, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
1. Financial statement presentation
The accounting and reporting policies of Beehive Insurance Agency, Inc.
conform with generally accepted accounting principles. In preparing the
Company's financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ significantly from
those estimates.
2. Business activity
Beehive Insurance Agency, Inc. is an independent insurance agency selling
all types of insurance to the general public.
3. Cash equivalents
For the purposes of the financial statements, the Company considers cash in
banks with maturities of 90 days or less.
4. Depreciation and amortization
Depreciation of property and equipment is provided using the straight-line
and declining-balance methods over the estimated useful lives of the
assets.
5. Income taxes
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred income tax assets and liabilities are
provided based on the difference between the financial statement and tax
bases of assets and liabilities as measured by the currently enacted tax
rates in effect for the years in which these differences are expected to
reverse. Deferred tax expense or benefit is the result of changes in
deferred tax assets and liabilities.
6. Fair value of financial instruments
The fair value of the Company's cash and cash equivalents and receivables,
approximate their carrying values.
7. Revenue recognition
The Company recognizes revenue at the effective date of new and renewal
polices, and when insurance premiums are due from the client.
F-71
<PAGE> 197
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
8. Recently issued accounting pronouncements not yet adopted
Comprehensive income
In September 1997, the FASB issued Statement of Financial Accounting
Standards No. 130 (SFAS 130), "Reporting Comprehensive Income." SFAS 130
requires entities presenting a complete set of financial statements to
include details of comprehensive income that arise in the reporting period.
Comprehensive income consists of net earnings or loss for the current
period and other comprehensive income, which consists of revenue, expenses,
gains, and losses that bypass the statement of earnings and are reported
directly in a separate component of equity. Other comprehensive income
includes, for example, foreign currency items, minimum pension liability
adjustments, and unrealized gains and losses on certain investment
securities. SFAS 130 requires that components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. This statement is effective for
fiscal years beginning after December 15, 1997 and requires restatement of
prior period financial statements presented for comparative purposes.
Management does not believe that the adoption of SFAS 130 will have a
material effect on the Company's financial statements.
NOTE B - PROPERTY AND EQUIPMENT
Cost of property and equipment and estimated useful lives are as follows:
<TABLE>
<CAPTION>
1997 1996 Years
-------- -------- -----------
<S> <C> <C> <C>
Land $ 12,500 $ 12,500 --
Buildings 56,705 56,705 20-45
Furniture and equipment 41,721 30,366 5-10
Automobiles 19,593 32,599 5-10
-------- --------
$130,519 $132,170
======== ========
</TABLE>
F-72
<PAGE> 198
NOTE C - LEASES
The Company leases office space from a related party under an operating
lease agreement. The lease agreement is on a month-to-month basis with
monthly installments in the amount of $1,614. The total rent expense for
the year ended December 31, 1997, was approximately $3,200. The Company had
no rent expense for the years ended December 31, 1996 and 1995.
NOTE D - INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current
Federal $ 130,870 $ 108,396 $ 109,652
State 12,702 17,794 17,196
--------- --------- ---------
143,572 126,190 126,848
--------- --------- ---------
Deferred
Federal (5,789) 2,645 (35,526)
State (451) 257 (3,448)
--------- --------- ---------
(6,240) 2,902 (38,974)
--------- --------- ---------
$ 137,332 $ 129,092 $ 87,874
========= ========= =========
</TABLE>
The income tax provision reconciled to the tax computed at the federal
statutory rate of 34% is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Federal income taxes at
statutory rate $ 125,522 $ 111,041 $ 74,126
State income taxes, net of
federal tax benefit 12,702 18,051 13,748
Other (892) -- --
--------- --------- ---------
$ 137,332 $ 129,092 $ 87,874
========= ========= =========
</TABLE>
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -------
<S> <C> <C>
Deferred tax asset
Unfunded pension $ 45,924 $36,072
=========== =======
</TABLE>
F-73
<PAGE> 199
NOTE E - DIVIDENDS
Dividends of $10 per share for the years ending December 31, 1997 and 1996
were declared on 21,487 shares outstanding.
NOTE F - PENSION PLAN
The Company participates in a defined benefit pension plan covering
substantially all of its employees. The benefits are based on years of
service and the employees' compensation during the five highest consecutive
years of participation in the plan. A participant is fully vested after six
years. Contributions are intended to provide not only for benefits
attributed to service to date, but also for those expected benefits to be
earned in the future.
The following table sets forth the plan's funded status as of the periods
presented, in accordance with FASB Statement 87: "Employers' Accounting for
Pensions":
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested
benefits of $ 154,379 and $137,678
for the years ended December 31, 1997
and 1996, respectively $ 156,057 $ 140,235
========= =========
Projected benefit obligation for service rendered
to date
$(190,126) $(185,150)
Plan assets at fair value, primarily U.S. government
securities and common stock funds 59,529 37,013
--------- ---------
Projected benefit obligation (in excess of) plan
assets (130,597) (148,137)
Unrecognized net obligation at January 1, 1989,
being recognized over 15 years (11,250) (13,124)
Unrecognized net loss from past experience
different from that assumed and effects of
changes in assumptions 18,726 16,482
--------- ---------
(Accrued) pension costs included in
accrued liabilities $(123,121) $(144,779)
========= =========
</TABLE>
F-74
<PAGE> 200
NOTE F - PENSION PLAN- CONTINUED
Net pension cost included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 5,881 $ 5,332 $ 5,453
Interest cost on projected
benefit obligation 12,562 12,318 23,043
Actual return on plan assets 1,348 (2,300) (44,926)
Net (deferral) and amortization (6,129) (2,709) 32,261
-------- -------- --------
Net pension cost $ 13,662 $ 12,641 $ 15,831
======== ======== ========
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7% for the years
ended December 31, 1997, 1996 and 1995. The expected long-term rate of
return was 7% for the years ended December 31, 1997, 1996 and 1995. The
expected average percentage increase in compensation levels was 3% for the
years ended December 31, 1997, 1996 and 1995.
NOTE G - RELATED PARTY TRANSACTIONS
The following is a summary of related party transactions that occurred
during the years ended December 31, 1997, 1995 and 1995. Related parties
considered herein include W.W. Clyde & Co., Geneva Rock Products, Inc., and
Utah Service, Inc., which are under common control.
The Company received commissions on the sale of insurance policies to
related parties in the amounts of $299,989, $270,078 and $231,780 for the
years ended December 31, 1997, 1996 and 1995, respectively.
The Company had accounts receivable from related parties in the amounts of
$96,600 and $51,000 for the years ended December 31, 1997 and 1996,
respectively.
NOTE H - CONCENTRATION OF CREDIT RISK
The Company maintains cash and cash equivalents at a financial institution.
At December 31, 1997, uninsured amounts held in this financial institution
totaled approximately $365,000, (approximately $475,000 as of December 31,
1996).
Accounts receivable at December 31, 1997 includes amounts due from three
customers totaling $64,156, $33,480, and $19,492, respectively. Accounts
receivable at December 31, 1996 includes amounts due from three customers
totaling $48,912, $21,281 and $19,992, respectively. The Company's accounts
receivable result from its insurance contracts with customers. The Company
controls credit risk associated with accounts receivable by leveraging the
unused portion of the policy.
F-75
<PAGE> 201
NOTE H - CONCENTRATION OF CREDIT RISK - CONTINUED
Approximately 54% of total commission revenues for the year ended December
31, 1997 was from three customers totaling 37%, 11%, and 6%, respectively.
Approximately 54% of total commission revenues for the year ended December
31, 1996 was from three customers totaling 40%, 11%, and 3%, respectively.
Approximately 50% of total commission revenues for the year ended December
31, 1995 was from two customers totaling 33% and 17%, respectively.
NOTE I - SUBSEQUENT EVENTS
As of November 13, 1997, Clyde Companies, Inc., which owns 17.22% of the
Company adopted an "Amended and Restated Agreement and Plan of Merger"
which provides for the merger of Clyde Companies, Inc. with the Company and
certain other companies related through common stockholders.
The merger, upon majority approval of the stockholders of each respective
company, will be effected by the exchange of shares of Clyde Companies,
Inc. common stock with the respective shares of common stock held by the
Company's stockholders. The merger transaction will be accounted for as a
purchase. The exchange rates used in determining the number of shares to be
exchanged are based upon independent valuations performed on each company
to be acquired by Clyde Companies, Inc.
In connection with the transaction, Clyde Companies, Inc. filed a
registration statement (Form S-4) with the Securities and Exchange
Commission for the purpose of registering the shares of Clyde Companies,
Inc. common stock to be issued in the merger.
F-76
<PAGE> 202
ANNEX A
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement") is made and entered into as of November 13, 1997 by and among Clyde
Companies, Inc., a Utah corporation (the "Parent"), W.W. Clyde Reorganization
Corporation, a Utah corporation ("CRC"), W.W. Clyde & Co., a Utah corporation
("Clyde"), Geneva Rock Reorganization Corporation, a Utah corporation ("GRRC"),
Geneva Rock Products, Inc., a Utah corporation ("Geneva Rock"), Utah Service
Reorganization Corporation, a Utah corporation ("USRC"), Utah Service Inc., a
Utah corporation ("Utah Service"), Beehive Insurance Reorganization Corporation,
a Utah corporation ("BIRC"), and Beehive Insurance Agency, Inc., a Utah
corporation ("Beehive Insurance").
Recitals
WHEREAS, the parties hereto entered into an Agreement and Plan
of Merger dated as of November 13, 1997 (the ""Original Merger Agreement");
WHEREAS, the parties hereto desire to amend and restate the
Original Merger Agreement in its entirety as set forth in this Agreement
effective as of March 13, 1998;
WHEREAS, the Board of Directors of each of the Parent, and CRC,
GRRC, USRC and BIRC (collectively, the "Reorganization Corporations") and Clyde,
Geneva Rock, Utah Service and Beehive Insurance (collectively, the "Acquired
Corporations" and, together with the Parent and the Reorganization Corporations,
the "Corporations") have approved, and have determined that it is advisable and
in the best interests of each of their respective shareholders for the Parent to
acquire the Acquired Corporations on the terms and conditions set forth in this
Agreement; and
WHEREAS, to accomplish such acquisitions, (i) the Board of
Directors of each of the Parent, CRC and Clyde has determined that CRC should be
merged with and into Clyde (the "Clyde Merger"), (ii) the Board of Directors of
each of the Parent, GRRC and Geneva Rock has determined that GRRC should be
merged with and into Geneva Rock (the "Geneva Rock Merger"), (iii) the Board of
Directors of each of the Parent, USRC and Utah Service has determined that USRC
should be merged with and into Utah Service (the "Utah Service Merger"), and
(iv) the Board of Directors of each of the Parent, BIRC and Beehive Insurance
has determined that BIRC should be merged with and into Beehive Insurance (the
"Beehive Insurance Merger" and, collectively with the Clyde Merger, the Geneva
Rock Merger and the Utah Service Merger, the "Mergers") in accordance with this
Agreement and the applicable provisions of the Utah Revised Business Corporation
Act (the "URBCA") and the Internal Revenue Code of 1986, as amended (the
"Code").
Agreement
NOW, THEREFORE, pursuant to and in accordance with the URBCA and
the Code, the Corporations agree upon and prescribe the terms and conditions of
the Mergers as follows:
I. Merger
A-1
<PAGE> 203
1.1 Names and States of Incorporation. The name and state of
incorporation of each of the constituent corporations in the Mergers is as
follows:
(a) for the Clyde Merger, W.W. Clyde
Reorganization Corporation, a Utah corporation, and W.W. Clyde &
Co., a Utah corporation;
(b) for the Geneva Rock Merger, Geneva Rock Reorganization
Corporation, a Utah corporation, and Geneva Rock Products, Inc.,
a Utah corporation;
(c) for the Utah Service Merger, Utah Service
Reorganization Corporation, a Utah corporation, and Utah Service
Inc., a Utah corporation; and
(d) for the Beehive Insurance Merger, Beehive Insurance
Reorganization Corporation, a Utah corporation, and Beehive
Insurance Agency, Inc., a Utah corporation.
1.2 Closing and Effective Time. The closing of each of the Mergers (the
"Closing") shall take place concurrently at the offices of Van Cott, Bagley,
Cornwall & McCarthy at 8:30 a.m. (local time) on a date (the "Closing Date") to
be specified by the Corporations, which shall be no sooner than the date upon
which all of the conditions specified in Article V of this Agreement have been
satisfied or waived by the applicable Corporations (other than those conditions
that, by their nature, are to be satisfied at the Closing). In accordance with
the URBCA and Articles of Mergers to be filed by each of the respective Acquired
Corporations with the Utah Department of Commerce, Division of Corporations and
Commercial Code (the "Utah Division of Corporations"), the Mergers shall become
effective sequentially, with the Clyde Merger becoming effective first, followed
one hour later by the Utah Service Merger, followed one hour later by the
Beehive Insurance Merger and followed one hour later by the Geneva Rock Merger.
Each of the respective Mergers shall be effective at the date and time specified
in the applicable Articles of Merger (for each Merger, the "Effective Time").
The Closing Date shall be prior to the Effective Time.
1.3 Mergers. At the Effective Time, the following shall occur:
(a) The respective Reorganization Corporation shall be
merged with and into the corresponding Acquired Corporation, and
the separate existence of the Reorganization Corporation shall
cease.
(b) The respective Acquired Corporation shall be the
surviving corporation and shall continue its corporate existence
in accordance with the laws of the State of Utah and under its
current name.
(c) The respective Merger shall have the effects set forth
in Section 16-10a-1106 of the URBCA.
1.4 Articles of Incorporation. The Articles of Incorporation of each of
the Acquired
A-2
<PAGE> 204
Corporations shall continue to be the Articles of Incorporation of such Acquired
Corporation after the Effective Time, until amended or repealed in accordance
with the URBCA.
1.5 Bylaws. The Bylaws of each of the Acquired Corporations shall
continue to be the Bylaws of such Acquired Corporation after the Effective Time,
until amended or repealed in the manner provided by such Bylaws and the URBCA.
1.6 Directors. The directors of each of the Acquired Corporations
immediately prior to the Effective Time shall continue to serve as the directors
of such Acquired Corporation for the term specified in the Bylaws of such
Acquired Corporation.
1.7 Officers. The officers of each of the Acquired Corporations
immediately prior to the Effective Time shall continue to be officers of such
Acquired Corporation until otherwise provided in accordance with the Bylaws of
such Acquired Corporation.
1.8 Securities Filings. If required by applicable law, the Corporations
shall promptly prepare and file with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-4 (including any amendments or
supplements thereto, the "Registration Statement") and, as part of the
Registration Statement, a letter, notice of meeting, proxy statement and form of
proxy to the shareholders of each of the Acquired Companies in connection with
the Mergers (collectively, including any amendments or supplements thereto, the
"Proxy Statement"). Each of the Corporations shall provide reasonable
opportunities for the other Corporations to review and comment on the contents
of the Registration Statement. At any time after the preparation of the
Registration Statement, each of the Corporations agrees promptly to notify the
others of and to correct any information which any of them shall have furnished
for inclusion in the Registration Statement that shall have become false or
misleading in any material respect. Each of the Corporations shall use its
reasonable best efforts to have the Registration Statement declared effective
under the Securities Act of 1933, as amended (the "Securities Act"), as promptly
as practicable after such filing. The Parent shall also take any action required
to be taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock (as defined below) in the Merger, and each of
the Corporations shall furnish all information concerning its business, affairs
and/or shareholders as may be reasonably requested in connection with any such
action.
1.9 Special Meeting. As promptly as practicable following the
execution and delivery of this Agreement, in accordance with the URBCA and other
applicable law, each of the Acquired Corporations (a) shall duly call, give
notice of, convene and hold a special meeting of its shareholders (each a
"Special Meeting") and shall submit this Agreement to a vote of such
shareholders at the Special Meeting, (b) subject to any review by the SEC, shall
include in the Proxy Statement, the recommendation of the Board of Directors
that the shareholders should vote in favor of the approval of this Agreement and
(c) shall take all such other action reasonably necessary or appropriate to
obtain the lawful approval of this Agreement by the shareholders.
1.10 Geneva Rock Common Stock Owned by Clyde. As of the date of
this Agreement, Clyde owns (and as of the Effective Time, Clyde will own) 7,518
shares (the
A-3
<PAGE> 205
"Distribution Shares") of Geneva Rock Common Stock (as defined below).
Immediately after the Effective Time of the Clyde Merger, Clyde, acting in
accordance with resolutions duly adopted by its Board of Directors, shall
distribute (in a dividend distribution) the Distribution Shares to the Parent.
Immediately upon such distribution, the Parent shall own the Distribution
Shares, and, at the Effective Time of the Geneva Rock Merger, the Distribution
Shares shall be treated in the same manner as all of the other shares of Geneva
Rock Common Stock owned by the Parent in accordance with Section 2.1(c) below.
II. Conversion of Shares
2.1 Conversion. As of the Effective Time, by virtue of each of the
Mergers and without any further action, the following shall occur:
(a) Each issued and outstanding share of Clyde Common
Stock (as defined below) (other than (i) shares of Clyde Common
Stock owned by the Parent, which shall not be converted and shall
each remain one (1) issued and outstanding share of Clyde Common
Stock, and (ii) Dissenting Shares (as defined below), if any)
shall be converted into 33.93 shares of Parent Common Stock.
(b) Each issued and outstanding share of CRC Common Stock
(as defined below) shall be converted into one (1) share of Clyde
Common Stock.
(c) Each issued and outstanding share of Geneva Rock
Common Stock (other than (i) shares of Geneva Rock Common Stock
owned by the Parent, which shall not be converted and shall each
remain one (1) issued and outstanding share of Geneva Rock Common
Stock, and (ii) Dissenting Shares, if any) shall be converted
into 239.27 shares of Parent Common Stock.
(d) Each issued and outstanding share of GRRC Common Stock
(as defined below) shall be converted into one (1) share of
Geneva Rock Common Stock.
(e) Each issued and outstanding share of Utah Service
Common Stock (as defined below) (other than (i) shares of Utah
Service Common Stock owned by the Parent, which shall not be
converted and shall each remain one (1) issued and outstanding
share of Utah Service Common Stock, and (ii) Dissenting Shares,
if any) shall be converted into 43.43 shares of Parent Common
Stock.
(f) Each issued and outstanding share of USRC Common Stock
(as defined below) shall be converted into one (1) share of Utah
Service Common Stock.
(g) Each issued and outstanding share of Beehive Insurance
Common Stock (as defined below) (other than (i) shares of Beehive
Insurance Common Stock owned by the Parent, which shall not be
converted and shall each
A-4
<PAGE> 206
remain one (1) issued and outstanding share of Beehive Insurance
Common Stock, and (ii) Dissenting Shares, if any) shall be
converted into 4.33 shares of Parent Common Stock.
(h) Each issued and outstanding share of BIRC Common Stock
(as defined below) shall be converted into one (1) share of
Beehive Insurance Common Stock.
2.2 Fractional Shares. Notwithstanding any other provision of this
Agreement to the contrary, each holder of shares of common stock of the Acquired
Corporations exchanged pursuant to the Mergers who would otherwise have been
entitled to receive a fraction of a share of Parent Common Stock (after taking
into account all Acquired Corporation Certificates delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fraction multiplied by $14.52 (the projected value, determined as of the
date of this Agreement, of one share of Parent Common Stock as of the Effective
Time). No such holder shall be entitled to any fractional share of Parent Common
Stock (or to any dividends, voting rights or any other rights as a shareholder
in respect of such fractional share of Parent Common Stock).
2.3 Acquired Corporation Certificates. Certificates nominally
representing shares of the common stock of the Acquired Corporations ("Acquired
Corporation Certificates") shall be treated as follows:
(a) As of the Effective Time, each Acquired
Corporation Certificate, other than any certificate representing
Dissenting Shares, if any, for all purposes, shall be deemed to
evidence the number of shares of Parent Common Stock determined
in accordance with Section 2.1 above.
(b) As soon as practicable after the Effective Time, the
Parent shall mail to each record holder of an outstanding
Acquired Corporation Certificate, as of the Effective Time, a
form of letter of transmittal (the "Transmittal Letter") that is
reasonably acceptable to the Acquired Corporations (which shall
specify that delivery of an Acquired Corporation Certificate
shall be effected, and risk of loss and title to the Acquired
Corporation Certificate shall pass, only upon proper delivery of
the Acquired Corporation Certificate to the Parent) and
instructions for use in effecting the surrender of each Acquired
Corporation Certificate in exchange for a Parent Common Stock
certificate ("Parent Certificate"). Upon surrender to the Parent
of an Acquired Corporation Certificate, together with a duly
executed Transmittal Letter (and any other documents which may be
reasonably required by the Parent, if any), the holder of such
Acquired Corporation Certificate shall receive promptly in
exchange therefor a Parent Certificate for the number of shares
of Parent Common Stock evidenced thereby in accordance with
Section 2.1 above. Thereafter, the applicable Acquired
Corporation Certificate shall be canceled. If a Parent
Certificate is to be issued to a person other than the person in
whose name the surrendered Acquired Corporation Certificate is
registered, it shall be a condition of issuance of the Parent
Certificate (x) that the Acquired Corporation Certificate so
surrendered shall be properly endorsed or otherwise be in proper
form for transfer and (y) that the person requesting such
issuance shall pay any transfer or other taxes required
A-5
<PAGE> 207
by reason of the issuance to a person other than the registered
holder of the Acquired Corporation Certificate surrendered or
establish to the satisfaction of the Parent that such tax has
been paid or is not applicable. The Parent shall pay all charges
and expenses, including those of the Acquired Corporations, in
connection with the distribution of the Parent Certificates.
(c) If any Acquired Corporation Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming such Acquired Corporation
Certificate to be lost, stolen or destroyed, the Parent will
issue in exchange for such lost, stolen or destroyed Acquired
Corporation Certificate the shares of Parent Common Stock
deliverable in respect thereof as determined in accordance with
Section 2.1 above; provided that, at the option of the Parent,
the person to whom such shares are issued, as a condition
precedent to the issuance of such shares, shall give to the
Parent a bond in such sum as the Parent may direct or otherwise
indemnify the Parent in a manner satisfactory to the Parent
against any claim that may be made against the Parent with
respect to the Acquired Corporation Certificate claimed to have
been lost, stolen or destroyed.
2.4 Dissenters' Rights. Notwithstanding any other provision of this
Agreement, each share of the common stock of any of the Acquired Corporations
(a) as to which a written notice of intent to demand payment was submitted to
the applicable Acquired Corporation in accordance with Section 16-10a-1321(1)(a)
of the URBCA, (b) which is not voted in favor of approval of this Agreement at a
Special Meeting, and (c) as to which a written demand for payment of fair value
shall have been or may still be timely filed, and the Acquired Corporation
Certificate(s) for such shares shall have been or may still be deposited with
the applicable Acquired Corporation in accordance with the requirements of Part
13 of the URBCA (collectively, "Dissenting Shares"), shall not be converted into
shares of Parent Common Stock. Each holder of Dissenting Shares who becomes
entitled under the URBCA to receive payment of the fair value of such holder's
Dissenting Shares shall receive such payment from the Parent (but only after
such fair value shall have been agreed upon or finally determined) and such
Dissenting Shares shall thereupon be canceled. Each Dissenting Share as to which
dissenters' rights pursuant to the URBCA shall be effectively withdrawn or lost
shall thereupon be deemed to have been converted, at the Effective Time, into
shares of Parent Common Stock in accordance with Section 2.1 above.
2.5 Options, Warrants or Other Rights. At the Effective Time, any
options, warrants or other rights to purchase shares of any of the Acquired
Corporations, without any further action, shall be terminated.
III. Representations and Warranties of the Acquired Corporations
Each of the Acquired Corporations, solely as to itself and not as
to any other Acquired Corporation, represents and warrants to the Parent as
follows, subject only to such limitations and exceptions as are set forth below:
A-6
<PAGE> 208
3.1 Organization and Good Standing. The Acquired Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Utah, and has all requisite corporate power and corporate
authority to own, lease and operate its properties to carry on its business as
now being conducted. The Acquired Corporation is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so qualified would not have a material
adverse effect on the Acquired Corporation.
3.2 Capital Structure of the Acquired Corporations.
(a) Clyde has an authorized capital structure consisting
of Two Hundred Thousand (200,000) shares of Ten Dollar ($10.00)
par value common stock ("Clyde Common Stock"), and Ninety-Four
Thousand Five Hundred Forty-Four (95,544) shares of Clyde Common
Stock are issued and outstanding.
(b) Geneva Rock has an authorized capital structure
consisting of Fifty Thousand (50,000) shares of Ten Dollar
($10.00) par value common stock ("Geneva Rock Common Stock"), and
Twenty-One Thousand Eight Hundred Two (21,802) shares of Geneva
Rock Common Stock are issued and outstanding.
(c) Utah Service has an authorized capital structure
consisting of One Hundred Thousand (100,000) shares of Ten Dollar
($10.00) par value common stock ("Utah Service Common Stock"),
and Five Thousand Four Hundred Thirteen (5,413) shares of Utah
Service Common Stock are issued and outstanding.
(d) Beehive Insurance has an authorized capital structure
consisting of Fifty Thousand (50,000) shares of One Dollar
($1.00) par value common stock ("Beehive Insurance Common
Stock"), and Twenty-One Thousand Four Hundred Sixty-Seven
(21,467) shares of Beehive Insurance Common Stock are issued and
outstanding.
3.3 Authority. The Acquired Corporation has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Acquired
Corporation, subject in the case of this Agreement only to the approval of this
Agreement by the shareholders of the Acquired Corporation as required under the
URBCA.
3.4 Execution and Delivery. This Agreement has been duly executed and
delivered by the Acquired Corporation and constitutes a valid and binding
obligation of the Acquired Corporation, enforceable against the Acquired
Corporation in accordance with its terms but subject to (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and equitable
principles, and (ii) statutes, rules or procedures and applicable case law
limiting the availability of or prescribing the procedural requirements for the
exercise of remedies.
A-7
<PAGE> 209
3.5 Property. The Acquired Corporation has good, valid and
marketable title to (or in the case of leased property, valid leasehold
interests in) all of its properties and assets.
3.6 No Violations. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby will not,
(a) conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or the creation of a lien, pledge, security interest, charge or other
encumbrance on assets (any such conflict, violation, default, right of
termination, cancellation or acceleration, loss or creation, a "Violation")
pursuant to any provision of the Articles of Incorporation or Bylaws of the
Acquired Corporation, or (b) result in any Violation of (i) any loan or credit
agreement, note, mortgage, indenture, lease or other agreement, obligation,
instrument, permit, concession, franchise, license, statute, law, ordinance,
rule or regulation applicable to the Acquired Corporation or its properties or
assets (except for such Violations as would not, singly or in the aggregate,
have a material adverse effect on the Acquired Corporation), or (ii) any
judgment, order or decree applicable to the Acquired Corporation or its
properties or assets.
3.7 Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental agency, authority or instrumentality, domestic
or foreign (each, a "Governmental Authority"), is required by or with respect to
the Acquired Corporation in connection with the execution and delivery of this
Agreement by the Acquired Corporation, or the consummation by the Acquired
Corporation of the transactions contemplated hereby, except for (a) the filing
with the SEC of the Registration Statement (including the Proxy Statement as a
part thereof), (b) the filing of the Articles of Merger with the Utah Division
of Corporations and appropriate documents with the relevant authorities of other
states in which the Acquired Corporation is qualified to do business, (c)
notices and other filings as may be required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (d) filings as
may be required under state securities laws and (e) such filings,
authorizations, orders and approvals as may be required under foreign laws.
3.8 Information Supplied. None of the information supplied or to
be supplied by the Acquired Corporation for inclusion or incorporation by
reference in the Proxy Statement, at the date of mailing to the Acquired
Corporation's shareholders and at the time of its Special Meeting, will contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All documents that the Acquired Corporation is responsible for
filing with any Governmental Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable law. Without limiting any of the representations and
warranties contained herein, no representation or warranty by the Acquired
Corporation as of the date thereof contains any untrue statement of material
fact, or omits a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which such statements are
or will be made, not misleading.
A-8
<PAGE> 210
3.9 Litigation. There are no actions, arbitrations, audits,
hearings, investigations, suits or litigation (whether civil, criminal,
administrative, investigative or informal) before or otherwise involving any
Governmental Authority, court or arbitrator (a "Proceeding") commenced by or
against the Acquired Corporation (or that otherwise relate to or may affect the
business or the assets of the Acquired Corporation) that either (a) challenge,
or that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of transactions specified in this Agreement, or
(b) would reasonably be expected to have a material adverse effect on the
Acquired Corporation. To the knowledge of the Acquired Corporation, (1) no such
Proceeding has been threatened, and (2) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding.
3.10 Financial Statements. The financial statements of the
Acquired Corporation (including any balance sheets and statements of income,
changes in stockholders' equity and cash flow, together with any reports thereon
of independent certified public accountants) provided by the Acquired
Corporation in connection with the preparation of (a) the Registration
Statement, and (b) the appraisals of the Acquired Companies prepared by Houlihan
Valuation Advisors and dated October 23, 1997 (the "HVA Appraisals"), fairly
present the financial condition and the results of operations, changes in
stockholders' equity and cash flow of the Acquired Corporation as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with generally accepted accounting principles
("GAAP"). The financial statements referred to in this Section 3.10 reflect the
consistent application of accounting principles throughout the periods involved,
except as otherwise disclosed in the notes to such financial statements.
3.11 Taxes.
(a) All material reports, filings, statements,
declarations and returns (collectively, "Tax Returns") with
respect to taxes, charges, fees, levies or assessments
(collectively, "Taxes") required to be filed by the Acquired
Corporation as of the Effective Time have been or will be duly
filed, and such Tax Returns are or will be true and correct in
all material respects. The Acquired Corporation has paid or will
pay all Taxes shown as due and payable on such Tax Returns; and
the charges, accruals and reserves for Taxes with respect to the
Acquired Corporation reflected in the Acquired Corporation's
financial statements are adequate under GAAP to cover Taxes
accruing through the date thereof, including contested amounts
and amounts not yet due and payable.
(b) There are no material claims with respect to Taxes
pending against the Acquired Corporation and the Acquired
Corporation is not aware of any threatened claim for Taxes or any
basis for such claims. No material issues have been raised in any
examination by any Governmental Authority with respect to the
Acquired Corporation which reasonably could be expected to result
in a proposed deficiency for any other period not so examined,
and there are not now in force any waivers or agreements by the
Acquired Corporation for the extension
A-9
<PAGE> 211
of time for the assessment of any material Taxes, nor has any
such waiver or agreement been requested by any Governmental
Authority. The Acquired Corporation does not have any liability
for any material Taxes of any corporation or entity other than
the Acquired Corporation.
(c) The Acquired Corporation has paid or is withholding
and will pay when due to the proper Governmental Authorities all
material withholding amounts required to be withheld with respect
to all Taxes.
3.12 Undisclosed Liabilities. The Acquired Corporation is not
subject to any liabilities of any nature which have had or can reasonably be
expected to have a material adverse effect on its business or financial
prospects.
IV. Representations and Warranties of the Parent
The Parent represents and warrants to the Acquired Corporations
as follows, subject only to such exceptions and limitations as are set forth
below:
4.1 Organization, Standing and Authority. Each of the Parent and
the Reorganization Corporations is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah, and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each of the Parent and the
Reorganization Corporations is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the Parent and the Reorganization Corporations considered as a whole.
4.2 Capital Structure of the Parent.
(a) As of the Effective Time, (i) the authorized capital
stock of the Parent will consist of Ten Million (10,000,000)
shares of common stock ("Parent Common Stock"), and (ii)
2,303,920 shares of Parent Common Stock will be issued and
outstanding. Shares of Parent Common Stock to be issued in the
Mergers, when issued in accordance with this Agreement, will be
validly issued, fully paid and nonassessable.
(b) Except for the Articles of Restatement of the Articles
of Incorporation of the Parent and the Amended and Restated
Articles of Incorporation of the Parent attached thereto
(collectively, the "Parent Recapitalization Documents"), there
are no options, warrants, calls, rights, commitments or
agreements of any character to which the Parent or any of the
Reorganization Corporations is a party or by which it is bound
obligating the Parent or any of the Reorganization Corporations
to issue, deliver or sell, or cause to be issued, delivered or
sold, shares of capital stock or obligating the Parent or
A-10
<PAGE> 212
any of the Reorganization Corporations to grant, extend or enter
into any such option, warrant, call, right, commitment or
agreement.
(c) Except for that certain Clyde Companies, Inc.
Stock Redemption Plan, adopted as of March 13, 1998 by the Board
of Directors of the Parent and the Parent Recapitalization
Documents, there are no outstanding contractual obligations of
the Parent or any of the Reorganization Corporations, to
repurchase, redeem or otherwise acquire any shares of capital
stock of the Parent or any of the Reorganization Corporations.
(d) Except for the Parent Recapitalization Documents, the
Parent has not (i) made or agreed to make any stock split or
stock dividend, or issued or permitted to be issued any shares of
capital stock or securities exercisable for or convertible into
shares of capital stock of the Parent or any of the
Reorganization Corporations.
(e) All of the outstanding shares of capital stock of each
Reorganization Corporation (i) are validly issued, fully paid and
nonassessable and free of any preemptive rights, and (ii) are
directly owned by the Parent, free and clear of all liens,
claims, pledges, agreements, voting or other restrictions,
charges or other encumbrances, with the result that the Parent
directly owns the entire equity interest in each of the
Reorganization Corporations.
4.3 Authority. The Parent has all requisite corporate power and
corporate authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Parent.
4.4 Execution and Delivery. This Agreement has been duly executed
and delivered by the Parent and constitutes a valid and binding obligation of
the Parent, enforceable against the Parent in accordance with its terms but
subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and equitable principles, and (ii) statutes, rules or procedures and
applicable case law limiting the availability of or prescribing the procedural
requirements for the exercise of remedies.
4.5 No Violations. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby will not,
(a) result in any Violation of any provision of the Articles of Incorporation or
Bylaws of the Parent, or (b) result in any Violation of (i) any loan or credit
agreement, note, mortgage, indenture, lease or other agreement, obligation,
instrument, permit, concession, franchise, license, statute, law, ordinance,
rule or regulation applicable to the Parent or its properties or assets (except
for such Violations as would not, singly or in the aggregate, have a material
adverse effect on the Parent), or (ii) any judgment, order or decree applicable
to the Parent or its properties or assets.
A-11
<PAGE> 213
4.6 Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is required
by or with respect to the Parent in connection with the execution and delivery
of this Agreement by the Parent, or the consummation by the Parent of the
transactions contemplated hereby, except for (a) the filing with the SEC of the
Registration Statement (including the Proxy Statement as a part thereof), (b)
the filing of the Articles of Merger with the Utah Division of Corporations and
appropriate documents with the relevant authorities of other states in which the
Parent is qualified to do business, (c) notices and other filings as may be
required under the HSR Act, (d) filings as may be required under state
securities laws and (e) such filings, authorizations, orders and approvals as
may be required under foreign laws.
4.7 Information Supplied. None of the information supplied or to
be supplied by the Parent for inclusion or incorporation by reference in the
Proxy Statement, at the date of mailing to the Acquired Corporation's
shareholders and at the time of the Special Meeting, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All documents that
the Parent is responsible for filing with any Governmental Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable law. Without limiting
any of the representations and warranties contained herein, no representation or
warranty by the Parent as of the date thereof contains any untrue statement of
material fact, or omits a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which such
statements are or will be made, not misleading.
4.8 Financial Statements. The financial statements of the Parent
(including any balance sheets and statements of income, changes in stockholders'
equity and cash flow, together with any reports thereon of independent certified
public accountants) provided by the Parent in connection with the preparation of
the Registration Statement, fairly present the financial condition and the
results of operations, changes in stockholders' equity and cash flow of the
Parent as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP. The financial statements
referred to in this Section 4.8 reflect the consistent application of accounting
principles throughout the periods involved, except as otherwise disclosed in the
notes to such financial statements.
4.9 Litigation. There are no Proceedings commenced by or against
the Parent or any of the Reorganization Corporations (or that otherwise relate
to or may affect the business or the assets of the Parent or any of the
Reorganization Corporations) that either (a) challenge or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any of
transactions specified in this Agreement, or (b) would reasonably be expected to
have a material adverse effect on the Parent and the Reorganization Corporations
considered as a whole. To the knowledge of the Parent, (a) no such Proceeding
has been threatened, and (b) no event has occurred or circumstance exists that
may give rise to or serve as a basis for the commencement of any such
Proceeding.
A-12
<PAGE> 214
4.10 Undisclosed Liabilities. The Parent is not subject to any
liabilities of any nature which have had or can reasonably be expected to have a
material adverse effect on its business or financial prospects.
V. Conditions to Closing
5.1 Conditions to the Corporations' Obligations. The respective
obligations of each of the Corporations to consummate the Mergers shall be
subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions:
(a) This Agreement shall have been approved by (i) the
shareholders of each of the Reorganization Corporations and the
Acquired Corporations in accordance with the URBCA, and (ii) a
majority of the shareholders of the Parent in accordance with
resolutions duly adopted by the Board of Directors of the Parent.
(b) The total number of Dissenting Shares, if converted
into shares of Parent Common Stock in accordance with Section 2.1
above, would be less than or equal to 346,935 shares of Parent
Common Stock (which number of shares of Parent Common Stock is
equal to five percent (5%) of the total number of shares of
Parent Common Stock that would be outstanding immediately after
the Mergers if there were no Dissenting Shares and all of the
shares of the common Stock of the Acquired Companies were
converted into Parent Common Stock in accordance with Section 2.1
above).
(c) The Parent and the Acquired Corporations shall have
received the opinion of Grant Thorton LLP that the Mergers
constitute tax-free transfers in accordance with Section 351 of
the Code or tax-free reorganizations in accordance with Section
368(a)(1)(B) of the Code.
(d) No Governmental Authority shall have issued any order,
and there shall not be any statute, rule, decree or regulation
restraining, prohibiting or making illegal the consummation of
the Merger.
(e) Any waiting period applicable to the consummation of
the Mergers under the HSR Act shall have expired or been
terminated.
5.2 Conditions to the Obligations of the Acquired Corporations.
The obligation of the Acquired Corporations to effect the Mergers is further
subject to the satisfaction or waiver, on or prior to the Closing Date, of each
of the following conditions:
(a) The representations and warranties of the Parent
contained in this Agreement shall be true and correct in all
material respects when made and as of the Closing Date (except
for matters which specifically address a particular date which
need only be true and correct as of such date).
A-13
<PAGE> 215
(b) The Parent shall have performed in all material
respects all of the obligations to be performed by it under this
Agreement prior to the Closing Date.
(c) A responsible officer of the Parent shall have
provided the Acquired Corporations with a certificate dated the
Closing Date which provides (i) that the matters referred to in
subsections (a) and (b) of this Section 5.2 are accurate and
complete, (ii) that the Parent is prepared in all material
respects to perform, and shall perform, all of the obligations to
be performed by it under this Agreement up to the Effective Time,
and (iii) for statements of fact with respect to such other
matters as the Acquired Corporations may reasonably request.
5.3 Conditions to the Obligations of the Parent. The obligation
of the Parent to effect the Mergers is further subject to the satisfaction or
waiver, on or prior to the Closing Date, of each of the following conditions:
(a) The representations and warranties of each of the
Acquired Corporations contained in this Agreement shall be true
and correct in all material respects when made and as of the
Closing Date (except for matters which specifically address a
particular date which need only be true and correct as of such
date).
(b) Each of the Acquired Corporations shall have performed
in all material respects all of the obligations to be performed
by it under this Agreement prior to the Closing Date.
(c) A responsible officer of each of the Acquired
Corporations shall have provided the Parent with a certificate
dated the Closing Date which provides (i) that the matters
referred to in subsections (a) and (b) of this Section 5.3 are
accurate and complete, (ii) that the Acquired Corporation is
prepared in all material respects to perform, and shall perform,
all of the obligations to be performed by it under this Agreement
up to the Effective Time, and (iii) for statements of fact with
respect to such other matters as the Parent may reasonably
request.
A-14
<PAGE> 216
VI. Termination
6.1 Right to Terminate. Notwithstanding any other provision of this
Agreement to the contrary, this Agreement may be terminated and the Mergers may
be abandoned at any time prior to the Effective Time, whether before or after
shareholder approval, in accordance with Sections 6.2 through 6.4 below.
6.2 Automatic Termination. Unless otherwise agreed in writing by
each of the Corporations, this Agreement shall be automatically terminated,
without any further actions by any of the Corporations (except as may be
otherwise required by the URBCA), if (a) any Governmental Authority shall have
issued a statute, order, decree or regulation or taken any other action
permanently restraining or enjoining or otherwise materially restricting the
consummation of the transactions contemplated by this Agreement and such
statute, order, decree, regulation or other action shall have become final and
non-appealable, or (b) the Mergers have not been consummated on or before June
30, 1998.
6.3 Termination by the Acquired Corporations. This Agreement may
be terminated by the Boards of Directors of the Acquired Corporations, acting
jointly, if the Parent breaches or fails in any material respect to perform or
comply with any of its covenants and agreements contained herein or breaches its
representations and warranties in any material respect; provided, however, that
if any such breach is curable by the breaching party through the exercise of the
breaching party's reasonable best efforts and for so long as such breaching
party shall be so attempting to cure such breach for a period not to exceed 20
days, the Acquired Corporations may not terminate this Agreement pursuant to
this Section 6.3.
6.4 Termination by the Parent. This Agreement may be terminated
by the Board of Directors of the Parent if any of the Acquired Corporations
breaches or fails in any material respect to perform or comply with any of its
covenants and agreements contained herein or breaches its representations and
warranties in any material respect; provided, however, that if any such breach
is curable by the Acquired Corporation through the exercise of the Acquired
Corporation's reasonable best efforts and for so long as the Acquired
Corporations shall be so attempting to cure such breach for a period not to
exceed 20 days, the Parent may not terminate this Agreement pursuant to this
Section 6.4.
6.5 Notice of Termination. In the event of the termination of this
Agreement as provided in Sections 6.3 or 6.4 above, written notice thereof shall
forthwith be given to the other party and such written notice shall specify the
provision of this Agreement pursuant to which such termination is made.
6.6 Effect of Termination. Upon the termination of this Agreement
pursuant to any of Sections 6.2, 6.3 or 6.4 above, this Agreement shall
thereupon become null and void and there shall be no liability on the part of
any of the Corporations to the other (or to any other person). Without limiting
the generality of the foregoing, the Corporations expressly agree (a) that the
sole remedy for any breach of this Agreement shall be the termination rights
contained in Sections 6.3 or 6.4 above, and (b) that in the event of any breach
of this Agreement, the breaching party shall have no liability to any person
whatsoever (including, without limitation, liability for actual, consequential,
punitive, exemplary or special damages).
A-15
<PAGE> 217
VII. General Provisions
7.1 Approval. This Agreement has been approved by the Board of Directors
and the shareholders of each of the Corporations as required by the URBCA.
7.2 Actions Prior to Closing. Between the date of this Agreement and the
Effective Time, (a) the Acquired Corporations shall each operate their
respective businesses in accordance with sound business practices and shall not
engage in any transactions other than in the ordinary course of business, and
(b) neither the Parent nor any of the Acquired Corporations shall issue any
additional shares of its capital stock (except, the Parent shall issue shares of
Parent Common Stock in accordance with the Parent Recapitalization Documents).
7.3 Taxation of Transaction. The Corporations intend that the
transactions contemplated by this Agreement shall constitute tax-free transfers
and/or reorganizations pursuant to Sections 351 and 368 of the Code. Therefore,
all of the terms and provisions of this Agreement shall be interpreted so that
such terms and provisions are in accordance with Sections 351 and 368 of the
Code.
7.4 Additional Actions. The officers of the Corporations shall execute
all such other documents and shall take all such other actions as may be
necessary or advisable to make this Agreement and the Mergers effective.
7.5 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented at any time prior to the
Closing Date by the written agreement of each of the Corporations and the
Parent.
7.6 Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of any of the Corporations to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
7.7 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, by overnight express
courier service or by facsimile transmission (in each case, as of the date of a
written receipt obtained by the party giving such notice), to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Clyde, to:
1375 N. Main Street
Springville, Utah 84663
Facsimile: (801) 489-7653
(b) if to Geneva Rock, to:
A-16
<PAGE> 218
302 West 5400 South
Suite 200
Murray, Utah 84107
Facsimile: (801) 765-7830
(c) if to the Utah Service, to:
35 East 400 South
Springville, Utah 84663
Facsimile: (801) 489-8978
(d) if to the Beehive Insurance, to:
302 West 5400 South
Suite 109
Murray, Utah 84107
Facsimile: (801) 685-2899
(e) if to the Parent, to:
1423 Devonshire Drive
Salt Lake City, Utah 84108
Facsimile: (801) 534-0058
Copies of any notices should be provided to counsel as follows:
Van Cott, Bagley, Cornwall & McCarthy
50 South Main Street, Suite 1600
Salt Lake City, Utah 84144
Attention: Arthur B. Ralph
Facsimile: (801) 534-0058
7.8 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the Corporations and their respective
successors and assigns.
7.9 Third Party Rights. This Agreement is not intended to confer upon
any other person except the Corporations any rights or remedies hereunder.
7.10 Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. All words used in this Agreement shall be construed to be of
such gender or number as the circumstances require.
A-17
<PAGE> 219
7.11 Entire Agreement. This Agreement, including any certificates and
instruments referred to herein, embody the entire agreement and understanding of
the Corporations in respect of the transactions contemplated by this Agreement.
There are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings between the
Corporations with respect to such transactions.
7.12 Expenses. If the Mergers are consummated in accordance with
this Agreement, the Parent shall pay all of the expenses incurred by the
Corporations in connection with transactions contemplated by this Agreement. If
this Agreement is terminated, (a) each Corporation shall pay its pro rata share
(based upon the valuation of each of the Corporations as set forth in the HVA
Appraisals) of the expenses incurred by all of the Corporations in connection
with transactions contemplated by this Agreement, and (b) the officers of each
of the Corporations shall, in good faith, take all of the actions which may be
necessary or advisable to cause such expenses to be paid in accordance with
clause (a) above.
7.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.14 Governing Law. This Agreement shall be governed by the laws of the
State of Utah (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
[signature page follows]
A-18
<PAGE> 220
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized officers of the Corporations as of __________, 1998, effective as of
the date first written above.
Acquired
Corporations: W.W. Clyde & Co., a Utah corporation
By: ____________________________
Its: ___________________________
Geneva Rock Products, Inc., a Utah corporation
By:
----------------------------
Its:
---------------------------
Utah Service Inc., a Utah corporation
By:
----------------------------
Its:
---------------------------
Beehive Insurance Agency, Inc., a Utah
corporation
By:
----------------------------
Its:
---------------------------
A-19
<PAGE> 221
Reorganization
Corporations: W.W. Clyde Reorganization
Corporation, a Utah corporation
Geneva Rock Reorganization
Corporation, a Utah corporation
Utah Service Reorganization
Corporation, a Utah corporation
Beehive Insurance Reorganization
Corporation, a Utah corporation
By:
----------------------------
Their:
---------------------------
The Parent: Clyde Companies, Inc.,
a Utah corporation
By:
----------------------------
Its:
---------------------------
A-20
<PAGE> 222
ANNEX B
[STOCK REDEMPTION PLAN]
[BEGINS ON NEXT PAGE]
<PAGE> 223
CLYDE COMPANIES, INC.
STOCK REDEMPTION PLAN
The Board of Directors (the "Board") of Clyde Companies, Inc., a Utah
corporation (the "Company"), has adopted the following stock redemption plan
(this "Plan"), effective as of January 1, 1999:
1. Purposes. Certain shareholders of the Company ("Shareholders")
desire to sell shares of the common stock of Company ("Common Stock") from time
to time. However, there is no public or other ready market for the Common Stock.
Accordingly, the Shareholders have requested that the Company redeem, on an
annual basis, a limited number of shares of Common Stock. The Board has
determined that it is advisable and in the best interests of the Company and the
Shareholders for the Company to redeem shares of Common Stock, each year on a
date established by the Board (the "Redemption Date"), in accordance with the
terms of this Plan (the "Redemption").
2. Valuation of the Common Stock. Each year, as soon as practicable
following the issuance by the Company's auditors of their report regarding the
consolidated financial statements of the Company and its subsidiaries for the
prior year (the "Financial Statements"), the Board shall cause an appraisal (or
an update of a prior appraisal) of the Company (the "Appraisal") to be completed
by an independent individual or firm selected by the Board which shall set forth
a determination of the total fair market value of the Company as of the last day
of the prior year (the "Appraisal Value"). The price to be paid to the
Shareholders for each share of redeemed Common Stock (the "Redemption Price")
shall be an amount equal to the Appraisal Value divided by the number of shares
of Common Stock outstanding on the last day of the prior year, discounted by
twenty-five percent (25%) (reflecting a lack of marketability and minority
interest).
3. Redemption Fund. As soon as practicable following the Appraisal,
the Board shall determine the amount which shall be made available by the
Company on the Redemption Date to fund the Redemption (the "Redemption Fund").
Notwithstanding any other provision of this Plan to the contrary, the Redemption
Fund shall be an amount which (a) for the years 1999 through 2003, is greater
than or equal to Seven Percent (7%) and less than or equal to Fifteen Percent
(15%) of the net earnings of the Company (after taxes) as recorded in the
Financial Statements, and (b) for the years 2004 and thereafter, is greater than
or equal to Five Percent (5%) and less than or equal to Ten Percent (10%) of the
net earnings of the Company (after taxes) as recorded in the Financial
Statements. Any amount of the Redemption Fund remaining after the Redemption
Date shall be reallocated for the purposes determined by the Board.
B-1
<PAGE> 224
4. Redemption Procedures. Each year, as soon as practicable after
the determination of the amount of the Redemption Fund, the following shall
occur:
(a) The Company shall mail to each record Shareholder (i) a
form of letter of transmittal (the "Transmittal Letter") advising such
Shareholder of his or her right to redeem shares of Common Stock and specifying
(A) the Appraisal Value, (B) the Redemption Price, (C) the Redemption Date, and
(D) the instructions necessary for the Shareholders to participate in and
complete the Redemption, (ii) the Financial Statements, (iii) a copy of the
Appraisal (or a summary thereof), and (iv) such other information as shall be
required by applicable law.
(b) The Shareholders who desire to participate in the
Redemption (each a "Selling Shareholder") shall comply with all of the
requirements set forth in the Transmittal Letter and shall surrender
certificates evidencing shares of Common Stock to be redeemed to the Company. If
less than all of the shares represented by any certificate evidencing shares of
Common Stock are to be redeemed, as soon as practicable following the Redemption
Date, the Company shall issue a new certificate to the Selling Shareholder for
the appropriate number of shares of Common Stock.
(c) If the number of shares of Common Stock offered for
Redemption by the Selling Shareholders is greater than the number of shares
which may be redeemed by the Company (given the amount of the Redemption Fund
and the Redemption Price), the Company shall spend the entire amount of the
Redemption Fund and shares of Common Stock shall be redeemed from each Selling
Shareholder on a pro rata basis.
(d) If the number of shares of Common Stock offered for
Redemption by the Selling Shareholders is less than the number of shares which
may be redeemed by the Company (given the amount of the Redemption Fund and the
Redemption Price), the Company shall spend such amount of the Redemption Fund as
is necessary to redeem all of the shares of Common Stock offered for Redemption
and the remaining amounts shall be treated as set forth in paragraph 3 above.
(e) In accordance with applicable law and the Transmittal
Letter, the Company shall pay to each Selling Shareholder an amount in cash
equal to the Redemption Price multiplied by the number of shares of Common Stock
redeemed from such Selling Shareholder pursuant to this Plan.
(f) Upon Redemption, all shares of Common Stock redeemed
shall be authorized and unissued shares of the Company and any certificates
representing such shares of Common Stock shall be canceled.
5. Eligible Shares. All shares of Common Stock shall be eligible
for redemption subject to and in accordance with the terms of this Plan.
6. Administration. This Plan shall be administered and interpreted
by the Board in its sole and absolute discretion. This Plan may be repealed,
amended, modified, supplemented or changed, or the Redemption for any particular
year may be canceled, only after the approval of such action by more than
seventy-five percent (75%) of the Board.
B-2
<PAGE> 225
ANNEX C
A M E N D E D A N D R E S T A T E D
B Y L A W S
OF
CLYDE COMPANIES, INC.
A UTAH CORPORATION
1997
C-1
<PAGE> 226
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1. OFFICES
Section 1.1. Business Offices.......................................................1
Section 1.2. Registered Office......................................................1
ARTICLE 2. SHAREHOLDERS
Section 2.1. Annual Shareholder Meeting.............................................1
Section 2.2. Special Shareholder Meetings...........................................1
Section 2.3. Place of Shareholder Meetings..........................................2
Section 2.4. Notice of Shareholder Meeting..........................................2
Section 2.5. Fixing of Record Date..................................................4
Section 2.6. Shareholder List.......................................................5
Section 2.7. Shareholder Quorum and Voting Requirements.............................5
Section 2.8. Proxies................................................................6
Section 2.9. Voting of Shares.......................................................6
Section 2.10. Corporation's Acceptance of Votes.....................................7
Section 2.11. Informal Action by Shareholders.......................................9
Section 2.12. Waiver of Notice.....................................................10
Section 2.13. Voting for Directors.................................................10
Section 2.14. Rights of Shareholders to Inspect Corporate Records..................10
Section 2.15. Furnishing Financial Statements to a Shareholder.....................12
Section 2.16. Information Respecting Shares........................................12
ARTICLE 3. BOARD OF DIRECTORS
Section 3.1. General Powers........................................................13
Section 3.2. Number, Tenure and Qualifications of Directors........................13
Section 3.3. Regular Meetings of the Board of Directors............................14
Section 3.4. Special Meetings of the Board of Directors............................14
Section 3.5. Notice and Waiver of Notice of Special Director Meetings..............14
Section 3.6. Quorum of Directors...................................................15
Section 3.7. Manner of Acting......................................................15
Section 3.8. Director Action By Written Consent....................................16
Section 3.9. Resignation of Directors..............................................16
Section 3.10. Removal of Directors.................................................16
Section 3.11. Board of Director Vacancies..........................................17
Section 3.12. Director Compensation................................................17
Section 3.13. Director Committees..................................................18
Section 3.14. Director's Rights to Inspect Corporate Records.......................18
</TABLE>
C-2
<PAGE> 227
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 4. EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 4.1. Creation of Committees................................................19
Section 4.2. Approval of Committees and Members....................................20
Section 4.3. Required Procedures...................................................20
Section 4.4. Authority.............................................................20
Section 4.5. Authority of Executive Committee......................................20
Section 4.6. Compensation..........................................................20
ARTICLE 5. OFFICERS
Section 5.1. Officers..............................................................21
Section 5.2. Appointment and Term of Office........................................21
Section 5.3. Resignation of Officers...............................................21
Section 5.4. Removal of Officers...................................................21
Section 5.5. The Chairman of the Board.............................................22
Section 5.6. The Vice Chairman.....................................................22
Section 5.7. Chief Executive Officer...............................................22
Section 5.8. President.............................................................23
Section 5.9. Vice Presidents.......................................................23
Section 5.10. Secretary............................................................24
Section 5.11. Treasurer............................................................24
Section 5.12. Assistant Secretaries and Assistant Treasurers.......................25
Section 5.13. General Manager......................................................25
Section 5.14. Salaries.............................................................26
Section 5.15. Surety Bonds.........................................................26
ARTICLE 6. LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 6.1. Limitation of Liability of Directors..................................26
Section 6.2. Indemnification of Directors..........................................27
Section 6.3. Advance Payment of Expenses...........................................28
Section 6.4. Indemnification of Officers, Employees, Fiduciaries, and Agents.......28
Section 6.5. Insurance.............................................................28
ARTICLE 7. EXECUTION OF INSTRUMENTS, BORROWING OF MONEY
Section 7.1. Execution of Instruments..............................................29
Section 7.2. Loans.................................................................29
Section 7.3. Deposits..............................................................29
Section 7.4. Checks, Drafts, etc...................................................30
Section 7.5. Bonds and Debentures..................................................30
</TABLE>
C-3
<PAGE> 228
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 7.6. Sale, Transfer, etc. of Securities....................................30
Section 7.7. Proxies...............................................................30
ARTICLE 8. CERTIFICATES FOR SHARES AND
Section 8.1. Certificates for Shares...............................................31
Section 8.2. Shares Without Certificates...........................................32
Section 8.3. Registration of Transfer of Shares....................................32
Section 8.4. Transfer Agents and Registrars........................................32
Section 8.5. Restrictions on Transfer of Shares Permitted..........................33
Section 8.6. Acquisition of Shares.................................................34
Section 8.7. Lost or Destroyed Certificates........................................34
ARTICLE 9. DISTRIBUTIONS
Section 9.1. Distributions.........................................................35
ARTICLE 10. CORPORATE SEAL
Section 10.1. Corporate Seal.......................................................35
ARTICLE 11. FISCAL YEAR
Section 11.1. Fiscal Year..........................................................35
ARTICLE 12. AMENDMENTS
Section 12.1. Amendments...........................................................35
</TABLE>
C-4
<PAGE> 229
AMENDED AND RESTATED
BYLAWS
OF
CLYDE COMPANIES, INC.
ARTICLE 1. OFFICES
Section 1.1. Business Offices. The principal office of Clyde
Companies, Inc. (the "Corporation") shall be located at any place either within
or outside the State of Utah, as designated in the Corporation's Articles of
Incorporation or the Corporation's most recent annual report on file with the
Utah Department of Commerce, Division of Corporations and Commercial Code (the
"Division") providing such information. The Corporation may have such other
offices, either within or outside the State of Utah as the Board of Directors
may designate or as the business of the Corporation may require from time to
time. The Corporation shall maintain at its principal office a copy of those
records specified in Section 2.14 of Article II of these Bylaws.
(16-10a-102(24))*
Section 1.2. Registered Office. The registered office of the
Corporation required by the Utah Revised Business Corporation Act shall be
located within the State of Utah. The address of the registered office may be
changed from time to time. (16-10a-501 and 16-10a-502)
ARTICLE 2. SHAREHOLDERS
Section 2.1. Annual Shareholder Meeting. An annual meeting of the
shareholders shall be held each year on the date, at the time and at the place,
fixed by the Board of Directors. The annual meeting shall be held for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. (16-10a-701)
Section 2.2. Special Shareholder Meetings. Special meetings of
the shareholders may be called, for any purposes described in the notice of the
meeting, by the
- ---------------------
* Citations in parentheses are to Utah Code Annotated. These citations are
for reference only and shall not constitute a part of these bylaws.
C-5
<PAGE> 230
President, or by the Board of Directors and shall be called by the President at
the request of the holder(s) of not less than one-tenth of all outstanding votes
of the Corporation entitled to be cast on any issue at the meeting. (16-10a-702)
Section 2.3. Place of Shareholder Meetings. The Board of
Directors may designate any place, either within or outside the State of Utah,
as the place for any annual meeting of the shareholders. The President, the
Board of Directors or the shareholder(s) authorized by these Bylaws to request a
meeting, as the case may be, may designate any place, either within or outside
the State of Utah, as the place for any special meeting of the shareholders
called by such person or group. If no designation is made regarding the place of
the meeting, the meeting shall be held at the principal office of the
Corporation. (16-10a-701(2) and 16-10a-702(3))
Section 2.4. Notice of Shareholder Meeting.
(a) Required Notice. Written notice stating the place, day and
hour of any annual or special shareholder meeting shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the person or group
calling the meeting, to each shareholder of record entitled to vote at such
meeting, and to any other shareholder entitled by the Utah Revised Business
Corporation Act or the Corporation's Articles of Incorporation to receive notice
of the meeting. Notice shall be deemed to be effective when mailed.
(b) Notice Not Required. Notice shall not be required to be given
to any shareholder to whom:
(1) A notice of two consecutive annual meetings, and all
notices of meetings or of the taking of action by written consent
without a meeting during the period between the two consecutive
annual meetings, have been mailed, addressed to the shareholder
at the shareholder's address as shown on the records of the
Corporation and have been returned undeliverable; or
(2) at least two payments, if sent by first class mail, of
dividends or interest on securities during a twelve month period,
have been mailed, addressed to the shareholder at the
shareholder's address as shown on the records of the Corporation,
and have been returned undeliverable.
If a shareholder to whom notice is not required to be given
delivers to the Corporation a written notice setting forth the shareholder's
current address, or if another address
C-6
<PAGE> 231
for the shareholder is otherwise made known to the Corporation, the requirement
that notice be given to the shareholder is reinstated. (16-10a-103 and
16-10a-705)
(c) Adjourned Meeting. If any shareholder meeting is adjourned to
a different date, time or place, notice need not be given of the new date, time
or place, if the new date, time or place is announced at the meeting before
adjournment. However, if the adjournment is for more than thirty (30) days, or
if after the adjournment a new record date for the adjourned meeting is or must
be fixed (see Section 2.5 of these Bylaws), then notice must be given pursuant
to the requirements of paragraph (a) of this Section 2.4 to shareholders of
record who are entitled to vote at the meeting. (16-10a-705(4))
(d) Contents of Notice. Notice of any special meeting of the
shareholders shall include a description of the purpose or purposes for which
the meeting is called. Except as provided in this paragraph (d) of Section 2.4,
in the Articles of Incorporation or in the Utah Revised Business Corporation
Act, notice of an annual meeting of the shareholders need not include a
description of the purpose or purposes for which the meeting is called.
(16-10a-705(2), (3))
(e) Waiver of Notice of Meeting. Any shareholder may waive notice
of a meeting by a writing signed by the shareholder which is delivered to the
Corporation (either before or after the date and time stated in the notice as
the date or time when any action will occur or has occurred) for inclusion in
the minutes or filing with the Corporation's records. (16-10a-706)
(f) Effect of Attendance at Meeting. A shareholder's attendance
at a meeting:
(1) Waives objection to lack of notice or defective notice
of the meeting, unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting business at
the meeting; and
(2) waives objection to consideration of a particular
matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects
to considering the matter when it is presented. (16-10a-706)
Section 2.5. Fixing of Record Date. For the purpose of
determining the shareholders of any voting group entitled to notice of or to
vote at any meeting of the shareholders, or the shareholders entitled to take
action without a meeting or to demand a special meeting, or the shareholders
entitled to receive payment of any distribution or dividend, or in order to make
a determination of the shareholders for any other proper purpose, the Board of
C-7
<PAGE> 232
Directors may fix in advance a date as the record date. Such record date shall
not be more than seventy (70) days prior to the date on which the particular
action, requiring such determination of the shareholders, is to be taken. If no
record date is so fixed by the Board of Directors, the record date shall be at
the close of business on the following dates:
(a) Annual and Special Meetings. With respect to an annual
meeting of the shareholders or any special meeting of the shareholders called by
the President, the Board of Directors or the shareholder(s) authorized by these
Bylaws to request a meeting, the day before the first notice is delivered to
shareholders. (16-10a-707(2))
(b) Meeting Demanded by Shareholders. With respect to a special
shareholder meeting demanded by the shareholders pursuant to the Utah Revised
Business Corporation Act, the earliest date of any of the demands pursuant to
which the meeting is called, or sixty (60) days prior to the date the first of
the written demands is received by the Corporation, whichever is later.
(16-10a-702(1)(b), (2))
(c) Action Without a Meeting. With respect to actions taken in
writing without a meeting (pursuant to Section 2.11 of these Bylaws), the date
the first shareholder delivers to the Corporation a signed written consent upon
which the action is taken.
(16-10a-704(6))
(d) Distributions. With respect to a distribution to the
shareholders (other than one involving a repurchase or reacquisition of shares),
the date the Board of Directors authorizes the distribution. (16-10a-640(2))
(e) Share Dividend. With respect to the payment of a share
dividend, the date the Board of Directors authorizes the share dividend.
(16-10a-623(3))
When a determination of the shareholders entitled to vote at any
meeting of the shareholders has been made as provided in this Section 2.5, such
determination shall apply to any adjournment thereof unless the Board of
Directors fixes a new record date, which it must do if the meeting is adjourned
to a date more than one hundred twenty (120) days after the date fixed for the
original meeting. (16-10a-707)
Section 2.6. Shareholder List. The Secretary shall make a
complete record of the shareholders entitled to vote at each meeting of
shareholders, arranged in alphabetical order within each class or series, with
the address of and the number of shares held by each. If voting groups exist
(see Section 2.7 of these Bylaws), the list must be arranged by voting group,
and within each voting group by class or series of shares. The shareholder list
must be available for inspection by any shareholder, beginning on the earlier of
ten (10) days before the meeting for
C-8
<PAGE> 233
which the list was prepared or two (2) business days after notice of the meeting
is given and continuing through the meeting and any adjournments. The list shall
be available at the Corporation's principal office or at a place identified in
the notice of the meeting in the city where the meeting is to be held. A
shareholder, his agent or attorney is entitled on written demand to inspect and,
subject to the requirements of Section 2.14 of these Bylaws, to inspect and copy
the list during regular business hours and during the period it is available for
inspection. The Corporation shall maintain the shareholder list in written form
or in another form capable of conversion into written form within a reasonable
time. (16-10a-720)
Section 2.7. Shareholder Quorum and Voting Requirements.
(a) Quorum. Unless the Articles of Incorporation, a Bylaw adopted
by the shareholders pursuant to the Utah Revised Business Corporation Act or the
Utah Revised Business Corporation Act provides otherwise, a majority of the
votes entitled to be cast on the matter by the voting group constitutes a quorum
of that voting group for action on that matter. (16-10a-725(1))
(b) Approval of Actions. If a quorum exists, action on a matter
(other than the election of directors) by a voting group is approved if the
votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the Articles of Incorporation, a Bylaw adopted by
the shareholders pursuant to the Utah Revised Business Corporation Act or the
Utah Revised Business Corporation Act requires a greater number of affirmative
votes. (16-10a-725(3))
(c) Single Voting Group. If the Articles of Incorporation or the
Utah Revised Business Corporation Act provides for voting by a single voting
group on a matter, action on that matter is taken when approved by that voting
group.
(16-10-726(1))
(d) Voting Groups. Shares entitled to vote as a separate voting
group may take action on a matter at a meeting only if a quorum of those shares
exists with respect to that matter. (16-10a-725(1)) If the Articles of
Incorporation or the Utah Revised Business Corporation Act provides for voting
by two or more voting groups on a matter, action on that matter is taken only
when approved by each of those voting groups counted separately. One voting
group may vote on a matter even though another voting group entitled to vote on
the matter has not voted. (16-10a-726(2))
(e) Effect of Representation. Once a share is represented for any
purpose at a meeting, including the purpose of determining that a quorum exists,
it is deemed present for
C-9
<PAGE> 234
quorum purposes for the remainder of the meeting and for any adjournment of that
meeting, unless a new record date is or must be set for that adjourned meeting.
(16-10a-725(2))
Section 2.8. Proxies. At all meetings of the shareholders, a
shareholder may vote in person or by a proxy executed in any lawful manner. Such
proxy shall be filed with the Corporation before or at the time of the meeting.
No proxy shall be valid after eleven months from the date of its execution
unless otherwise provided in the proxy.
(16-10a-722)
Section 2.9. Voting of Shares.
(a) Votes per Share. Unless otherwise provided in the Articles of
Incorporation, each outstanding share entitled to vote shall be entitled to one
vote, and each fractional share shall be entitled to a corresponding fractional
vote, upon each matter submitted to a vote at a meeting of shareholders.
(16-10a-721(1))
(b) Restriction on Shares Held by Controlled Corporation. Except
as provided by specific court order, no shares of the Corporation held by
another corporation, if a majority of the shares entitled to vote for the
election of directors of such other corporation are held by the Corporation,
shall be voted at any meeting of the Corporation or counted in determining the
total number of outstanding shares at any given time for purposes of any
meeting. However, the power of the Corporation to vote any shares, including its
own shares, held by it in a fiduciary capacity is not hereby limited.
(16-10a-721(2), (3))
(c) Redeemable Shares. Redeemable shares are not entitled to be
voted after notice of redemption is mailed to the holders thereof and a sum
sufficient to redeem the shares has been deposited with a bank, trust company or
other financial institution under an irrevocable obligation to pay the holders
the redemption price on surrender of the shares. (16-10a-721(4))
Section 2.10. Corporation's Acceptance of Votes.
(a) Corresponding Name. If the name signed on a vote, consent,
waiver, proxy appointment or proxy appointment revocation corresponds to the
name of a shareholder, the Corporation, if acting in good faith, is entitled to
accept the vote, consent, waiver, proxy appointment or proxy appointment
revocation and give it effect as the act of the shareholder. (16-10a-724(1))
(b) Name does not Correspond. If the name signed on a vote,
consent, waiver, proxy appointment or proxy appointment revocation does not
correspond to the name of a shareholder, the Corporation, if acting in good
faith, is nevertheless entitled to accept the vote,
C-10
<PAGE> 235
consent, waiver, proxy appointment or proxy appointment revocation and give it
effect as the act of the shareholder if:
(1) The shareholder is an entity as defined in the Utah
Revised Business Corporation Act and the name signed purports to
be that of an officer or agent of the entity;
(2) the name signed purports to be that of an
administrator, executor, guardian or conservator representing the
shareholder and, if the Corporation requests, evidence of
fiduciary status acceptable to the Corporation has been presented
with respect to the vote, consent, waiver, proxy appointment or
proxy appointment revocation;
(3) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the Corporation
requests, evidence of this status acceptable to the Corporation
has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(4) the name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact of the shareholder and, if
the Corporation requests, evidence acceptable to the Corporation
of the signatory's authority to sign for the shareholder has been
presented with respect to the vote, consent, waiver, proxy
appointment or proxy appointment revocation;
(5) two or more persons are the shareholder as cotenants
or fiduciaries and the name signed purports to be the name of at
least one of the cotenants or fiduciaries and the person signing
appears to be acting on behalf of all the cotenants or
fiduciaries; or
(6) the acceptance of the vote, consent, waiver, proxy
appointment or proxy appointment revocation is otherwise proper
under rules established by the Corporation that are not
inconsistent with the provisions of this Section 2.10.
(16-10a-724(2))
(c) Shares owned by Two or More Persons. If shares of the
Corporation are registered in the names of two or more persons, or if two or
more persons have the same fiduciary relationship respecting the same shares,
unless the Secretary is given written notice to the contrary and furnished with
a copy of the instrument creating the relationship, their acts with respect to
voting shall have the following effect:
C-11
<PAGE> 236
(1) If only one votes, the act binds all;
(2) if more than one vote, the act of the majority so
voting binds all;
(3) if more than one vote, but the vote is evenly split on
any particular matter, each faction may vote the securities in
question proportionately; and
(4) if the instrument so filed or the registration of the
shares shows that any tenancy is held in unequal interests, a
majority or even split for the purpose of this Section 2.10 shall
be a majority or even split in interest. (16-10a-724(3))
(d) Rejection. The Corporation is entitled to reject a vote,
consent, waiver, proxy appointment or proxy appointment revocation if the
Secretary or other officer or agent authorized to tabulate votes, acting in good
faith, has reasonable basis for doubt about the validity of the signature on it
or about the signatory's authority to sign for the shareholder. (16-10a-724(4))
(e) No Liability. The Corporation and its officer or agent who
accepts or rejects a vote, consent, waiver, proxy appointment or proxy
appointment revocation in good faith and in accordance with the standards of
this Section 2.10 are not liable in damages to the shareholder for the
consequences of the acceptance or rejection. (16-10a-724(5))
(f) Validity. Corporate action based on the acceptance or
rejection of a vote, consent, waiver, proxy appointment or proxy appointment
revocation under this Section 2.10 is valid unless a court of competent
jurisdiction determines otherwise. (16-10a-724(6))
Section 2.11. Informal Action by Shareholders.
(a) Written Consent. Unless otherwise provided in the Articles of
Incorporation, any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice if one or
more consents in writing, setting forth the action so taken, are signed by all
of the shareholders entitled to vote on the matter. (16-10a-704)
(b) Revocation. Any shareholder giving a written consent, or the
shareholders' proxyholder, or a transferee of the shares or a personal
representative of the shareholder or their respective proxyholder, may revoke
the consent by a signed writing describing the action and stating that the
shareholder's prior consent is revoked, if the writing is received by the
Corporation prior to the effectiveness of the action. (16-10a-704(3))
C-12
<PAGE> 237
(c) Effective Date. Action taken pursuant to this Section 2.11 is
not effective unless all written consents on which the Corporation relies for
the taking of action are received by the Corporation within a sixty (60) day
period and are not revoked. Action thus taken is effective as of the date the
last written consent necessary to effect the action is received by the
Corporation; provided, however, that the effective date of the action may be any
date that is specified in all the written consents as the effective date of the
action. The writing may be received by the Corporation by electronically
transmitted facsimile or other form of communication providing the Corporation
with a complete copy thereof, including a copy of the signature. (16-10a-704(4))
(d) Effect of Action Without a Meeting. Action taken under this
Section 2.11 has the same effect as action taken at a meeting of shareholders
and may be so described in any document. (16-10a-704(7))
Section 2.12. Waiver of Notice. A shareholder may waive any
notice required by the Utah Revised Business Corporation Act, the Corporation's
Articles of Incorporation or these Bylaws. Such a waiver may be made before or
after the date and time stated in the notice as the date or time when any action
will occur or has occurred. Such a waiver must be in a writing signed by the
shareholder and must be delivered to the Corporation for inclusion in the
minutes of the relevant meeting of the shareholders or in the Corporation's
records. (16-10a-706(1))
Section 2.13. Voting for Directors. At each election of
directors, unless otherwise provided in the Articles of Incorporation or the
Utah Revised Business Corporation Act, every shareholder entitled to vote at the
election has the right to vote, in person or by proxy, all of the votes to which
the shareholder's shares are entitled for as many persons as there are directors
to be elected and for whose election the shareholder has the right to vote.
Unless otherwise provided in the Articles of Incorporation or the Utah Revised
Business Corporation Act, directors are elected by a plurality of the votes cast
by the shares entitled to be voted in the election, at a meeting at which a
quorum is present. (16-10a-728(1), (2))
Section 2.14. Rights of Shareholders to Inspect Corporate
Records.
(a) Minutes and Accounting Records. The Corporation shall keep,
as permanent records, minutes of all meetings of its shareholders and Board of
Directors, a record of all actions taken by its shareholders or Board of
Directors without a meeting, a record of all actions taken on behalf of the
Corporation by a committee of the Board of Directors in place of the Board of
Directors, and a record of all waivers of notices of meetings of its
shareholders,
C-13
<PAGE> 238
meetings of the Board of Directors, or any meetings of committees of the Board
of Directors. The Corporation shall maintain appropriate accounting records.
(16-10a-1601(1), (2))
(b) Absolute Inspection Rights. If a shareholder gives the
Corporation written notice of the shareholder's demand at least five (5)
business days before the date on which the shareholder wishes to inspect and
copy, a shareholder (or the shareholder's agent or attorney) has the right to
inspect and copy, during regular business hours, any of the following records,
all of which the Corporation is required to keep at its principal office:
(1) The Corporation's Articles of Incorporation
currently in effect;
(2) the Corporation's Bylaws currently in effect;
(3) the minutes of all shareholders' meetings, and records
of all action taken by shareholders without a meeting, for the
past three years;
(4) all written communications within the past three years
to shareholders as a group or to the holders of any class or
series of shares as a group;
(5) a list of the names and business addresses of the
Corporation's current officers and directors;
(6) the Corporation's most recent annual report delivered
to the Division; and
(7) all financial statements prepared for periods ending
during the last three years that a shareholder could request
pursuant to Section 16-10a-1605 of the Utah Revised Business
Corporation Act. (16-10a-1601(5) and 16-10a-1602(1))
(c) Conditional Inspection Rights. If a shareholder gives the
Corporation a written demand made in good faith and for a proper purpose at
least five business days before the date on which the shareholder wishes to
inspect and copy, the shareholder describes with reasonable particularity the
shareholder's purpose and the records the shareholder desires to inspect, and
the records are directly connected with the shareholder's purpose, the
shareholder (or the shareholder's agent or attorney) is entitled to inspect and
copy, during regular business hours at a reasonable location specified by the
Corporation, any of the following records of the Corporation:
C-14
<PAGE> 239
(1) Excerpts from:
(i) Minutes of any meeting of the Board of
Directors, records of any action of a committee of the
Board of Directors while acting on behalf of the
Corporation in place of the Board of Directors;
(ii) minutes of any meeting of the shareholders;
(iii)records of action taken by the shareholders
without a meeting; and
(iv) waivers of notices of any meeting of the
shareholders, of any meeting of the Board of Directors, or
of any meeting of a committee of the Board of Directors;
(2) accounting records of the Corporation; and
(3) the record of the Corporation's shareholders referred
to in Section 16-10a-1601(3) of the Utah Revised Business
Corporation Act. (16-10a-1602(2))
(d) Copy Costs. The right to copy records includes, if
reasonable, the right to receive copies made by photographic, xerographic or
other means. The Corporation may impose a reasonable charge, payable in advance,
covering the costs of labor and material, for copies of any documents provided
to a shareholder. The charge may not exceed the estimated cost of production or
reproduction of the records. (16-10a-1603)
(e) Shareholder Includes Beneficial Owner. For purposes of this
Section 2.14, the term "shareholder" shall include a beneficial owner whose
shares are held in a voting trust and any other beneficial owner who establishes
beneficial ownership.
(16-10a-1602(4)(b))
Section 2.15. Furnishing Financial Statements to a Shareholder.
Upon the written request of any shareholder, the Corporation shall mail to the
shareholder its most recent annual or quarterly financial statements showing in
reasonable detail its assets and liabilities and the results of its operations.
(16-10a-1605)
Section 2.16. Information Respecting Shares. Upon the written
request of any shareholder, the Corporation, at its own expense, shall mail to
the shareholder information respecting the designations, preferences,
limitations and relative rights applicable to each class of shares, the
variations determined for each series, and the authority of the Board of
Directors to determine variations for any existing or future class or series.
The Corporation may comply by
C-15
<PAGE> 240
mailing the shareholder a copy of its Articles of Incorporation containing such
information. (16-10a-1606)
ARTICLE 3. BOARD OF DIRECTORS
Section 3.1. General Powers. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, the Board of Directors,
subject to any limitation set forth in the Articles of Incorporation or in any
agreement authorized by Section 16-10a-732 of the Utah Revised Business
Corporation Act. (16-10a-801)
Section 3.2. Number, Tenure and Qualifications of Directors.
(a) Number. The number of directors of the Corporation shall be
not less than eight (8) nor more than eleven (11). The number of directors may
be fixed or changed within the range specified in this Section 3.2 by the
shareholders or the Board of Directors, but no decrease may shorten the term of
any incumbent director. (16-10a-803(1), (2))
(b) Tenure. Each director shall hold office until the next annual
meeting of shareholders or until removed. However, if a director's term expires,
the director shall continue to serve until the director's successor shall have
been elected and qualified, or until there is a decrease in the number of
directors. (16-10a-805)
(c) Qualifications. Directors need not be residents of the State
of Utah or shareholders of the Corporation unless the Articles of Incorporation
so prescribe. (16-10a-802) Directors shall have the following qualifications:
(i) For a period of five (5) years after the date these
Amended and Restated Bylaws are adopted (but not thereafter), (A) six (6) of the
directors shall be direct descendants (or the spouse of a direct descendant) of
W.W. Clyde, and (B) two (2) of the directors shall be direct descendants (or the
spouse of a direct descendant) of Edward Clyde.
(ii) No person over seventy-five (75) years old shall be
elected or appointed a director of the Corporation; provided, however, that any
director elected within sixty (60) days after the adoption of these Amended and
Restated Bylaws shall be qualified to be a director during the period five (5)
years after the date of the adoption of these Amended and Restated Bylaws
(without regard to such person's age).
Section 3.3. Regular Meetings of the Board of Directors. A
regular meeting of the Board of Directors shall be held without other notice
than provided by this Section 3.3
C-16
<PAGE> 241
immediately after, and at the same place as, the annual meeting of shareholders.
The Board of Directors may provide, by resolution, the time and place for the
holding of additional regular meetings without other notice than such
resolution.
Section 3.4. Special Meetings of the Board of Directors. Special
meetings of the Board of Directors may be called by or at the request of the
President, a Vice President or any two (2) directors, who may fix any place,
either within or outside the State of Utah, as the place for holding the
meeting.
Section 3.5. Notice and Waiver of Notice of Special Director
Meetings.
(a) Notice. Unless the Articles of Incorporation provide for a
longer or shorter period, special meetings of the Board of Directors must be
preceded by at least two (2) days notice of the date, time and place of the
meeting. (16-10a-822(2)) Notice may be communicated in person, by telephone, by
any form of electronic communication, or by mail or private carrier.
(16-10a-103(2)) At the written request of any director, notice of any special
meeting of the Board of Directors shall be given to such director by facsimile
or telex, as the case may be, at the number designated in writing by such
director from time to time.
(b) Effective Date. Notice of any meeting of the Board of
Directors shall be deemed to be effective at the earliest of the following: (1)
when received; (2) five (5) days after it is mailed; or (3) the date shown on
the return receipt if sent by registered or certified mail, return receipt
requested, and the receipt is signed by or on behalf of the director.
(16-10a-103(5)).
(c) Waiver of Notice. A director may waive notice of any meeting.
Except as provided in this Section 3.5, the waiver must be in writing and signed
by the director entitled to the notice. The waiver shall be delivered to the
Corporation for filing with the corporate records, but delivery and filing are
not conditions to its effectiveness.
(16-10a-823(1))
(d) Effect of Attendance. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except when a
director attends a meeting for the express purpose of objecting to the
transaction of any business and at the beginning of the meeting, or promptly
upon arrival, the director objects to holding the meeting or transacting
business at the meeting because of lack of notice or defective notice, and does
not thereafter vote for or assent to action taken at the meeting.
(16-10a-823(2))
Section 3.6. Quorum of Directors. A majority of the number of
directors prescribed by resolution (or if no number is prescribed, the number in
office immediately before the meeting begins) shall constitute a quorum for the
transaction of business at any meeting of
C-17
<PAGE> 242
the Board of Directors, unless the Articles of Incorporation require a greater
number. (16-10a-824(1)(b))
Section 3.7. Manner of Acting.
(a) Action by Majority. If a quorum is present when a vote is
taken, the affirmative vote of a majority of directors present is the act of the
Board of Directors, unless the Corporation's Articles of Incorporation or the
Utah Revised Business Corporation Act requires the vote of a greater number of
directors. (16-10a-824(3))
(b) Telephonic Meetings. Unless the Articles of Incorporation
provide otherwise, any or all directors may participate in a regular or special
meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.
(16-10a-820(2))
(c) Effect of Presence at Meeting. A director who is present at a
meeting of the Board of Directors when corporate action is taken is considered
to have assented to the action taken, unless:
(1) The director objects at the beginning of the meeting,
or promptly upon arrival, to holding it or transacting business
at the meeting;
(2) the director contemporaneously requests his dissent or
abstention as to any specific action to be entered into the
minutes of the meeting; or
(3) the director causes written notice of a dissent or
abstention as to any specific action to be received by the
presiding officer of the meeting before its adjournment or by the
Corporation promptly after adjournment of the meeting.
(16-10a-824(4))
(d) Right of Dissent or Abstention. The right of dissent or
abstention as to a specific action is not available to a director who votes in
favor of the action taken. (16-10a-824(5))
Section 3.8. Director Action By Written Consent. Unless the
Articles of Incorporation or the Utah Revised Business Corporation Act provide
otherwise, any action required or permitted to be taken by the Board of
Directors at a meeting may be taken without a meeting if all the directors
consent to the action in writing. Action is taken by written consent at the time
the last director signs a writing describing the action taken, unless, prior to
that time,
C-18
<PAGE> 243
any director has revoked a consent by a writing signed by the director and
received by the Secretary. Action taken by written consent is effective when the
last director signs the consent, unless the Board of Directors establishes a
different effective date. Action taken by written consent has the same effect as
action taken at a meeting of directors and may be described as such in any
document. (16-10a-821)
Section 3.9. Resignation of Directors. A director may resign at
any time by giving a written notice of resignation to the Corporation. A
resignation of a director is effective when the notice is received by the
Corporation unless the notice specifies a later effective date. A director who
resigns may deliver a statement of his resignation pursuant to Section
16-10a-1608 of the Utah Revised Business Corporation Act to the Division for
filing. (16-10a-807)
Section 3.10. Removal of Directors. The shareholders may remove
one or more directors at a meeting called for that purpose if notice has been
given that a purpose of the meeting is such removal. The removal may be with or
without cause, unless the Articles of Incorporation provide that directors may
only be removed with cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove the director. If cumulative voting is in effect, a director may
not be removed if the number of votes sufficient to elect the director under
cumulative voting is voted against the director's removal. If cumulative voting
is not in effect, a director may be removed only if the number of votes cast to
remove the director exceeds the number of votes cast against removal of the
director. (16-10a-808)
Section 3.11. Board of Director Vacancies.
(a) Vacancies. Unless the Articles of Incorporation provide
otherwise, if a vacancy occurs on the Board of Directors, including a vacancy
resulting from an increase in the number of directors:
(1) The shareholders may fill the vacancy;
(2) the Board of Directors may fill the vacancy; or
(3) if the directors remaining in office constitute fewer
than a quorum of the board, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining in
office. (16-10a-810(1))
(b) Rights of Voting Groups. Unless the Articles of Incorporation
provide otherwise, if the vacant office was held by a director elected by a
voting group of shareholders:
C-19
<PAGE> 244
(1) If one or more directors were elected by the same
voting group, only they are entitled to vote to fill the vacancy
if it is filled by the directors; and
(2) only the holders of shares of that voting group are
entitled to vote to fill the vacancy if it is filled by the
shareholders. (16-10a-810(2))
(c) Election of Director Prior to Vacancy. A vacancy that will
occur at a specific later date, because of a resignation effective at a later
date, may be filled before the vacancy occurs, but the new director may not take
office until the vacancy occurs. (16-10a-810(3))
(d) Effect of Expiration of Term. If a director's term expires,
the director shall continue to serve until the director's successor is elected
and qualified or until there is a decrease in the number of directors. The term
of a director elected to fill a vacancy expires at the next shareholders'
meeting at which directors are elected.
(16-10a-805(5))
Section 3.12. Director Compensation. Unless otherwise provided in
the Articles of Incorporation, by resolution of the Board of Directors, each
director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as a director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the Corporation in any capacity
and receiving compensation therefor.
Section 3.13. Director Committees. Committees of the Board of
Directors may be established in accordance with Article 4 of these Bylaws.
Section 3.14. Director's Rights to Inspect Corporate Records.
(a) Absolute Inspection Rights. If a director gives the
Corporation written notice of the director's demand at least five (5) business
days before the date on which the director wishes to inspect and copy, the
director (or the director's agent or attorney) has the right to inspect and
copy, during regular business hours, any of the following records, all of which
the Corporation is required to keep at its principal office:
(1) The Corporation's Articles of Incorporation
currently in effect;
(2) the Corporation's Bylaws currently in effect;
C-20
<PAGE> 245
(3) the minutes of all shareholders' meetings, and records
of all action taken by shareholders without a meeting, for the
past three years;
(4) all written communications within the past three years
to shareholders as a group or to the holders of any class or
series of shares as a group;
(5) a list of the names and business addresses of the
Corporation's current officers and directors;
(6) the Corporation's most recent annual report delivered
to the Division; and
(7) all financial statements prepared for periods ending
during the last three years that a shareholder could request.
(16-10a-1601(5) and 16-10a-1602(1))
(b) Conditional Inspection Rights. In addition, if a director
gives the Corporation a written demand made in good faith and for a proper
purpose at least five business days before the date on which the director wishes
to inspect and copy, the director describes with reasonable particularity the
director's purpose and the records the director desires to inspect, and the
records are directly connected with the director's purpose, the director (or the
director's agent or attorney) is entitled to inspect and copy, during regular
business hours at a reasonable location specified by the Corporation, any of the
following records of the Corporation:
(1) Excerpts from:
(i) Minutes of any meeting of the Board of
Directors, records of any action of a committee of the
Board of Directors while acting on behalf of the
Corporation in place of the Board of Directors;
(ii) minutes of any meeting of the shareholders;
(iii) records of action taken by the shareholders
without a meeting; and
(iv) waivers of notices of any meeting of the
shareholders, of any meeting of the Board of Directors, or
of any meeting of a committee of the Board of Directors;
(2) accounting records of the Corporation; and
C-21
<PAGE> 246
(3) the record of the Corporation's shareholders referred
to in Section 16-10a-1601(3) of the Utah Revised Business
Corporation Act. (16-10a-1602(2))
(d) Copy Costs. The right to copy records includes, if
reasonable, the right to receive copies made by photographic, xerographic or
other means. The Corporation may impose a reasonable charge, payable in advance,
covering the costs of labor and material, for copies of any documents provided
to the director. The charge may not exceed the estimated cost of production or
reproduction of the records. (16-10a-1603)
ARTICLE 4. EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 4.1. Creation of Committees. Unless the Articles of
Incorporation provide otherwise, the Board of Directors may create an Executive
Committee and such other committees as it may deem appropriate and appoint
members of the Board of Directors to serve on such committees. Each committee
must have two (2) or more members, one of whom shall be the Chairman of the
Board, if there be such an officer, and one of whom shall be the President of
the Corporation. (16-10a-825(1))
Section 4.2. Approval of Committees and Members. The creation of
a committee and appointment of members to it must be approved by the greater of:
(1) A majority of all the directors in office when the
action is taken; or
(2) the number of directors required by the Articles of
Incorporation to take such action, or, if not specified in the
Articles of Incorporation, the number required by Section 3.7 of
these Bylaws to take action.
(16-10a-825(2))
Section 4.3. Required Procedures. Sections 3.4 through 3.10 of
these Bylaws, which govern procedures applicable to the Board of Directors, also
apply to committees and their members. (16-10a-825(3))
Section 4.4. Authority. Unless limited by the Articles of
Incorporation or the Utah Revised Business Corporation Act, each committee may
exercise those aspects of the authority of the Board of Directors which the
Board of Directors confers upon such committee in the resolution creating the
committee. (16-10a-825(4))
Section 4.5. Authority of Executive Committee. The Executive
Committee shall have, and may exercise all powers of the Board of Directors with
respect to the management of the business and affairs of the Corporation during
the intervals between the
C-22
<PAGE> 247
meetings of the Board of Directors. Provided, however, the Executive Committee
shall not have the power to fill vacancies on the Board of Directors or to amend
these Bylaws.
Section 4.6. Compensation. Unless otherwise provided in the
Articles of Incorporation, the Board of Directors may provide for the payment of
a fixed sum and/or expenses of attendance to any member of a committee for
attendance at each meeting of such committee. Provided, however, no such
payments shall be made to committee members who are salaried employees of the
Corporation.
ARTICLE 5. OFFICERS AND ADVISORS
Section 5.1. Officers and Advisors. The officers of the
Corporation shall be a President, one or more Vice Presidents, a Secretary and a
Treasurer, each of whom shall be appointed by the Board of Directors. The Board
of Directors may appoint a Chief Executive Officer and such other officers and
assistant officers as may be deemed necessary. If specifically authorized by the
Board of Directors, an officer may appoint one or more officers or assistant
officers. The same individual may simultaneously hold more than one office in
the Corporation. (16-10a-830) The Board of Directors may also appoint, but shall
not be required to appoint, a Chairman of the Board and one or more Board
Advisors. The Chairman of the Board and any Board Advisors shall not be officers
of the Corporation, but shall be advisors to the Board of Directors and to the
Corporation. The Board of Directors may appoint such other advisors as may be
deemed necessary.
Section 5.2. Appointment and Term. Each of the officers and
advisors of the Corporation shall be appointed by the Board of Directors for a
term determined by the Board of Directors. If no term is specified, each officer
or advisor shall hold office until the officer or advisor resigns, dies, is
removed in the manner provided in Section 5.4 of these Bylaws, or until the
first meeting of the directors held after the next annual meeting of the
shareholders. If the appointment of officers or advisors shall not be made at
such meeting, such appointment shall be made as soon thereafter as is
convenient. If a vacancy shall occur in any office or advisory position, or if a
new office or advisory position shall be created, the Board of Directors may
appoint officer(s) or advisor(s) to fill such vacancy, office or position, and
such appointment shall be for the term determined by the Board of Directors.
Each officer and advisor shall hold office until his or her successor shall have
been duly appointed. (16-10a-830)
The designation of a specified term does not grant to the officer
or advisor any contract rights, and the Board of Directors may remove the
officer or advisor at any time prior to the end of such term. (16-10a-833)
C-23
<PAGE> 248
Section 5.3. Resignation. Any officer or advisor may resign at
any time by giving written notice of resignation to the Corporation.
(16-10a-832(1))
Section 5.4. Removal. Any officer, advisor or agent of the
Corporation may be removed by the Board of Directors at any time, with or
without cause. Such removal shall be without prejudice to the contract rights,
if any, of the person so removed. Appointment of an officer, advisor or agent
shall not of itself create contract rights. (16-10a-832)
Section 5.5. The Chairman of the Board. The Chairman of the
Board, if there be such a position, shall have the following powers and duties:
(a) To be a senior advisor to the Corporation and, in addition to
the duties specified in this Section 5.5, to perform such duties as may be
assigned to him by the Board of Directors;
(b) to preside at all meetings of the shareholders of the
Corporation;
(c) to preside at all meetings of the Board of Directors;
(d) to be a member of the Executive Committee, if any.
(16-10a-831)
Section 5.6. Board Advisors. The Board of Directors may from time
to time designate and appoint one or more Board Advisors. Each Board Advisor
shall have the right to attend meetings of the Board of Directors, but a Board
Advisor shall not be a director and shall not vote on any matter voted upon by
the directors. Each Board Advisor shall have such powers and perform such duties
as may from time to time be assigned to him or her by the Board of Directors or
by the Chairman of the Board.
Section 5.7. Chief Executive Officer. The Chief Executive
Officer, if there be such an officer, shall be the principal executive officer
of the Corporation and, subject to the control of the Board of Directors, in
general, shall supervise and control all of the business and affairs of the
Corporation. If no Chairman of the Board has been appointed, or in his absence,
the Chief Executive Officer, when present, shall preside at all meetings of the
shareholders and of the Board of Directors. The Chief Executive Officer may
sign, with the Secretary or any other proper officer of the Corporation
authorized by the Board of Directors, certificates for shares of the
Corporation, the issuance of which shall have been authorized by a resolution of
the Board of Directors, and deeds, mortgages, bonds, contracts or other
instruments, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed; and in general shall perform all duties incident to the
office of
C-24
<PAGE> 249
Chief Executive Officer and such other duties as may be prescribed by the Board
of Directors from time to time. (16-10a-831)
Section 5.8. President. The President shall be an executive
officer of the Corporation, and, if there be no Chief Executive Officer, shall
be the principal executive officer of the Corporation and, subject to the
control of the Board of Directors, in general, shall supervise and control all
of the business and affairs of the Corporation. In the absence of the Chief
Executive Officer or in the event of his death or inability or refusal to act,
the President shall perform the duties of the Chief Executive Officer, and when
so acting, shall have all the powers of and be subject to all the restrictions
upon the Chief Executive Officer. In the absence of the Chairman of the Board
and the Chief Executive Officer, the President, when present, shall preside at
all meetings of the shareholders and of the Board of Directors. The President
may sign, with the Secretary or any other proper officer of the Corporation
authorized by the Board of Directors, certificates for shares of the
Corporation, the issuance of which shall have been authorized by a resolution of
the Board of Directors, and deeds, mortgages, bonds, contracts or other
instruments, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed; and in general shall perform all duties incident to the
office of President and such other duties as may be prescribed by the Chief
Executive Officer or the Board of Directors from time to time.
(16-10a-831)
Section 5.9. Vice Presidents. In the absence of the President or
in the event of his death or inability or refusal to act, the Vice President (or
in the event there be more than one Vice President, the Vice Presidents in the
order designated at the time of their election, or in the absence of any
designation, then in the order of their appointment) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. If there is no Vice President, then
the Treasurer shall perform such duties of the President. Any Vice President may
sign, with the Secretary or an Assistant Secretary, certificates for shares of
the Corporation the issuance of which have been authorized by resolution of the
Board of Directors; and shall perform such other duties as from time to time may
be assigned to him or her by the Chief Executive Officer, the President or by
the Board of Directors.
(16-10a-831)
Section 5.10. Secretary. The Secretary shall have the following
powers and duties:
(a) to keep the minutes of the proceedings of the shareholders
and of the Board of Directors and the other records and information of the
Corporation required to be kept, in one or more books provided for that purpose;
C-25
<PAGE> 250
(b) to see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law;
(c) to be custodian of the corporate records and of any seal of
the Corporation;
(d) when requested or required, to authenticate any records of
the Corporation;
(e) to keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder;
(f) to sign with the Chief Executive Officer, the President or a
Vice President, certificates for shares of the Corporation, the issuance of
which shall have been authorized by resolution of the Board of Directors;
(g) to have general charge of the stock transfer books of the
Corporation; and
(h) in general, to perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him or
her by the Chief Executive Officer, the President or by the Board of Directors.
(16-10a-830 and 16-10a-831)
Section 5.11. Treasurer. The Treasurer shall have the following
powers and duties:
(a) to have charge and custody of and be responsible for all
funds and securities of the Corporation;
(b) to receive and give receipts for moneys due and payable to
the Corporation from any source whatsoever, and deposit all such moneys in the
name of the Corporation in such banks, trust companies or other depositories as
shall be selected by the Board of Directors;
(c) in general, to perform all of the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him or her by the Chief Executive Officer, the President or by the Board of
Directors; and
(d) if required by the Board of Directors, to give a bond for the
faithful discharge of his or her duties in such sum and with such surety or
sureties as the Board of Directors shall determine. (16-10a-831)
Section 5.12. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries, when authorized by the Board of Directors, may sign, with
the President or a Vice
C-26
<PAGE> 251
President, certificates for shares of the Corporation, the issuance of which
shall have been authorized by a resolution of the Board of Directors. The
Assistant Treasurers, if required by the Board of Directors, shall give bonds
for the faithful discharge of their duties in such sums and with such sureties
as the Board of Directors shall determine. The Assistant Secretaries and
Assistant Treasurers, in general, shall perform such duties as shall be assigned
to them by the Secretary or the Treasurer, respectively, or by the Chief
Executive Officer, the President or the Board of Directors. (16-10a-831)
Section 5.13. General Manager. The Chief Executive Officer, the
President or the Board of Directors (or the Executive Committee, if any) may
appoint a General Manager who may, or may not, be one of the officers or
directors of the Corporation. The General Manager shall have the following
powers and duties:
(a) If so designated by the Board of Directors, the General
Manager may be an executive officer of the Corporation.
(b) If so directed by the Chief Executive Officer, the President
or the Board of Directors (or the Executive Committee, if any), the General
Manager may have management of the business of the Corporation and its dealings
and, if so directed, may have general charge of the business affairs and
property of the Corporation, general supervision over its employees and agents;
provided, however, the General Manager shall be at all times subject to the
control of the Chief Executive Officer, the President or the Board of Directors
(or the Executive Committee, if any).
(c) If so directed by the Chief Executive Officer, the President
or the Board of Directors (or the Executive Committee, if any), the General
Manager may employ all employees of the Corporation, or delegate such employment
to subordinate officers or division chiefs, and shall have authority to
discharge any person so employed.
(d) The General Manager shall make a report to the Chief
Executive Officer, the President and the Board of Directors quarterly, or more
often if required to do so, setting forth the result of the operations under his
charge, together with suggestions looking to the improvement and betterment of
the condition of the Corporation, and to perform such other duties as the Board
of Directors shall require.
Section 5.14. Salaries. The salaries of the officers, advisors
and agents shall be fixed from time to time by the Board of Directors; provided,
however, that the Board of Directors may delegate to any person or group of
persons the power to fix the salaries or other compensation of any subordinate
officers, advisors or agents. No officer shall be prevented from
C-27
<PAGE> 252
receiving any such salary or compensation by reason of the fact that he is also
a director of the Corporation.
Section 5.15. Surety Bonds. In the event the Board of Directors
shall so require, any officer, advisor or agent of the Corporation shall execute
to the Corporation a bond in such sums and with such surety or sureties as the
Board of Directors may direct, conditioned upon the faithful performance of his
duties to the Corporation, including responsibility for negligence and for the
accounting for all property, monies or securities of the Corporation which may
come into his hands.
ARTICLE 6. LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 6.1. Limitation of Liability of Directors. Directors
shall not be liable to the Corporation or its shareholders for monetary damages
for any action taken or any failure to take any action, as a director, except
liability for:
(a) the amount of a financial benefit received by a director to
which he is not entitled;
(b) an intentional infliction of harm on the Corporation or its
shareholders;
(c) a violation of Section 16-10a-842 of the Utah Revised
Business Corporation Act;
C-28
<PAGE> 253
(d) an intentional violation of criminal law. (16-10a-841(1))
Section 6.2. Indemnification of Directors. Unless otherwise
provided in the Articles of Incorporation, the Corporation shall indemnify any
individual made a party to a proceeding because the individual is or was a
director of the Corporation against liability incurred in the proceeding.
Provided, however, the Corporation shall only indemnify an individual if it has
authorized the indemnification in accordance with Section 16-10a-906(4) of the
Utah Revised Business Corporation Act and a determination has been made in
accordance with the procedures set forth in Section 16-10a-906(2) of the Utah
Revised Business Corporation Act that indemnification is in accordance with the
following requirements:
(a) Standard of Conduct. The Corporation shall determine that:
(1) The individual's conduct was in good faith;
(2) the individual reasonably believed that his or her
conduct was in, or not opposed to, the Corporation's best
interests; and
(3) in the case of any criminal proceeding, the individual
had no reasonable cause to believe that his or her conduct was
unlawful.
(16-10a-902(1))
(b) No Indemnification in Certain Circumstances. The Corporation
shall not indemnify an individual under this Section 6.2:
(1) In connection with a proceeding by or in the right of
the Corporation in which the individual was adjudged liable to
the Corporation; or
(2) in connection with any other proceeding charging that
the individual derived an improper personal benefit, whether or
not involving action in the individual's official capacity, in
which proceeding he or she was adjudged liable on the basis that
he or she derived an improper personal benefit. (16-10a-902(4))
(c) Indemnification in Derivative Actions Limited.
Indemnification permitted under this Section 6.2 in connection with a proceeding
by or in the right of the Corporation is limited to reasonable expenses incurred
in connection with the proceeding.
(16-10a-902(5))
Section 6.3. Advance Payment of Expenses. Unless otherwise
provided in the Articles of Incorporation, the Corporation may pay for or
reimburse in advance of final
C-29
<PAGE> 254
disposition of any proceeding the reasonable expenses incurred by an individual
who is a party to a proceeding because he or she is or was a director of the
Corporation if (i) in accordance with the procedures and standards set forth in
Section 16-10a-906(4) of the Utah Revised Business Corporation Act, an
authorization of payment is made, and (ii) in accordance with the procedures of
Section 16-10a-906(2) of the Utah Revised Business Corporation Act, a
determination is made that the following has occurred:
(a) Written Affirmation. The individual has furnished to the
Corporation a written affirmation of the individual's good faith belief that the
individual has met the standard of conduct described in Section 6.2 of these
Bylaws.
(b) Written Undertaking. The individual has furnished to the
Corporation a written undertaking, executed personally or on the individual's
behalf, to repay the advance if it is ultimately determined that the individual
did not meet the standard of conduct (which undertaking must be an unlimited
general obligation of the individual but need not be secured and may be accepted
without reference to financial ability to make repayment).
(c) Factual Determination. A determination has been made that the
facts then known to those making the determination would not preclude
indemnification under Section 6.2 of these Bylaws or Part 9 of the Utah Revised
Business Corporation Act.
(16-10a-904)
Section 6.4. Indemnification of Officers, Employees, Fiduciaries
and Agents. Unless otherwise provided in the Articles of Incorporation, the
Corporation shall indemnify and advance expenses to any individual made a party
to a proceeding because the individual is or was an officer, employee, fiduciary
or agent of the Corporation to the same extent as to an individual made a party
to a proceeding because the individual is or was a director of the Corporation,
or to a greater extent, if not inconsistent with public policy, if provided for
by general or specific action of the Board of Directors. (16-10a-907)
Section 6.5. Insurance. The Corporation may purchase and maintain
liability insurance on behalf of a person who is or was a director, officer,
employee, fiduciary or agent of the Corporation, or who, while serving as a
director, officer, employee, fiduciary or agent of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
trustee, employee, fiduciary or agent of another foreign or domestic corporation
or other person, or of an employee benefit plan, against liability asserted
against or incurred by him or her in that capacity or arising from his or her
status as a director, officer, employee, fiduciary or agent, whether or not the
Corporation would have power to indemnify him or her against the same liability
under Sections 16-10a-902, 16-10a-903, or 16-10a-907 of the Utah Revised
Business Corporation Act. Insurance may be procured from any insurance company
designated by the Board of Directors, whether the insurance company is formed
under the laws of the State of Utah
C-30
<PAGE> 255
or any other jurisdiction of the United States or elsewhere, including any
insurance company in which the Corporation has an equity or any other interest
through stock ownership or otherwise. (16-10a-908)
ARTICLE 7. EXECUTION OF INSTRUMENTS, BORROWING OF MONEY
AND DEPOSIT OF CORPORATE FUNDS
Section 7.1. Execution of Instruments. Subject to any limitation
contained in the Utah Revised Business Corporation Act, the Articles of
Incorporation or these Bylaws, and subject to any limitations that may be
imposed by the Board of Directors, the Chief Executive Officer, President, any
Vice President or the Secretary, in the name and on behalf of the Corporation,
may execute and deliver any contract or other instrument. Subject to any
limitation contained in the Utah Revised Business Corporation Act, the Articles
of Incorporation or these Bylaws, the Board of Directors may authorize in
writing any other officer or agent to execute and deliver any contract or other
instrument in the name and on behalf of the Corporation; any such authorization
may be general or confined to specific instances.
Section 7.2. Loans. No loan or advance shall be contracted on
behalf of the Corporation, no negotiable paper or other evidence of its
obligation under any loan or advance shall be issued in its name, and no
property of the Corporation shall be mortgaged, pledged, hypothecated,
transferred or conveyed as security for the payment of any loan, advance,
indebtedness or liability of the Corporation, unless and except as authorized by
the Board of Directors. Any such authorization may be general or confined to
specific instances.
Section 7.3. Deposits. All monies of the Corporation not
otherwise employed shall be deposited from time to time to its credit in such
banks or trust companies or with such bankers or other depositories as the Board
of Directors may select, or as from time to time may be selected by any officer
or agent authorized to do so by the Board of Directors.
Section 7.4. Checks, Drafts, etc. All notes, drafts, acceptances,
checks, endorsements, and, subject to the provisions of these Bylaws, evidences
of indebtedness of the Corporation shall be signed by such officer or officers
or such agent or agents of the Corporation and in such manner as the Board of
Directors from time to time may determine. Endorsements for deposit to the
credit of the Corporation in any of its duly authorized depositories shall be in
such manner as the Board of Directors from time to time may determine.
Section 7.5. Bonds and Debentures. Every bond or debenture issued
by the Corporation shall be evidenced by an appropriate instrument which shall
be signed by the Chief Executive Officer, President or a Vice President and by
the Secretary. Where such bond or debenture is authenticated with the manual
signature of an authorized officer of the Corporation
C-31
<PAGE> 256
or other trustee designated by the indenture of trust or other agreement under
which such security is issued, the signature of any of the Corporation's
officers named thereon may be a facsimile. In case any officer who signed, or
whose facsimile signature has been used on any such bond or debenture, shall
cease to be an officer of the Corporation for any reason before the same has
been delivered by the Corporation, such bond or debenture may nevertheless be
adopted by the Corporation and issued and delivered as though the person who
signed it or whose facsimile signature has been used thereon had not ceased to
be such officer.
Section 7.6. Sale, Transfer, etc. of Securities. Sales,
transfers, endorsements, and assignments of shares of stocks, bonds, and other
securities owned by or standing in the name of the Corporation and the execution
and delivery on behalf of the Corporation of any and all instruments in writing
incident to any such sale, transfer, endorsement or assignment, shall be
effected by the Chief Executive Officer, President, any Vice President, or by
any officer or agent thereunto authorized by the Board of Directors.
Section 7.7. Proxies. Proxies to vote with respect to shares of
stock of other corporations used by or standing in the name of the Corporation
shall be executed and delivered on behalf of the Corporation by the Chief
Executive Officer, President, any Vice President, or by any officer or agent
thereunto authorized by the Board of Directors.
ARTICLE 8. CERTIFICATES FOR SHARES AND
THEIR TRANSFER
Section 8.1. Certificates for Shares.
(a) Content. Certificates representing shares of the Corporation,
at a minimum, shall state on their face the name of the Corporation and that the
Corporation is organized under the laws of the State of Utah; the name of the
person to whom issued; and the number and class of shares and the designation of
the series, if any, the certificate represents; and be in such form as is
determined by the Board of Directors. Such certificates shall be signed by the
President or a Vice President and by the Secretary or an Assistant Secretary and
may be sealed with the corporate seal or a facsimile thereof. The signatures of
the officers may be facsimiles if the certificate is countersigned by a transfer
agent, or registered by a registrar, other than the Corporation itself or an
employee of the Corporation. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate ceases to be an officer
before the certificate is issued, the certificate may be issued by the
corporation with the same effect as if the person were an officer at the date of
its issue. Each certificate for shares shall be consecutively numbered or
otherwise identified. The certificates may contain any other information the
Corporation considers necessary or appropriate. (16-10a-625)
C-32
<PAGE> 257
(b) Legend as to Class or Series. If the Corporation is
authorized to issue different classes of shares or different series within a
class, the designations, preferences, limitations, and relative rights
applicable to each class, the variations in preferences, limitations, and
relative rights determined for each series, and the authority of the Board of
Directors to determine variations for any existing or future class or series
must be summarized on the front or back of each certificate. Alternatively, each
certificate may state conspicuously on its front or back that the Corporation
will furnish the shareholder this information on request in writing and without
charge. (16-10a-625)
(c) Shareholder List. The name and address of the person to whom
the shares represented are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation.
(d) Transferring Shares. All certificates surrendered to the
Corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms and indemnity to
the Corporation as the Board of Directors may prescribe.
Section 8.2. Shares Without Certificates.
(a) Issuing Shares Without Certificates. Unless the Articles of
Incorporation provide otherwise, the Board of Directors may authorize the
issuance of some or all of the shares of any or all classes or series without
certificates. The authorization does not affect shares already represented by
certificates until they are surrendered to the Corporation.
(b) Information Statement Required. Within a reasonable time
after the issuance or transfer of shares without certificates, the Corporation
shall send the shareholder a written statement containing, at a minimum, the
name of the Corporation and that it is organized under the laws of the State of
Utah; the name of the person to whom issued; and the number and class of shares
and the designation of the series, if any, of the issued shares. If the
Corporation is authorized to issue different classes of shares or different
series within a class, the written statement shall describe the designations,
preferences, limitations, and relative rights applicable to each class, the
variations in preferences, limitations, and relative rights determined for each
series, and the authority of the Board of Directors to determine variations for
any existing or future class or series. (16-10a-626)
Section 8.3. Registration of Transfer of Shares. Registration of
the transfer of shares of the Corporation shall be made only on the stock
transfer books of the Corporation. In order to register a transfer, the record
owner shall surrender the shares to the Corporation for
C-33
<PAGE> 258
cancellation, properly endorsed by the appropriate person or persons with
reasonable assurances that the endorsements are genuine and effective. Unless
the Corporation has established a procedure by which a beneficial owner of
shares held by a nominee is to be recognized by the Corporation as the owner,
the person in whose name shares stand on the books of the Corporation shall be
deemed by the Corporation to be the owner thereof for all purposes.
Section 8.4. Transfer Agents and Registrars. The Board of
Directors may appoint one or more transfer agents and one or more registrars
with respect to the certificates representing shares of stock of the Corporation
and may require all such certificates to bear the signature of either or both.
The Board of Directors may from time to time define the respective duties of
such transfer agents and registrars.
Section 8.5. Restrictions on Transfer of Shares Permitted. The
Board of Directors or the shareholders may impose restrictions on the transfer
or registration of transfer of shares (including any security convertible into,
or carrying a right to subscribe for or acquire shares). A restriction does not
affect shares issued before the restriction was adopted unless the holders of
the shares are parties to the restriction agreement or voted in favor of the
restriction or otherwise consented to the restriction.
(a) A restriction on the transfer or registration of transfer of
shares may be authorized:
(1) To maintain the Corporation's status when it is
dependent on the number or identity of its shareholders;
(2) to preserve entitlements, benefits or exemptions under
federal, state or local laws; and
(3) for any other reasonable purpose.
(b) A restriction on the transfer or registration of transfer of
shares may:
(1) Obligate the shareholder first to offer the
Corporation or other persons, separately, consecutively or
simultaneously, an opportunity to acquire the restricted shares;
(2) obligate the Corporation or other persons, separately,
consecutively or simultaneously, to acquire the restricted
shares;
C-34
<PAGE> 259
(3) require, as a condition to a transfer or registration,
that any one or more persons, including the Corporation or any of
its shareholders, approve the transfer or registration, if the
requirement is not manifestly unreasonable; or
(4) prohibit the transfer or the registration of a
transfer of the restricted shares to designated persons or
classes of persons, if the prohibition is not manifestly
unreasonable.
A restriction on the transfer or registration of transfer of
shares is valid and enforceable against the holder or a transferee of the holder
if the restriction is authorized by this Section 8.5 and its existence is noted
conspicuously on the front or back of the certificate, or if the restriction is
contained in the information statement required by Section 8.2 of these Bylaws
with regard to shares issued without certificates. Unless so noted, a
restriction is not enforceable against a person without knowledge of the
restriction. (16-10a-627)
Section 8.6. Acquisition of Shares. The Corporation may acquire
its own shares, and, unless otherwise provided in the Articles of Incorporation,
the shares so acquired constitute authorized but unissued shares.
If the Articles of Incorporation prohibit the reissue of acquired
shares, the number of authorized shares shall be reduced by the number of shares
acquired, effective upon amendment of the Articles of Incorporation, which
amendment shall be adopted by the shareholders or the Board of Directors without
shareholder action. Appropriate Articles of Amendment must be delivered to the
Division and must set forth:
(a) The name of the Corporation;
(b) the reduction in the number of authorized shares, itemized by
class and series;
(c) the total number of authorized shares, itemized by class and
series, remaining after reduction of the shares; and
(d) a statement that the amendment was adopted by the Board of
Directors without shareholder action and that shareholder action was not
required if such be the case. (16-10a-631)
Section 8.7. Lost or Destroyed Certificates. If the holder of a
certificate for shares of the Corporation claims that a certificate has been
lost, destroyed or wrongfully taken, the Corporation shall issue a new
certificate to such holder, if such holder:
C-35
<PAGE> 260
(a) so requests before the Corporation has notice that the
certificate has been acquired by a bona fide purchaser;
(b) files with the Corporation a sufficient indemnity bond; and
(c) satisfies any other reasonable requirements imposed by the
Corporation. (70A-8-405).
ARTICLE 9. DISTRIBUTIONS
Section 9.1. Distributions. The Board of Directors may authorize,
and the Corporation may make, distributions (including dividends on its
outstanding shares) in the manner and upon the terms and conditions provided by
law and in the Articles of Incorporation. (16-10a-640)
ARTICLE 10. CORPORATE SEAL
Section 10.1. Corporate Seal. The Board of Directors may provide
a corporate seal which may be circular in form and have inscribed thereon any
designation including the name of the Corporation, Utah as the state of
incorporation, and the words "Corporate Seal."
ARTICLE 11. FISCAL YEAR
Section 11.1. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
ARTICLE 12. AMENDMENTS
Section 12.1. Amendments. The Corporation's Board of Directors
may amend these Bylaws, except to the extent that the Articles of Incorporation,
these Bylaws or the Utah Revised Business Corporation Act reserve this power
exclusively to the shareholders in whole or in part. However, the Board of
Directors may not adopt, amend, or repeal a Bylaw that fixes a shareholder
quorum or voting requirement that is greater than required by the Utah Revised
Business Corporation Act.
Section 3.2 of these Bylaws may be amended by the Board of
Directors or by the shareholders; provided, however, that any such amendment of
Section 3.2 of these Bylaws must be approved by a seventy-five percent (75%)
majority of the directors or the shareholders, as the case may be.
C-36
<PAGE> 261
If authorized by the Articles of Incorporation, the shareholders
may adopt, amend or repeal a Bylaw that fixes a greater quorum or voting
requirement for shareholders, or voting groups of shareholders, than is required
by the Utah Revised Business Corporation Act. Any such action shall comply with
the provisions of the Utah Revised Business Corporation Act.
The Corporation's shareholders may amend or repeal the
Corporation's Bylaws even though the Bylaws may also be amended or repealed by
the Corporation's Board of Directors. (16-10a-1020 to 16-10a-1022)
ADOPTED as of the 12th day of November, 1997.
C-37
<PAGE> 262
ANNEX D
[UTAH REVISED BUSINESS CORPORATION ACT SECTIONS 16-10A-1301
THROUGH 16-10A-1331]
UTAH CODE
TITLE 16. CORPORATIONS
CHAPTER 10A. REVISED BUSINESS CORPORATION ACT
PART 13. DISSENTERS' RIGHTS
16-10a-1301. Definitions.
For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 16-10a-1302 and who exercises that right when and
in the manner required by Sections 16-10a-1320 through 16-10a-1328.
(4) "Fair value" with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the statutory rate set forth in Section
15-1-1, compounded annually.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent the beneficial owner
is recognized by the corporation as the shareholder as provided in Section
16-10a-723.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
16-10a-1302. Right to dissent.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
from, and obtain payment of the fair value of shares held by him in the event
of, any of the following corporate actions:
(a) consummation of a plan of merger to which the corporation is a
party if:
(i) shareholder approval is required for the merger by Section
16-10a-1103 or the articles of incorporation; or
(ii) the corporation is a subsidiary that is merged with its parent
under Section 16-10a-1104;
(b) consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired;
(c) consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under Subsection 16-10a-1202(1), but not including
a sale for cash pursuant to a plan by which all or substantially all of the net
proceeds of the sale will be distributed to the shareholders within one year
after the date of sale; and
(d) consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote upon
the consent of the corporation to the disposition pursuant to Subsection
16-10a-1202(2).
D-1
<PAGE> 263
(2) A shareholder is entitled to dissent and obtain payment of the fair
value of his shares in the event of any other corporate action to the extent the
articles of incorporation, bylaws, or a resolution of the board of directors so
provides.
(3) Notwithstanding the other provisions of this part, except to the
extent otherwise provided in the articles of incorporation, bylaws, or a
resolution of the board of directors, and subject to the limitations set forth
in Subsection (4), a shareholder is not entitled to dissent and obtain payment
under Subsection (1) of the fair value of the shares of any class or series of
shares which either were listed on a national securities exchange registered
under the federal Securities Exchange Act of 1934, as amended, or on the
National Market System of the National Association of Securities Dealers
Automated Quotation System, or were held of record by more than 2,000
shareholders, at the time of:
(a) the record date fixed under Section 16-10a-707 to determine the
shareholders entitled to receive notice of the shareholders' meeting at which
the corporate action is submitted to a vote;
(b) the record date fixed under Section 16-10a-704 to determine
shareholders entitled to sign writings consenting to the proposed corporate
action; or
(c) the effective date of the corporate action if the corporate action
is authorized other than by a vote of shareholders.
(4) The limitation set forth in Subsection (3) does not apply if the
shareholder will receive for his shares, pursuant to the corporate action,
anything except:
(a) shares of the corporation surviving the consummation of the plan of
merger or share exchange;
(b) shares of a corporation which at the effective date of the plan of
merger or share exchange either will be listed on a national securities exchange
registered under the federal Securities Exchange Act of 1934, as amended, or on
the National Market System of the National Association of Securities Dealers
Automated Quotation System, or will be held of record by more than 2,000
shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection (4), or cash
in lieu of fractional shares.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this part may not challenge the corporate action creating the entitlement
unless the action is unlawful or fraudulent with respect to him or to the
corporation.
16-10a-1303. Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and causes the
corporation to receive written notice which states the dissent and the name and
address of each person on whose behalf dissenters' rights are being asserted.
The rights of a partial dissenter under this subsection are determined as if the
shares as to which the shareholder dissents and the other shares held of record
by him were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) the beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) the beneficial shareholder dissents with respect to all shares of
which he is the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
beneficial shareholder must certify to the corporation that both he and the
record shareholders of all shares owned beneficially by him have asserted, or
will timely assert, dissenters' rights as to all the shares unlimited on the
ability to exercise dissenters' rights. The certification requirement must be
stated in the dissenters' notice given pursuant to Section 16-10a-1322.
D-2
<PAGE> 264
16-10a-1320. Notice of dissenters' rights.
(1) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must be sent to all shareholders of the corporation as of the
applicable record date, whether or not they are entitled to vote at the meeting.
The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this part. The notice must be accompanied by a copy of
this part and the materials, if any, that under this chapter are required to be
given the shareholders entitled to vote on the proposed action at the meeting.
Failure to give notice as required by this subsection does not affect any action
taken at the shareholders' meeting for which the notice was to have been given.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10a-704, any written or oral solicitation of a shareholder to execute
a written consent to the action contemplated by Section 16-10a-704 must be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this part, by a copy of this
part, and by the materials, if any, that under this chapter would have been
required to be given to shareholders entitled to vote on the proposed action if
the proposed action were submitted to a vote at a shareholders' meeting. Failure
to give written notice as provided by this subsection does not affect any action
taken pursuant to Section 16-10a-704 for which the notice was to have been
given.
16-10a-1321. Demand for payment - Eligibility and notice of intent.
(1) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) must cause the corporation to receive, before the vote is taken,
written notice of his intent to demand payment for shares if the proposed action
is effectuated; and
(b) may not vote any of his shares in favor of the proposed action.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10a-704, a shareholder who wishes to assert dissenters' rights may
not execute a writing consenting to the proposed corporate action.
(3) In order to be entitled to payment for shares under this part, unless
otherwise provided in the articles of incorporation, bylaws, or a resolution
adopted by the board of directors, a shareholder must have been a shareholder
with respect to the shares for which payment is demanded as of the date the
proposed corporate action creating dissenters' rights under Section 16-10a-1302
is approved by the shareholders, if shareholder approval is required, or as of
the effective date of the corporate action if the corporate action is authorized
other than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of Subsections (1)
through (3) is not entitled to payment for shares under this part.
16-10a-1322. Dissenters' notice.
(1) If proposed corporate action creating dissenters' rights under Section
16-10a-1302 is authorized, the corporation shall give a written dissenters'
notice to all shareholders who are entitled to demand payment for their shares
under this part.
(2) The dissenters' notice required by Subsection (1) must be sent no
later than ten days after the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302, and shall:
(a) state that the corporate action was authorized and the effective
date or proposed effective date of the corporate action;
(b) state an address at which the corporation will receive payment
demands and an address at which certificates for certificated shares must be
deposited;
(c) inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
D-3
<PAGE> 265
(d) supply a form for demanding payment, which form requests a
dissenter to state an address to which payment is to be made;
(e) set a date by which the corporation must receive the payment demand
and by which certificates for certificated shares must be deposited at the
address indicated in the dissenters' notice, which dates may not be fewer than
30 nor more than 70 days after the date the dissenters' notice required by
Subsection (1) is given;
(f) state the requirement contemplated by Subsection 16-10a-1303(3), if
the requirement is imposed; and
(g) be accompanied by a copy of this part.
16-10a-1323. Procedure to demand payment.
(1) A shareholder who is given a dissenters' notice described in Section
16-10a-1322, who meets the requirements of Section 16-10a-1321, and wishes to
assert dissenters' rights must, in accordance with the terms of the dissenters'
notice:
(a) cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in Subsection 16-10a-1322(2)(d), duly
completed, or may be stated in another writing;
(b) deposit certificates for his certificated shares in accordance with
the terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters' notice described
in Section 16-10a-1322, as contemplated by Section 16-10a-1327, certify in
writing, in or with the payment demand, whether or not he or the person on whose
behalf he asserts dissenters' rights acquired beneficial ownership of the shares
before the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action creating dissenters' rights under
Section 16-10a-1302.
(2) A shareholder who demands payment in accordance with Subsection (1)
retains all rights of a shareholder except the right to transfer the shares
until the effective date of the proposed corporate action giving rise to the
exercise of dissenters' rights and has only the right to receive payment for the
shares after the effective date of the corporate action.
(3) A shareholder who does not demand payment and deposit share
certificates as required, by the date or dates set in the dissenters' notice, is
not entitled to payment for shares under this part.
16-10a-1324. Uncertificated shares.
(1) Upon receipt of a demand for payment under Section 16-10a-1323 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
of the shares until the proposed corporate action is taken or the restrictions
are released under Section 16-10a-1326.
(2) In all other respects, the provisions of Section 16-10a-1323 apply to
shareholders who own uncertificated shares.
16-10a-1325. Payment.
(1) Except as provided in Section 16-10a-1327, upon the later of the
effective date of the corporate action creating dissenters' rights under Section
16-10a-1302, and receipt by the corporation of each payment demand pursuant to
Section 16-10a-1323, the corporation shall pay the amount the corporation
estimates to be the fair value of the dissenter's shares, plus interest to each
dissenter who has complied with Section 16-10a-1323, and who meets the
requirements of Section 16-10a-1321, and who has not yet received payment.
(2) Each payment made pursuant to Subsection (1) must be accompanied by:
(a) (i) (A) the corporation's balance sheet as of the end of its most
recent fiscal year, or if not available, a fiscal year ending not more than 16
months before the date of payment;
(B) an income statement for that year;
D-4
<PAGE> 266
(C) a statement of changes in shareholders' equity for that year and
a statement of cash flow for that year, if the corporation customarily provides
such statements to shareholders; and
(D) the latest available interim financial statements, if any;
(ii) the balance sheet and statements referred to in Subsection (i)
must be audited if the corporation customarily provides audited financial
statements to shareholders;
(b) a statement of the corporation's estimate of the fair value of the
shares and the amount of interest payable with respect to the shares;
(c) a statement of the dissenter's right to demand payment under
Section 16-10a-1328; and (d) a copy of this part.
16-10a-1326. Failure to take action.
(1) If the effective date of the corporate action creating dissenters'
rights under Section 16-10a-1302 does not occur within 60 days after the date
set by the corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10a-1322, the corporation shall return all
deposited certificates and release the transfer restrictions imposed on
uncertificated shares, and all shareholders who submitted a demand for payment
pursuant to Section 16-10a-1323 shall thereafter have all rights of a
shareholder as if no demand for payment had been made.
(2) If the effective date of the corporate action creating dissenters'
rights under Section 16-10a-1302 occurs more than 60 days after the date set by
the corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10a-1322, then the corporation shall send a
new dissenters' notice, as provided in Section 16-10a-1322, and the provisions
of Sections 16-10a-1323 through 16-10a-1328 shall again be applicable.
16-10a-1327. Special provisions relating to shares acquired after announcement
of proposed corporate action.
(1) A corporation may, with the dissenters' notice given pursuant to
Section 16-10a-1322, state the date of the first announcement to news media or
to shareholders of the terms of the proposed corporate action creating
dissenters' rights under Section 16-10a-1302 and state that a shareholder who
asserts dissenters' rights must certify in writing, in or with the payment
demand, whether or not he or the person on whose behalf he asserts dissenters'
rights acquired beneficial ownership of the shares before that date. With
respect to any dissenter who does not certify in writing, in or with the payment
demand that he or the person on whose behalf the dissenters' rights are being
asserted, acquired beneficial ownership of the shares before that date, the
corporation may, in lieu of making the payment provided in Section 16-10a-1325,
offer to make payment if the dissenter agrees to accept it in full satisfaction
of his demand.
(2) An offer to make payment under Subsection (1) shall include or be
accompanied by the information required by Subsection 16-10a-1325(2).
16-10a-1328. Procedure for shareholder dissatisfied with payment or offer.
(1) A dissenter who has not accepted an offer made by a corporation under
Section 16-10a-1327 may notify the corporation in writing of his own estimate of
the fair value of his shares and demand payment of the estimated amount, plus
interest, less any payment made under Section 16-10a-1325, if:
(a) the dissenter believes that the amount paid under Section
16-10a-1325 or offered under Section 16-10a-1327 is less than the fair value of
the shares;
(b) the corporation fails to make payment under Section 16-10a-1325
within 60 days after the date set by the corporation as the date by which it
must receive the payment demand; or
D-5
<PAGE> 267
(c) the corporation, having failed to take the proposed corporate action
creating dissenters' rights, does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as required
by Section 16-10a-1326.
(2) A dissenter waives the right to demand payment under this section unless
he causes the corporation to receive the notice required by Subsection (1)
within 30 days after the corporation made or offered payment for his shares.
16-10a-1330. Judicial appraisal of shares - Court action.
(1) If a demand for payment under Section 16-10a-1328 remains unresolved,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand contemplated by Section 16-10a-1328, and petition the court to
determine the fair value of the shares and the amount of interest. If the
corporation does not commence the proceeding within the 60-day period, it shall
pay each dissenter whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in Subsection
(1) in the district court of the county in this state where the corporation's
principal office, or if it has no principal office in this state, the county
where its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with, or whose shares were acquired by, the foreign
corporation was located.
(3) The corporation shall make all dissenters who have satisfied the
requirements of Sections 16-10a-1321, 16-10a-1323, and 16-10a-1328, whether or
not they are residents of this state whose demands remain unresolved, parties to
the proceeding commenced under Subsection (2) as an action against their shares.
All such dissenters who are named as parties must be served with a copy of the
petition. Service on each dissenter may be by registered or certified mail to
the address stated in his payment demand made pursuant to Section 16-10a-1328.
If no address is stated in the payment demand, service may be made at the
address stated in the payment demand given pursuant to Section 16-10a-1323. If
no address is stated in the payment demand, service may be made at the address
shown on the corporation's current record of shareholders for the record
shareholder holding the dissenter's shares. Service may also be made otherwise
as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under Subsection (2) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
Subsection (2) is entitled to judgment:
(a) for the amount, if any, by which the court finds that the fair
value of his shares, plus interest, exceeds the amount paid by the corporation
pursuant to Section 16-10a-1325; or
(b) for the fair value, plus interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under Section 16-10a-1327.
16-10a-1331. Court costs and counsel fees.
(1) The court in an appraisal proceeding commenced under Section
16-10a-1330 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the court. The
court shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds that the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Section
16-10a-1328.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
D-6
<PAGE> 268
(a) against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Sections 16-10a-1320 through 16-10a-1328; or
(b) against either the corporation or one or more dissenters, in favor
of any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this part.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to those counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
D-7
<PAGE> 269
ANNEX E
SUMMARY OF VALUATION METHODS OF HOULIHAN VALUATION ADVISORS
Set forth below is a summary of the approaches used by Houlihan
Valuation Advisors ("HVA") in estimating the fair market enterprise value of W.
W. Clyde & Co. ("Clyde"), Geneva Rock Products, Inc. ("Geneva Rock"), Utah
Service, Inc. ("Utah Service") and Beehive Insurance Agency, Inc. ("Beehive
Insurance") as of June 30, 1997. As part of its valuation, HVA projected the
earnings of Clyde, Geneva Rock, Utah Service and Beehive Insurance as described
below.
Projected Earnings
HVA has prepared income statement projections for the five year period
from 1997 to 2001 for each of Clyde, Geneva Rock, Utah Service and Beehive
Insurance. These projections were prepared based on an analysis of each
company's historical operating results and conversations between HVA and the
management of each respective company. FORECASTING THE FUTURE IS AT BEST A
DIFFICULT AND TENUOUS PROCESS. THERE WILL UNDOUBTEDLY BE DISPARITIES BETWEEN THE
PROJECTED FIGURES AND ACTUAL RESULTS, SINCE EVENTS AND CIRCUMSTANCES FREQUENTLY
DO NOT OCCUR AS EXPECTED, AND THOSE DISPARITIES MAY BE MATERIAL. THE HVA
VALUATION REPORTS DO NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF ANY
OF THE CONSTITUENT CORPORATIONS AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT ANY OF
THE SPECIAL MEETINGS OF ANY CONSTITUENT CORPORATION.
CLYDE
HVA's income statement projections yielded the following earnings per
share estimates for the years 1997 through 2001 for Clyde: $12.03 for 1997,
$12.57 for 1998, $13.14 for 1999, $13.75 for 2000, and $14.40 for 2001, based on
94,544 shares outstanding. These estimates exclude the equity of Clyde in the
net earnings received from Geneva Rock. HVA used the following assumptions in
arriving at these projections:
1. Construction revenue is assumed to grow at a compound annual rate of
5.0% from the 1996 figure of $19,055,500 throughout the forecast period.
This projected growth rate is well above the compound annual revenue
decline experienced by Clyde over the 1992-96 period of 7.4%, but is
similar to the revenue growth generated by Clyde in both 1993 and 1995
of 4.0% and 5.5%, respectively.
2. Cost of construction is assumed to remain constant at the 1992-96
average figure of 87.4% of construction revenue throughout the forecast
period.
E-1
<PAGE> 270
3. Operating expenses are assumed to grow at a compound annual rate of 3.0%
from the 1996 figure of $1,443,200 throughout the forecast period,
identical to the compound annual growth rate in operating expenses
experienced by Clyde over the 1992-96 period of 3.0% per year.
4. Interest expense is assumed to be negligible throughout the forecast
period, consistent with the virtual absence of interest expense over the
1992-96 period as well as the present absence of long-term debt.
5. Other income (comprised of interest income, gain on sale of fixed
assets, and miscellaneous income) is assumed to remain constant at the
1996 figure of $770,000 (rounded) throughout the forecast period. This
figure is also similar to the 1992-96 period average figure of $760,000
(rounded).
6. Income tax is assumed to remain constant at a combined federal and state
corporate income tax rate of 37% of projected pre-tax earnings
throughout the forecast period.
7. Free cash flow is defined as net income plus non-cash depreciation
expense less capital expenditures. Depreciation expense and capital
expenditures are assumed to offset each other throughout the forecast
period, consistent with the experience of Clyde throughout most of the
1992-96 period. With the exception of 1995, during which Clyde incurred
very large capital expenditures (totaling $4.55 million), Clyde had
average annual capital expenditures of $1.53 million and very similar
average non-cash depreciation expense of $1.41 million. In other words,
non-cash depreciation expense is assumed to be sufficient in the future
to fund required levels of capital expenditures. Consequently, free cash
flow is projected to be identical to net income throughout the forecast
period.
GENEVA ROCK
HVA's income statement projections yielded the following earnings per
share estimates for the years 1997 through 2001 for Geneva Rock: $444.00 for
1997, $490.00 for 1998, $541.00 for 1999, $598.00 for 2000, and $661.00 for
2001, based on 21,802 shares outstanding. HVA used the following assumptions in
arriving at these projections:
1. Sales and contract income are assumed to grow at a compound annual rate
of 10.0% from the 1996 figure of $105,451,000 throughout the forecast
period. This projected growth rate is below the compound annual sales
growth rate experienced by Geneva Rock over the 1991-96 period of 15.8%,
but is above the 1996 sales increase of 5.0%.
2. Cost of sales and contracts is assumed to remain constant at the 1996
figure of 84.3% of sales and contract income throughout the forecast
period. This figure is similar to the 1991-96 average cost of sales
figure of 84.5%.
3. Operating expenses are assumed to grow at a compound annual rate of 6.0%
from the 1996 figure of $3,386,000 throughout the forecast period. This
differential between projected
E-2
<PAGE> 271
sales growth and projected operating expense growth of 4.0% (or 10.0%
vs. 6.0%) is roughly consistent with the differential experienced over
the 1991-96 period of 4.6% (or 15.8% compound annual sales growth vs.
11.2% compound annual operating expense growth), and reflects the
presence of operating leverage (or fixed costs) in an environment of
increasing sales.
4. Interest expense is assumed to be negligible throughout the forecast
period, consistent with the absence of interest expense throughout the
1992-96 period and Geneva Rock's virtual absence of long-term debt.
5. Other income (comprised primarily of miscellaneous income and net income
from investments less bad debt expense) is assumed to remain constant at
the 1996 figure of $727,000 throughout the forecast period. This figure
is also similar to the 1991-96 average figure of $650,000.
6. Income tax is assumed to remain constant at a combined federal and state
corporate income tax rate of 37% of projected pre-tax earnings
throughout the forecast period.
7. Free cash flow is defined as net income plus non-cash depreciation
expense less capital expenditures. Depreciation expense and capital
expenditures are assumed to offset each other throughout the forecast
period, consistent with the experience of Geneva Rock in 1996, during
which depreciation expense and capital expenditures were virtually
identical (at $6.62 million and $6.71 million, respectively). In other
words, non-cash depreciation expense is assumed to be sufficient in the
future to fund required levels of capital expenditures. Consequently,
free cash flow is projected to be identical to net income throughout the
forecast period.
UTAH SERVICE
HVA's income statement projections yielded the following earnings per
share estimates for the years 1997 through 2001 for Utah Service: $74.32 for
1997, $80.10 for 1998, $86.31 for 1999, $93.02 for 2000, and $100.22 for 2001,
based on 5,413 shares outstanding. HVA used the following assumptions in
arriving at these projections:
1. Sales are assumed to grow at a compound annual rate of 6.0% from the
1996 figure of $13,107,900 throughout the forecast period. This
projected growth rate is well below the compound annual sales growth
rate experienced by Utah Service over the 1991-96 period of 22.9%, but
is above the 1996 sales decline of 3.5%.
2. Cost of goods sold is assumed to remain constant at the 1991-96 average
figure of 83.8% of sales throughout the forecast period.
3. Operating expenses are assumed to grow at a compound annual rate of 5.0%
from the 1996 figure of $1,627,500 throughout the forecast period.
E-3
<PAGE> 272
4. Interest expense is assumed to remain constant at the 1996 figure of
$28,100 throughout the forecast period.
5. Other income (comprised primarily of service charge income and discounts
earned, but excluding rental income) is assumed to remain constant at
the 1996 adjusted figure of $124,700 throughout the forecast period.
6. Income tax is assumed to remain constant at a combined federal and state
corporate income tax rate of 37% of projected pre-tax earnings
throughout the forecast period.
7. Free cash flow is defined as net income plus non-cash depreciation
expense less capital expenditures. Depreciation expense is assumed to
remain constant at the 1996 figure of $128,000 throughout the forecast
period. Capital expenditures are assumed to remain constant at the
1992-96 average figure (excluding 1995, when capital expenditures of
$996,400 were incurred, primarily to build the new hardware store) of
$50,000 throughout the forecast period. Capital expenditures during
these years remained relatively constant, at $47,100 in 1992, $54,000 in
1993, $73,200 in 1994, and $26,100 in 1996.
BEEHIVE INSURANCE
HVA's income statement projections yielded the following earnings per
share estimates for the years 1997 through 2001 for Beehive Insurance: $11.38
for 1997, $11.70 for 1998, $12.02 for 1999, $12.35 for 2000, and $12.69 for
2001, based on 21,487 shares outstanding. HVA used the following assumptions in
arriving at these projections:
1. Revenues are assumed to grow at a compound annual rate of 3.0% from the
1996 figure of $577,600 throughout the forecast period.
2. Operating expenses are assumed to grow at a compound annual rate of 3.0%
from the 1996 figure of $243,500 throughout the forecast period.
3. Interest expense is assumed to be negligible throughout the forecast
period, consistent with Beehive Insurance's absence of long-term or
other interest-bearing debt.
4. Other income (comprised primarily of interest income and rental income)
is assumed to remain constant at the 1991-96 average figure of $32,200
throughout the forecast period.
5. Income tax is assumed to remain constant at the 1991-96 average of 35%
of pre-tax earnings throughout the forecast period.
6. Free cash flow is defined as net income plus non-cash depreciation
expense less capital expenditures. Depreciation expense and capital
expenditures are assumed to offset each other throughout the forecast
period, consistent with the experience of Beehive Insurance over the
1991-96 period, during which depreciation expense and capital
expenditures
E-4
<PAGE> 273
remained relatively similar. Consequently, free cash flow is projected
to be identical to net income throughout the forecast period.
E-5
<PAGE> 274
Valuation Methods
HVA used the following four widely recognized approaches in estimating
the fair market enterprise value of Clyde, Geneva Rock, Utah Service and Beehive
Insurance: book value (including liquidation value), transaction value, market
value (derived from market value ratios of similar firms), and income value
(based on the present value of future benefits). The uncertainty inherent in the
valuation process causes these differing methods of valuation to produce
different estimates of value.
Book/Liquidation Value
The book value of a company, that is, the carrying balances of the
equity accounts on the company's records, normally bears only a tenuous
relationship to the market value of the firm's stock. A useful accounting
concept, it has a somewhat limited role in the valuation process. For
informational purposes, the book value, as of December 31, 1996. of (i) Clyde
was $34,947,000 or $370.00 per share, based on 94,544 shares outstanding, (ii)
Geneva Rock Products was $57,179,000 or $2,623 per share, based on 21,802 shares
outstanding, (iii) of Utah Service was $3,614,500 or $668.00 per share, based on
5,413 shares outstanding and (iv) of Beehive Insurance was $378,900 or $17.63
per share, based on 21,487 shares outstanding.
A common alternative measure of book value is the liquidation value of
the business. A quitting concern concept, it is normally not entirely applicable
to the valuation of a typical going concern. The value of a company is typically
not a function of what the assets of the company could be sold for (net of
liabilities), but is rather a function of how those assets can be utilized in
generating revenue and net income. Furthermore, given that each of Clyde, Geneva
Rock, Utah Service and Beehive Insurance has been in existence for several
decades, HVA concluded it was not likely that any of them will be liquidated in
the foreseeable future. The management of each of Clyde, Geneva Rock, Utah
Service and Beehive Insurance has indicated to HVA that it has no plans to
liquidate.
Nevertheless, liquidation value does serve a useful role as a valuation
benchmark. At the very least, it approximates the value of the residual assets
distributable to shareholders were the business to be wound up with all
obligations discharged. It is particularly germane in the case of Clyde, since
its liquidation value appears to be well above its value as a going concern (in
the context of the contemplated consolidation of Clyde with the other three
related companies), and was therefore deemed by HVA to be the most appropriate
measure of its fair market enterprise value.
The liquidation value of Clyde as of December 31, 1996 is estimated by
HVA to be $62,100,000 or $657.00 per share. As previously discussed, HVA deemed
this figure to be the best indicator of the fair market enterprise value of
Clyde as of June 30, 1997. The liquidation value of Geneva Rock as of December
31, 1996 is estimated to be $90,730,000 or $4,162 per share. The liquidation
value of Utah Service as of December 31, 1996 is estimated to be $4,090,000 or
$756.00 per share. Liquidation value is not considered in arriving at a final
estimate of the fair market enterprise value of Beehive Insurance as of June 30,
1997. However, given that Beehive
E-6
<PAGE> 275
Insurance carries on its books the land and building comprising its operating
facilities at depreciated historical cost, which has been held for many years
and has appreciated significantly in value, the liquidation value of Beehive
Insurance is likely at least somewhat above Beehive Insurance's book value of
$378,900 or $17.63 per share as of December 31, 1996.
Transaction Value
Transaction value is the value at which shares of the subject security
were sold recently. A recent sale of a security is an indicator of value for
both legal and economic purposes. If an examination of all the relevant facts
reveals that the transaction took place at arm's length, i.e., that neither
buyer nor seller was forced to deal and both had adequate information and that
the transaction was for reasonable consideration, the value established in such
a transaction would be difficult to contest.
In preparing its valuation reports, HVA was informed by management of
the companies that there have been no recent transactions involving the common
stock of Clyde, Geneva Rock, Utah Service or Beehive Insurance, and no
acquisition offers for any of the foregoing companies. Consequently, transaction
value was not considered in arriving at a final estimate of the fair market
enterprise value of the Clyde, Geneva Rock, Utah Service or Beehive Insurance as
of June 30, 1997.
Market Value
The market value approach attempts to determine the value of Clyde,
Geneva Rock, Utah Service and Beehive Insurance as if their respective shares
were traded on an exchange in an active, public market. This is accomplished by
determining a comparative price-earnings ratio, which is the ratio of the market
price of a share of stock to the earnings per share; a comparative price to cash
flow ratio, which is the ratio of the market price of a share of stock to the
operating cash flow (net income plus depreciation) per share; a comparative
price to revenue ratio, which is the ratio of the market price of a share of
stock to the dollar sales per share; and a comparative price to book ratio,
which is the ratio of the market price of a share of stock to the book value per
share. Appropriate ratios for Clyde, Geneva Rock, Utah Service and Beehive
Insurance can be determined by comparing the firm with others in the same
industry and, from its relative standing in the industry, inferring market value
ratios based on ratios in the industry.
The price-earnings ratio is an important determinant of value because it
reflects the expectations of market participants. Generally speaking, investors
are willing to pay a higher price for today's earnings if they expect those
earnings to grow in the future. Conversely, they will pay a lower price if they
anticipate earnings to decline.
Ideally, market value ratios for Clyde, Geneva Rock, Utah Service and
Beehive Insurance should be inferred from ratios of similar firms whose stocks
are traded actively in public markets. Unfortunately, many companies with
operations similar to those of Clyde, Geneva Rock, Utah Service and Beehive
Insurance, respectively, are small, closely held businesses for which no market
value has been established. Since these companies are not publicly traded, it is
impossible to use
E-7
<PAGE> 276
them as a basis for making inferences regarding the market value of Clyde,
Geneva Rock, Utah Service and Beehive Insurance, respectively. Therefore, a
group of much larger, publicly traded companies is selected as being
representative of the industry in which each of Clyde, Geneva Rock, Utah Service
and Beehive Insurance, respectively, operates.
CLYDE
HVA selected the following companies which it considered to be
representative of the industry of which Clyde is a member: Ameron International,
Atkinson (Guy F.) Company, Baker (Michael) Corp., BFC Construction, Dames &
Moore, Devcon International, Fluor Corp., Foster Wheeler, Granite Construction,
Harding Lawson Associates, ICF Kaiser International, Insituform Technologies,
Jacobs Engineering Group, Morrison Knudsen, Perini Corp., Stone & Webster, STV
Group, United Dominion Industries and URS Corp.
Although these companies obviously differ from Clyde, HVA concluded that
the differences are not of prime significance, since a direct comparison is not
intended but rather a relative comparison that reflects an aggregate appraisal
of the industry. To the extent that the firms in the industry sample group and
Clyde are affected by similar fundamental economic factors, investors'
expectations regarding the long-term growth and success of the former are
justifiably imputable to the future of the latter.
In 1996, Clyde had mixed profitability ratios when compared with the
average experience of the sample group of public companies. Clyde's net margin
of 4.2% was well above the sample group average figure of 2.1%. Clyde's adjusted
return on assets was similar to that of the sample group average (3.2% vs.
3.5%); however, its adjusted return on equity was significantly below the sample
group average figure (3.5% vs. 10.2%).
Clyde appears to have much lower financial risk when compared with the
average company in the sample group. Clyde had a 1996 long-term debt to equity
ratio of only 0.7%, well below the sample group average figure of 42.5%.
Furthermore, Clyde's current ratio of 15.0 times was well above the sample group
average figure of 1.8 times, suggesting much better relative liquidity.
Clyde's revenues declined by 10.6% in 1996 and at a compound annual rate
of 7.4% over the 1992-96 period. Conversely, the sample group experienced
average compound annual revenue growth of 7.8% per year over the last five years
and similar revenue growth of 7.9% in 1996. Clyde's revenues are projected by
HVA to grow over the 1997-2001 period at a compound annual rate of 5.0%,
increasing from the 1996 figure of $19.1 million to a projected level of $24.3
million in 2001. This projected growth rate is well below the average compound
annual revenue growth rate forecast for the companies in the sample group by
Value Line Investment Survey of 10.8% over the next five years.
Clyde's adjusted net income declined by 55.6% in 1996 and at a compound
annual rate of 23.0% over the 1992-96 period. Conversely, the sample group had
average compound annual earnings growth of 7.8% per year over the last five
years and 3.4% during the most recent year. Clyde's earnings are projected by
HVA to grow at a compound annual rate of 11.3% over the 1997-
E-8
<PAGE> 277
2001 period, from the 1996 adjusted figure of $796,800 to a projected level of
$1,361,600 in 2001. This projected growth rate is somewhat below the average
compound annual earnings growth rate projected by Wall Street analysts over the
next five years for the companies in the sample group of 14.2% (Source: First
Call Earnings Estimates).
In summary, HVA concluded that Clyde appears to have somewhat inferior
overall investment quality when compared with the publicly traded firms in the
sample group, with its higher net margin and lower financial risk being more
than offset, in HVA's opinion, by its smaller size, its relative absence of
geographical diversification, its lower return on invested equity capital, its
lower historical revenue and earnings growth, and its lower future revenue and
earnings growth prospects.
To the sample group's mean price-earnings ratio of 15.0, mean price to
cash flow ratio of 7.5, mean price to revenue ratio of 32.9%, and mean price to
book ratio of 149.5%, a 20% discount is applied to reflect the inferior overall
investment quality of Clyde relative to that of the publicly traded firms in the
sample group, as discussed above. To the resulting figures is applied an
additional 30% discount to reflect the lack of marketability of Clyde's shares,
being privately held, relative to the ready marketability of the publicly traded
shares of the sample group companies. Finally, a partially offsetting premium of
30% is applied to the resulting figures to reflect valuation of Clyde on an
enterprise value (controlling interest) basis. The result is a net discount of
27% deemed by HVA to be applicable to the mean market value ratios of the sample
group in valuing Clyde on an enterprise value basis.
Application of the resulting adjusted price-earnings ratio of 11.0 to
Clyde's average adjusted net income over the 1992-96 period of $1,498,700 yields
a market value estimate of $16,486,000. To this figure is added the estimated
pro-rata value of Clyde's 34.77% equity interest in Geneva Rock. HVA has
estimated the fair market enterprise value of Geneva Rock to be $101,000,000 as
of June 30, 1997. Clyde's pro-rata share of this total value is therefore
$35,118,000 (or $101,000,000 x .3477). Adding this figure to the above derived
price-earnings value of $16,486,000 yields a market value estimate of
$51,604,000 or $546.00 per share.
Application of the resulting price to cash flow ratio of 5.5 times to
Clyde's average adjusted operating cash flow (net income plus non-cash
depreciation expense) over the 1992-96 period of $2,963,500 yields a market
value estimate of $16,299,000. Adding to this figure the estimated value of
Clyde's equity interest in Geneva Rock of $35,118,000 yields a market value
estimate of $51,417,000 or $544.00 per share.
Application of the resulting price to revenue ratio of 24.0% to Clyde's
average revenues over the 1992-96 period of $22,678,700 yields a market value
estimate of $5,443,000. Adding to this figure the estimated value of Clyde's
equity interest in Geneva Rock of $35,118,000 yields a market value estimate of
$40,561,000 or $429.00 per share.
Finally, application of the resulting price to book ratio of 109.1% to
Clyde's December 31, 1996 adjusted book value (excluding the book carrying value
of its investment in Geneva Rock of $19,882,000) of $15,065,000 (or $34,947,000
- - $19,882,000) yields a market value estimate of
E-9
<PAGE> 278
$16,436,000. Adding to this figure the estimated value of Clyde's equity
interest in Geneva Rock of $35,118,000 yields a market value estimate of
$51,554,000 or $545.00 per share.
Each of these market value figures is as of June 30, 1997, and HVA
considered each in arriving at a final estimate of the fair market enterprise
value of Clyde as of that date.
GENEVA ROCK
HVA selected the following companies which it considered to be
representative of the industry of which Geneva Rock is a member: Ameron
International, Atkinson (Guy F.) Company, Calmat Co., Centex Construction
Products, Continental Materials, Devcon International, Florida Rock Industries,
Giant Cement, Granite Construction, Green (A.P.) Industries, Lafarge Corp., Lone
Star Industries, Martin Marietta Materials, Medusa Corp., Monroc, Inc., Morrison
Knudsen, Puerto Rican Cement, Southdown, Inc., STV Group, Texas Industries and
Vulcan Materials. Although these companies obviously differ from Geneva Rock,
HVA concluded that the differences are not of prime significance, since a direct
comparison is not intended but rather a relative comparison that reflects an
aggregate appraisal of the industry. To the extent that the firms in the
industry sample group and Geneva Rock are affected by similar fundamental
economic factors, investors' expectations regarding the long-term growth and
success of the former are justifiably imputable to the future of the latter.
In 1996, Geneva Rock had somewhat better profitability ratios when
compared with the average experience of the sample group of public companies.
Geneva Rock's net margin of 8.3% was slightly above the sample group average
figure of 7.6%, as was its return on assets (12.3% vs. 7.9%) and return on
equity (15.4% vs. 13.7%).
Geneva Rock appears to have lower financial risk when compared with the
average company in the sample group, although the sample group likewise has low
financial risk. Geneva Rock had a 1996 long-term debt to equity ratio of only
11.5%, well below the likewise low sample group average figure of 31.6%.
Furthermore, Geneva Rock's current ratio of 4.3 times was well above the sample
group average figure of 2.0 times, suggesting better relative liquidity.
Geneva Rock's revenues increased at a compound annual rate of 15.8% over
the 1991-96 period, well above the average compound annual revenue growth rate
experienced by the sample group during the period of 8.4%. However, Geneva
Rock's revenues grew by only 5.0% in 1996; the sample group's average revenue
growth rate likewise slowed in 1996, to only 4.1%. Geneva Rock's revenues are
projected by HVA to grow over the 1997-2001 period at a compound annual rate of
10.0%, increasing from the 1996 figure of $105.5 million to a projected level of
$169.8 million in 2001. This projected growth rate is well above the average
compound annual revenue growth rate forecast for the companies in the sample
group by Value Line Investment Survey of 6.0% over the next five years.
Geneva Rock's net income grew at a compound annual rate of 33.4% over
the 1991-96 period, but declined by 19.9% in 1996. The sample group likewise had
excellent (albeit much lower) average compound annual earnings growth of 13.8%
per year over the last five years, and
E-10
<PAGE> 279
similarly lower average earnings growth of 5.8% in 1996. Geneva Rock's earnings
are projected by HVA to grow at a compound annual rate of 10.4% over the
1997-2001 period, increasing from the 1996 adjusted figure of $8.8 million to a
projected level of $14.4 million in 2001. This projected growth rate is similar
to the average compound annual earnings growth rate projected by Wall Street
analysts over the next five years for the companies in the sample group of 11.7%
per year (Source: First Call Earnings Estimates).
In summary, HVA concluded that Geneva Rock appears to have roughly
similar overall investment quality when compared with the publicly traded firms
in the sample group, with its better profitability ratios, lower financial risk,
and generally higher historical sales and earnings growth being offset, in HVA's
opinion, by its smaller size and its relative absence of geographical
diversification. As previously mentioned, Geneva Rock's future earnings growth
prospects are estimated to be similar to those of the average company in the
sample group.
To the sample group's mean price-earnings ratio of 13.5, mean price to
cash flow ratio of 7.2, mean price to revenue ratio of 95.3%, and mean price to
book ratio of 180.3%, a 30% discount is applied to reflect the lack of
marketability of Geneva Rock's shares, being privately held, relative to the
ready marketability of the publicly traded shares of the sample group companies.
To the resulting figures is applied a partially offsetting premium of 30% to
reflect valuation of Geneva Rock on an enterprise value (controlling interest)
basis. The result is a net discount of 9% deemed by HVA to be applicable to the
mean market value ratios of the sample group in valuing Geneva Rock on an
enterprise value basis.
Application of the resulting adjusted price-earnings ratio of 12.3 to
Geneva Rock's 1996 adjusted net income of $8,797,000 yields a market value
estimate of $108,203,000 or $4,963 per share. Application of the resulting price
to cash flow ratio of 6.6 to Geneva Rock's 1996 adjusted cash flow from
operations (net income plus non-cash depreciation expense) of $15,414,000 yields
a market value estimate of $101,732,000 or $4,666 per share. Application of the
resulting price to revenue ratio of 86.7% to Geneva Rock's 1996 total revenues
of $116,338,000 (or Geneva Rock's revenues of $105,451,000 plus the 1996
revenues of Geneva Rock's newly-acquired subsidiary, J & J Building Supply,
Inc., which were not consolidated with Geneva Rock's revenues in Geneva Rock's
1996 income statement, of $10,887,000) yields a market value estimate of
$100,865,000 or $4,626 per share. Finally, application of the resulting price to
book ratio of 164.1% to the Geneva Rock's December 31, 1996 book value of
$57,179,000 yields a market value estimate of $93,831,000 or $4,304 per share.
Each of these market value figures is as of June 30, 1997, and HVA
considered each in arriving at a final estimate of the fair market enterprise
value of Geneva Rock as of that date.
UTAH SERVICE
HVA selected the following companies which it considered to be
representative of the industry of which Utah Service is a member: BMC West,
Casey's General Stores, Central Tractor Farm & Country, Dairy Mart Convenience
Stores, DIY Home Warehouse, Eagle Hardware & Garden, E-Z Serve Corp., FFP
Partners, Getty Petroleum, Grossman's, Inc., Hechinger Company, Home Depot,
Lowe's Companies, National Home Centers, Payless
E-11
<PAGE> 280
Cashways, Sherwin-Williams, Southland Corp., Strober Organization, Travel Ports
of America, Trend Lines, Uni-Marts, Wickes Lumber and Wolohan Lumber. Although
these companies obviously differ from Utah Service, HVA concluded that the
differences are not of prime significance, since a direct comparison is not
intended but rather a relative comparison that reflects an aggregate appraisal
of the industry. To the extent that the firms in the industry sample group and
Utah Service are affected by similar fundamental economic factors, investors'
expectations regarding the long-term growth and success of the former are
justifiably imputable to the future of the latter.
In 1996, Utah Service had better profitability ratios when compared with
the average experience of the sample group of public companies. Utah Service's
adjusted net margin of 3.1% was above the sample group average figure of 2.0%,
as was its adjusted return on assets (9.5% vs. 4.4%) and its adjusted return on
equity (11.3% vs. 9.6%).
Utah Service appears to have lower financial risk when compared with the
average company in the sample group. Utah Service had a 1996 long-term debt to
equity ratio of only 5.5%, well below the sample group average figure of 77.0%.
Furthermore, Utah Service's current ratio of 6.1 times was well above the sample
group average figure of 1.6 times, suggesting better relative liquidity.
Utah Service's sales increased at a compound annual rate of 22.9% over
the 1991-96 period, well above the average compound annual sales growth rate
experienced by the sample group during the period of 10.6%. However, Utah
Service's sales declined by 3.5% in 1996, while the sample group generated
average sales growth of 7.6% during the year. Utah Service's sales are projected
by HVA to grow over the 1997-2001 period at a compound annual rate of 6.0%,
increasing from the 1996 figure of $13.1 million to a projected level of $17.5
million in 2001. This projected growth rate is well below the average compound
annual sales growth rate forecast for the companies in the sample group by Value
Line Investment Survey of 10.6% over the next five years.
Utah Service's adjusted net income grew by 20.3% in 1996 and at a
compound annual rate of 21.5% over the 1991-96 period. The sample group likewise
had solid earnings gains over the period, albeit the growth rates were below
those of Utah Service (at 7.2% during the most recent year and a compound annual
rate of 13.2% over the last five years). Utah Service's earnings are projected
to grow at a compound annual rate of 5.8% over the 1997-2001 period, from the
1996 figure of $410,200 to a projected level of $542,500 in 2001. This projected
growth rate is well below the average compound annual earnings growth rate
projected by Wall Street analysts over the next five years for the companies in
the sample group of 14.6% (Source: First Call Earnings Estimates).
In summary, HVA concluded that Utah Service appears to have slightly
inferior overall investment quality when compared with the publicly traded firms
in the sample group, with its better profitability ratios, lower financial risk,
and higher historical sales and earnings growth being more than offset, in HVA's
opinion, by its much smaller size, its relative absence of geographical
diversification, and its lower future sales and earnings growth prospects
(resulting primarily from it
E-12
<PAGE> 281
being a single-site location, whereas the companies in the publicly traded
sample group are typically expanding chains).
To the sample group's mean price-earnings ratio of 15.5, mean price to
cash flow ratio of 7.4, mean price to revenue ratio of 31.7%, and mean price to
book ratio of 149.8%, a 10% discount is applied to reflect the inferior overall
investment quality of Utah Service relative to that of the publicly traded firms
in the sample group, as discussed above. To the resulting figures is applied an
additional 30% discount to reflect the lack of marketability of Utah Service's
shares, being privately held, relative to the ready marketability of the
publicly traded shares of the sample group companies. Finally, a partially
offsetting premium of 30% is applied to the resulting figures to reflect
valuation of Utah Service on an enterprise value (controlling interest) basis.
The result is a net discount of 18% deemed by HVA to be applicable to the mean
market value ratios of the sample group in valuing Utah Service on an enterprise
value basis.
Application of the resulting adjusted price-earnings ratio of 12.7 to
Utah Service's 1996 adjusted net income of $410,200 yields a market value
estimate of $5,209,500. To this figure is added the estimated after-tax proceeds
which would be generated from the sale of Utah Service's nonoperating assets
(e.g., two retail buildings which are leased out and a 2.67 acre parcel of raw
land, all located in Springville, Utah), derived as follows. Utah Service has
recently received an offer on the two retail buildings in the amount of
$305,000. This offer is assumed to reasonably reflect the fair market value of
these buildings. The parcel of raw land was appraised at $70,000 as of November
23, 1994 by John Golden Taylor, MAI of Cook, Taylor & Uriona. It is assumed that
this appraised value still reasonably reflects the fair market value of this
property. The land on which the buildings are located was initially acquired by
Utah Service for $29,500; the depreciated book value of the buildings themselves
is only $1,300. The piece of raw land was initially acquired by Utah Service at
a cost of $1,400. It is assumed that sale of these properties would trigger
capital gains taxes at a combined federal and state corporate income tax rate of
37%. The combined estimated values of the properties is $375,000 ($305,000 +
$70,000); their tax basis is assumed to be equal to their depreciated book value
of only $43,200 (or $29,500 + $1,300 + $1,400). Consequently, it is estimated
that sale of the properties would trigger income taxes of $125,000 rounded (or
.37 x ($375,000 - $43,200)), resulting in net after-tax proceeds to the Company
from the sale of $250,000. Adding this figure to the above derived
price-earnings value estimate of $5,209,500 yields a market value estimate for
Utah Service of $5,459,500 or $1,009.00 per share.
Application of the resulting price to cash flow ratio of 6.1 to Utah
Service's 1996 adjusted cash flow from operations (adjusted net income plus
depreciation) of $538,200 yields a market value estimate of $3,283,000. Adding
to this figure the above derived estimated after-tax proceeds from sale of Utah
Service's nonoperating assets of $250,000 yields a market value estimate for
Utah Service of $3,533,000 or $653.00 per share.
Application of the resulting price to revenue ratio of 26.0% to Utah
Service's 1996 sales of $13,107,900 yields a market value estimate of
$3,408,100. Adding to this figure the estimated after-tax proceeds from sale of
Utah Service's nonoperating assets of $250,000 yields a market value estimate of
$3,658,100 or $676.00 per share.
E-13
<PAGE> 282
Finally, application of the resulting price to book ratio of 122.8% to
Utah Service's December 31, 1996 adjusted book value of $3,571,300 (or reported
book value of $3,614,500 less depreciated book value of Utah Service's
nonoperating assets of $43,200) yields a market value estimate of $4,385,600.
Adding to this figure the estimated after-tax proceeds from sale of Utah
Service's nonoperating assets of $250,000 yields a market value estimate of
$4,635,600 or $856.00 per share.
Each of these market value figures is as of June 30, 1997, and HVA
considered each in arriving at a final estimate of the fair market enterprise
value of Utah Service as of that date.
BEEHIVE INSURANCE
HVA selected the following companies which it considered to be
representative of the industry of which Utah Service is a member: ACMAT Corp.,
Acordia, Inc., Alexander & Alexander, Aon Corp., Baldwin & Lyons, Crop Growers
Corp., Frontier Adjusters, Gallagher (Arthur J.), Hilb, Rogal and Hamilton,
Markel Corp., Marsh & McLennan, Poe & Brown, St. Paul Companies and Seibels
(Bruce) Group. Although these companies obviously differ from Beehive Insurance,
HVA concluded the differences are not of prime significance, since a direct
comparison is not intended but rather a relative comparison that reflects an
aggregate appraisal of the industry. To the extent that the firms in the
industry sample group and Beehive Insurance are affected by similar fundamental
economic factors, investors' expectations regarding the long-term growth and
success of the former are justifiably imputable to the future of the latter.
In 1996, Beehive Insurance had much better profitability ratios when
compared with the average experience of the sample group of public companies.
Beehive Insurance's net margin of 40.5% was well above the sample group average
figure of 11.2%, as was its return on assets (30.9% vs. 5.4%) and its return on
equity (61.7% vs. 17.7%).
Beehive Insurance appears to have even lower financial risk than the
average company in the sample group, which also has very low financial risk.
Beehive Insurance has no long-term debt; the sample group had an average
long-term debt to equity ratio of only 28.8% in 1996. Furthermore, Beehive
Insurance's 1996 current ratio of 1.8 times was above the sample group average
figure of 1.0 times, suggesting better relative liquidity.
Beehive Insurance's revenues increased at a compound annual rate of only
0.3% over the 1991-96 period, well below the average compound annual revenue
growth rate experienced by the sample group during the period of 7.3%. Beehive
Insurance's revenues did increase by 7.4% in 1996, only slightly below the
sample group's average revenue growth during the year of 8.0%. Beehive
Insurance's revenues are projected by HVA to grow over the 1997-2001 period at a
compound annual rate of only 3.0%, increasing from the 1996 figure of $577,600
to a projected level of $669,600 in 2001. This projected growth rate is well
below the average compound annual revenue growth rate forecast for the companies
in the sample group by Value Line Investment Survey of 9.0% over the next five
years.
Beehive Insurance's net income grew by 9.4% in 1996, but still declined
at a compound annual rate of 1.7% over the 1991-96 period. The sample group had
virtually identical average
E-14
<PAGE> 283
1996 earnings growth of 9.5%, but had much higher average compound annual
earnings growth over the last five years of 11.2% per year. Beehive Insurance's
earnings are projected by HVA to grow at a compound annual rate of only 3.1%
over the 1997-2001 period, from the 1996 figure of $233,800 to a projected level
of $272,700 in 2001. This projected growth rate is well below the average
compound annual earnings growth rate projected by Wall Street analysts over the
next five years for the companies in the sample group of 10.5% (Source: First
Call Earnings Estimates).
In summary, HVA concluded that Beehive Insurance appears to have
significantly inferior overall investment quality when compared with the
publicly traded firms in the sample group, with its better profitability ratios
and lower financial risk being more than offset, in our opinion, by its much
smaller size, its relative absence of geographical and operational
diversification, its significant reliance upon two key customers, its lower
historical revenue and earnings growth, and its lower future revenue and
earnings growth prospects.
To the sample group's mean price-earnings ratio of 14.8, mean price to
cash flow ratio of 11.0, mean price to revenue ratio of 160.4%, and mean price
to book ratio of 266.9%, a 40% discount is applied to reflect the inferior
overall investment quality of Beehive Insurance relative to that of the publicly
traded firms in the sample group, as discussed above. To the resulting figures
is applied an additional 30% discount to reflect the lack of marketability of
Beehive Insurance's shares, being privately held, relative to the ready
marketability of the publicly traded shares of the sample group companies.
Finally, a partially offsetting premium of 30% is applied to the resulting
figures to reflect valuation of Beehive Insurance on an enterprise value
(controlling interest) basis. The result is a net discount of 45% deemed by HVA
to be applicable to the mean market value ratios of the sample group in valuing
Beehive Insurance on an enterprise value basis.
Application of the resulting adjusted price-earnings ratio of 8.1 to
Beehive Insurance's 1996 net income of $233,800 yields a market value estimate
of $1,893,800 or $88.14 per share. Application of the resulting price to cash
flow ratio of 6.1 to Beehive Insurance's 1996 cash flow from operations (net
income plus depreciation) of $242,600 yields a market value estimate of
$1,479,900 or $68.87 per share. Application of the resulting price to revenue
ratio of 88.2% to Beehive Insurance's 1996 revenues of $577,600 yields a market
value estimate of $509,400 or $23.71 per share. Finally, application of the
resulting price to book ratio of 146.8% to Beehive Insurance's December 31, 1996
book value of $378,900 yields a market value estimate of $556,200 or $25.89 per
share. Both the price to revenue and price to book figures were deemed by HVA to
materially understate the fair market value of Beehive Insurance, resulting from
Beehive Insurance's much higher net margin (return on revenues) and return on
equity ratios relative to those of the sample group, and were consequently not
considered in arriving at a final estimate of Beehive Insurance's fair market
enterprise value. The price-earnings and price to cash flow figures were
considered in arriving at a final estimate of the fair market enterprise value
of Beehive Insurance as of June 30, 1997.
Income Value
The income approach to valuation estimates the worth of a company's
stock by determining the present value of the future income stream expected to
accrue to the stockholder. This is
E-15
<PAGE> 284
accomplished by, first, forecasting the firm's future income stream and the
disposition of such and, second, discounting it at a rate commensurate with the
risk to which it is exposed.
The present value of future income depends on the amount and timing of
that income. Since both the amount and timing are uncertain -- income might be
less than expected and/or income might materialize later than expected -- this
uncertainty must be quantified and incorporated into a discount rate. Thus,
given the amount and timing of a future income stream, high uncertainty
necessitates a high discount rate and results in a relatively low present value,
while low uncertainty merits a low discount rate and a relatively high present
value.
The appropriate discount rate, that is, the minimum rate of return
required by an investor purchasing the firm's shares, must have as its
foundation the yields available on competing financial assets in the public
markets. This follows from the observations noted below.
1. Securities with different risk characteristics provide
different rates of return commensurate with those uncertainties.
This hierarchy of risk and reward furnishes benchmarks from which
a suitable discount rate may be selected for an income stream of
known risk properties.
2. A particular investor, due perhaps to his aversion to risk,
may find market returns inadequate at every level of risk. In a
competitive market, however, he is a "price taker" and, as such,
is limited to either investing at the going rates or not
investing at all.
3. On the other hand, there will always be a buyer and seller
willing to deal at the market rates, precisely because the market
rates represent the consensus of many investors.
Thus, it is possible to estimate an "objective" valuation of a security
based on a discount rate derived from the market.
The rate of return required on a typical common stock is 9.0% above the
prevailing rate of inflation (or 14.0%, assuming a long-term expected inflation
rate of 5.0%). An investor would require from his holding of a controlling
interest in Clyde, Geneva Rock, Utah Service or Beehive Insurance securities a
return estimated by HVA to be 2.0% above the average yield available in the
common stock market (or 16.0%). It is reasonable for him to require a premium on
the general market because of industry- and company-specific risk
characteristics (e.g., the competitive nature of particular industries; the
smaller size of the companies; the relative nonmarketability of their shares;
their relative absence of geographical diversification; and the uncertainty
relating to their ability to achieve future projected earnings levels). These
risk factors are offset in part by a risk reduction for valuation of the
companies on an enterprise value (controlling interest) basis.
The estimated required rate of return of 16.0% is a function of the
returns available on the sample group of publicly traded firms referred to in
the Market Value sections of the report referred to above, as quantitatively
estimated by the Capital Asset Pricing Model and the Gordon Growth
E-16
<PAGE> 285
Model, plus an additional risk premium for the company-specific risk
characteristics previously alluded to, less a partially offsetting risk
reduction for valuation on a controlling interest basis.
The income valuation model used is based on the assumption that the
firm's earnings are retained in total and dividend payments deferred until a
specified year when the firm begins paying all of its earnings as dividends and
does so indefinitely into the future. Once these dividend payments begin to
occur, the basis for the firm's internally financed growth ceases. In the
absence of new external financing, the firm reaches a "steady state" and
earnings remain constant indefinitely thereafter, growing only in nominal terms
in step with inflation. While it is not necessary that the firm actually so
behaves, this is a necessary specification for the valuation formula to be
technically correct. Basically, what is being specified is the firm's
dividend-paying ability. Only dividends can correctly be used in the income
valuation approach for a common stock.
CLYDE
If it is assumed that all of Clyde's future projected net income will be
available to be paid out as dividends from the valuation date forward, and if it
is further assumed that post-2001 net income will remain constant in real terms,
or will grow in nominal terms at an expected long-term rate of inflation of 5.0%
from the 2001 projected figure of $1,361,600, an income value estimate of
$10,214,000 is derived. As was the case with the values derived using the market
value approach, to this figure is added the estimated value of Clyde's equity
interest in Geneva Rock of $35,118,000, resulting in a total income value
estimate of $45,332,000 or $479.00 per share. This figure was considered by HVA
in arriving at a final estimate of the fair market enterprise value of Clyde as
of June 30, 1997.
GENEVA ROCK
If it is assumed that all of Geneva Rock's future projected net income
will be available to be paid out as dividends from the valuation date forward,
and if it is further assumed that post-2001 net income will remain constant in
real terms, or will grow in nominal terms at an expected long-term rate of
inflation of 5.0% from the 2001 projected figure of $14,401,000, an income value
estimate of $103,339,000 or $4,740 per share is derived. This figure was
considered by HVA in arriving at a final estimate of the fair market enterprise
value of Geneva Rock as of June 30, 1997.
E-17
<PAGE> 286
UTAH SERVICE
If it is assumed that all of Utah Service's future projected free cash
flow (or projected net income plus non-cash depreciation expense less capital
expenditures) will be available to be paid out as dividends from the valuation
date forward, and if it is further assumed that post-2001 free cash flow will
remain constant in real terms, or will grow in nominal terms at an expected
long-term rate of inflation of 5.0% from the 2001 projected figure of $620,500,
an income value estimate of $4,580,100 is derived. As was the case under the
market value approach, to this figure is added the estimated after-tax proceeds
to Utah Service from the sale of its nonoperating assets of $250,000, resulting
in a total income value estimate of $4,830,100 or $892.00 per share. This figure
was considered by HVA in arriving at a final estimate of the fair market
enterprise value of Utah Service as of June 30, 1997.
BEEHIVE INSURANCE
If it is assumed that all of Beehive Insurance's future projected net
income will be available to be paid out as dividends from the valuation date
forward, and if it is further assumed that post-2001 net income will grow into
perpetuity at a compound annual rate of 3.0% from the 2001 projected figure of
$272,700, an income value estimate of $1,868,200 or $86.95 per share is derived.
This figure was considered by HVA in arriving at a final estimate of the fair
market enterprise value of Beehive Insurance as of June 30, 1997.
Summary and Conclusion
CLYDE
In estimating the fair market enterprise value of Clyde common stock,
all the various valuation methods were considered; however, HVA gave the
liquidation method 100% weight because this method resulted in a significantly
higher value than the going concern. Based on this approach the fair market
enterprise value of Clyde as of June 30, 1997 was estimated by HVA to be $657
per share for a total value of $62,100,000.
GENEVA ROCK
HVA estimated the fair market enterprise value of Geneva Rock common
stock as follows: (i) book value was estimated at $2,623 per share for a total
value of $57,179,000 and assigned a weight of 0% in the final calculation; (ii)
liquidation value was estimated at $4,162 per share for a total value of
$90,730,000 and assigned a weight of 10% in the final calculation; (iii) the
price-earnings method yielded a value of $4,963 per share for a total value of
$108,203,000 and was assigned a weight of 10% in the final calculation; (iv) the
price to cash flow method yielded a value of $4,666 per share for a total value
of $101,732,000 and was assigned a weight of 10% in the final calculation; (v)
the price to revenue method yielded a value of $4,626 per share for a total
value of $100,865,000 and was assigned a weight of 10% in the final calculation;
(vi) the price to book value method yielded a value of $4,304 per share for a
total value of $93,831,000 and was assigned a weight of 10% in the final
calculation; and (vii)
E-18
<PAGE> 287
income value was estimated at $4,740 per share for a total value of $103,339,000
and was assigned a weight of 50% in the final calculation. As set forth above,
HVA determined that the book value method was, in its judgment, not applicable
and should be assigned a weight of 0% in calculating the fair market enterprise
value of Geneva Rock. Based on the foregoing estimated values and weights, the
fair market enterprise value of Geneva Rock common stock as of June 30, 1997 was
estimated to be $4,633 per share for a total value of $101,206,000 and rounded
to $101,000,000.
UTAH SERVICE
HVA estimated the fair market enterprise value of Utah Service common
stock as follows: (i) book value was estimated at $668 per share for a total
value of $3,614,500 and assigned a weight of 0% in the final calculation; (ii)
liquidation value was estimated at $756 per share for a total value of
$4,090,000 and assigned a weight of 10% in the final calculation; (iii) the
price-earnings method yielded a value of $1,009 per share for a total value of
$5,459,500 and was assigned a weight of 10% in the final calculation; (iv) the
price to cash flow method yielded a value of $653 per share for a total value of
$3,533,000 and was assigned a weight of 10% in the final calculation; (v) the
price to revenue method yielded a value of $676 per share for a total value of
$3,658,100 and was assigned a weight of 10% in the final calculation; (vi) the
price to book value method yielded a value of $856 per share for a total value
of $4,635,600 and was assigned a weight of 10% in the final calculation; and
(vii) income value was estimated at $892 per share for a total value of
$4,830,100 and was assigned a weight of 50% in the final calculation. As set
forth above, HVA determined that the book value method was, in its judgment, not
applicable and should be assigned a weight of 0% in calculating the fair market
enterprise value of Utah Service. Based on the foregoing estimated values and
weights, the fair market enterprise value of the Utah Service common stock as of
June 30, 1997 was estimated to be $841 per share for a total value of $4,552,800
and rounded to $4,550,000.
BEEHIVE INSURANCE
HVA estimated the fair market enterprise value of Beehive Insurance
common stock as follows: (i) book value was estimated at $17.63 per share for a
total value of $378,900 and assigned a weight of 0% in the final calculation;
(ii) the price-earnings method yielded a value of $88.14 per share for a total
value of $1,893,800 and was assigned a weight of 20% in the final calculation;
(iii) the price to cash flow method yielded a value of $68.87 per share for a
total value of $1,479,900 and was assigned a weight of 20% in the final
calculation; (iv) the price to revenue method yielded a value of $23.71 per
share for a total value of $509,400 and was assigned a weight of 0% in the final
calculation; (v) the price to book value method yielded a value of $25.89 per
share for a total value of $556,200 and was assigned a weight of 0% in the final
calculation; and (vi) income value was estimated at $86.95 per share for a total
value of $1,868,200 and was assigned a weight of 60% in the final calculation.
As set forth above, HVA determined that the book value method was, in its
judgment, not applicable and should be assigned a weight of 0% in calculating
the fair market enterprise value of Utah Service. In addition HVA determined
that the price to revenue and price to book figures materially understate the
fair market value of Beehive Insurance and should not be considered in arriving
at
E-19
<PAGE> 288
a final estimate of the fair market enterprise value of Beehive Insurance. Based
on the foregoing estimated values and weights, the fair market enterprise value
of Beehive Insurance common stock as of June 30, 1997 was estimated to be $83.77
per share for a total value of $1,795,700 and rounded to $1,800,000.
E-20
<PAGE> 289
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article IV, Section 1 of CCI's Articles of Incorporation provides that,
except as otherwise required by Utah law, CCI will indemnify and advance
expenses to its directors and officers and to any person who is or was serving
at CCI's request as a director or officer of another domestic or foreign
corporation or other person to the fullest extent permitted by Utah law. Article
IV, Section 2 of CCI's Articles of Incorporation provides that the personal
liability of the directors and officers of CCI to CCI or its shareholders will
be eliminated or limited to the fullest extent permitted by Utah law. Section
6.2 of CCI's Bylaws provides for indemnification of directors to the fullest
extent and in the manner permitted by Utah law. Sections 16-10a-901 through
16-10a-909 of the Utah Revised Business Corporation Law make provision for such
indemnification in terms sufficiently broad to cover directors under certain
circumstances for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act").
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT
NUMBER EXHIBIT
- ------ -------
2.1 Agreement and Plan of Merger dated as of November 13, 1997 by and
among CCI, W.W. Clyde Reorganization Corporation, Clyde, Geneva Rock
Reorganization Corporation, Geneva Rock, Utah Service Reorganization
Corporation, Utah Service, Beehive Insurance Reorganization
Corporation and Beehive Insurance (amended and restated as set forth
in Exhibit 2.2).
*2.2 Amended and Restated Agreement and Plan of Merger dated as of
November 13, 1997 by and among CCI, W.W. Clyde Reorganization
Corporation, Clyde, Geneva Rock Reorganization Corporation, Geneva
Rock, Utah Service Reorganization Corporation, Utah Service,
Beehive Insurance Reorganization Corporation and Beehive Insurance.
3.1 Articles of Incorporation of CCI
3.2 Bylaws of CCI.
4.2 Form of CCI Common Stock Certificate.
5 Opinion of Van Cott, Bagley, Cornwall & McCarthy re legality of
Common Stock.
*8 Opinion of Grant Thornton LLP regarding tax matters.
[CCI Material Contracts: Exhibits 10.1-10.3]
10.1 Voting Agreement dated November 14, 1997 among the persons named on
Schedule 1 thereto.
*10.2 Stock Redemption Plan adopted by the Board of Directors of CCI as of
November 12, 1997.
II-1
<PAGE> 290
10.3 Form of Employment Agreement between CCI and Richard C. Clyde.
[Geneva Rock Material Contracts: Exhibits 10.4-10.10C]
10.4 Promissory Note dated June 28, 1996 in favor of J&J Mill and Lumber
Company.
10.5 Promissory Note dated October 18, 1994 in favor of Ideal Concrete
Corporation.
10.6 Lease dated January 1, 1991 between Mt. Jordan Limited Partnership
and Geneva Rock.
10.7 Asphalt Sales Contract dated February 13, 1997 between Geneva Rock
and Sinclair Oil Corporation.
10.8 Asphalt Cement Contract dated May 29, 1997 between Geneva Rock and
Crysen Refining, Inc.
10.9 Stock Purchase and Shipping Order dated May 1, 1997 between Geneva
Rock and Conoco Inc.
10.10 Stock Purchase and Shipping Order dated July 1, 1997 between Geneva
Rock and Conoco Inc.
10.10A Real Property Purchase Agreement dated September 2, 1997 between
Geneva Rock and Orton Ranch & Development, Inc.
10.10B Purchase Order dated May 29, 1997 from Jacobsen, Okland Joint
Venture regarding Little America Grand Hotel project.
10.10C Material Contract dated September 12, 1997 between Geneva Rock and
Wasatch Constructors.
[Clyde Material Contracts: Exhibits 10.11-10.17]
10.11 Contract dated October 2, 1997 between Clyde and Holmes Creek
Irrigation Company.
10.12 Contract No. ES-01 dated July 21, 1997 between Clyde and Kennecott
Utah Copper Corporation.
10.13 Agreement dated September 12, 1997 between Clyde and Sun River St.
George Development, L.C.
10.14 Agreement dated July 23, 1997 between Clyde and USPCI.
10.15 Profit Participation Agreement dated September 23, 1997 between
Clyde and Overland Trails, L.L.C.
10.16 Contract dated April 28, 1997 between Clyde and the Utah Department
of Transportation.
II-2
<PAGE> 291
10.17 Proposal and Contract dated September 22, 1997 between Clyde and the
United States Department of Transportation.
[Utah Service Material Contracts: Exhibits 10.18-10.19]
10.18 Supply Contract dated July 2, 1990 between Utah Service and Mike
Petersen Oil Company
10.19 Ace Dealer Franchise Agreement dated April 29, 1981 between Utah
Service and Ace Hardware Corporation
[Beehive Insurance Material Contracts: Exhibits 10.20-10.28]
10.20 Agency Agreement dated September 7, 1993 between Beehive Insurance
and St. Paul Fire and Marine Insurance Company.
10.21 Agency-Company Agreement dated December 27, 1994 between Beehive
Insurance and Reliance Insurance Company
10.22 Agency Agreement dated January 1, 1995 between Beehive Insurance and
The Ohio Casualty Insurance Company.
10.23 Producer Agreement dated May 16, 1988 between Beehive Insurance and
The Swett & Crawford Group, Inc.
10.24 Producer Agreement dated January 1, 1993 between Beehive Insurance
and Sobieski & Bradley, Inc.
10.25 Agency-Company Agreement dated December 15, 1992 between Beehive
Insurance and Royal Insurance Company of America.
10.26 Independent Agency Agreement dated January 1, 1997 between Beehive
Insurance and Unigard Insurance Company.
10.27 Lease Agreement dated October 31, 1997 between Beehive Insurance and
Geneva Rock.
10.28 Retirement Plan for Employees of Clyde, Geneva Rock and Beehive
Insurance.
21 Subsidiaries of the Registrant.
*23.1 Consent of Houlihan Valuation Advisors.
23.2 Consent of Van Cott, Bagley, Cornwall & McCarthy (included in
Exhibit 5.1).
*23.3 Consents of Grant Thornton LLC
*23.4 Consent of Daines Associates LLC
*23.5 Consent of Squire & Company, PC
24.1 Power of Attorney (included in the signature page hereto).
27.1 Financial Data Schedule for CCI.
27.2 Financial Data Schedule for Clyde.
II-3
<PAGE> 292
27.3 Financial Data Schedule for Geneva Rock.
27.4 Financial Data Schedule for Utah Service.
27.5 Financial Data Schedule for Beehive Insurance.
*99.1 Forms of Proxy Cards.
99.2 Valuation report of Houlihan Valuation Advisors with respect to
Clyde.
99.3 Valuation report of Houlihan Valuation Advisors with respect to
Geneva Rock.
99.4 Valuation report of Houlihan Valuation Advisors with respect to Utah
Service.
99.5 Valuation report of Houlihan Valuation Advisors with respect to
Beehive Insurance.
*99.6 Form of Letter of Transmittal
- ----------
* Filed with Amendment No. 2 to the Registration Statement
(b) Financial Statement Schedules
Schedules have been omitted because the information required to be
set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed
pursuant to the immediately preceding paragraph, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person of the Registrant in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such
II-4
<PAGE> 293
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and CCI being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933:
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-5
<PAGE> 294
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Salt Lake City, State of Utah, on April 10, 1998.
CLYDE COMPANIES, INC.
By: /s/ CAROL C. SALISBURY
-------------------------------------
Carol C. Salisbury
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on April 10,
1998 in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* President and Director
- -------------------------------
Carol C. Salisbury
* Vice President and Director
- -------------------------------
Ila C. Cook
* Vice President and Director
- -------------------------------
William R. Clyde
* Secretary, Treasurer and Director
- -------------------------------
Louise C. Gammell
* Director
- -------------------------------
Paul B. Clyde
* Director
- -------------------------------
Richard C. Clyde
</TABLE>
* By: /s/ CAROL C. SALISBURY
- -------------------------------
Carol C. Salisbury
Attorney-in-fact
II-6
<PAGE> 295
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE
- ----------- ------- -------
<S> <C> <C>
2.1 Agreement and Plan of Merger dated as of November 13, 1997 by and
among CCI, W.W. Clyde Reorganization Corporation, Clyde, Geneva Rock
Reorganization Corporation, Geneva Rock, Utah Service Reorganization
Corporation, Utah Service, Beehive Insurance (amended and restated
as set forth in Exhibit 2.2).
*2.2 Amended and Restated Agreement and Plan of Merger dated as of
November 13, 1997 by and among CCI, W.W. Clyde Reorganization
Corporation Clyde, Geneva Rock Reorganization Corporation, Geneva
Rock Utah Service Reorganization Corporation, Utah Service, Beehive
Insurance Reorganization Corporation and Beehive Insurance.
3.1 Articles of Incorporation of CCI
3.2 Bylaws of CCI.
4.1 Bylaws of CCI filed as Exhibit 3.2 to this Registration Statement.
4.2 Form of CCI Common Stock Certificate.
5 Opinion of Van Cott, Bagley, Cornwall & McCarthy re legality of
Common Stock.
*8 Opinion of Grant Thornton LLP regarding tax matters.
[CCI Material Contracts: Exhibits 10.1-10.3]
10.1 Voting Agreement dated November 14, 1997 among the persons named on
Schedule 1 thereto.
*10.2 Stock Redemption Plan adopted by the Board of Directors of CCI as of
November 12, 1997.
10.3 Form of Employment Agreement between CCI and Richard C. Clyde.
[Geneva Rock Material Contracts: Exhibits 10.4-10C]
10.4 Promissory Note dated June 28, 1996 in favor of J&J Mill and Lumber
Company.
10.5 Promissory Note dated October 18, 1994 in favor of Ideal Concrete
Corporation.
10.6 Lease dated January 1, 1991 between Mt. Jordan Limited Partnership
and Geneva Rock.
10.7 Asphalt Sales Contract dated February 13, 1997 between Geneva Rock
and Sinclair Oil Corporation.
10.8 Asphalt Cement Contract dated May 29, 1997 between Geneva Rock and
Crysen Refining, Inc.
10.9 Stock Purchase and Shipping Order dated May 1, 1997 between Geneva
Rock and Conoco Inc.
10.10 Stock Purchase and Shipping Order dated July 1, 1997 between Geneva
Rock and Conoco Inc.
10.10A Real Property Purchase Agreement dated September 2, 1997 between
Geneva Rock and Orton Ranch & Development, Inc.
10.10B Purchase Order dated May 29, 1997 from Jacobsen, Okland Joint
Venture regarding Little America Grand Hotel project.
10.10C Material Contract dated September 12, 1997 between Geneva Rock and
Wasatch Constructors
[Clyde Material Contracts: Exhibits 10.11-10.17]
10.11 Contract dated October 2, 1997 between Clyde and Holmes Creek
Irrigation Company.
10.12 Contract No. ES-01 dated July 21, 1997 between Clyde and Kennecott
</TABLE>
II-7
<PAGE> 296
<TABLE>
<S> <C>
Utah Copper Corporation.
10.13 Agreement dated September 12, 1997 between Clyde and Sun River St.
George Development, L.C.
10.14 Agreement dated July 23, 1997 between Clyde and USPCI.
10.15 Profit Participation Agreement dated September 23, 1997 between
Clyde and Overland Trails, L.L.C.
10.16 Contract dated April 28, 1997 between Clyde and the Utah Department
of Transportation.
10.17 Proposal and Contract dated September 22, 1997 between Clyde and the
United States Department of Transportation.
[Utah Service Material Contracts: Exhibits 10.18-10.19]
10.18 Supply Contract dated July 2, 1990 between Utah Service and Mike
Petersen Oil Company
10.19 Ace Dealer Franchise Agreement dated April 29, 1981 between Utah
Service and Ace Hardware Corporation
[Beehive Insurance Material Contracts: Exhibits 10.20-10.28]
10.20 Agency Agreement dated September 7, 1993 between Beehive Insurance
and St. Paul Fire and Marine Insurance Company.
10.21 Agency-Company Agreement dated December 27, 1994 between Beehive
Insurance and Reliance Insurance Company
10.22 Agency Agreement dated January 1, 1995 between Beehive Insurance and
The Ohio Casualty Insurance Company.
10.23 Producer Agreement dated May 16, 1988 between Beehive Insurance and
The Swett & Crawford Group, Inc.
10.24 Producer Agreement dated January 1, 1993 between Beehive Insurance
and Sobieski & Bradley, Inc.
10.25 Agency-Company Agreement dated December 15, 1992 between Beehive
Insurance and Royal Insurance Company of America.
10.26 Independent Agency Agreement dated January 1, 1997 between Beehive
Insurance and Unigard Insurance Company.
10.27 Lease Agreement dated October 31, 1997 between Beehive Insurance and
Geneva Rock.
10.28 Retirement Plan for Employees of Clyde, Geneva Rock and Beehive
Insurance.
</TABLE>
II-8
<PAGE> 297
<TABLE>
<S> <C> <C>
21 Subsidiaries of the Registrant.
*23.1 Consent of Houlihan Valuation Advisors.
23.2 Consent of Van Cott, Bagley, Cornwall & McCarthy (included in
Exhibit 5.1).
*23.3 Consents of Grant Thornton LLP
*23.4 Consent of Daines Associates LLC
*23.5 Consent of Squire & Company, PC
24.1 Power of Attorney (included in the signature page hereto).
27.1 Financial Data Schedule for CCI.
27.2 Financial Data Schedule for Clyde.
27.3 Financial Data Schedule for Geneva Rock.
27.4 Financial Data Schedule for Utah Service.
27.5 Financial Data Schedule for Beehive Insurance.
*99.1 Forms of Proxy Cards.
99.2 Valuation report of Houlihan Valuation Advisors with respect to
Clyde.
99.3 Valuation report of Houlihan Valuation Advisors with respect to
Geneva Rock.
99.4 Valuation report of Houlihan Valuation Advisors with respect to Utah
Service.
99.5 Valuation report of Houlihan Valuation Advisors with respect to
Beehive Insurance.
*99.6 Form of Letter of Transmittal
</TABLE>
*Filed with Amendment No. 2 to Registration Statement
II-9
<PAGE> 1
[EXHIBIT 2.2]
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement") is made and entered into as of November 13, 1997 by and among Clyde
Companies, Inc., a Utah corporation (the "Parent"), W.W. Clyde Reorganization
Corporation, a Utah corporation ("CRC"), W.W. Clyde & Co., a Utah corporation
("Clyde"), Geneva Rock Reorganization Corporation, a Utah corporation ("GRRC"),
Geneva Rock Products, Inc., a Utah corporation ("Geneva Rock"), Utah Service
Reorganization Corporation, a Utah corporation ("USRC"), Utah Service Inc., a
Utah corporation ("Utah Service"), Beehive Insurance Reorganization Corporation,
a Utah corporation ("BIRC"), and Beehive Insurance Agency, Inc., a Utah
corporation ("Beehive Insurance").
Recitals
WHEREAS, the parties hereto entered into an Agreement and Plan of Merger
dated as of November 13, 1997 (the "Original Merger Agreement");
WHEREAS, the parties hereto desire to amend and restate the Original
Merger Agreement in its entirety as set forth in this Agreement effective as of
April 17, 1998;
WHEREAS, the Board of Directors of each of the Parent, and CRC, GRRC,
USRC and BIRC (collectively, the "Reorganization Corporations") and Clyde,
Geneva Rock, Utah Service and Beehive Insurance (collectively, the "Acquired
Corporations" and, together with the Parent and the Reorganization Corporations,
the "Corporations") have approved, and have determined that it is advisable and
in the best interests of each of their respective shareholders for the Parent to
acquire the Acquired Corporations on the terms and conditions set forth in this
Agreement; and
WHEREAS, to accomplish such acquisitions, (i) the Board of Directors of
each of the Parent, CRC and Clyde has determined that CRC should be merged with
and into Clyde (the "Clyde Merger"), (ii) the Board of Directors of each of the
Parent, GRRC and Geneva Rock has determined that GRRC should be merged with and
into Geneva Rock (the "Geneva Rock Merger"), (iii) the Board of Directors of
each of the Parent, USRC and Utah Service has determined that USRC should be
merged with and into Utah Service (the "Utah Service Merger"), and (iv) the
Board of Directors of
<PAGE> 2
each of the Parent, BIRC and Beehive Insurance has determined that BIRC should
be merged with and into Beehive Insurance (the "Beehive Insurance Merger" and,
collectively with the Clyde Merger, the Geneva Rock Merger and the Utah Service
Merger, the "Mergers") in accordance with this Agreement and the applicable
provisions of the Utah Revised Business Corporation Act (the "URBCA") and the
Internal Revenue Code of 1986, as amended (the "Code").
Agreement
NOW, THEREFORE, pursuant to and in accordance with the URBCA and the
Code, the Corporations agree upon and prescribe the terms and conditions of the
Mergers as follows:
I. Merger
1.1 Names and States of Incorporation. The name and state of
incorporation of each of the constituent corporations in the Mergers is as
follows:
(a) for the Clyde Merger, W.W. Clyde Reorganization Corporation,
a Utah corporation, and W.W. Clyde & Co., a Utah corporation;
(b) for the Geneva Rock Merger, Geneva Rock Reorganization
Corporation, a Utah corporation, and Geneva Rock Products, Inc., a Utah
corporation;
(c) for the Utah Service Merger, Utah Service Reorganization
Corporation, a Utah corporation, and Utah Service Inc., a Utah
corporation; and
(d) for the Beehive Insurance Merger, Beehive Insurance
Reorganization Corporation, a Utah corporation, and Beehive Insurance
Agency, Inc., a Utah corporation.
1.2 Closing and Effective Time. The closing of each of the Mergers (the
"Closing") shall take place concurrently at the offices of Van Cott, Bagley,
Cornwall & McCarthy at 8:30 a.m. (local time) on a date (the "Closing Date") to
be specified by the Corporations, which shall be no sooner than the date upon
which all of the conditions specified in Article V of this Agreement have been
satisfied or waived by the applicable Corporations (other than those conditions
that, by their nature, are to be satisfied at the Closing). In accordance with
the URBCA and Articles of Mergers to be filed by each of the respective Acquired
Corporations with the Utah Department of
2
<PAGE> 3
Commerce, Division of Corporations and Commercial Code (the "Utah Division of
Corporations"), the Mergers shall become effective sequentially, with the Clyde
Merger becoming effective first, followed one hour later by the Utah Service
Merger, followed one hour later by the Beehive Insurance Merger and followed one
hour later by the Geneva Rock Merger. Each of the respective Mergers shall be
effective at the date and time specified in the applicable Articles of Merger
(for each Merger, the "Effective Time"). The Closing Date shall be prior to the
Effective Time.
1.3 Mergers. At the Effective Time, the following shall occur:
(a) The respective Reorganization Corporation shall be merged
with and into the corresponding Acquired Corporation, and the separate
existence of the Reorganization Corporation shall cease.
(b) The respective Acquired Corporation shall be the surviving
corporation and shall continue its corporate existence in accordance
with the laws of the State of Utah and under its current name.
(c) The respective Merger shall have the effects set forth in
Section 16-10a-1106 of the URBCA.
1.4 Articles of Incorporation. The Articles of Incorporation of each of
the Acquired Corporations shall continue to be the Articles of Incorporation of
such Acquired Corporation after the Effective Time, until amended or repealed in
accordance with the URBCA.
1.5 Bylaws. The Bylaws of each of the Acquired Corporations shall
continue to be the Bylaws of such Acquired Corporation after the Effective Time,
until amended or repealed in the manner provided by such Bylaws and the URBCA.
1.6 Directors. The directors of each of the Acquired Corporations
immediately prior to the Effective Time shall continue to serve as the directors
of such Acquired Corporation for the term specified in the Bylaws of such
Acquired Corporation.
1.7 Officers. The officers of each of the Acquired Corporations
immediately prior to the Effective Time shall continue to be officers of such
Acquired Corporation until otherwise provided in accordance with the Bylaws of
such Acquired Corporation.
3
<PAGE> 4
1.8 Securities Filings. If required by applicable law, the Corporations
shall promptly prepare and file with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-4 (including any amendments or
supplements thereto, the "Registration Statement") and, as part of the
Registration Statement, a letter, notice of meeting, proxy statement and form of
proxy to the shareholders of each of the Acquired Companies in connection with
the Mergers (collectively, including any amendments or supplements thereto, the
"Proxy Statement"). Each of the Corporations shall provide reasonable
opportunities for the other Corporations to review and comment on the contents
of the Registration Statement. At any time after the preparation of the
Registration Statement, each of the Corporations agrees promptly to notify the
others of and to correct any information which any of them shall have furnished
for inclusion in the Registration Statement that shall have become false or
misleading in any material respect. Each of the Corporations shall use its
reasonable best efforts to have the Registration Statement declared effective
under the Securities Act of 1933, as amended (the "Securities Act"), as promptly
as practicable after such filing. The Parent shall also take any action required
to be taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock (as defined below) in the Merger, and each of
the Corporations shall furnish all information concerning its business, affairs
and/or shareholders as may be reasonably requested in connection with any such
action.
1.9 Special Meeting. As promptly as practicable following the execution
and delivery of this Agreement, in accordance with the URBCA and other
applicable law, each of the Acquired Corporations (a) shall duly call, give
notice of, convene and hold a special meeting of its shareholders (each a
"Special Meeting") and shall submit this Agreement to a vote of such
shareholders at the Special Meeting, (b) subject to any review by the SEC, shall
include in the Proxy Statement, the recommendation of the Board of Directors
that the shareholders should vote in favor of the approval of this Agreement and
(c) shall take all such other action reasonably necessary or appropriate to
obtain the lawful approval of this Agreement by the shareholders.
1.10 Geneva Rock Common Stock Owned by Clyde. As of the date of this
Agreement, Clyde owns (and as of the Effective Time, Clyde will own) 7,518
shares (the "Distribution Shares") of Geneva Rock Common Stock (as defined
below). Immediately after the Effective Time of the Clyde Merger, Clyde, acting
in accordance with resolutions duly adopted by its Board of Directors, shall
distribute (in a dividend distribution) the
4
<PAGE> 5
Distribution Shares to the Parent. Immediately upon such distribution, the
Parent shall own the Distribution Shares, and, at the Effective Time of the
Geneva Rock Merger, the Distribution Shares shall be treated in the same manner
as all of the other shares of Geneva Rock Common Stock owned by the Parent in
accordance with Section 2.1(c) below.
II. Conversion of Shares
2.1 Conversion. As of the Effective Time, by virtue of each of the
Mergers and without any further action, the following shall occur:
(a) Each issued and outstanding share of Clyde Common Stock (as
defined below) (other than (i) shares of Clyde Common Stock owned by the
Parent, which shall not be converted and shall each remain one (1)
issued and outstanding share of Clyde Common Stock, and (ii) Dissenting
Shares (as defined below), if any) shall be converted into 33.93 shares
of Parent Common Stock.
(b) Each issued and outstanding share of CRC Common Stock (as
defined below) shall be converted into one (1) share of Clyde Common
Stock.
(c) Each issued and outstanding share of Geneva Rock Common
Stock (other than (i) shares of Geneva Rock Common Stock owned by the
Parent, which shall not be converted and shall each remain one (1)
issued and outstanding share of Geneva Rock Common Stock, and (ii)
Dissenting Shares, if any) shall be converted into 239.27 shares of
Parent Common Stock.
(d) Each issued and outstanding share of GRRC Common Stock (as
defined below) shall be converted into one (1) share of Geneva Rock
Common Stock.
(e) Each issued and outstanding share of Utah Service Common
Stock (as defined below) (other than (i) shares of Utah Service Common
Stock owned by the Parent, which shall not be converted and shall each
remain one (1) issued and outstanding share of Utah Service Common
Stock, and (ii) Dissenting Shares, if any) shall be converted into 43.43
shares of Parent Common Stock.
(f) Each issued and outstanding share of USRC Common Stock (as
defined below) shall be converted into one (1) share of Utah Service
Common Stock.
5
<PAGE> 6
(g) Each issued and outstanding share of Beehive Insurance
Common Stock (as defined below) (other than (i) shares of Beehive
Insurance Common Stock owned by the Parent, which shall not be converted
and shall each remain one (1) issued and outstanding share of Beehive
Insurance Common Stock, and (ii) Dissenting Shares, if any) shall be
converted into 4.33 shares of Parent Common Stock.
(h) Each issued and outstanding share of BIRC Common Stock (as
defined below) shall be converted into one (1) share of Beehive
Insurance Common Stock.
2.2 Fractional Shares. Notwithstanding any other provision of this
Agreement to the contrary, each holder of shares of common stock of the Acquired
Corporations exchanged pursuant to the Mergers who would otherwise have been
entitled to receive a fraction of a share of Parent Common Stock (after taking
into account all Acquired Corporation Certificates delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fraction multiplied by $14.52 (the projected value, determined as of the
date of this Agreement, of one share of Parent Common Stock as of the Effective
Time). No such holder shall be entitled to any fractional share of Parent Common
Stock (or to any dividends, voting rights or any other rights as a shareholder
in respect of such fractional share of Parent Common Stock).
2.3 Acquired Corporation Certificates. Certificates nominally
representing shares of the common stock of the Acquired Corporations ("Acquired
Corporation Certificates") shall be treated as follows:
(a) As of the Effective Time, each Acquired Corporation
Certificate, other than any certificate representing Dissenting Shares,
if any, for all purposes, shall be deemed to evidence the number of
shares of Parent Common Stock determined in accordance with Section 2.1
above.
(b) As soon as practicable after the Effective Time, the Parent
shall mail to each record holder of an outstanding Acquired Corporation
Certificate, as of the Effective Time, a form of letter of transmittal
(the "Transmittal Letter") that is reasonably acceptable to the Acquired
Corporations (which shall specify that delivery of an Acquired
Corporation Certificate shall be effected, and risk of loss and title to
the Acquired
6
<PAGE> 7
Corporation Certificate shall pass, only upon proper delivery of the
Acquired Corporation Certificate to the Parent) and instructions for use
in effecting the surrender of each Acquired Corporation Certificate in
exchange for a Parent Common Stock certificate ("Parent Certificate").
Upon surrender to the Parent of an Acquired Corporation Certificate,
together with a duly executed Transmittal Letter (and any other
documents which may be reasonably required by the Parent, if any), the
holder of such Acquired Corporation Certificate shall receive promptly
in exchange therefor a Parent Certificate for the number of shares of
Parent Common Stock evidenced thereby in accordance with Section 2.1
above. Thereafter, the applicable Acquired Corporation Certificate shall
be canceled. If a Parent Certificate is to be issued to a person other
than the person in whose name the surrendered Acquired Corporation
Certificate is registered, it shall be a condition of issuance of the
Parent Certificate (x) that the Acquired Corporation Certificate so
surrendered shall be properly endorsed or otherwise be in proper form
for transfer and (y) that the person requesting such issuance shall pay
any transfer or other taxes required by reason of the issuance to a
person other than the registered holder of the Acquired Corporation
Certificate surrendered or establish to the satisfaction of the Parent
that such tax has been paid or is not applicable. The Parent shall pay
all charges and expenses, including those of the Acquired Corporations,
in connection with the distribution of the Parent Certificates.
(c) If any Acquired Corporation Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Acquired Corporation Certificate to be lost,
stolen or destroyed, the Parent will issue in exchange for such lost,
stolen or destroyed Acquired Corporation Certificate the shares of
Parent Common Stock deliverable in respect thereof as determined in
accordance with Section 2.1 above; provided that, at the option of the
Parent, the person to whom such shares are issued, as a condition
precedent to the issuance of such shares, shall give to the Parent a
bond in such sum as the Parent may direct or otherwise indemnify the
Parent in a manner satisfactory to the Parent against any claim that may
be made against the Parent with respect to the Acquired Corporation
7
<PAGE> 8
Certificate claimed to have been lost, stolen or destroyed.
2.4 Dissenters' Rights. Notwithstanding any other provision of this
Agreement, each share of the common stock of any of the Acquired Corporations
(a) as to which a written notice of intent to demand payment was submitted to
the applicable Acquired Corporation in accordance with Section 16-10a-1321(1)(a)
of the URBCA, (b) which is not voted in favor of approval of this Agreement at a
Special Meeting, and (c) as to which a written demand for payment of fair value
shall have been or may still be timely filed, and the Acquired Corporation
Certificate(s) for such shares shall have been or may still be deposited with
the applicable Acquired Corporation in accordance with the requirements of Part
13 of the URBCA (collectively, "Dissenting Shares"), shall not be converted into
shares of Parent Common Stock. Each holder of Dissenting Shares who becomes
entitled under the URBCA to receive payment of the fair value of such holder's
Dissenting Shares shall receive such payment from the Parent (but only after
such fair value shall have been agreed upon or finally determined) and such
Dissenting Shares shall thereupon be canceled. Each Dissenting Share as to which
dissenters' rights pursuant to the URBCA shall be effectively withdrawn or lost
shall thereupon be deemed to have been converted, at the Effective Time, into
shares of Parent Common Stock in accordance with Section 2.1 above.
2.5 Options, Warrants or Other Rights. At the Effective Time, any
options, warrants or other rights to purchase shares of any of the Acquired
Corporations, without any further action, shall be terminated.
III. Representations and Warranties of the Acquired Corporations
Each of the Acquired Corporations, solely as to itself and not as to any
other Acquired Corporation, represents and warrants to the Parent as follows,
subject only to such limitations and exceptions as are set forth below:
3.1 Organization and Good Standing. The Acquired Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Utah, and has all requisite corporate power and corporate
authority to own, lease and operate its properties to carry on its business as
now being conducted. The Acquired Corporation is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary, except where the
8
<PAGE> 9
failure to be so qualified would not have a material adverse effect on the
Acquired Corporation.
3.2 Capital Structure of the Acquired Corporations.
(a) Clyde has an authorized capital structure consisting of Two
Hundred Thousand (200,000) shares of Ten Dollar ($10.00) par value
common stock ("Clyde Common Stock"), and Ninety-Four Thousand Five
Hundred Forty-Four (95,544) shares of Clyde Common Stock are issued and
outstanding.
(b) Geneva Rock has an authorized capital structure consisting
of Fifty Thousand (50,000) shares of Ten Dollar ($10.00) par value
common stock ("Geneva Rock Common Stock"), and Twenty-One Thousand Eight
Hundred Two (21,802) shares of Geneva Rock Common Stock are issued and
outstanding.
(c) Utah Service has an authorized capital structure consisting
of One Hundred Thousand (100,000) shares of Ten Dollar ($10.00) par
value common stock ("Utah Service Common Stock"), and Five Thousand Four
Hundred Thirteen (5,413) shares of Utah Service Common Stock are issued
and outstanding.
(d) Beehive Insurance has an authorized capital structure
consisting of Fifty Thousand (50,000) shares of One Dollar ($1.00) par
value common stock ("Beehive Insurance Common Stock"), and Twenty-One
Thousand Four Hundred Sixty-Seven (21,467) shares of Beehive Insurance
Common Stock are issued and outstanding.
3.3 Authority. The Acquired Corporation has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Acquired
Corporation, subject in the case of this Agreement only to the approval of this
Agreement by the shareholders of the Acquired Corporation as required under the
URBCA.
3.4 Execution and Delivery. This Agreement has been duly executed and
delivered by the Acquired Corporation and constitutes a valid and binding
obligation of the Acquired Corporation, enforceable against the Acquired
Corporation in accordance with its terms but subject to (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and
9
<PAGE> 10
equitable principles, and (ii) statutes, rules or procedures and applicable case
law limiting the availability of or prescribing the procedural requirements for
the exercise of remedies.
3.5 Property. The Acquired Corporation has good, valid and marketable
title to (or in the case of leased property, valid leasehold interests in) all
of its properties and assets.
3.6 No Violations. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not, (a)
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or the creation of a lien, pledge, security interest, charge or other
encumbrance on assets (any such conflict, violation, default, right of
termination, cancellation or acceleration, loss or creation, a "Violation")
pursuant to any provision of the Articles of Incorporation or Bylaws of the
Acquired Corporation, or (b) result in any Violation of (i) any loan or credit
agreement, note, mortgage, indenture, lease or other agreement, obligation,
instrument, permit, concession, franchise, license, statute, law, ordinance,
rule or regulation applicable to the Acquired Corporation or its properties or
assets (except for such Violations as would not, singly or in the aggregate,
have a material adverse effect on the Acquired Corporation), or (ii) any
judgment, order or decree applicable to the Acquired Corporation or its
properties or assets.
3.7 Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental agency, authority or instrumentality, domestic
or foreign (each, a "Governmental Authority"), is required by or with respect to
the Acquired Corporation in connection with the execution and delivery of this
Agreement by the Acquired Corporation, or the consummation by the Acquired
Corporation of the transactions contemplated hereby, except for (a) the filing
with the SEC of the Registration Statement (including the Proxy Statement as a
part thereof), (b) the filing of the Articles of Merger with the Utah Division
of Corporations and appropriate documents with the relevant authorities of other
states in which the Acquired Corporation is qualified to do business, (c)
notices and other filings as may be required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (d) filings as
may be required under state securities laws and (e) such filings,
authorizations, orders and approvals as may be required under foreign laws.
10
<PAGE> 11
3.8 Information Supplied. None of the information supplied or to be
supplied by the Acquired Corporation for inclusion or incorporation by reference
in the Proxy Statement, at the date of mailing to the Acquired Corporation's
shareholders and at the time of its Special Meeting, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All documents that
the Acquired Corporation is responsible for filing with any Governmental
Authority in connection with the transactions contemplated hereby will comply as
to form in all material respects with the provisions of applicable law. Without
limiting any of the representations and warranties contained herein, no
representation or warranty by the Acquired Corporation as of the date thereof
contains any untrue statement of material fact, or omits a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which such statements are or will be made, not misleading.
3.9 Litigation. There are no actions, arbitrations, audits, hearings,
investigations, suits or litigation (whether civil, criminal, administrative,
investigative or informal) before or otherwise involving any Governmental
Authority, court or arbitrator (a "Proceeding") commenced by or against the
Acquired Corporation (or that otherwise relate to or may affect the business or
the assets of the Acquired Corporation) that either (a) challenge, or that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of transactions specified in this Agreement, or (b) would
reasonably be expected to have a material adverse effect on the Acquired
Corporation. To the knowledge of the Acquired Corporation, (1) no such
Proceeding has been threatened, and (2) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding.
3.10 Financial Statements. The financial statements of the Acquired
Corporation (including any balance sheets and statements of income, changes in
stockholders' equity and cash flow, together with any reports thereon of
independent certified public accountants) provided by the Acquired Corporation
in connection with the preparation of (a) the Registration Statement, and (b)
the appraisals of the Acquired Companies prepared by Houlihan Valuation Advisors
and dated October 23, 1997 (the "HVA Appraisals"), fairly present the financial
condition and the results of operations, changes in stockholders' equity and
cash flow of the Acquired Corporation as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with
generally accepted
11
<PAGE> 12
accounting principles ("GAAP"). The financial statements referred to in this
Section 3.10 reflect the consistent application of accounting principles
throughout the periods involved, except as otherwise disclosed in the notes to
such financial statements.
3.11 Taxes.
(a) All material reports, filings, statements, declarations and
returns (collectively, "Tax Returns") with respect to taxes, charges,
fees, levies or assessments (collectively, "Taxes") required to be filed
by the Acquired Corporation as of the Effective Time have been or will
be duly filed, and such Tax Returns are or will be true and correct in
all material respects. The Acquired Corporation has paid or will pay all
Taxes shown as due and payable on such Tax Returns; and the charges,
accruals and reserves for Taxes with respect to the Acquired Corporation
reflected in the Acquired Corporation's financial statements are
adequate under GAAP to cover Taxes accruing through the date thereof,
including contested amounts and amounts not yet due and payable.
(b) There are no material claims with respect to Taxes pending
against the Acquired Corporation and the Acquired Corporation is not
aware of any threatened claim for Taxes or any basis for such claims. No
material issues have been raised in any examination by any Governmental
Authority with respect to the Acquired Corporation which reasonably
could be expected to result in a proposed deficiency for any other
period not so examined, and there are not now in force any waivers or
agreements by the Acquired Corporation for the extension of time for the
assessment of any material Taxes, nor has any such waiver or agreement
been requested by any Governmental Authority. The Acquired Corporation
does not have any liability for any material Taxes of any corporation or
entity other than the Acquired Corporation.
(c) The Acquired Corporation has paid or is withholding and will
pay when due to the proper Governmental Authorities all material
withholding amounts required to be withheld with respect to all Taxes.
3.12 Undisclosed Liabilities. The Acquired Corporation is not subject to
any liabilities of any nature which have had or
12
<PAGE> 13
can reasonably be expected to have a material adverse effect on its business or
financial prospects.
IV. Representations and Warranties of the Parent
The Parent represents and warrants to the Acquired Corporations as
follows, subject only to such exceptions and limitations as are set forth below:
4.1 Organization, Standing and Authority. Each of the Parent and the
Reorganization Corporations is a corporation duly organized, validly existing
and in good standing under the laws of the State of Utah, and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Each of the Parent and the
Reorganization Corporations is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the Parent and the Reorganization Corporations considered as a whole.
4.2 Capital Structure of the Parent.
(a) As of the Effective Time, (i) the authorized capital stock
of the Parent will consist of Ten Million (10,000,000) shares of common
stock ("Parent Common Stock"), and (ii) 2,303,920 shares of Parent
Common Stock will be issued and outstanding. Shares of Parent Common
Stock to be issued in the Mergers, when issued in accordance with this
Agreement, will be validly issued, fully paid and nonassessable.
(b) Except for the Articles of Restatement of the Articles of
Incorporation of the Parent and the Amended and Restated Articles of
Incorporation of the Parent attached thereto (collectively, the "Parent
Recapitalization Documents"), there are no options, warrants, calls,
rights, commitments or agreements of any character to which the Parent
or any of the Reorganization Corporations is a party or by which it is
bound obligating the Parent or any of the Reorganization Corporations to
issue, deliver or sell, or cause to be issued, delivered or sold, shares
of capital stock or obligating the Parent or any of the Reorganization
Corporations to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement.
13
<PAGE> 14
(c) Except for that certain Clyde Companies, Inc. First Amended
and Restated Stock Redemption Plan, adopted as of March 13, 1998 by the
Board of Directors of the Parent and the Parent Recapitalization
Documents, there are no outstanding contractual obligations of the
Parent or any of the Reorganization Corporations, to repurchase, redeem
or otherwise acquire any shares of capital stock of the Parent or any of
the Reorganization Corporations.
(d) Except for the Parent Recapitalization Documents, the Parent
has not (i) made or agreed to make any stock split or stock dividend, or
issued or permitted to be issued any shares of capital stock or
securities exercisable for or convertible into shares of capital stock
of the Parent or any of the Reorganization Corporations.
(e) All of the outstanding shares of capital stock of each
Reorganization Corporation (i) are validly issued, fully paid and
nonassessable and free of any preemptive rights, and (ii) are directly
owned by the Parent, free and clear of all liens, claims, pledges,
agreements, voting or other restrictions, charges or other encumbrances,
with the result that the Parent directly owns the entire equity interest
in each of the Reorganization Corporations.
4.3 Authority. The Parent has all requisite corporate power and
corporate authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Parent.
4.4 Execution and Delivery. This Agreement has been duly executed and
delivered by the Parent and constitutes a valid and binding obligation of the
Parent, enforceable against the Parent in accordance with its terms but subject
to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and equitable principles, and (ii) statutes, rules or procedures and applicable
case law limiting the availability of or prescribing the procedural requirements
for the exercise of remedies.
4.5 No Violations. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not, (a)
result in any Violation of any provision of the Articles of Incorporation or
Bylaws of the
14
<PAGE> 15
Parent, or (b) result in any Violation of (i) any loan or credit agreement,
note, mortgage, indenture, lease or other agreement, obligation, instrument,
permit, concession, franchise, license, statute, law, ordinance, rule or
regulation applicable to the Parent or its properties or assets (except for such
Violations as would not, singly or in the aggregate, have a material adverse
effect on the Parent), or (ii) any judgment, order or decree applicable to the
Parent or its properties or assets.
4.6 Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is required
by or with respect to the Parent in connection with the execution and delivery
of this Agreement by the Parent, or the consummation by the Parent of the
transactions contemplated hereby, except for (a) the filing with the SEC of the
Registration Statement (including the Proxy Statement as a part thereof), (b)
the filing of the Articles of Merger with the Utah Division of Corporations and
appropriate documents with the relevant authorities of other states in which the
Parent is qualified to do business, (c) notices and other filings as may be
required under the HSR Act, (d) filings as may be required under state
securities laws and (e) such filings, authorizations, orders and approvals as
may be required under foreign laws.
4.7 Information Supplied. None of the information supplied or to be
supplied by the Parent for inclusion or incorporation by reference in the Proxy
Statement, at the date of mailing to the Acquired Corporation's shareholders and
at the time of the Special Meeting, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. All documents that the
Parent is responsible for filing with any Governmental Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable law. Without limiting any of the
representations and warranties contained herein, no representation or warranty
by the Parent as of the date thereof contains any untrue statement of material
fact, or omits a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which such statements are
or will be made, not misleading.
4.8 Financial Statements. The financial statements of the Parent
(including any balance sheets and statements of income, changes in stockholders'
equity and cash flow, together with any reports thereon of independent certified
public
15
<PAGE> 16
accountants) provided by the Parent in connection with the preparation of the
Registration Statement, fairly present the financial condition and the results
of operations, changes in stockholders' equity and cash flow of the Parent as at
the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP. The financial statements referred to in
this Section 4.8 reflect the consistent application of accounting principles
throughout the periods involved, except as otherwise disclosed in the notes to
such financial statements.
4.9 Litigation. There are no Proceedings commenced by or against the
Parent or any of the Reorganization Corporations (or that otherwise relate to or
may affect the business or the assets of the Parent or any of the Reorganization
Corporations) that either (a) challenge or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of transactions
specified in this Agreement, or (b) would reasonably be expected to have a
material adverse effect on the Parent and the Reorganization Corporations
considered as a whole. To the knowledge of the Parent, (a) no such Proceeding
has been threatened, and (b) no event has occurred or circumstance exists that
may give rise to or serve as a basis for the commencement of any such
Proceeding.
4.10 Undisclosed Liabilities. The Parent is not subject to any
liabilities of any nature which have had or can reasonably be expected to have a
material adverse effect on its business or financial prospects.
V. Conditions to Closing
5.1 Conditions to the Corporations' Obligations. The respective
obligations of each of the Corporations to consummate the Mergers shall be
subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions:
(a) This Agreement shall have been approved by (i) the
shareholders of each of the Reorganization Corporations and the Acquired
Corporations in accordance with the URBCA, and (ii) a majority of the
shareholders of the Parent in accordance with resolutions duly adopted
by the Board of Directors of the Parent.
(b) The total number of Dissenting Shares, if converted into
shares of Parent Common Stock in accordance with Section 2.1 above,
would be less than or equal to 346,935 shares of Parent Common Stock
16
<PAGE> 17
(which number of shares of Parent Common Stock is equal to five percent
(5%) of the total number of shares of Parent Common Stock that would be
outstanding immediately after the Mergers if there were no Dissenting
Shares and all of the shares of the common stock of the Acquired
Companies were converted into Parent Common Stock in accordance with
Section 2.1 above).
(c) The Parent and the Acquired Corporations shall have received
the opinion of Grant Thorton LLP that the Mergers constitute tax-free
transfers in accordance with Section 351 of the Code or tax-free
reorganizations in accordance with Section 368(a)(1)(B) of the Code.
(d) No Governmental Authority shall have issued any order, and
there shall not be any statute, rule, decree or regulation restraining,
prohibiting or making illegal the consummation of the Merger.
(e) Any waiting period applicable to the consummation of the
Mergers under the HSR Act shall have expired or been terminated.
5.2 Conditions to the Obligations of the Acquired Corporations. The
obligation of the Acquired Corporations to effect the Mergers is further subject
to the satisfaction or waiver, on or prior to the Closing Date, of each of the
following conditions:
(a) The representations and warranties of the Parent contained
in this Agreement shall be true and correct in all material respects
when made and as of the Closing Date (except for matters which
specifically address a particular date which need only be true and
correct as of such date).
(b) The Parent shall have performed in all material respects all
of the obligations to be performed by it under this Agreement prior to
the Closing Date.
(c) A responsible officer of the Parent shall have provided the
Acquired Corporations with a certificate dated the Closing Date which
provides (i) that the matters referred to in subsections (a) and (b) of
this Section 5.2 are accurate and complete, (ii) that the Parent is
prepared in all material respects to
17
<PAGE> 18
perform, and shall perform, all of the obligations to be performed by it
under this Agreement up to the Effective Time, and (iii) for statements
of fact with respect to such other matters as the Acquired Corporations
may reasonably request.
5.3 Conditions to the Obligations of the Parent. The obligation of the
Parent to effect the Mergers is further subject to the satisfaction or waiver,
on or prior to the Closing Date, of each of the following conditions:
(a) The representations and warranties of each of the Acquired
Corporations contained in this Agreement shall be true and correct in
all material respects when made and as of the Closing Date (except for
matters which specifically address a particular date which need only be
true and correct as of such date).
(b) Each of the Acquired Corporations shall have performed in
all material respects all of the obligations to be performed by it under
this Agreement prior to the Closing Date.
(c) A responsible officer of each of the Acquired Corporations
shall have provided the Parent with a certificate dated the Closing Date
which provides (i) that the matters referred to in subsections (a) and
(b) of this Section 5.3 are accurate and complete, (ii) that the
Acquired Corporation is prepared in all material respects to perform,
and shall perform, all of the obligations to be performed by it under
this Agreement up to the Effective Time, and (iii) for statements of
fact with respect to such other matters as the Parent may reasonably
request.
VI. Termination
6.1 Right to Terminate. Notwithstanding any other provision of this
Agreement to the contrary, this Agreement may be terminated and the Mergers may
be abandoned at any time prior to the Effective Time, whether before or after
shareholder approval, in accordance with Sections 6.2 through 6.4 below.
6.2 Automatic Termination. Unless otherwise agreed in writing by each of
the Corporations, this Agreement shall be automatically terminated, without any
further actions by any of the Corporations (except as may be otherwise required
by the URBCA), if (a) any Governmental Authority shall have issued a
18
<PAGE> 19
statute, order, decree or regulation or taken any other action permanently
restraining or enjoining or otherwise materially restricting the consummation of
the transactions contemplated by this Agreement and such statute, order, decree,
regulation or other action shall have become final and non-appealable, or (b)
the Mergers have not been consummated on or before September 30, 1998.
6.3 Termination by the Acquired Corporations. This Agreement may be
terminated by the Boards of Directors of the Acquired Corporations, acting
jointly, if the Parent breaches or fails in any material respect to perform or
comply with any of its covenants and agreements contained herein or breaches its
representations and warranties in any material respect; provided, however, that
if any such breach is curable by the breaching party through the exercise of the
breaching party's reasonable best efforts and for so long as such breaching
party shall be so attempting to cure such breach for a period not to exceed 20
days, the Acquired Corporations may not terminate this Agreement pursuant to
this Section 6.3.
6.4 Termination by the Parent. This Agreement may be terminated by the
Board of Directors of the Parent if any of the Acquired Corporations breaches or
fails in any material respect to perform or comply with any of its covenants and
agreements contained herein or breaches its representations and warranties in
any material respect; provided, however, that if any such breach is curable by
the Acquired Corporation through the exercise of the Acquired Corporation's
reasonable best efforts and for so long as the Acquired Corporations shall be so
attempting to cure such breach for a period not to exceed 20 days, the Parent
may not terminate this Agreement pursuant to this Section 6.4.
6.5 Notice of Termination. In the event of the termination of this
Agreement as provided in Sections 6.3 or 6.4 above, written notice thereof shall
forthwith be given to the other party and such written notice shall specify the
provision of this Agreement pursuant to which such termination is made.
6.6 Effect of Termination. Upon the termination of this Agreement
pursuant to any of Sections 6.2, 6.3 or 6.4 above, this Agreement shall
thereupon become null and void and there shall be no liability on the part of
any of the Corporations to the other (or to any other person). Without limiting
the generality of the foregoing, the Corporations expressly agree (a) that the
sole remedy for any breach of this Agreement shall be the termination rights
contained in Sections 6.3 or 6.4 above, and (b) that in the event of any breach
of this Agreement, the
19
<PAGE> 20
breaching party shall have no liability to any person whatsoever (including,
without limitation, liability for actual, consequential, punitive, exemplary or
special damages).
VII. General Provisions
7.1 Approval. This Agreement has been approved by the Board of Directors
and the shareholders of each of the Corporations as required by the URBCA.
7.2 Actions Prior to Closing. Between the date of this Agreement and the
Effective Time, (a) the Acquired Corporations shall each operate their
respective businesses in accordance with sound business practices and shall not
engage in any transactions other than in the ordinary course of business, and
(b) neither the Parent nor any of the Acquired Corporations shall issue any
additional shares of its capital stock (except, the Parent shall issue shares of
Parent Common Stock in accordance with the Parent Recapitalization Documents).
7.3 Taxation of Transaction. The Corporations intend that the
transactions contemplated by this Agreement shall constitute tax-free transfers
and/or reorganizations pursuant to Sections 351 and 368 of the Code. Therefore,
all of the terms and provisions of this Agreement shall be interpreted so that
such terms and provisions are in accordance with Sections 351 and 368 of the
Code.
7.4 Additional Actions. The officers of the Corporations shall execute
all such other documents and shall take all such other actions as may be
necessary or advisable to make this Agreement and the Mergers effective.
7.5 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented at any time prior to the
Closing Date by the written agreement of each of the Corporations and the
Parent.
7.6 Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of any of the Corporations to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
20
<PAGE> 21
7.7 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, by overnight express
courier service or by facsimile transmission (in each case, as of the date of a
written receipt obtained by the party giving such notice), to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Clyde, to:
1375 N. Main Street
Springville, Utah 84663
Facsimile: (801) 489-7653
(b) if to Geneva Rock, to:
302 West 5400 South
Suite 200
Murray, Utah 84107
Facsimile: (801) 765-7830
(c) if to the Utah Service, to:
35 East 400 South
Springville, Utah 84663
Facsimile: (801) 489-8978
(d) if to the Beehive Insurance, to:
302 West 5400 South
Suite 109
Murray, Utah 84107
Facsimile: (801) 685-2899
(e) if to the Parent, to:
1423 Devonshire Drive
Salt Lake City, Utah 84108
Facsimile: (801) 534-0058
Copies of any notices should be provided to counsel as follows:
Van Cott, Bagley, Cornwall & McCarthy
50 South Main Street, Suite 1600
Salt Lake City, Utah 84144
Attention: Arthur B. Ralph, Esq.
Facsimile: (801) 534-0058
21
<PAGE> 22
7.8 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the Corporations and their respective
successors and assigns.
7.9 Third Party Rights. This Agreement is not intended to confer upon
any other person except the Corporations any rights or remedies hereunder.
7.10 Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. All words used in this Agreement shall be construed to be of
such gender or number as the circumstances require.
7.11 Entire Agreement. This Agreement, including any certificates and
instruments referred to herein, embody the entire agreement and understanding of
the Corporations in respect of the transactions contemplated by this Agreement.
There are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings between the
Corporations with respect to such transactions.
7.12 Expenses. If the Mergers are consummated in accordance with this
Agreement, the Parent shall pay all of the expenses incurred by the Corporations
in connection with transactions contemplated by this Agreement. If this
Agreement is terminated, (a) each Corporation shall pay its pro rata share
(based upon the valuation of each of the Corporations as set forth in the HVA
Appraisals) of the expenses incurred by all of the Corporations in connection
with transactions contemplated by this Agreement, and (b) the officers of each
of the Corporations shall, in good faith, take all of the actions which may be
necessary or advisable to cause such expenses to be paid in accordance with
clause (a) above.
7.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.14 Governing Law. This Agreement shall be governed by the laws of the
State of Utah (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
22
<PAGE> 23
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized officers of the Corporations as of __________, 1998, effective as of
the date first written above.
Acquired
Corporations: W.W. Clyde & Co., a Utah
corporation
By: ____________________________
Its: ___________________________
Geneva Rock Products, Inc., a Utah
corporation
By: ____________________________
Its: ___________________________
Utah Service Inc., a Utah
corporation
By: ____________________________
Its: ___________________________
Beehive Insurance Agency, Inc., a
Utah corporation
By: ____________________________
Its: ___________________________
24
<PAGE> 24
Reorganization
Corporations: W.W. Clyde Reorganization
Corporation, a Utah corporation
Geneva Rock Reorganization
Corporation, a Utah corporation
Utah Service Reorganization
Corporation, a Utah corporation
Beehive Insurance Reorganization
Corporation, a Utah corporation
By: ____________________________
Their: _________________________
The Parent: Clyde Companies, Inc.,
a Utah corporation
By: ____________________________
Its: ___________________________
25
<PAGE> 1
[EXHIBIT 8]
Dear Clyde Companies, Inc., W.W. Clyde and Co., Geneva Rock Products Inc.,
Utah Service Inc. and Beehive Insurance Agency Inc. and the Stockholders of
all above-named corporations:
Pursuant to an Agreement and Plan of Merger (the "Agreement") by and among Clyde
Companies, Inc., ("Companies"), W.W. Clyde Reorganization Corporation ("CRC"),
Geneva Rock Reorganization Corporation ("GRRC"), Utah Service Reorganization
Corporation ("USRC"), Beehive Insurance Reorganization Corporation ("BIRC")
(CRC, GRRC, USRC and BIRC are hereafter collectively referred to as the "Merger
Cos."), WW. Clyde and Co., ("Clyde"), Geneva Rock Products Inc. ("Geneva"), Utah
Service Inc. ("Service") and Beehive Insurance Agency Inc. ("Beehive") (Clyde,
Geneva, Service and Beehive are hereafter collectively referred to as the
"Targets"), the Merger Cos. will be merged with and into the Targets (the
"Merger(s)").
Grant Thornton LLP (the "Firm") has been requested to provide an opinion (the
"Opinion") as to certain federal income tax consequences resulting from the
Mergers. Specifically, with respect to these matters, you have asked the Firm to
address the federal income tax consequences of the following questions:
1. Whether the Mergers will constitute "reorganizations" within the meaning of
Section 368(a)(1)1 of the Code and/or transfers within the meaning of
Section 351?
2. Whether Companies and the Targets will each be a "party to the
reorganization" within the meaning of Section 368(b) of the Code?
3. Whether gain or loss will be recognized to the Shareholders (as defined
below) upon the receipt of Companies voting common stock solely in exchange
for common stock of the Targets?
- ----------
(1) All section references are to the Internal Revenue Code of 1986, as amended.
All regulation references are to the Income Tax Regulations thereunder.
1
<PAGE> 2
4. Whether the basis of the shares of Companies voting common stock received
by the Shareholders will be the same, in each instance, as the basis of the
shares of common stock of the Targets surrendered in exchange therefor?
5. Whether the holding period of Companies voting common stock received by the
Shareholders will include, in each instance, the period during which the
common stock of the Targets surrendered in exchange therefor was held?
6. Whether the payment of cash in lieu of fractional share interests of
Companies will be treated as if the fractional shares were distributed as
part of the Merger and then redeemed by the Companies under the provisions
of Section 302 of the Code?
7. Whether the Distribution (as defined below) will result in the recognition
of gain?
In rendering the Opinion, representatives of the Firm have examined and relied
upon (i) the Agreement; (ii) a draft Form S-4 Registration Statement; and (iii)
a draft Stock Redemption Plan (these items are hereafter collectively referred
to as the "Documents").
Additionally, the Opinion is explicitly conditioned upon representations
contained in certain letters dated as of the date hereof from the Companies and
the Shareholders to the Firm, copies of which are attached to this opinion as
Exhibit A and Exhibit B (the "Representation Letters"). In that regard, the Firm
hereby incorporates by reference all of the statements of facts and factual
representations contained in the Documents and Representation Letters and, for
purposes of rendering the Opinion, the Firm has assumed (without attempting any
independent verification) that all of the statements of facts and factual
representations set forth in the Documents and Representation Letters are true
and complete.
I. OPINION
Based upon the foregoing facts, factual assumptions and representations set
forth in Sections II and III hereof, together with the Exhibits attached hereto
and incorporated by reference in each of such Sections, and the Code, Committee
Reports, legislative history and the relevant Internal Revenue Service and
judicial precedents as of the date hereof, the Firm is of the Opinion that:
2
<PAGE> 3
1. For federal income tax purposes, the Mergers in each instance will be
ignored under the step transaction doctrine discussed below and the
Restructuring (as defined below) will be considered a transfer by each of
the Shareholders of their respective stock of the Targets to Companies
solely in exchange for voting common stock (Rev. Rul. 67-448, 1967-2 C.B.
144). As viewed above, the Restructuring with respect to each of the
Targets will qualify as a reorganization within the meaning of Section
368(a)(1)(B) of the Code and/or a transfer of property as described in
Section 351.
2. Companies and the Targets will each be a "party to the reorganization"
within the meaning of Section 368(b) of the Code. Section 368(b) of the
Code.
3. No gain or loss will be recognized to the Shareholders (except to the
extent of fractional share interest, if any,) upon the receipt of
Companies' voting common stock solely in exchange for the Targets common
stock. Section 354(a)(1) and Section 351(a) of the Code.
4. The basis of the shares of Companies voting common stock received
(including fractional share interests, if any,) by the Shareholder will be
the same, in each instance, as the basis of the common stock of the Targets
surrendered by such shareholder in exchange therefor. Section 358(a)(1) of
the Code.
5. Provided the common stock of the Targets surrendered by the Shareholder was
held as a capital asset, the holding period of the Companies voting common
stock (including any fractional shares interest) received in exchange
therefor will include the period during which common stock of the Targets
surrendered by such shareholder in exchange therefor was held. Section
1223(1) of the Code.
6. The payment of cash to any Shareholder made in lieu of a fractional
interest in a share of Companies' voting common stock to which such
Shareholder is entitled will be treated as a distribution in full payment
for such fractional interest. Rev. Proc. 77-41, 1977-2 C.B. 574. Provided
the fractional interest surrendered by the Shareholder was held as a
capital asset, any gain or loss recognized by the shareholder on receipt of
a payment of cash in exchange therefor will be taxable as a capital gain or
loss, long-term or short-term, depending on
3
<PAGE> 4
whether the Shareholder had held the share of Companies' common stock
giving rise thereto for more than 18 months before the Restructuring.
7. Any gain realized on the Distribution will not result in immediate
recognition but will be taken into income pursuant to the provisions of
Section 1.1502-13 of the Regulations.
II. FACTS
A. BACKGROUND
Companies is a Utah corporation that directly conducts no business activities
but acts as a holding company for a portion of the stock of the Targets.
Specifically, Companies holds 33.78% of the stock of Clyde, 21.67% of the stock
of Geneva, 31.37% of the stock of Service and 17.22% of the stock of Beehive.
Except for cash, the stock of the Targets is Companies only asset. The
shareholders of Companies and their direct percentage of stock holdings is
attached hereto as Exhibit C (these shareholders are hereafter collectively
referred to as the "Companies Shareholders"). In November 1997, the name of
Companies was changed from W.W. Clyde Investment Co.
Clyde is a Utah corporation that is directly engaged in various aspects of the
construction industry. The shareholders of Clyde and their direct percentage of
stock holdings is attached hereto as Exhibit D (these shareholders are hereafter
referred to as the "Clyde Shareholders"). Clyde currently holds 34.77% of the
stock of Geneva.
Geneva is a Utah corporation that is engaged in the ready-mix concrete business,
as well as other construction related activities. The shareholders of Geneva and
their direct percentage holdings is attached hereto as Exhibit E (these
shareholders are hereafter referred to as the "Geneva Shareholders").
Service is a Utah corporation that owns and operates a hardware store and
adjacent gasoline/convenience store. The shareholders of Service and their
direct percentage holdings is attached as Exhibit F (these shareholders are
hereafter collectively referred to as the "Service Shareholders").
4
<PAGE> 5
Beehive is a Utah corporation that operates as an independent insurance agency
providing all types of insurance coverage for the general public. The
shareholders of Beehive and their direct percentage holdings is attached as
Exhibit G (these shareholders are hereafter collectively referred to as the
"Beehive Shareholders"). (The Clyde Shareholders, the Geneva Shareholders, the
Service Shareholders and the Beehive Shareholders are hereafter referred to as
the "Shareholders".)
The Merger Cos. are each wholly-owned, newly-organized subsidiaries of Companies
formed solely for the purpose of participating in the proposed transaction
described below.
B. THE TRANSACTION
For what has been represented to be valid business reasons, the following
transactions (hereafter collectively referred to as the "Restructuring") will
occur:
1. Each outstanding share of Companies on November 13, 1997 at 5:00 p.m. was
converted into 40 shares.
2. All cash held by Companies other than an amount necessary to satisfy its
tax liability upon the consummation of the Restructuring will be
distributed to Companies Shareholders.
3. In anticipation of the Restructuring, Companies has adopted a stock
redemption plan (the "Plan") pursuant to which it is expected that
Companies will redeem a limited number of its shares each year at the
discretion of the Board of Directors of Companies.
4. The Merger Cos. will be formed as described above.
5. Pursuant to the terms of the Agreement, CRC, GRRC, USRC and BIRC will merge
with and into Clyde, Geneva, Service and Beehive, respectively. The Mergers
will be pursuant to the terms of the applicable state laws, with the
Targets being the surviving corporations. In accordance with applicable
state law and the merger agreement between Companies, the Targets and the
Merger Cos., the Mergers will occur sequentially on the same date with CRC
merging into Clyde (the "Clyde Merger") first, thereafter BIRC merging into
Beehive, and one hour thereafter GRRC merging into Geneva.
5
<PAGE> 6
6. Immediately after the Clyde Merger and approximately one hour prior to any
other Mergers, Clyde will distribute (the "Distribution") all of its stock
holdings in Geneva to Companies.
7. All of the outstanding stock of the Targets, except for shares held by
Companies, fractional share interests or shares held by dissenting
shareholders, if any, will be converted into solely voting common stock of
Companies.
8. As a result of the Mergers and Distribution, all of the outstanding stock
of the Targets will be held by Companies.
9. No fractional share interests of Companies' stock will be issued. In lieu
thereof, cash will be paid.
10. Pursuant to the terms of the applicable state laws, shareholders of the
Targets may dissent to the Mergers. Any cash paid to dissenting
shareholders will be provided by their respective Target corporation.
Companies will provide no funds directly or indirectly to dissenting
shareholders of the Targets.
11. All corporate expenses of the Restructuring will be paid by Companies from
dividends, received after the Mergers from the Targets. If the
Restructuring is not consummated, each of the Targets would pay its
proportionate share of the Restructuring expenses.
At the conclusion of the Restructuring, the Shareholders will hold at least 80%
of the outstanding stock of Companies and each of the Targets will be a
wholly-owned subsidiary of Companies.
III. REPRESENTATIONS
The following representations were made by the management of the Targets,
Companies, and certain Shareholders who individually and collectively understand
that these representations form an integral part of our opinion regarding the
Restructuring:
1. The fair market value of Companies' stock received as a result of the
Restructuring will in each instance be approximately equal to the fair
market value of the Targets' stock surrendered.
6
<PAGE> 7
2. The Targets have no plan or intention to issue additional shares of its
stock that would result in Companies losing control of any of the Targets
within the meaning of Section 368(c) of the Code.
3. Except as provided for in the Plan, Companies has no plan or intention to
reacquire any of its stock issued in the transaction.
4. Companies has no plan or intention to liquidate the Targets, to merge the
Targets with or into another corporation; to sell or otherwise dispose of
the stock of the Targets except for transfers of stock to corporations
controlled by Companies or the Targets; or to cause the Targets to sell or
otherwise dispose of any of its assets, except for dispositions made in the
ordinary course of business.
5. Following the Restructuring, each Target will continue its historic
business or use a significant portion of its historic business assets in a
business.
6. On the date of the Restructuring, the fair market value of the assets of
the Targets will in each instance exceed the sums of its liabilities, plus
the amount of liabilities, if any, to which the assets are subject.
7. The Targets are not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
8. None of the compensation received by any of the Shareholder will be
separate consideration for, or allocable to, any of their shares of
Targets' stock; none of the shares of Companies stock received by any
shareholder-employees will be separate consideration for, or allocable to,
any employment agreement; and the compensation paid to any
shareholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's-length
for similar services.
9. Immediately after the Restructuring, the Targets will not have outstanding
any warrants, options, convertible securities or any other type of right
pursuant to which any person could acquire stock that will cause Companies
not to control the Targets within the meaning of Section 368(c) of the
Code.
7
<PAGE> 8
10. There are valid business purposes for the Restructuring.
11. To the best of the knowledge of the management of the Companies,
shareholders of the Targets who hold less than 2% of the stock have no plan
or intention to sell, exchange or otherwise dispose of any of the
Companies' stock received in the proposed transaction except as provided
under the stock redemption plan of Companies effective as of January 1,
1999.
12. Except as set forth immediately below any Shareholder holding 2% or more of
Companies' stock has no plan or intention to sell, exchange or otherwise
dispose of any of Companies stock received in the proposed transactions.
While none of the Shareholders has a current plan to do so, a Shareholder
may, if circumstances require, exercise his or her rights pursuant to the
stock redemption plan of Companies effective as of January 1, 1999.
13. No liabilities will be assumed by Companies or the Targets as part of the
transaction. The stock of the Targets is not subject to any liabilities.
14. The payment of cash in lieu of fractional shares of Companies stock is
solely for the purpose of avoiding the expense and inconvenience to
Companies of issuing fractional shares and does not represent separately
bargained-for consideration. The total cash consideration that will be paid
in the transaction to the Shareholders instead of issuing fractional shares
of Companies stock will not exceed one percent of the total consideration
that will be issued in the transaction to the Shareholders in exchange for
their shares of the Targets' stock. The fractional share interests of each
Shareholder will be aggregated, and no Shareholder will receive cash in an
amount equal to or greater than the value of one full share of Companies
stock.
15. Companies has not acquired any of the stock of the Targets during the last
five years.
16. Companies will file a federal consolidated tax return for the year that
includes the Distribution.
17. Except as set forth below, Companies and the Shareholders will pay their
own expenses incurred in the Restructuring. Companies will pay expenses
that are solely and directly
8
<PAGE> 9
related to the transaction in accordance with the guidances established in
Rev. Rul. 73-54, 1973-1 C.B. 187.
18. The facts and factual representations set forth in Section II above,
together with the Exhibits attached hereto and incorporated herein by
reference thereto and in this Section III, are true, correct and complete
as of the date thereof.
19. There are no facts relevant to the transactions described in Section IIB or
issues addressed in this letter that have not been supplied to the Firm.
IV. DISCUSSION
In order to be tax-free, the Restructuring has to satisfy both the statutory
requirements set forth in the Code and several judicially-created concepts that
in certain instances are elaborated upon in the regulations and by the Internal
Revenue Service in administrative pronouncements such as revenue rulings and
procedures. Among these judicially-created concepts are continuity of interest,
continuity of business enterprise, the step transaction doctrine and business
purpose.
1. THE STATUTE
Section 368(a)(1)(B) of the Code defines the term reorganization to mean the
acquisition of the stock of a corporation (T) solely in exchange for voting
stock of another corporation (P) if immediately after the transaction P controls
T.
Section 351 of the Internal Revenue Code provides that no gain or loss will be
recognized if property is transferred to a corporation by one or more persons
solely in exchange for stock of the transferee corporation provided that
immediately after the exchange the person or persons who transferred the
property are in control of the transferee. While neither the Code nor Internal
Revenue Service regulations define the term "property," stock of a corporation
undoubtedly satisfies the requirement.
As defined in Section 368(c) of the Code, the term control means the ownership
of stock possessing at least 80% of the total combined voting power of all
classes of stock entitled to vote and at least 80% of the total number of shares
of all other classes of stock.
9
<PAGE> 10
In Rev. Rul. 67-448, 1967-2 C.B. 144, the Internal Revenue Service (the
"Service") determined that a transaction could constitute a reorganization
within the meaning of Section 368(a)(1)(B) if a corporation, P, gained control
of another corporation, T, solely in exchange for its voting stock through a
merger of a newly-formed transitory subsidiary of P with and into T. The
existence of the subsidiary and its merger into T are ignored for federal income
tax purposes. The transaction is treated as a direct acquisition by P of the T
stock solely in exchange for voting stock. This same principal applies to ignore
the existence of the Subsidiary and treat the transaction as a transfer of
property pursuant to Section 351. In Rev. Rul. 69-585, 1969-2 C.B. 56, the
Service determined that both the control and solely for voting stock requirement
of Section 368(a)(1)(B) were satisfied when P received 25% of the stock of T as
a dividend from its wholly-owned subsidiary.
The structure of the Mergers is consistent with the transaction described in
Rev. Rul. 67-448. Companies formation of Merger Cos. will be accomplished solely
to effectuate the Mergers. Except for minimal capital, the Merger Cos. will have
no assets and will conduct no business activities. As a result of the Merger and
Distribution, the Targets will become wholly-owned subsidiaries of Companies
with its shareholders receiving solely voting common stock of Companies. Thus
for federal income tax purposes, the Merger should be ignored. Companies should
be treated as transferring solely its voting common stock to the Shareholders in
exchange for their stock. Immediately after the Restructuring, Companies will
hold all of the stock of the Targets and will thus control the Targets within
the meaning of Section 368(c). Representations have been obtained indicating
Companies will not undertake a transaction that will result in the loss of
control of the Targets and result in the Shareholders receiving non-Companies
voting stock consideration for their stock. Consequently, the Restructuring
meets the definition of a reorganization as defined in Section 368(a)(1)(B).
Additionally, since the facts indicate that the shareholders hold at least 80%
of the outstanding stock of Companies immediately after the Restructuring, it
meets the definition of a transfer within the meaning of Section 351 of the
Code.
A party to the reorganization is defined in Section 368(b) of the Code to
include both corporations in the case of reorganization resulting from the
acquisition by one corporation of the stock or properties of another. Since the
Restructuring qualifies as a reorganization within the meaning of Section
368(a)(1)(B), Companies and each of the Targets will each be a party to the
reorganization.
10
<PAGE> 11
Section 354(a)(1) of the Code provides that neither gain nor loss will be
recognized if the stock in a corporation that is a party to reorganization is
exchanged pursuant to a plan of reorganization solely for stock of another
corporation that is a party to the reorganization. Under Section 356(a)(1), if
property or money is received in addition to the stock, gain, if any, to the
recipient will be recognized but in an amount not in excess of the sum of the
money or the fair market value of any other property. Pursuant to
Section 356(a)(2), if the receipt of money or other property has the effect of a
dividend distribution (determined using the attribution rules of Section 318),
then it will be treated as a dividend distribution to the extent of each
distributees ratable share of earnings and profits. The remainder of any gain
will be treated as gain from the exchange of property.
The Shareholders will receive solely Companies voting common stock in the
Restructuring. Consequently, pursuant to Section 354(a)(1), no gain or loss
should be recognized to the Shareholders on the receipt of Companies stock in
exchange for stock of the Targets. Similarly, since the Restructuring satisfies
the requirements of Section 351, no gain or loss is also recognized under that
provision.
Section 351(e) of the Code provided that the general non-recognition rule of
Section 351(a) does not apply to transfers of property to an investment company.
As part of the Taxpayer Relief Act of 1997, Congress provided guidance in
Section 351(e)(1) in determining when a company is to be considered an
investment company. The Firm has reviewed Section 351(e)(1) and examined its
legislative history. It is the Firm's opinion that Companies is not an
investment company within the meaning of Section 351(e).
Additionally, a transaction cannot qualify as a reorganization within the
meaning of Section 368(a) if any two parties to the transaction are investment
companies within the meaning of Section 368(a)(2)(F) of the Code. The Firm is of
the opinion that no two parties to the Restructuring are investment companies
within the meaning of Section 368(a)(2)(F).
2. JUDICIAL GLOSS
a) Continuity of Interest
11
<PAGE> 12
It is well established that a reorganization under Section 368(a)(1) must also
meet the continuity of interest doctrine. See Pinellas Ice & Cold Storage Co. v.
Commissioner, S. Ct., 3 USTC P. 1023, 287 US 462 (1933) and Section 1.368-1(b)
of the Regulations. The purpose of this doctrine is to ensure that the
shareholders of the acquired corporation ("Target") maintain, if only
indirectly, a substantial part of the equity investment in Target following the
reorganization through holding of the acquiring corporation's stock. If the
Target shareholders do not satisfy this requirement, the transaction becomes a
taxable stock or asset acquisition. See Helvering v. Minnesota Tea Co., S. Ct.,
36-1 USTC P. 9015, 296 US 378. In the case of the Restructuring, if it was a
taxable event, the Shareholders would be considered to have sold their stock to
Companies.
In ascertaining whether sufficient continuity is present, the Internal Revenue
Service and the courts look to the historic (old and cold) shareholders of
Target. See Superior Coach of Florida Inc., 80 TC 895 (1983) and Yoc Heating
Co., 61 TC 168 (1973). These historic shareholders must receive a substantial
part of the consideration in stock of the acquiring corporation. It is generally
accepted that 40% is sufficient continuity. See Nelson v. Helvering, S.
Ct., 36-1 USTC P. 9019. In the Restructuring, the Shareholders, are receiving
solely voting stock of Companies.
Continuity of interest must also be maintained by the historic shareholders of
Target for a period of time after the reorganization . It is clear that the
Internal Revenue Service takes post-reorganization sales undertaken as part of
the plan of reorganization into account in measuring continuity of interest. See
Section 3.02 of Rev. Proc. 77-37, 1977-2 C.B. 568. To satisfy
post-reorganization continuity, case law and IRS pronouncements, while not
completely consistent or clear, appear to require that at the time of
reorganization, Target's shareholders had no intention, or perhaps fixed
intention, to dispose of the stock of the acquiring corporation. See McDonalds
Restaurants of Illinois v. Commissioner, 82-2 USTC P. 9581 (1982); Estate of
Christian, 57 TCM 1231, Dec. 45296 (M), TC Memo 1989-413; and R.A. Penrod, 88 TC
1415 (1987). Generally, the actual ownership of the stock of the acquiring
corporation for some period of time following the transaction establishes the
requisite continuity. See Rev. Rul. 66-23, 1966-1 C.B. 67 and Rev. Rul. 78-142,
1978-1 C.B. 111.
12
<PAGE> 13
Nothing in the Documents or the facts as the Firm understands them indicates
that the Shareholders, who will participate in the Restructuring, are not its
historic shareholders for purposes of continuity of interest. Additionally, it
has been represented that, except as might occur under the Plan, to the best of
management's knowledge the Shareholders of the Targets who hold less than 2% of
their stock will not dispose of any amount of Companies stock after the
Restructuring. Additionally, except as might occur under the Plan, Shareholders
of the Targets who hold 2% or more of their stock have no plan or intention to
dispose of any amount of their shares. Consequently, it is our opinion that
continuity of interest should be satisfied in the Restructuring.
b) Continuity of Business Enterprise
A transaction constitutes a tax-free reorganization only if there is a
"continuity of the business enterprise under the modified corporate form." Reg.
Section 1.368-1(b). This means that the acquiring corporation must either (1)
continue Target's historic business or (2) use a significant portion of Target's
historic business assets in a business. Reg. Section 1.368-1(d)(2); and George
R. Laure v. Commissioner, CA-6, 81-2 USTC P. 9517, aff'g, rev'g, and rem'g TC,
653 F.2d 253. In determining whether a line of business or a portion of Target's
historic business assets is "significant," all relevant facts and circumstances
are considered. Reg. Section 1.368-1(d)(3), (4).
A representation has been given that indicates continuity of business will be
satisfied. The facts support this representation. Given the above, it is our
opinion continuity of business enterprise will be satisfied in the
Restructuring.
c) Step Transaction
The step transaction doctrine permits a series of formally separate steps to be
amalgamated and treated as a single transaction if the steps are in substance
integrated, interdependent and focused toward a particular result. See Penrod,
p. 1428 and Rev. Rul. 79-250, 1979-2 C.B. 156.
13
<PAGE> 14
A review of case law indicates the step transaction doctrine is a very nebulous
concept. While courts generally speak in terms of end result, binding commitment
or interdependence in applying the step transaction doctrine, the key to its
application, regardless of the test the court allegedly applies, appears to be
intent and temporal proximity. See Penrod; R. Campbell, 15 TC 312 (195));
Cal-Maine Foods Inc. v. Commissioner, 93 TC 181 (1989); and Private Letter
Ruling 8742033 (July 20, 1987).
If it can be demonstrated that at the time of the first in a series of
transactions the taxpayer had no intent to effectuate the subsequent
transactions, the series of transactions generally will not be stepped together.
See Penrod; Estate of Christian, 57 TCM 1231, Dec. 45926 (M) TCM 1989-413 and
IRS Technical Advice Memorandum 8646002 (July 18, 1989). Courts rarely rely on
the word of the taxpayer in discerning intent but rather look at all of the
facts and circumstances. Unanticipated, material changes in circumstances beyond
the taxpayer's control are critical in establishing the lack of intent.
The amount of time that elapses between the first and subsequent transaction
often is significant in determining whether to step the transactions together.
The shorter the period of time between the transactions, the greater the
likelihood of stepping the transactions together. See Private Letter Ruling
8742033 (July 20, 1987) [two transactions four months apart were not viewed as
independent].
The step transaction doctrine applies to the Restructuring in the sense that the
Merger of Merger Cos. with and into the respective Targets will be ignored. The
substance of the Mergers is a direct acquisition of the Targets stock by
Companies solely in exchange for its voting stock.
Additionally, the step transaction doctrine could apply to negate the control
immediately after requirement of Section 351 if the Shareholders as part of the
Restructuring dispose of an amount of Companies' stock sufficient to result in
the loss of control as defined in Section 368(c). Nothing in the Documents or
facts as the Firm understands them indicates that this will occur. The only
possible sale of stock might occur through the operation of the Plan. The Firm
is of the opinion that any such sale, based on the facts and representations
given, should be treated as a transaction separate from the Restructuring and
thus have no impact on the Restructuring.
14
<PAGE> 15
d) Business Purpose
There must be a valid business purpose for a reorganization. Gregory v.
Helvering, 293 US 465 (1935) and Section 1.368-1(b), Section 1.368-1(c) and
Section 1.368-2(g) of the Regulations. Companies and the Targets Boards of
Directors believe there are numerous valid business reasons for the
Restructuring. Nothing in the Documents or facts contradict this. Thus, the Firm
is of the opinion that a valid business reason exists for the Restructuring.
3. CASH RECEIVED IN LIEU OF FRACTIONAL SHARES
No fractional shares of Companies voting common stock will be issued in the
Restructuring. A Target shareholder who receives cash in lieu of a fractional
share would generally be treated as having received such fractional share
pursuant to the Mergers and then as having exchanged such fractional share for
cash in a redemption by Companies subject to Section 302(a) of the Code,
provided that such redemption is "substantially disproportionate" with respect
to such Target shareholder or is "not essentially equivalent to a dividend." If
the Companies common stock represents a capital asset in the hands of the
shareholder, then the shareholder will generally recognize capital gain on such
a deemed redemption of the fractional share in an amount equal to the excess of
the amount of cash received for such fractional share over the shareholder's tax
basis in the fractional share, or capital loss in an amount equal to the excess
of the shareholder's tax basis in the fractional share over the amount of cash
received for such fractional share. Any such capital gain or loss will be
long-term if the Targets' common stock exchanged was held for more than 18
months.
Administratively, however, the Internal Revenue Service has concluded in Rev.
Proc. 77-41 that cash in lieu of fractional shares will be treated as received
in an exchange subject to Section 302(a) of the Code if the cash distribution is
undertaken solely for the purpose of saving the corporation the expense and
inconvenience of issuing and transferring a fractional share interest, and it is
not separately bargained for consideration. Additionally, certain information
such as the maximum amount of cash that can be received by any shareholder and
the percentage of total cash consideration will be considered in determining
whether the transaction is governed by Section 302(a). A representation has been
made that the sole purpose of issuing cash in lieu of fractional share
15
<PAGE> 16
interests in Companies is to save Companies the expense and inconvenience of
issuing such an interest and that this does not represent separately bargained
for consideration. An additional representation has been made with respect to
the minimal amount of cash an individual shareholder of a Target can receive in
exchange for a fractional share interest as well as to the amount of total cash
being issued in exchange for fractional shares. Accordingly, any cash issued in
lieu of fractional shares should be treated as a sale or exchange under Section
302(a).
The Service has also determined that the payment of cash in lieu of fractional
share interests by the acquiring corporation does not violate the solely for
requirement of Section 368(a)(1)(B) if the cash is not separately bargained for
consideration. Rev. Rul. 66-365, 1966-2 C.B. 116. A representation to this
effect has been given to the Firm. Consequently, any cash provided by Companies
in lieu of any fractional share interests will not be treated as non-stock
consideration for purposes of Section 368(a)(1)(B).
V. CAVEATS AND LIMITATIONS
This opinion is subject to the receipt of all Representation Letters and the
consummation of the Restructuring as described herein.
It is assumed for the purpose of this Opinion that the management of Companies
and the Targets are not aware of any facts inconsistent with those set forth
above and in the Documents. Also, it is assumed that the Documents accurately
reflect all consummated and proposed transactions. The existence of inconsistent
facts and/or consummated or proposed transactions not set forth in the Documents
could materially alter our opinions.
Additionally, the opinions expressed herein are based upon the provisions of the
Code, Treasury regulations (both current and proposed) promulgated thereunder,
judicial decisions, revenue rulings and procedures and related authorities
issued to, and in effect on, the date of this opinion.
Furthermore, no assurance can be given that the Internal Revenue Service or the
courts will not alter their present views, either prospectively or
retroactively, or adopt new views in respect of
16
<PAGE> 17
our opinions. In that event, the opinions expressed herein would necessarily
have to be reevaluated in light of any change in such views. We assume no
obligation to advise you of any change in any such provisions or views which
would affect our opinions set forth herein.
Our opinion is based solely upon the facts, representations and assumptions
contained herein, and we have not undertaken an independent investigation of any
such facts or representations. Our opinion would require reevaluation in the
event of any change in any such fact or representation.
The opinions expressed in this opinion reflect what we believe to be the federal
income tax consequences of the transactions described herein. Nevertheless, they
are only opinions, and no assurance can be given that the Internal Revenue
Service will not challenge any position taken in such opinions. Furthermore, it
should be noted that we express no opinion regarding tax consequences under the
laws of any state or local jurisdiction.
VI. SUBSTANTIAL AUTHORITY
Without limiting the foregoing, providing the facts, assumptions, and
representations contained herein are correct, substantial authority, within the
meaning of Section 6662 of the Code, exists to each of the conclusions made in
this opinion.
If you have questions, please feel free to call either Steve Smith at
801/373-3654 or Robert B. Haran at 202/861-4151.
17
<PAGE> 18
VII. CONSENT
We hereby consent to the references contained in the Form S-4 Registration
Statement of Companies ("Form S-4") to the Firm's Opinion and to the inclusion
of the Opinion as an exhibit to the Form S-4.
Sincerely,
/s/ GRANT THORNTON LLP
----------------------
Grant Thornton LLP
November 19, 1997
18
<PAGE> 19
*This representation letter was signed by selected
executive officers of the Companies
Exhibit A
Clyde Companies, Inc.
November 19, 1997
Mr. Steve Smith
Grant Thornton LLP
3507 N. University Avenue
Suite 200
Provo, UT 84604
Re: Representation Letter for that Certain Opinion Letter (the "Opinion")
of Grant Thornton LLP (the "Firm")
Dear Mr. Smith:
The Firm has acted as tax adviser to the Clyde Companies (the Companies) in
connection with their Restructuring as defined in the Opinion.
The Companies have requested that the Firm render the Opinion concerning the
various federal tax ramifications resulting from the Restructuring. The Firm is
delivering the Opinion to the Companies with respect to this issue. Defined
terms used in this letter and not defined herein are used as defined in the
Opinion. In Section II of the Opinion, including the Exhibits attached therein
in Section I of the Opinion, the Firm recites the facts relevant to the
transaction and Section III of the Opinion recites certain factual
representations relevant to the transaction on which the Firm has relied, and
assumed the truth, correctness and completeness of, in rendering the Opinion.
The purpose of this letter is to verify the facts contained in Section II of the
Opinion and the factual representations contained in Section III of the Opinion
to the Firm for purposes of rendering the Opinion. For purposes of rendering the
Opinion, [The name and title of each individual who signed this representation
letter was inserted here] hereby represents and warrants the following actual
statements and representations:
REPRESENTATIONS
The following representations were made by the management of The Targets, Clyde
Companies, Inc. and the Targets Shareholders who individually and collectively
understand that these representations form an integral part of our opinion
regarding the Restructuring:
1. The fair market value of the Clyde Companies, Inc. stock received as a
result of the Restructuring will in each instance be approximately equal to
the fair market value of the Targets' stock surrendered.
2. The Targets have no plan or intention to issue additional shares of its
stock that would result in Clyde Companies, Inc. losing control of any of
the Targets within the meaning of Section 368(c) of the Code.
A-1
<PAGE> 20
Exhibit A
Clyde Companies, Inc.
3. Clyde Companies, Inc. has no plan or intention to reacquire any of its
stock issued in the transaction.
4. Clyde Companies, Inc. has no plan or intention to liquidate the Targets, to
merger the Targets with or into another corporation; to sell or otherwise
dispose of the stock of the Targets except for transfers of stock to
corporations controlled by Clyde Companies, Inc. or the Targets; or to
cause the Targets to sell or otherwise dispose of any of its assets, except
for dispositions made in the ordinary course of business.
5. Following the Restructuring, the Targets will continue its historic
business or use a significant portion of its historic business assets in a
business.
6. On the date of the Restructuring, the fair market value of the assets of
the Targets will in each instance exceed the sums of its liabilities, plus
the amount of liabilities, if any, to which the assets are subject.
7. The Targets are not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
8. None of the compensation received by any of Targets Shareholder will be
separate consideration for, or allocable to, any of their shares of
Targets' stock; none of the shares of Clyde Companies, Inc. stock received
by any shareholder-employees will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
shareholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's-length
for similar services.
9. Immediately after the Restructuring, the Targets will not have outstanding
any warrants, options, convertible securities or any other type of right
pursuant to which any person could acquire stock that will cause Clyde
Companies, Inc. not to control the Targets within the meaning of Section
368(c) of the Code.
10. There are valid business purposes for the Restructuring.
11. To the best of the knowledge of the management of the Companies
shareholders of the Targets who hold less than 2% of the stock have no plan
or intention to sell, exchange or otherwise dispose of any of the stock of
Clyde Companies, Inc. received in the proposed transaction except as
provided under the stock redemption plan of Clyde Companies, Inc.,
effective as of January 1, 1999.
12. No liabilities will be assumed by Clyde Companies, Inc. or the Targets as
part of the transaction. The stock of the Targets is not subject to any
liabilities.
13. The payment of cash in lieu of fractional shares of Clyde Companies, Inc.
stock is solely for the purpose of avoiding the expense and inconvenience
to Clyde Companies, Inc. of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the transaction to the Shareholders
instead of issuing
A-2
<PAGE> 21
Exhibit A
Clyde Companies, Inc.
fractional shares of Clyde Companies, Inc. stock will not exceed one
percent of the total consideration that will be issued in the transaction
to the Shareholders in exchange for their shares of the Targets' stock. The
fractional share interests of each Shareholder will be aggregated, and no
Shareholder will receive cash in an amount equal to or greater than the
value of one full share of Clyde Companies, Inc. stock.
14. Clyde Companies, Inc. has not acquired any of the stock of the Targets
during the last five years.
15. Clyde Companies, Inc. will file a federal consolidated tax return for the
year that includes the Distribution.
16. Except as set forth below, Clyde Companies, Inc., the Targets and the
Shareholders will pay their own expenses incurred in the Restructuring.
Clyde Companies, Inc., however, will pay certain expenses that are solely
and directly related to the transaction in accordance with the guidelines
established in Rev. Rul. 73-54, 1973-1 C.B. 187.
17. The facts and factual representations set forth in Section II above,
together with the Exhibits attached hereto and incorporated herein by
reference thereto and in this Section III, are true, correct and complete
as of the date thereof.
18. There are no facts relevant to the transactions described in Section IIB or
issues addressed in this letter that have not been supplied to the Firm.
[The name and title of each individual who signed this representation letter was
inserted here] hereby acknowledges and agrees that the Firm is relying upon the
factual statements and representations contained in this letter without any
independent verification thereof for purposes of rendering the Opinion and that
any untrue statement of a material fact contained in this letter or the Opinion
or the omission of any material fact contained in this letter or the Opinion
could render the opinion contained in the Opinion inapplicable. [The name and
title of each individual who signed this representation letter was inserted
here] further acknowledges and agrees that the Firm is under no continuing
obligation to update or otherwise verify any factual statements or
representations contained in this letter or the Opinion from and after the date
hereof.
Very truly yours,
A-3
<PAGE> 22
Exhibit B*
Clyde Companies, Inc.
December 15, 1997
Mr. Steve Smith
Grant Thornton LLP
3507 N. University Avenue
Suite 200
Provo, UT 84604
Re: Representation Letter for that Certain Opinion Letter (the "Opinion")
of Grant Thornton LLP (the "Firm")
Dear Mr. Smith:
The Firm has acted as tax adviser to the Clyde Companies (the Companies) in
connection with their Restructuring as defined in the Opinion.
The Companies have requested that the Firm render the Opinion concerning
the various federal tax ramifications resulting from the Restructuring. The
Firm is delivering the Opinion to the Companies with respect to these
issues.
For purposes of rendering the Opinion, [The names of the individuals who signed
this representation letter were inserted here], hereby represents and warrants
the following actual statements and representations:
REPRESENTATIONS
Except as set forth immediately below, I have no plan or intention to sell,
exchange or otherwise dispose of any of the Clyde Companies, Inc. stock received
in the proposed transactions.
Exception 1. While I have no current plan to do so, I may if circumstances
require exercise my rights pursuant to the stock redemption plan of Clyde
Companies, Inc. effective as of January 1, 1999.
Exception 2. I may transfer some or all of the Clyde Companies, Inc. stock
received to family members pursuant to an estate gifting plan subject to
the annual exclusion amounts set forth in Section 2503(b) of Internal
Revenue Code.
[The names of the individuals who signed this representation letter were
inserted here], hereby acknowledges and agrees that the Firm is relying upon the
factual statements and representations contained in this letter without any
independent verification thereof for purposes of rendering the Opinion and that
any untrue statement of a material fact contained in this letter or the omission
of any material fact contained in this letter could render the opinion contained
in the Opinion inapplicable. FirstName LastName further acknowledges and agrees
that the Firm is under no continuing obligation to update or otherwise verify
any factual statements or representations contained in this letter from and
after the date hereof.
Very truly yours,
* This representation letter was signed by shareholders holding 2% to 4.99%
ownership of Clyde Companies, Inc.
B-1
<PAGE> 23
Exhibit B*
Clyde Companies, Inc.
November 19, 1997
Mr. Steve Smith
Grant Thornton LLP
3507 N. University Avenue
Suite 200
Provo, UT 84604
Re: Representation Letter for that Certain Opinion Letter (the "Opinion")
of Grant Thornton LLP (the "Firm")
Dear Mr. Smith:
The Firm has acted as tax adviser to the Clyde Companies (the Companies) in
connection with their Restructuring as defined in the Opinion.
The Companies have requested that the Firm render the Opinion concerning the
various federal tax ramifications resulting from the Restructuring. The Firm is
delivering the Opinion to the Companies with respect to this issue. Defined
terms used in this letter and not defined herein are used as defined in the
Opinion. In Section II of the Opinion, including the Exhibits attached therein
in Section I of the Opinion, the Firm recites the facts relevant to the
transaction and Section III of the Opinion recites certain factual
representations relevant to the transaction on which the Firm has relied, and
assumed the truth, correctness and completeness of, in rendering the Opinion.
The purpose of this letter is to verify the facts contained in Section II of the
Opinion and the factual representations contained in Section III of the Opinion
to the Firm for purposes of rendering the Opinion. For purposes of rendering the
Opinion, FirstName LastName, hereby represents and warrants the following actual
statements and representations:
REPRESENTATIONS
The following representations were made by the management of The Targets, Clyde
Companies, Inc. and the Targets Shareholders who individually and collectively
understand that these representations form an integral part of our opinion
regarding the Restructuring:
1. Except as set forth immediately below, I have no plan or intention to sell,
exchange or otherwise dispose of any of the Clyde Companies, Inc. stock
received in the proposed transactions. While I have no current plan to do
so, I may if circumstances require exercise my rights pursuant to the stock
redemption plan of Clyde Companies, Inc. effective as of January 1, 1999.
2. The facts and factual representations set forth in Section II above,
together with the Exhibits attached hereto and incorporated herein by
reference thereto and in this Section III, are true, correct and complete
as of the date thereof.
* This representation letter was signed by shareholders holding more than 4.99%
ownership of Clyde Companies, Inc.
B-2
<PAGE> 24
3. There are no facts relevant to the transactions described in Section IIB or
issues addressed in this letter that have not been supplied to the Firm.
[The names of the individuals who signed this representation letter was
inserted here], hereby acknowledges and agrees that the Firm is relying upon the
factual statements and representations contained in this letter without any
independent verification thereof for purposes of rendering the Opinion and that
any untrue statement of a material fact contained in this letter or the Opinion
or the omission of any material fact contained in this letter or the Opinion
could render the opinion contained in the Opinion inapplicable. FirstName
LastName further acknowledges and agrees that the Firm is under no continuing
obligation to update or otherwise verify any factual statements or
representations contained in this letter or the Opinion from and after the date
hereof.
Very truly yours,
B-3
<PAGE> 25
Exhibit C
Clyde Companies, Inc.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES SHARES
------------ ------ ------
<S> <C> <C>
W. Cornell Clyde 158 0.2743%
Richard C. Clyde 200 0.3472%
Richard/Patricia Clyde 2040 3.5418%
Richard Clyde Trust 320 0.5556%
Patricia Clyde Trust 320 0.5556%
Jeffrey Clyde 100 0.1736%
Lisa Bunker 100 0.1736%
Laurie Shaefer 100 0.1736%
Melanie C. Bitters 100 0.1736%
Matthew C. Clyde 100 0.1736%
Carma Clyde Russell 1360 2.3612%
Kenneth/Carma Russell 4030 6.9968%
Louise C. Clyde 175 0.3038%
Paul B. Clyde 1000 1.7362%
Paul/Jeanette Clyde 808 1.4028%
Dianne C. Carr 1000 1.7362%
Dianne/Wallace Carr 1109 1.9254%
Barbara Robertson 1000 1.7362%
Barbara/John Robertson 1109 1.9254%
Wilford W. Clyde 1000 1.7362%
Wilford/Natalie Clyde 808 1.4028%
Carl C. Clyde 1450 2.5174%
Carl/Heather Clyde 69 0.1198%
William R. Clyde Trust 27 0.0469%
Reklaw and Co. 4477 7.7728%
Willford Russell Clyde 703 1.2205%
H. Leon Clyde 703 1.2205%
Marietta C. Young 703 1.2205%
Joan Whicker 703 1.2205%
William Dale Clyde 703 1.2205%
Steven L. Clyde 703 1.2205%
Helene Clyde Arnett 703 1.2205%
Warren D. Clyde 703 1.2205%
Carol Clyde Salisbury 3059 5.3109%
Susan Salisbury 1600 2.7779%
Carol Ann S. Larson 1600 2.7779%
Sally S. Anderson 1600 2.7779%
David C. Salisbury 1450 2.5174%
David/Katherine Salisbury 150 0.2604%
</TABLE>
C-1
<PAGE> 26
Exhibit C
Clyde Companies, Inc.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES SHARES
------------ ------ ------
<S> <C> <C>
Invo, L.C. (Ila/Vernon Cook) 3387 5.8804%
Bruce Vernon Cook 1140 1.9792%
Glen Clyde Cook 745 1.2934%
Joshua G. Cook 82 0.1424%
Glen Cook for Jed R. Cook 81 0.1406%
Glen Cook for Emily Cook 81 0.1406%
David Osmond Cook 517 0.8976%
Nan Cook Oblad 1259 2.1858%
J. Phillip Cook 124 0.2153%
J. Phillip/Charlotta Cook 517 0.8976%
Catherine Cook Rasband 1107 1.9219%
Christine Cook Christensen 887 1.5400%
Louise Clyde Gammell 5568 9.6670%
B. Clyde Gammell 945 1.6407%
Mary Louise Winkler 1010 1.7535%
A. Ray Gammell 945 1.6407%
Louise G. for John Gammell 1160 2.0140%
Total 57598
Total shares 57598
</TABLE>
C-2
<PAGE> 27
Exhibit D
W. W. Clyde & Co.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES SHARES
------------ ------ ------
<S> <C> <C>
W. Cornell Clyde 4580 4.8443%
Edna T. Clyde 755 0.7986%
Richard C. Clyde 1375 1.4543%
Richard/Patricia Clyde 925 0.9784%
Richard Clyde Trust 150 0.1587%
Patricia Clyde Trust 150 0.1587%
Jeffrey Clyde 100 0.1058%
Lisa Bunker 100 0.1058%
Laurie Shaefer 100 0.1058%
Melanie C. Bitters 100 0.1058%
Matthew C. Clyde 100 0.1058%
Carma Clyde Russell 400 0.4231%
Kenneth/Carma Russell 300 0.3173%
Louise C. Clyde Marital Trust 1470 1.5548%
Paul B. Clyde 1115 1.1793%
Paul/Jeanette Clyde 610 0.6452%
Dianne C. Carr 1300 1.3750%
Dianne/Wallace Carr 25 0.0264%
Barbara Robertson 1065 1.1265%
Barbara/John Robertson 360 0.3808%
Wilford W. Clyde 1065 1.1265%
Wilford/Natalie Clyde 610 0.6452%
Carl C. Clyde 1190 1.2587%
Carl/Heather Clyde 370 0.3914%
William R. Clyde Trust 75 0.0793%
Reklaw and Co. 30 0.0317%
Willford Russell Clyde 1035 1.0947%
H. Leon Clyde 117 0.1238%
Leon.Aartie Clyde 450 0.4760%
Johanna C. Miner 78 0.0825%
Elisabeth Ailene O'Byrne 78 0.0825%
Harold Edward Clyde 78 0.0825%
Tanya Noel Clyde 78 0.0825%
Michael Aaron Clyde 78 0.0825%
Benjamin Leon Clyde 78 0.0825%
Marietta C. Young 585 0.6188%
Marietta/Norman Young 450 0.4760%
Joan Whicker 585 0.6188%
Joan/Ross Whicker 450 0.4760%
</TABLE>
D-1
<PAGE> 28
Exhibit D
W. W. Clyde & Co.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES SHARES
------------ ------ ------
<S> <C> <C>
William Dale Clyde 585 0.6188%
Cherilyn Marie Clyde 225 0.2380%
David Joseph Clyde 225 0.2380%
Steven L. Clyde 885 0.9361%
Steven/Pamela Clyde 150 0.1587%
Helene Clyde Arnett 1035 1.0947%
Warren D. Clyde 1035 1.0947%
Carol Clyde Salisbury 2090 2.2106%
David E. Salisbury 250 0.2644%
Invo, L.C. (Ila/Vernon Cook) 2330 2.4645%
David Osmond Cook 10 0.0106%
Louise Clyde Gammell 2320 2.4539%
B. Clyde Gammell 5 0.0053%
Mary Louise Winkler 5 0.0053%
A. Ray Gammell 5 0.0053%
Louise G. for John Gammell 5 0.0053%
Harry Scott Clyde 1027 1.0863%
Janice Scott Clyde 100 0.1058%
Terry L. Carlson 538 0.5690%
Scott G. Carlson 205 0.2168%
Claudia Snyder 607 0.6420%
Kenneth C. Snyder 135 0.1428%
Kurt C. Gramoll 547 0.5786%
Junko N. Gramoll 195 0.2063%
Hal M. Clyde Trust 3150 3.3318%
Hal Michael Clyde 500 0.5289%
Kevin Edward Clyde 10 0.0106%
Patrick/Matissa Clyde 490 0.5183%
Jon Courtney Clyde 500 0.5289%
Norman D. Clyde 50 0.0529%
Norman D. Clyde Family Trust 3100 3.2789%
Tawna Clyde Smith 500 0.5289%
Cheryl C. Dubose 500 0.5289%
Lance D. Clyde 500 0.5289%
Grant Clyde Family Trust 2075 2.1947%
Leone Clyde Family Trust 414 0.4379%
Leone Clyde Trust 1476 1.5612%
Corinne C. Sorenson 135 0.1428%
Claudia C. Talbot 135 0.1428%
</TABLE>
D-2
<PAGE> 29
Exhibit D
W. W. Clyde & Co.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES SHARES
------------ ------ ------
<S> <C> <C>
Clarese C. Lee 135 0.1428%
Calvin G. Clyde Trust 2505 2.6496%
DeAnn Spencer for Diedra S. 50 0.0529%
DeAnn Spencer for Rixa S. 50 0.0529%
DeAnn Spencer for Jocelyn S. 50 0.0529%
DeAnn Spencer for Brittany S. 50 0.0529%
DeAnn Spencer for Garrett S. 50 0.0529%
Eric S. Clyde 250 0.2644%
Carla Clyde Lewis 50 0.0529%
Carla Lewis for Alan R. Lewis 50 0.0529%
Carla Lewis for Nathan Lewis 50 0.0529%
Carla Lewis for Melanie Lewis 50 0.0529%
Carla Lewis for Jonthan Lewis 50 0.0529%
Loretta Clyde Buckley 150 0.1587%
Loretta Buckley for Lance B. 50 0.0529%
Loretta Buckley for Ira B. 50 0.0529%
Mark Eliot Clyde 250 0.2644%
Tania C. Stewart 250 0.2644%
Don Roger Clyde 4570 4.8337%
Joseph/Pauline Pace Trust 3290 3.4799%
Totals 62609
Total Shares 94544
</TABLE>
D-3
<PAGE> 30
Exhibit E
Geneva Rock Products, Inc.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES SHARES
------------ ------ ------
<S> <C> <C>
W. Cornell Clyde 3 0.0138%
W. Cornell/Edna Clyde 575 2.6374%
Edna T. Clyde 443 2.0319%
Richard C. Clyde 60 0.2752%
Louise C. Clyde 620 2.8438%
Louise C. Clyde Marital Trust 14 0.0642%
Paul B. Clyde 143 0.6559%
Paul/Jeanette Clyde 37 0.1697%
Trent Clyde 15 0.0688%
Todd Clyde 15 0.0688%
Timothy Clyde 15 0.0688%
Tiffany C. Hardy 15 0.0688%
Paul Clyde for Tami Clyde 15 0.0688%
Paul Clyde for Traci Clyde 15 0.0688%
Paul Clyde for Tyler Clyde 15 0.0688%
Paul Clyde for Travis Clyde 15 0.0688%
Dianne C. Carr 143 0.6559%
Dianne/Wallace Carr 37 0.1697%
Dainne Carr for Julie Carr 15 0.0688%
Dianne Carr for Michael Carr 15 0.0688%
Dianne Carr for Daniel Carr 15 0.0688%
Dianne Carr for Wendy Carr 15 0.0688%
Barbara Robertson 143 0.6559%
Barbara/John Robertson 37 0.1697%
Barbara C. for Steven Robertson 15 0.0688%
Barbara C. for Christian Robertson 15 0.0688%
Barbara C. for Jacob Robertson 15 0.0688%
Barbara C. for James Robertson 15 0.0688%
Barbara C. for Kirsteen Robertson 15 0.0688%
Barbara C. for Jennifer Robertson 15 0.0688%
Barbara C. for Matthew Robertson 15 0.0688%
Wilford W. Clyde 186 0.8531%
Wilford/Natalie Clyde 37 0.1697%
Wilford Clyde for Camille Clyde 15 0.0688%
Wilford Clyde for Melia Clyde 15 0.0688%
Wilford Clyde for Alison Clyde 15 0.0688%
Wilford Clyde for Katie 15 0.0688%
Carl C. Clyde 185 0.8485%
Carl/Heather Clyde 37 0.1697%
</TABLE>
E-1
<PAGE> 31
Exhibit E
Geneva Rock Products, Inc.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES SHARES
------------ ------ ------
<S> <C> <C>
Carl Clyde for Johathan Clyde 15 0.0688%
Carl Clyde for Jared Clyde 15 0.0688%
William R. Clyde Trust 26 0.1193%
Reklaw and Co. 3 0.0138%
Willford Russell Clyde 187 0.8577%
H. Leon Clyde 187 0.8577%
Marietta/Norman Young 187 0.8577%
Joan/Ross Whicker 187 0.8577%
William Dale Clyde 187 0.8577%
Steven L. Clyde 187 0.8577%
Helene Clyde Arnett 187 0.8577%
Warren D. Clyde 187 0.8577%
Carol Clyde Salisbury 2 0.0092%
Ila Clyde Cook 2 0.0092%
Louise Clyde Gammell 1 0.0046%
A. Ray Gammell 1 0.0046%
Harry Scott Clyde 150 0.6880%
Christina Clyde Schroeder 42 0.1926%
Terry L. Carlson 81 0.3715%
Scott G. Carlson 12 0.0550%
Claudia Snyder 38 0.1743%
Kenneth C. Snyder 12 0.0550%
Kurt C. Gramoll 81 0.3715%
Junko N. Gramoll 12 0.0550%
James Clyde Gramoll 43 0.1972%
Hal M. Clyde Trust 879 4.0317%
Hal Michael Clyde 25 0.1147%
Kevin Edward Clyde 25 0.1147%
Jon Courtney Clyde 25 0.1147%
Norman D. Clyde 304 1.3944%
Norman/Phyllis Clyde 650 2.9814%
Leone Clyde 180 0.8256%
Leone Clyde Family Trust 123 0.5642%
Calvin/Brigitta Clyde 503 2.3071%
Don Roger Clyde 303 1.3898%
Don Roger/Thuryle Clyde 410 1.8806%
Joseph/Pauline Pace Trust 303 1.3898%
Albert/Kristine Schellenberg 10 0.0459%
John/Ann Young 10 0.0459%
</TABLE>
E-2
<PAGE> 32
Exhibit E
Geneva Rock Products, Inc.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES SHARES
------------ ------ ------
<S> <C> <C>
Clista Thomas Family Trust 669 3.0685%
Totals 9496
Total Shares 21802
</TABLE>
E-3
<PAGE> 33
Exhibit F
Utah Service, Inc.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES SHARES
------------ ------ ------
<S> <C> <C>
W. Cornell Clyde 161 2.9743%
Richard C. Clyde 22 0.4064%
Louise C. Clyde Marital Trust 53 0.9791%
Paul/Jeanette Clyde 21 0.3880%
Dianne/Wallace Carr 21 0.3880%
Barbara/John Robertson 21 0.3880%
Wilford/Natalie Clyde 21 0.3880%
Carl/Heather Clyde 21 0.3880%
William R. Clyde 14 0.2586%
Reklaw and Co. 11 0.2032%
Willford Russell Clyde 13 0.2402%
H. Leon Clyde 13 0.2402%
Marietta C. Young 13 0.2402%
Joan Whicker 13 0.2402%
William Dale Clyde 13 0.2402%
Steven L. Clyde 13 0.2402%
Helene Clyde Arnett 13 0.2402%
Warren D. Clyde 13 0.2402%
Carol Clyde Salisbury 248 4.5816%
Ila C. Cook Family Trust 192 3.5470%
Vernon O. Cook Family Trust 129 2.3832%
Invo, L.C. (Ila/Vernon Cook) 189 3.4916%
David Osmond Cook 379 7.0017%
Louise Clyde Gammell 300 5.5422%
Blake H. Gammell 86 1.5888%
B. Clyde Gammell 5 0.0924%
Mary Louise Winkler 5 0.0924%
A. Ray Gammell 5 0.0924%
Louise G. for John Gammell 5 0.0924%
Christina Clyde Schroeder 24 0.4434%
Claudia Snyder 23 0.4249%
Kurt C. Gramoll 23 0.4249%
James Clyde Gramoll 23 0.4249%
Caroliva Bandy 23 0.4249%
Brian Jarvis Clyde 23 0.4249%
Damon Clyde 23 0.4249%
Daniel Clyde 32 0.5912%
Robert Clyde 32 0.5912%
Ronald Clyde 23 0.4249%
</TABLE>
F-1
<PAGE> 34
Exhibit F
Utah Service, Inc.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES SHARES
------------ ------ ------
<S> <C> <C>
Stephen Clyde 32 0.5912%
Hal M. Clyde Trust 192 3.5470%
Norman D. Clyde 191 3.5285%
Grant Clyde Family Trust 191 3.5285%
Brigitta Clyde 191 3.5285%
Don Roger Clyde 192 3.5470%
Joseph/Pauline Pace Trust 191 3.5285%
Harriet Burt 65 1.2008%
Taylor C. Burt 60 1.1084%
Payfryman Trust Lorus 17 0.3141%
Naomi Wight Rowley 33 0.6096%
Max/Ivy Thorn 17 0.3141%
J. Richard Walton Trust 17 0.3141%
H. LaMar Weight 64 1.1823%
Totals 3715
Total Shares 5413
</TABLE>
F-2
<PAGE> 35
Exhibit G
Beehive Insurance Agency, Inc.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES SHARES
------------ ------ ------
<S> <C> <C>
W. Cornell Clyde 288 1.3403%
W. Cornell/Edna Clyde 1500 6.9810%
Richard Clyde Trust 10 0.0465%
Patricia Clyde Trust 490 2.2804%
Carma Clyde Russell 200 0.9308%
Louise C. Clyde 1690 7.8652%
Paul B. Clyde 10 0.0465%
Paul/Jeanette Clyde 58 0.2699%
Dianne/Wallace Carr 57 0.2653%
Barbara/John Robertson 57 0.2653%
Wilford/Natalie Clyde 58 0.2699%
Carl/Heather Clyde 58 0.2699%
William R. Clyde Trust 16 0.0745%
Reklaw and Co. 288 1.3403%
Willford Russell Clyde 123 0.5724%
H. Leon Clyde 123 0.5724%
Marietta C. Young 123 0.5724%
Joan Whicker 123 0.5724%
William Dale Clyde 123 0.5724%
Steven L. Clyde 123 0.5724%
Helene Clyde Arnett 123 0.5724%
Warren D. Clyde 123 0.5724%
Carol Clyde Salisbury 689 3.2066%
Ila C. Cook Family Trust 688 3.2019%
Louise Clyde Gammell 269 1.2519%
Blake H. Gammell 5 0.0233%
Blake/Louise Gammell 400 1.8616%
B. Clyde Gammell 20 0.0931%
Mary Louise Winkler 5 0.0233%
A. Ray Gammell 5 0.0233%
Louise G. for John Gammell 5 0.0233%
Harry Scott Clyde 425 1.9779%
Melza Beth Gramoll 425 1.9779%
Robert Melvin Clyde 425 1.9779%
Hal M. Clyde Trust 916 4.2630%
Norman D. Clyde 116 0.5399%
Norman/Phyllis Clyde 1250 5.8175%
Tawna Clyde Smith 100 0.4654%
Cheryl C. Dubose 100 0.4654%
</TABLE>
G-1
<PAGE> 36
Exhibit G
Beehive Insurance Agency, Inc.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES SHARES
------------ ------ ------
<S> <C> <C>
Lance D. Clyde 100 0.4654%
Grant Clyde Family Trust 417 1.9407%
Calvin/Brigitta Clyde 417 1.9407%
Don Roger Clyde 417 1.9407%
Joseph/Pauline Pace Trust 417 1.9407%
Clista Thomas Family Trust 500 2.3270%
Payfryman Trust Lorus 500 2.3270%
J. Richard Walton Trust 3000 13.9619%
W. Douglas Snow 200 0.9308%
Stanco, Inc. 212 0.9866%
Totals 17787
Total Shares 21487
</TABLE>
G-2
<PAGE> 1
[EXHIBIT 10.2]
CLYDE COMPANIES, INC.
AMENDED AND RESTATED
STOCK REDEMPTION PLAN
The Board of Directors (the "Board") of Clyde Companies, Inc., a
Utah corporation (the "Company"), has adopted the following stock redemption
plan (this "Plan"), effective as of January 1, 1999:
1. Purposes. Certain shareholders of the Company ("Shareholders")
desire to sell shares of the common stock of Company ("Common Stock") from time
to time. However, there is no public or other ready market for the Common Stock.
Accordingly, the Shareholders have requested that the Company redeem, on an
annual basis, a limited number of shares of Common Stock. The Board has
determined that it is advisable and in the best interests of the Company and the
Shareholders for the Company to redeem shares of Common Stock, each year on a
date established by the Board (the "Redemption Date"), in accordance with the
terms of this Plan (the "Redemption").
2. Valuation of the Common Stock. Each year, as soon as
practicable following the issuance by the Company's auditors of their report
regarding the consolidated financial statements of the Company and its
subsidiaries for the prior year (the "Financial Statements"), the Board shall
cause an appraisal (or an update of a prior appraisal) of the Company (the
"Appraisal") to be completed by an independent individual or firm selected by
the Board which shall set forth a determination of the total fair market value
of the Company as of the last day of the prior year (the "Appraisal Value"). The
price to be paid to the Shareholders for each share of redeemed Common Stock
(the "Redemption Price") shall be an amount equal to the Appraisal Value divided
by the number of shares of Common Stock outstanding on the last day of the prior
year, discounted by twenty-five percent (25%) (reflecting a lack of
marketability and minority interest).
3. Redemption Fund. As soon as practicable following the
Appraisal, the Board shall determine the amount which shall be made available by
the Company on the Redemption Date to fund the Redemption (the "Redemption
Fund"). Notwithstanding any other provision of this Plan to the contrary, the
Redemption Fund shall be an amount which (a) for the years 1999 through 2003, is
greater than or equal to Seven Percent (7%) and less than or equal to Fifteen
Percent (15%) of the net earnings of the Company (after taxes) as recorded in
the Financial Statements, and (b) for the years 2004 and thereafter, is greater
than or equal to Five Percent (5%) and less than or equal to Ten Percent (10%)
of the net earnings of the Company (after taxes) as recorded in the
<PAGE> 2
Financial Statements. Any amount of the Redemption Fund remaining after the
Redemption Date shall be reallocated for the purposes determined by the Board.
4. Redemption Procedures. Each year, as soon as practicable after
the determination of the amount of the Redemption Fund, the following shall
occur:
(a) The Company shall mail to each record Shareholder (i)
a form of letter of transmittal (the "Transmittal Letter") advising such
Shareholder of his or her right to redeem shares of Common Stock and specifying
(A) the Appraisal Value, (B) the Redemption Price, (C) the Redemption Date, and
(D) the instructions necessary for the Shareholders to participate in and
complete the Redemption, (ii) the Financial Statements, (iii) a copy of the
Appraisal (or a summary thereof), and (iv) such other information as shall be
required by applicable law.
(b) The Shareholders who desire to participate in the
Redemption (each a "Selling Shareholder") shall comply with all of the
requirements set forth in the Transmittal Letter and shall surrender
certificates evidencing shares of Common Stock to be redeemed to the Company. If
less than all of the shares represented by any certificate evidencing shares of
Common Stock are to be redeemed, as soon as practicable following the Redemption
Date, the Company shall issue a new certificate to the Selling Shareholder for
the appropriate number of shares of Common Stock.
(c) If the number of shares of Common Stock offered for
Redemption by the Selling Shareholders is greater than the number of shares
which may be redeemed by the Company (given the amount of the Redemption Fund
and the Redemption Price), the Company shall spend the entire amount of the
Redemption Fund and shares of Common Stock shall be redeemed from each Selling
Shareholder on a pro rata basis.
(d) If the number of shares of Common Stock offered for
Redemption by the Selling Shareholders is less than the number of shares which
may be redeemed by the Company (given the amount of the Redemption Fund and the
Redemption Price), the Company shall spend such amount of the Redemption Fund as
is necessary to redeem all of the shares of Common Stock offered for Redemption
and the remaining amounts shall be treated as set forth in paragraph 3 above.
(e) In accordance with applicable law and the Transmittal
Letter, the Company shall pay to each Selling Shareholder an amount in cash
equal to the Redemption Price multiplied by the number of shares of Common Stock
redeemed from such Selling Shareholder pursuant to this Plan.
(f) Upon Redemption, all shares of Common Stock redeemed
shall be authorized and unissued shares of the Company
2
<PAGE> 3
and any certificates representing such shares of Common Stock shall be canceled.
5. Eligible Shares. All shares of Common Stock shall be eligible
for redemption subject to and in accordance with the terms of this Plan.
6. Administration. This Plan shall be administered and
interpreted by the Board in its sole and absolute discretion. This Plan may be
repealed, amended, modified, supplemented or changed, or the Redemption for any
particular year may be canceled, only after the approval of such action by more
than seventy-five percent (75%) of the Board.
3
<PAGE> 1
[EXHIBIT 23.1]
CONSENT
To the Board of Directors of
Clyde Companies Inc.
Gentlemen:
We hereby consent to the references to our firm which appear in the
Registration Statement of Clyde Companies, Inc. on Form S-4 and the Proxy
Statement/Prospectus. We also consent to the following reports prepared by our
firm being filed as annexes to the Proxy Statement/Prospectus:
1. Valuation of W.W. Clyde & Co. dated October 23, 1997.
2. Valuation of Geneva Rock Products, Inc. dated October 23, 1997.
3. Valuation of Utah Service, Inc. dated October 23, 1997.
4. Valuation of Beehive Insurance Agency, Inc. dated October 23, 1997.
We also consent to the use in the Registration Statement of Annex E
thereto, which was not prepared by our firm but which is a summary of certain
valuation reports that were prepared by our firm.
HOULIHAN VALUATION ADVISORS
By: /s/ David Dorton
------------------------
David Dorton
Salt Lake City, Utah
Date: April 8, 1998
<PAGE> 1
[EXHIBIT 23.3]
CONSENT
We have issued our report dated March 20, 1998, accompanying the
financial statements of Clyde Companies, Inc. contained in the Registration
Statement and Prospectus. We consent to the use of the aforementioned report in
the Registration Statement and Prospectus and to the use of our name as it
relates to the above Company appearing under the captions "Selected Financial
Information," Summary Historical Financial Information" and "Experts."
/s/ Grant Thornton LLP
----------------------------
Grant Thornton LLP
Provo, Utah
April 9, 1998
<PAGE> 2
CONSENT
We have issued our report dated March 5, 1998, accompanying the
financial statements of W. W. Clyde & Co., contained in the Registration
Statement and Prospectus. We consent to the use of the aforementioned report in
the Registration Statement and Prospectus and to the use of our name as it
relates to the above Company appearing under the captions "Selected Financial
Information," Summary Historical Financial Information" and "Experts."
/s/ Grant Thornton LLP
----------------------------
Grant Thornton LLP
Provo, Utah
April 9, 1998
<PAGE> 3
CONSENT
We have issued our report dated February 20, 1998, accompanying the
financial statements of Geneva Rock Products, Inc., contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned report in the Registration Statement and Prospectus and to the
use of our name as it relates to the above Company appearing under the captions
"Selected Financial Information," Summary Historical Financial Information" and
"Experts."
/s/ Grant Thornton LLP
----------------------------
Grant Thornton LLP
Provo, Utah
April 9, 1998
<PAGE> 4
CONSENT
We have issued our report dated February 27, 1998, accompanying the
financial statements of Utah Service, Inc., contained in the Registration
Statement and Prospectus. We consent to the use of the aforementioned report in
the Registration Statement and Prospectus and to the use of our name as it
relates to the above Company appearing under the captions "Selected Financial
Information," Summary Historical Financial Information" and
"Experts."
/s/ Grant Thornton LLP
----------------------------
Grant Thornton LLP
Provo, Utah
April 9, 1998
<PAGE> 5
CONSENT
We have issued our report dated March 13, 1998, accompanying the
financial statements of Beehive Insurance Agency, Inc., contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned report in the Registration Statement and Prospectus and to the
use of our name as it relates to the above Company appearing under the captions
"Selected Financial Information," Summary Historical Financial Information" and
"Experts."
/s/ Grant Thornton LLP
----------------------------
Grant Thornton LLP
Provo, Utah
April 9, 1998
<PAGE> 1
[EXHIBIT 23.4]
CONSENT
We have issued our report dated October 21, 1997 accompanying the
financial statements of Beehive Insurance Agency, Inc. contained in the
Registration Statement on Form S-4 of Clyde Companies, Inc. and the Proxy
Statement/Prospectus. We consent to the use of the aforementioned report in the
Registration Statement and the Proxy Statement/Prospectus and to the use of our
name as it appears in the Registration Statement and the Proxy
Statement/Prospectus.
/s/ Daines Associates LLC
------------------------------
Daines Associates LLC
Salt Lake City, Utah
April 8, 1998
<PAGE> 1
[EXHIBIT 23.5]
CONSENT
We have issued our report dated February 15, 1997 accompanying the
consolidated financial statements of Geneva Rock Products, Inc. contained in the
Registration Statement on Form S-4 of Clyde Companies, Inc. and the Proxy
Statement/Prospectus. We consent to the use of the aforementioned report in the
Registration Statement and the Proxy Statement/Prospectus and to the use of our
name as it appears in the Registration Statement and the Proxy
Statement/Prospectus.
/s/ Squire & Co.
-----------------------
Squire & Co.
Orem, Utah
April 8, 1998
<PAGE> 1
[EXHIBIT 99.1]
PROXY
CLYDE COMPANIES, INC.
1423 Devonshire Drive
Salt Lake City, Utah 84108
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CLYDE
COMPANIES, INC. FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON FRIDAY,
JUNE 19, 1998.
The undersigned hereby constitutes and appoints Carol C. Salisbury and Ila
C. Cook or either of them, with full power of substitution, attorneys, and
proxies of the undersigned, to represent the undersigned and vote all shares of
the common stock of Clyde Companies, Inc. ("CCI") which the undersigned would be
entitled to vote if personally present at CCI's Special Meeting of Shareholders
to be held at the offices of Geneva Rock Products, Inc., 1565 W. 400 N., Orem,
Utah on Friday, June 19, 1998 at 11:30 a.m., local time, and at any postponement
or adjournment thereof, in the following manner:
1. To approve the Amended and Restated Agreement and Plan of Merger dated
as of November 13, 1997 providing for the merger ("Merger") of wholly
owned subsidiaries of CCI with W.W. Clyde & Co. ("Clyde"), Geneva Rock
Products, Inc. ("Geneva Rock"), Utah Service, Inc. ("Utah Service")
and Beehive Insurance Agency, Inc. ("Beehive Insurance"), each of
which will become wholly owned subsidiaries of CCI. Upon the effective
date of the Merger, each issued and outstanding share of common stock
of Clyde, Geneva Rock, Utah Service and Beehive Insurance will be
converted into, respectively, 33.93, 239.27, 43.43 and 4.33 shares of
common stock, no par value, of CCI.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Other Matters. The proxies are authorized to vote upon such other
business as may properly come before the Special Meeting, or any postponement or
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEM 1.
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES IT
REPRESENTS WILL BE VOTED AT THE SPECIAL MEETING IN ACCORDANCE WITH THE CHOICE
SPECIFIED ABOVE. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR
PROPOSAL ONE. THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF
THE DESIGNATED INDIVIDUALS WITH RESPECT TO MATTERS INCIDENT TO THE CONDUCT OF
THE SPECIAL MEETING AND ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
SPECIAL MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
Please date and sign exactly as your name or names appear hereon. If
more than one owner exists, all should sign. When signing as attorney, executor,
trustee, or guardian, give your full title as such. If the signatory is a
corporation or partnership, sign the full corporate or partnership name by a
duly authorized officer or partner.
Dated: __________________, 1998
_______________________________
Signature
_______________________________
Signature
_______________________________
Type or Print
PLEASE PROMPTLY COMPLETE, DATE, SIGN, AND RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE
<PAGE> 2
PROXY
W.W. CLYDE & CO.
1375 North Main Street
Springville, Utah 84663
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF W.W. CLYDE &
CO. FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON FRIDAY, JUNE 19, 1998.
The undersigned hereby constitutes and appoints Richard C. Clyde and Paul
B. Clyde or either of them, with full power of substitution, attorneys, and
proxies of the undersigned, to represent the undersigned and vote all shares of
the common stock of W.W. Clyde & Co. ("Clyde") which the undersigned would be
entitled to vote if personally present at Clyde's Special Meeting of
Shareholders to be held at the offices of Geneva Rock Products, Inc., 1565 W.
400 N., Orem, Utah on Friday, June 19, 1998 at 8:00 a.m., local time, and at any
postponement or adjournment thereof, in the following manner:
1. To approve the Amended and Restated Agreement and Plan of Merger dated
as of November 13, 1997 providing for the merger ("Merger") of wholly
owned subsidiaries of Clyde Companies, Inc. ("CCI") with Clyde, Geneva
Rock Products, Inc. ("Geneva Rock"), Utah Service, Inc. ("Utah
Service") and Beehive Insurance Agency, Inc. ("Beehive Insurance"),
each of which will become wholly owned subsidiaries of CCI. Upon the
effective date of the Merger, each issued and outstanding share of
common stock of Clyde, Geneva Rock, Utah Service and Beehive Insurance
will be converted into, respectively, 33.93, 239.27, 43.43 and 4.33
shares of common stock, no par value, of CCI.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Other Matters. The proxies are authorized to vote upon such other
business as may properly come before the Special Meeting, or any postponement or
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEM 1.
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES IT
REPRESENTS WILL BE VOTED AT THE SPECIAL MEETING IN ACCORDANCE WITH THE CHOICE
SPECIFIED ABOVE. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR
PROPOSAL ONE. THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF
THE DESIGNATED INDIVIDUALS WITH RESPECT TO MATTERS INCIDENT TO THE CONDUCT OF
THE SPECIAL MEETING AND ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
SPECIAL MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
Please date and sign exactly as your name or names appear hereon. If
more than one owner exists, all should sign. When signing as attorney, executor,
trustee, or guardian, give your full title as such. If the signatory is a
corporation or partnership, sign the full corporate or partnership name by a
duly authorized officer or partner.
Dated: __________________, 1998
_______________________________
Signature
_______________________________
Signature
_______________________________
Type or Print
PLEASE PROMPTLY COMPLETE, DATE, SIGN, AND RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE
<PAGE> 3
PROXY
GENEVA ROCK PRODUCTS, INC.
1565 West 400 North
Orem, Utah 84057
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF GENEVA ROCK
PRODUCTS, INC. FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON FRIDAY,
JUNE 19, 1998.
The undersigned hereby constitutes and appoints Wilford W. Clyde and Albert
T. Schellenberg or either of them, with full power of substitution, attorneys,
and proxies of the undersigned, to represent the undersigned and vote all shares
of the common stock of Geneva Rock Products, Inc. ("Geneva Rock") which the
undersigned would be entitled to vote if personally present at Geneva Rock's
Special Meeting of Shareholders to be held at the offices of Geneva Rock, 1565
W. 400 N., Orem, Utah on Friday, June 19, 1998 at 9:30 a.m., local time, and at
any postponement or adjournment thereof, in the following manner:
1. To approve the Amended and Restated Agreement and Plan of Merger dated
as of November 13, 1997 providing for the merger ("Merger") of wholly
owned subsidiaries of Clyde Companies, Inc. ("CCI") with W.W. Clyde &
Co. ("Clyde"), Geneva Rock, Utah Service, Inc. ("Utah Service") and
Beehive Insurance Agency, Inc. ("Beehive Insurance"), each of which
will become wholly owned subsidiaries of CCI. Upon the effective date
of the Merger, each issued and outstanding share of common stock of
Clyde, Geneva Rock, Utah Service and Beehive Insurance will be
converted into, respectively, 33.93, 239.27, 43.43 and 4.33 shares of
common stock, no par value, of CCI.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Other Matters. The proxies are authorized to vote upon such other
business as may properly come before the Special Meeting, or any postponement or
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEM 1.
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES IT
REPRESENTS WILL BE VOTED AT THE SPECIAL MEETING IN ACCORDANCE WITH THE CHOICE
SPECIFIED ABOVE. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR
PROPOSAL ONE. THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF
THE DESIGNATED INDIVIDUALS WITH RESPECT TO MATTERS INCIDENT TO THE CONDUCT OF
THE SPECIAL MEETING AND ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
SPECIAL MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
Please date and sign exactly as your name or names appear hereon. If
more than one owner exists, all should sign. When signing as attorney, executor,
trustee, or guardian, give your full title as such. If the signatory is a
corporation or partnership, sign the full corporate or partnership name by a
duly authorized officer or partner.
Dated: __________________, 1998
_______________________________
Signature
_______________________________
Signature
_______________________________
Type or Print
PLEASE PROMPTLY COMPLETE, DATE, SIGN, AND RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE
<PAGE> 4
PROXY
UTAH SERVICE, INC.
35 East 400 South
Springville, Utah 84663
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF UTAH
SERVICE, INC. FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON FRIDAY, JUNE
19, 1998.
The undersigned hereby constitutes and appoints Vernon O. Cook and David
O. Cook or either of them, with full power of substitution, attorneys, and
proxies of the undersigned, to represent the undersigned and vote all shares of
the common stock of Utah Service, Inc. ("Utah Service") which the undersigned
would be entitled to vote if personally present at Utah Service's Special
Meeting of Shareholders to be held at the offices of Geneva Rock Products,
Inc.,1565 W. 400 N., Orem, Utah on Friday, June 19, 1998 at 10:30 a.m., local
time, and at any postponement or adjournment thereof, in the following manner:
1. To approve the Amended and Restated Agreement and Plan of Merger dated
as of November 13, 1997 providing for the merger ("Merger") of wholly
owned subsidiaries of Clyde Companies, Inc. ("CCI") with W.W. Clyde &
Co. ("Clyde"), Geneva Rock Products, Inc. ("Geneva Rock"), Utah
Service and Beehive Insurance Agency, Inc. ("Beehive Insurance"), each
of which will become wholly owned subsidiaries of CCI. Upon the
effective date of the Merger, each issued and outstanding share of
common stock of Clyde, Geneva Rock, Utah Service and Beehive Insurance
will be converted into, respectively, 33.93, 239.27, 43.43 and 4.33
shares of common stock, no par value, of CCI.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Other Matters. The proxies are authorized to vote upon such other
business as may properly come before the Special Meeting, or any postponement or
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEM 1.
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES IT
REPRESENTS WILL BE VOTED AT THE SPECIAL MEETING IN ACCORDANCE WITH THE CHOICE
SPECIFIED ABOVE. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR
PROPOSAL ONE. THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF
THE DESIGNATED INDIVIDUALS WITH RESPECT TO MATTERS INCIDENT TO THE CONDUCT OF
THE SPECIAL MEETING AND ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
SPECIAL MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
Please date and sign exactly as your name or names appear hereon. If
more than one owner exists, all should sign. When signing as attorney, executor,
trustee, or guardian, give your full title as such. If the signatory is a
corporation or partnership, sign the full corporate or partnership name by a
duly authorized officer or partner.
Dated: __________________, 1998
_______________________________
Signature
_______________________________
Signature
_______________________________
Type or Print
PLEASE PROMPTLY COMPLETE, DATE, SIGN, AND RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE
<PAGE> 5
PROXY
BEEHIVE INSURANCE AGENCY, INC.
302 West 5400 South, Suite 109
Murray, Utah 84107
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BEEHIVE
INSURANCE AGENCY, INC. FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
FRIDAY, JUNE 19, 1998.
The undersigned hereby constitutes and appoints W. Douglas Snow and Carol
C. Salisbury or either of them, with full power of substitution, attorneys, and
proxies of the undersigned, to represent the undersigned and vote all shares of
the common stock of Beehive Insurance Agency, Inc. ("Beehive Insurance") which
the undersigned would be entitled to vote if personally present at Beehive
Insurance's Special Meeting of Shareholders to be held at the offices of Geneva
Rock Products, Inc., 1565 W. 400 N., Orem, Utah on Friday, June 19, 1998 at
11:00 a.m., local time, and at any postponement or adjournment thereof, in the
following manner:
1. To approve the Amended and Restated Agreement and Plan of Merger dated
as of November 13, 1997 providing for the merger ("Merger") of wholly
owned subsidiaries of Clyde Companies, Inc. ("CCI") with W.W. Clyde &
Co. ("Clyde"), Geneva Rock Products, Inc. ("Geneva Rock"), Utah
Service, Inc. ("Utah Service") and Beehive Insurance, each of which
will become wholly owned subsidiaries of CCI. Upon the effective date
of the Merger, each issued and outstanding share of common stock of
Clyde, Geneva Rock, Utah Service and Beehive Insurance will be
converted into, respectively, 33.93, 239.27, 43.43 and 4.33 shares of
common stock, no par value, of CCI.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Other Matters. The proxies are authorized to vote upon such other
business as may properly come before the Special Meeting, or any postponement or
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEM 1.
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES IT
REPRESENTS WILL BE VOTED AT THE SPECIAL MEETING IN ACCORDANCE WITH THE CHOICE
SPECIFIED ABOVE. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR
PROPOSAL ONE. THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF
THE DESIGNATED INDIVIDUALS WITH RESPECT TO MATTERS INCIDENT TO THE CONDUCT OF
THE SPECIAL MEETING AND ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
SPECIAL MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
Please date and sign exactly as your name or names appear hereon. If
more than one owner exists, all should sign. When signing as attorney, executor,
trustee, or guardian, give your full title as such. If the signatory is a
corporation or partnership, sign the full corporate or partnership name by a
duly authorized officer or partner.
Dated: __________________, 1998
_______________________________
Signature
_______________________________
Signature
_______________________________
Type or Print
PLEASE PROMPTLY COMPLETE, DATE, SIGN, AND RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE
<PAGE> 1
[EXHIBIT 99.6]
FORM OF LETTER OF TRANSMITTAL
LETTER OF TRANSMITTAL
(IMPORTANT: See Instructions on Reverse Side)
TO: Clyde Companies, Inc.
1423 Devonshire Drive
Salt Lake City, UT 84108
Telephone: (801) 582-2783
............................., 1998
(please date)
NOTE: If the name and address shown
at left are not correct, please make
any changes necessary. (See
Instructions 2 and 3)
Dear Sir or Madam:
The undersigned surrenders herewith the following certificate(s) representing
shares of common stock, par value $10 per share ("Clyde Common Stock"), of W.W.
Clyde & Co. ("Clyde"), common stock, par value $10 per share ("Geneva Rock
Common Stock"), of Geneva Rock Products, Inc. ("Geneva Rock"), common stock, par
value $10 per share ("Utah Service Common Stock"), of Utah Service, Inc. ("Utah
Service"), and/or common stock, par value $1 per share ("Beehive Insurance
Common Stock"), of Beehive Insurance Agency, Inc. ("Beehive Insurance"), in
exchange for a certificate for the number of whole shares of common stock, no
par value ("CCI Common Stock"), of Clyde Companies, Inc., ("CCI") to which the
undersigned is entitled to pursuant to the Agreement and Plan of Merger, dated
as of November 13, 1997. Pursuant to the Agreement and Plan of Merger, each
share of Clyde Common Stock, Geneva Rock Common Stock, Utah Service Common Stock
and Beehive Insurance Common Stock will be converted into, respectively, 33.93,
239.27, 43.43 and 4.33 shares of CCI Common Stock.
================================================================================
Company Name Certificate Numbers Number of Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please issue the certificate(s) of CCI Common Stock, to which the undersigned is
entitled in the name appearing above, subject to the following instructions:
- --------------------------------------------------------------------------------
Fill in ONLY if new certificate(s) are to be issued in a name OTHER
than that of the owner whose name appears ABOVE or if delivery
is to be made OTHER than to such owner.
- --------------------------------------------------------------------------------
(Please Print)
1
<PAGE> 2
Issue Certificate(s) to Mail or Deliver to
Name .....................................................................
.....................................................................
Address .....................................................................
.....................................................................
- --------------------------------------------------------------------------------
INSERT SOCIAL SECURITY OR TAX
IDENTIFICATION NO. SIGNATURE(S)....................................
# ....................................
-----------------------------
2
<PAGE> 3
INSTRUCTIONS
1. This Letter of Transmittal should be filled in, dated, signed and mailed
to Clyde Companies, Inc., 1423 Devonshire Drive, Salt Lake City, Utah
84108 accompanied by all stock certificates representing Clyde Common
Stock, Geneva Rock Common Stock, Utah Service Common Stock, or Beehive
Insurance Common Stock presently held by you. The delivery of such
certificate(s) shall be effected, and risk of loss and title shall pass,
only upon proper delivery to CCI, so the method of transmitting or
delivering such certificate(s) is at the risk of the owner. If such
certificate(s) are sent by mail, certified or registered mail, return
receipt requested, is recommended (an addressed envelope is enclosed).
2. If the new and corrected certificate(s) of CCI Common Stock are to be
issued in a name other than that appearing on the face of the
certificate(s) surrendered, the certificate(s) surrendered must be
assigned to such transferee and the signature thereto must be guaranteed,
in the usual form, by a commercial bank or trust company, or by a member
firm of a major stock exchange. All endorsements or separate stock powers
executed by officers of corporations, partnerships, administrators,
executors, trustees, guardians, attorneys-in-fact or others acting in a
fiduciary or representative capacity must be accompanied by proper
documentary evidence of such person's appointment and authority to act. In
all cases involving a change of ownership, the appropriate state transfer
tax stamps or funds to cover the purchase of such stamps must be attached.
3. If any certificates surrendered are incorrectly registered (that is, the
name of the registered holder is misspelled, etc.), or if any of the
certificates surrendered have varying name registrations and the new
certificates are to be issued to the same person in a corrected name,
which is not exactly the same registration as that shown on the face of
all the certificate(s) surrendered, then the certificate(s) surrendered
should be endorsed in blank with the correct name (that is, first name,
middle initial, if any, and last name) and below the signature of
endorsement please write "incorrectly described as (insert the name
exactly as it appears on the face of the certificate(s) surrendered)." The
signature to each such endorsement should then be guaranteed in the manner
outlined in Instruction 2, above.
4. Fractional shares of CCI Common Stock will not be issued. In lieu of
fractional shares, shareholders of Clyde, Geneva Rock, Utah Service and
Beehive Insurance will receive cash equal to the product of (i) such
fraction multiplied by (ii) $14.52.
3
