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FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended
DECEMBER 31, 1995
Commission file number
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UTAH RESOURCES INTERNATIONAL, INC.
(Name of small business issuer in its charter)
UTAH 87-0273519
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(State of Incorporation) (I.R.S. Employer Identification No.)
297 W. Hilton Drive, Suite #4
St. George, Utah 84770
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(Address of principal executive offices including zip code)
Issuer's telephone number: (801) 628-8080
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
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Common Stock
Par Value $.10 Per Share
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
(1) Yes No X
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(2) Yes X No
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Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge,
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in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-KSB or any amendments of this Form 10-KSB. [ ]
Issuer's revenues for its most recent 1995 Fiscal Year is $787,369
(excluding any revenues from Midwest which have been classified as
discontinued operations).
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, based on the
last sales transaction which occurred December 9, 1996 at approximately $.875
per share is $795,430.13.
The number of shares of Common Stock, $.10 par value, outstanding on
October 8, 1996 was 2,522,808 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-KSB Document
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Part I None
Part II None
Part III
Item 13 - Exhibits and Reports on Exhibits as specified
Form 8-K in Item 13 of this Report
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) BUSINESS DEVELOPMENT.
FORM AND YEAR OF ORGANIZATION
Utah Resources International, Inc. ("URI" or the "Company") is a Utah
corporation, organized in 1966 as Utah Industrial, Inc. It was renamed Utah
Resources International, Inc. in 1969. The Company's executive offices are
located at 297 W. Hilton Drive, Suite #4, St. George, Utah 84770.
STOCK PURCHASE AGREEMENT - JULY 3, 1996
Subsequent to the period covered by this report, on April 5, 1996,
Inter-Mountain Capital Corporation, a Delaware corporation wholly owned by
John Fife ("IMCC"), entered into a Letter of Intent with the Company (the
"Letter of Intent"), whereby IMCC agreed, if certain conditions were met, to
purchase a 51% interest in the Company at a purchase price of $3.35 per
share. One of the conditions for consummating the transaction contemplated
by the Letter of Intent was the spinoff of Midwest Railroad Construction and
Maintenance Corporation ("Midwest"). Pursuant to the Letter of Intent, IMCC
agreed to pay 10% of the purchase price at closing with the remaining 90%
owing to be evidenced by a promissory note. The Letter of Intent also
provided that the Company grant IMCC a ten year option to purchase an
additional 150,000 or more shares of URI's stock, so that IMCC, at all times
would have the right to own a 51% interest in the Company. The Letter of
Intent also provided that subsequent to the closing and subject to financing
and other conditions, the Company would cause either a: (i) 12,500 to 1
share reverse split of the Company's stock, at $3.35 per share, with
fractional shareholders given the option to round-up and maintain their
shareholder status; or (ii) tender offer for its shares at $3.35 per share
subject to certain payment options. If the transactions contemplated by the
Letter of Intent were consummated it was the intent of IMCC to delist the
common stock of the Company from any national securities exchange. In order
to obtain a copy of the Letter of Intent and for a more detailed description
of the terms of the Letter of Intent, see Schedule 13D-A, filed by IMCC on
September 9, 1996 and Schedule 13D, filed by IMCC on April 16, 1996. The
Company entered into the Letter of Intent over the objections of Mark Jones
and Jenny Morgan, being two directors of the Company.
On May 17, 1996, a shareholders derivative suit captioned as MARK
TECHNOLOGIES CORP., ET AL. V. UTAH RESOURCES INTERNATIONAL, INC. ET AL., was
filed as Civil No. 96-090-3332CV in the Third Judicial Court of Salt Lake
County, Utah (the "Second State Action"). Mark G. Jones, a director of the
Company, is the controlling shareholder of Mark Technologies Corporation.
The Second State Action, included, among other things, a request for the
issuance of a temporary restraining order and injunction against the
transactions contemplated in the Letter of Intent. Furthermore, plaintiff
wished to have the sale of the 51% interest to IMCC voted on by the
shareholders of the Company.
On or about June 26, 1996, the Company entered into two settlement
agreements. The first settlement agreement was by and among the Company, John
H. Morgan, Daisy R. Morgan, IMCC, John Fife, Robinson & Sheen, L.L.C., R. Dee
Erickson, Lyle D. Hurd, and E. Jay Sheen (the "Morgan Settlement Agreement"),
whereby certain disputes among the parties were resolved and settled and the
parties agreed to use their best efforts to terminate the 1993
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Settlement Agreement. A copy of the Morgan Settlement Agreement is attached
as Exhibit 10.37. The "1993 Settlement Agreement" was the result of the
settlement of a shareholders' derivative action captioned as ERNEST MUTH, ET
AL. V. JOHN H. MORGAN, JR. ET AL., which was filed as Civil Number C-87-1632
in the Third Judicial District Court of Salt Lake County, Utah (the "First
State Action"), where plaintiffs therein alleged, among other things, that
the officers and directors of the Company committed various breaches of their
fiduciary duties to the Company. A settlement agreement in the First State
Action was entered on April 6, 1993 (the "1993 Settlement Agreement"). On or
about July 21, 1995, attorneys for the Company on behalf of the Company filed
an action against John H. Morgan and Daisy R. Morgan, directors of the
Company, to enforce the 1993 Settlement Agreement in the First State Action
which resulted in certain findings of fact and conclusions of law and an
order enforcing the 1993 Settlement Agreement entered by Judge Michael R.
Murphy on October 4, 1995 (the "Murphy Order"). The Murphy Order was
appealed by John H. Morgan, Jr. and Daisy R. Morgan and cross-appealed by the
Company. An Order to Show Cause was subsequently filed in the First State
Action on behalf of the Company by attorneys for the Company against John H.
Morgan, Jr., Daisy R. Morgan, and Mark G. Jones and others (the "Order to
Show Cause"). The second settlement agreement was by and among the Company,
R. Dee Erickson, E. Jay Sheen, Lyle D. Hurd, Mark G. Jones, Mark Technologies
Corporation, Anne Morgan, Victoria Morgan, IMCC, John Fife and Robinson &
Sheen, L.L.C. (the "1996 Settlement Agreement), whereby the parties agreed,
among other things, to dismiss the Second State Action and to use their best
efforts to terminate the 1993 Settlement Agreement and to settle certain
other litigation. A copy of the 1996 Settlement Agreement is attached as
Exhibit 10.38. For a more detailed description of the Company's legal
proceedings, see "Item 3. Legal Proceedings," and copies of the Morgan
Settlement Agreement and the 1996 Settlement Agreement which are attached
hereto as Exhibits 10.37 and 10.38 respectively. In addition, the 1996
Settlement Agreement amended certain provisions of the Letter of Intent
including, the elimination of the option that IMCC would cause the Company to
initiate a tender offer for its shares and the reduction in the reverse split
from 12,500 shares to 1 to 1,000 shares to 1, and an increase in the IMCC
payment at closing from 10% to 15% of the purchase price. On or about August
9, 1996, a Motion to Intervene was filed by shareholders Jenny T. Morgan,
Gerard E. Morgan, John C. Morgan (together the "Objectors"). On August 23,
1996, the court denied the Objectors petition. The 1996 Settlement Agreement
and the Morgan Settlement were approved by the Third Judicial District Court
of Salt Lake County, West Valley Department of Utah, on or about August 23,
1996. The First Federal Action and the Second State Action were dismissed
with prejudice on August 28, 1996. The Order to Show Cause was dismissed
with prejudice and the 1993 Settlement Agreement was terminated on August 29,
1996.
On July 3, 1996, pursuant to the Letter of Intent and the 1996
Settlement Agreement, the Company and IMCC entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement"), whereby the Company issued and
sold 1,275,912 shares (the "Purchased Shares") of its common, $.10 par value
per share stock (the "Common Stock") to IMCC, so that IMCC owned a 50.5%
interest in the Company. IMCC acquired the Purchased Shares at a price equal
to $3.35 per share for an aggregate purchase price of $4,274,305.20 (the
"Purchase Price"), of which $641,145.78 was paid in cash by IMCC to the
Company at the closing. The remaining portion of the purchase price of
$3,633,159.42 was evidenced by IMCC's promissory note (the "Note"). The Note
bears interest at a rate equal to the short-term applicable federal rate
published by the Internal Revenue Service in effect at the time of closing,
and is adjusted on each anniversary of the Note to the applicable short-term
federal rate in effect on such anniversary date. Interest on the Note is to
be paid currently in arrears on each anniversary of the Note. At the
closing, IMCC paid $197,872.52 to the Company, which amount represented the
present value first year of interest due under the Note. The principal and
any unpaid interest accrued under the Note is due and payable August 1, 2001.
The Note is secured by the Purchased Shares as evidenced by a stock pledge
agreement, dated as of July 3, 1996, by and
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between IMCC and the Company (the "Stock Pledge Agreement"). Pursuant to a
separate written guaranty agreement, John Fife personally guaranteed payment of
25% of all amounts due under the Note from time to time. For a more detailed
description of the Stock Purchase Agreement, see Form 8-K filed by the
Company on July 18, 1996, and to review a copy of the Stock Purchase
Agreement, see Schedule 13D-A filed by IMCC on September 9, 1996.
As required by the Stock Purchase Agreement, E. Jay Sheen and R. Dee
Erickson, submitted their resignations as directors of the Company, effective
July 13, 1996. As further required by the Stock Purchase Agreement, John
Fife was appointed a director of the Company. David Fife, the brother of
John Fife was also appointed a director of the Company. John Fife and David
Fife were appointed as directors of the Company as part of the Muth Group
pursuant to the 1993 Settlement Agreement, effective July 13, 1996. As
required by the Stock Purchase Agreement, John Fife was elected President and
Chief Executive Officer of the Company in July, 1996 pursuant to a 3-2 vote
of the Board. John Fife also serves as Chairman of the Board of the Company
pursuant to a 3-2 vote of the Board.
The Stock Purchase Agreement contemplated that subject to applicable
state and federal securities and state corporate law, the Company would cause
a 1,000 to 1 share reverse split of the Company's stock to the shareholders
of record at $3.35 per share, with fractional shareholders given the option
to either purchase additional fractional shares to round up to one whole
share following the reverse split or sell their fractional shares for cash to
the Company. IMCC was granted a ten year option to purchase 150,000 or more
additional shares of stock at a purchase price equal to $3.35 per share and
on the same terms and conditions as those provided under the Stock Purchase
Agreement, so that after the reverse split IMCC may maintain its 50.5%
majority interest in the Company. Subsequent to the reverse split and
subject to applicable state and federal securities and state corporate law,
any Company shares redeemed by the Company pursuant to the reverse split (the
"Returned Shares") may be acquired by the remaining shareholders, other than
IMCC or its affiliates, in increments of 1,000 shares (the "Returned Share
Option"), at a purchase price equal to the pre-reverse-split price of $3.35
per share (the "Returned Share Purchase Price"). Only those shares for which
the Company has received a fully and properly executed letter of transmittal,
accompanied by the required documents, will qualify as Returned Shares for
the purposes of this Returned Share Option. Such Common Stock shall be
purchased in blocks of 1,000 shares of Common Stock such that each purchase
of a 1,000 share block of Common Stock shall be converted into one (1) share
of common $10.00 par value per share stock of the Company (the "New Stock").
In the event the Returned Share Option is over-subscribed, then each of the
exercising shareholders may purchase the Returned Shares on a pro-rata basis
(as determined by the number of shares held by each of the exercising
shareholders as of the record date less those shares held by IMCC), but in no
event in less than 1,000 share blocks. In the event of such
over-subscription, each qualified shareholder could elect to purchase that
percentage of Returned Shares equal to X/(Y-Z) where "X" equals the number of
New Stock shares owned by the qualified shareholder wishing to purchase the
Returned Shares, "Y" equals the total number of issued shares of New Stock,
and "Z" equals the number of issued shares of New Stock owned by IMCC.
Twenty-five percent (25%) of the Returned Share Purchase Price shall be
payable in cash upon exercise, with the remaining balance of $2.51 per share
being evidenced by a note (the "Returned Share Note"), payable in three (3)
years. Subject to applicable Internal Revenue Service rules, the Returned
Share Note shall bear simple interest at the short term applicable federal
rate as stated in June, 1996, which interest shall be payable annually in
arrears. Payment of the Returned Share Note will be secured by a pledge of
the Returned Shares purchased, as converted into share(s) of New Stock,
pursuant to a stock pledge agreement to be provided by the Company.
Exercising shareholders purchasing Returned Shares shall be required to apply
any dividends, distributions
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or other payments made to the shareholder of the Company on the Returned
Shares/New Stock to payment of the unpaid balance of the Returned Share Note.
Returned Shares, as converted into New Stock, purchased by an exercising
shareholder shall be fully votable in accordance with the terms of the Company's
organizational documents and other agreements binding the Company for so long as
the exercising shareholder is not in default under the pledge agreement or the
Returned Share Note.
As a result of the reverse split, the Company is expected to become a non-
reporting company. A company with assets of over $5 million becomes a
"reporting company" when its shareholders number 500 or more. To thereafter be
allowed to become a "non-reporting company" and cease reporting to the
Securities and Exchange Commission, the number of shareholders must decline to
less than 300. Of the approximately 558 shareholders, approximately 479
shareholders of record own fewer than 1,000 shares, leaving approximately 79
shareholders post reverse-split if none of these shareholders exercise their
option to round up.
In addition to the contractual requirement that a reverse stock split
occur, as provided for in the Stock Purchase Agreement, the Company's senior
management and its Board of Directors have assessed the advantages and
disadvantages of the Company's status as a "reporting company" under the
Exchange Act. First, such reporting is very costly. Furthermore, a majority of
the Board of Directors does not believe that being a "reporting company" has
given the Company any significant advantage the Company would not otherwise have
had as a "non-SEC reporting company." The Company's registration with the SEC
has not improved flexibility for current or future financing of corporate
expansion through the building of a broader equity base, nor has it made the
valuation of shares of the Common Stock significantly easier (since no active
market exists for the sale of stock which is reflective of the Company's
operations and earnings potential). Finally, such registration has not resulted
in the development of an active public market for the Common Stock and thus has
not provided substantially increased liquidity for shareholders who desire to
sell their Common Stock. For a more detailed description of the history of the
Stock Purchase Agreement see "ITEM 3 LEGAL PROCEEDINGS," Schedule 13D/A filed
September 9, 1996, Form 8-K filed July 19, 1996, and Schedule 13D filed
April 16, 1996.
SHARE EXCHANGE AGREEMENT
On June 13, 1995, the Company consummated the exchange of 590,000 shares
of its common stock, representing approximately 33% of the total issued and
outstanding shares of the Company's common stock following the transaction,
in return for receipt of all of the issued and outstanding stock of Midwest
Railroad Construction and Maintenance Corporation ("Midwest") pursuant to a
Plan of Share Exchange and Share Exchange Agreement, dated February 16, 1995
by and among the Company, Midwest, Robert D. Wolff ("RD Wolff") and Judith J.
Wolff ("JJ Wolff") (the "Share Exchange Agreement"). The Share Exchange
Agreement was approved by a 3-2 vote of the Board. Directors, John H.
Morgan Jr. and Daisy R. Morgan voted against the Share Exchange Agreement.
All of the common stock of Midwest was owned by RD Wolff and JJ Wolff. The
Share Exchange Agreement was accomplished as a tax free reorganization
pursuant to Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended (the
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"Code"). Midwest, headquartered in Salt Lake City, Utah, is in the railroad
construction and maintenance business, operating out of five regional offices
located in Utah, Wyoming, Colorado, Nebraska and New Mexico. Midwest also
provides railroad engineering, surveying, bridge and structural maintenance,
grade crossing and in-plant switching services. Pursuant to the terms of the
Share Exchange Agreement, the Company agreed to: (i) indemnify Midwest and
the Wolffs from any liability to the Company's shareholders, its officers or
directors, whether brought directly by the person or in a derivative capacity
arising from Midwest's or the Wolffs' negotiation, execution, or consummation
of the Share Exchange Agreement; (ii) execute a three year employment
agreement between RD Wolff and the Company, whereby RD Wolff would act as the
President of Midwest; (iii) apply for a listing of its stock on the NASDAQ;
and (iv) lend Midwest, in the form of a line of credit, a sum not to exceed
$250,000, with the first draw available after February 15, 1995, evidenced by
a promissory note in standard form, bearing an interest rate of 1% over the
posted prime lending rate at First Security Bank of Utah, N.A., as of
February 15, 1995, and adjusted each three months thereafter. Prior to the
closing of the Share Exchange Agreement, Midwest borrowed a total of $100,000
against the line of credit. Pursuant to the terms and conditions of the
Share Exchange Agreement, the line of credit from the Company became
subordinate to Midwest's existing credit line of $350,000. The line of
credit was secured by the assets and equipment of Midwest. The Company
entered into an employment agreement with RD Wolff, dated as of June 13, 1995
(the "Wolff Employment Agreement"), and an operating agreement between
Midwest and RD Wolff, dated as of June 13, 1995 (the "Operating Agreement").
Pursuant to the Wolff Employment Agreement,RD Wolff was to serve as CEO of
the Company and Midwest, and RD Wolff was to receive $125,000 per year in
compensation during the term of the Wolff Employment Agreement. Furthermore,
during the first five quarters of the Wolff Employment Agreement, beginning
July 1, 1995, RD Wolff was to receive $25,000 in additional compensation per
quarter. In addition to his base salary, RD Wolff was to receive an annual
bonus computed on the after tax net earnings of Midwest, as follows: (a) 5%
of the first $200,000 in net earnings of Midwest; (b) 7% of the next
$200,000; and (c) 10% of all amounts over the first $400,000 in net earnings
of Midwest. RD Wolff was also entitled to participate in the Company's
health and benefit plans. Pursuant to the terms of the Operating Agreement
and for services performed in connection with the consummation of the Share
Exchange Agreement, the Company paid to each of R. Dee Erickson and E. Jay
Sheen, both of whom were directors of the Company at the time of the
execution of the Share Exchange Agreement, as compensation, 38,000 shares
each of the Company's Common Stock and $104,000 in cash. For a more detailed
description of the Share Exchange Agreement, the Wolff Employment Agreement
and the Operating Agreement and for copies of the above listed agreements see
Form 8-K filed on behalf of the Company on July 20, 1995.
On July 18, 1995, Anne Morgan and Victoria Morgan, at the time
shareholders of the Company and the adult daughters of John H. Morgan, Jr.
("JH Morgan") and Daisy R. Morgan ("DR Morgan"), both former directors and
shareholders of the Company, filed a shareholders derivative action against
R. Dee Erickson ("Erickson"), E. Jay Sheen ("Sheen"), Lyle D. Hurd ("Hurd")
(Messrs. Erickson, Sheen and Hurd were three of the five directors of the
Company at the time the suit was filed, with JH Morgan and DR Morgan being
the remaining two directors), the Company, Midwest, RD Wolff and JJ Wolff, in
the United States District Court for the Central District of Utah, Case
Number 2:95CV 661J, captioned as ANNE MORGAN ET AL. V. R. DEE ERICKSON, ET
AL. (the "First Federal Action"). The complainants alleged, among other
things that the defendants had violated proxy solicitation rules, violated
disclosure rules under the Exchange Act of 1934, breached their fiduciary
duties to the Company's shareholders, breached professional duties, committed
fraud, wasted and looted the Company's assets, converted Company property,
engaged in self-dealing, mismanaged the Company and breached their duty of
loyalty. The complaint sought, among other things, the rescission of the
Share Exchange Agreement.
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The terms of the Letter of Intent between IMCC and the Company required
that the Company rescind the Share Exchange Agreement. For the foregoing
reason, Midwest and the Company entered into a Splitoff Agreement, dated as
of April 25, 1996 (the "Splitoff Agreement"), whereby the Share Exchange
Agreement was rescinded. A copy of the Splitoff Agreement is attached hereto
as Exhibit 10.36. Pursuant to the terms of the Splitoff Agreement, URI
transferred all of the outstanding shares of Midwest stock held by the
Company to the Wolffs in exchange for the 590,000 shares of URI stock then
held by the Wolffs which transfer was accomplished tax free in accordance
with Section 355 of the Code. Furthermore, the Share Exchange Agreement, the
Wolff Employment Agreement and the Operating Agreement were cancelled. RD
Wolff ceased to be the President of URI. Midwest received a net intercompany
transfer of approximately $316,974.17 through March 31, 1996, which Midwest
retained. Furthermore, the parties to the Splitoff Agreement agreed that in
the event intercompany transfers for the period from July 1, 1995 through
March 31, 1996 were: (i) less than $316,974.17, then URI would pay Midwest
the difference; or (ii) more than $316,974.17, then Midwest would pay URI the
difference.
Pursuant to the Splitoff Agreement, URI agreed to indemnify Midwest and
the Wolffs and their respective agents, employees, attorneys, officers,
directors and assigns from any and all claims, causes of action, liabilities,
damages, costs, expenses and attorneys' fees arising from or relating in any
way to URI or the Share Exchange Agreement. This indemnification provision
would not apply to acts of fraud, gross negligence or willful misconduct by
RD Wolff. The Wolffs and Midwest agreed to indemnify URI and its respective
agents, employees, attorneys, officers, directors, successors and assigns
from any and all claims, causes of action, liabilities and damages arising
from or relating in any way to the Splitoff Agreement, which indemnification
obligation is limited to $312,000. Within 30 days from the date of execution
of the Splitoff Agreement, the Company's accountants are to calculate the
federal, state and local income taxes attributable to Midwest's business
operations (excluding any impact of salary payable or paid to RD Wolff or any
intercompany charges to the Company for rent, overhead and administrative
expenses) for the period commencing June 1, 1995 and terminating on December
31, 1995. Such taxes are to be determined on the basis as if the Company and
Midwest were not filing a consolidated tax return for the same period or part
thereof (whether or not a consolidated return is filed). The amount of such
taxes is to be considered an intercompany receivable between the Company and
Midwest. Midwest agreed to pay such tax amount to the Company in 12
installments. Simultaneous with the execution of the Splitoff Agreement,
Midwest paid the Company the sum of $10,000 as an initial tax payment. The
balance due the Company is to be paid in 11 additional equal monthly
installments, each such installment due on the first day of each month until
all 11 installments have been paid in full. The first of the 11 monthly
installments is due and payable on the first day of the month following the
determination of the taxes owed by Midwest to the Company. The taxes to be
paid have not yet been determined.
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(b) BUSINESS OF COMPANY.
URI is a real property development corporation. The Company directly
owns approximately 394 acres of undeveloped land in St. George, Utah, 353
acres of which are developable on which it conducts its real property
development business, primarily through its wholly-owned subsidiary,
Tonaquint, Inc. ("Tonaquint"). Most of the land is near the Southgate golf
course. URI also has interests in partnerships that own and are developing
other real property in St. George. The Company receives revenues from its
ownership of overriding royalty interests in producing oil and gas leases in
Utah and Wyoming, dating from the Company's historic business of acquiring
and selling oil, gas and mineral leases.
The Company's undeveloped real property is adjacent to Interstate
Highway 15, a major traffic route from Salt Lake City to Las Vegas and Southern
California. URI's real estate development activities in recent years have
concentrated on subdividing and selling improved lots for residential
construction, as the financial condition of the Company and the St. George, Utah
real estate market have permitted. The Company's lands include premium priced
hillside view lots, as well as lower-priced lots. In addition, the Company
pursues commercial real estate development of some of its undeveloped real
property.
On June 13, 1995, the Company consummated the exchange of 590,000 shares
of its common stock, representing approximately 33% of the total issued and
outstanding shares of the Company's common stock, for all of the issued and
outstanding stock of Midwest Railroad Construction and Maintenance
Corporation ("Midwest") pursuant to a Plan of Share Exchange and Share
Exchange Agreement, dated February 16, 1995 by and among the Company,
Midwest, Robert D. Wolff ("RD Wolff") and Judith J. Wolff ("JJ Wolff") (the
"Share Exchange Agreement"). All of the common stock of Midwest was owned by
RD Wolff and JJ Wolff. The Share Exchange Agreement was accomplished as a
tax free reorganization pursuant to Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended. Midwest, headquartered in Salt Lake City,
Utah, is in the railroad construction and maintenance business, operating out
of five regional offices located in Utah, Wyoming, Colorado, Nebraska and New
Mexico. Midwest also provides railroad engineering, surveying, bridge and
structural maintenance, grade crossing and in-plant switching services.
Through the remainder of 1995 and through April 25, 1996, Midwest and URI
conducted the above activities. On April 25, 1996, Midwest and URI entered
into a Splitoff Agreement, whereby, among other things, the Share Exchange
Agreement was rescinded. For 1995 reporting purposes, Midwest's operations
are classified as discontinued operations, with a net income of approximately
$93,000 from operations and a net loss on disposal of discontinued items of
approximately $684,000 to the Company. For a more detailed description of
Midwest and the Splitoff Agreement see, "ITEM 3 LEGAL PROCEEDINGS," and Form
8-K filed July 20, 1996.
REAL PROPERTY DEVELOPMENT ACTIVITIES
In 1995, the Company sold a total of three (3) improved residential
building lots in its Southgate Hills Phase II subdivision, generating $145,000
in gross revenues. Three (3) residential lots remained in inventory at year
end, 1995 and one lot remains in inventory as of
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this filing in 1997. The Company sold its one/half interest in a one and
one/half acre parcel of golf course commercial property through the
partnership of Southgate Resort located on Tonaquint
Drive, for $171,098. In 1994, the Company sold a total of 17 improved
residential building lots in its Southgate Hills Phase II subdivision generating
approximately $800,000 in gross revenues. In mid-1993 the City of St. George
began condemnation proceedings against 8.45 acres of real property owned by
Tonaquint, Inc., located directly south of the St. George airport. The City
needed the property to accommodate runway expansion at the airport. The matter
was settled in early 1994. The City paid Tonaquint $135,000 for the acreage,
which the Company accepted under threat of condemnation (Section 1033 of the
Internal Revenue Code of 1986, as amended).
In July of 1992, Tonaquint executed a Sale and Option Agreement with Kay H.
Traveler (the "Sale and Option Agreement"), pursuant to which Tonaquint was to
sell 14 acres to Mr. Traveler, for a total purchase price of $350,000 ($25,000
per acre), and grant Mr. Traveler an option to acquire an additional 40 acres at
option exercise prices ranging from $20,000 to $50,000 per acre, exercisable
over five years, so long as minimum option exercises occurred each year. Mr.
Traveler's inspection of the 14 acres disclosed adverse soil conditions,
resulting in the execution of an Addendum to the Sale and Option Agreement by
the parties in March of 1993. Mr. Traveler was granted an option to acquire a
total of 56 acres at prices ranging from $22,000 to $50,000 per acre. The Kay
Traveler Sale and Option Agreement resulted in 1995 sales of 3.48 acres for the
sum of $152,137. From July 1992 through December 31, 1995, Kay Traveler
exercised his option for a cumulative total of 30.57 of the 75.98 acres
available, for the sum of $836,206. Approximately 45.41 acres remain under
option to Mr. Traveler.
During the latter half of 1994, the Company began its development
efforts for Southgate Phase III, consisting of a total of 37 acres of land
above the Southgate golf course, suitable for view-lot residential
construction. The land to be developed is on the hillside directly to the
south of the Southgate golf course and directly to the west of Interstate 15.
The sloping topography of the land requires that the Hillside Ordinance
Committee of the St. George Planning and Zoning Commission approve the
Company's planned development of the acreage. The Company is seeking approval
for development of all 37 acres for a total of 79 lots. This approval has
taken longer than originally anticipated, due in part to the restrictions of
the hillside ordinance and the increasing political pressure to restrict real
estate development generally in St. George, which has resulted in an
increasing regulatory burden on real estate development. Approval is expected
no earlier than the first quarter of 1997. Thereafter, the Company
anticipates, upon Board approval, excavating, building roads, bringing
utilities to the property, constructing curbs and gutters, and selling
the improved lots.
Beginning in late 1994, the Company began planning for the development of
its Southgate Valley subdivision, 125 lots on 32 acres of the Company's property
located west of the Southgate golf course. The Company received approval from
the St. George Planning and Zoning Commission for development of the property.
The Company is considering alternative development opportunities from
residential to commercial, based upon zoning requirements and market need.
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REAL PROPERTY DEVELOPMENT INDUSTRY OVERVIEW, GOVERNMENT REGULATION, AND
COMPETITION
The real estate development industry in general and the residential real
estate development industry in particular is a high risk industry, subject to
changes in general economic conditions, fluctuating interest rates, and changing
demand for the types of developments being considered. Volatility in local and
regional land use demands, as well as changing supply and demand for the
specific uses for which the real property is being developed are also factors in
assessing the relative risks of the business. The demand for residential real
estate development is particularly sensitive to changing interest rates and
shifting demographics. Both of these factors affecting the demand for
residential housing are highly unpredictable over both the short and long-term.
Real estate development is a government regulated industry. The regulation
of real estate development is often carried out in an unpredictable fashion,
reflective of both political and rational considerations. Regulation is carried
on by municipal, county, state and federal agencies, but municipal and county
governments have the greatest regulatory impact. St. George City, in which URI
operates, has been adopting increasingly restrictive regulations associated with
development activities, including the adoption of more restrictive building
codes and ordinances, greater emphasis on land use planning, pressure to
increase the number of low density resident developments, and heightened
public concern aimed at limiting development as a means to control growth.
Development in some areas close to the Company's lands may be limited by
governmental environmental protection activities. Government regulation can
have effect on the viability of real estate development by the Company.
The real property development industry is highly competitive. Several
development companies with interests in St. George have longer operating
histories, greater financial strength and more experience in the industry
than does the Company. The Company's development activities historically
have represented less than 5% of total real estate development activity in
the area in and around St. George, and, in management's view, that percentage
is likely to decrease in the near term given the dramatic increase in overall
development activities in the area. The perceived strength of the St. George
real estate market has recently attracted many more developers to the area,
increasing the competition for the Company. The Company has very little
debt, which has served it well in being able to weather the ups and downs in
the St. George real estate market. Management believes that the Company's
positive equity to debt ratio could provide the Company with increased
liquidity through improved borrowing capabilities.
PARTNERSHIPS
TONAQUINT-INDIAN HILLS LIMITED PARTNERSHIP
All but approximately $15,500 of the remaining assets of Tonaquint-Indian
Hills Limited Partnership, which constructed 26 condominium townhomes on 4 acres
of land in the late 1980's, were distributed in 1993. The Company plans to
dissolve the partnership in 1997 and
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distribute its remaining assets. The Tonaquint-Indian Hills Limited Partnership
has been inactive through 1995.
SERVICE STATION PARTNERSHIP
The Company, effective April 30, 1993, discontinued operations of the
Partnership other than the environmental remediation described below, and the
operations up to that date are included in discontinued operations on the
Company's financial statements. The Company, together with Tonaquint, owned
as of December 31, 1995, partnership interests representing an approximate
79% interest in the Service Station Limited Partnership #2, a Utah limited
partnership organized to build and operate a service station/mini-grocery
store adjacent to the St. George Hilton Inn in St. George, Utah. In a
transaction coincident with the sale of the St. George Hilton Inn, the
partnership entered into a put/call option contract with St. George Inn,
L.C., dated May 21, 1993. Under the terms of the option contract, St. George
Inn, L.C. granted the partnership a one-year put option to require St. George
Inn, L.C. to purchase the service station for $200,000 in cash, subject only
to the requirement that the partnership complete the environmental clean-up
of the site prior to exercising the option and a simultaneous call option
granting St. George Inn, L.C. a two year option to purchase the site for
$200,000 in cash whether or not the environmental remediation has occurred.
The clean-up had not been completed by May 15, 1994 when the partnership's
put option expired. Further, the environmental remediation had not been
completed by May 15, 1995 when the two year option to St. George, L.C. had
expired. St. George Inn, L.C. has claimed that the option was extended by
the partnership and that the partnership has not completed its remediation
operations. Negotiations are ongoing with St. George Inn, L.C. to resolve
this matter.
In 1989, the partnership replaced its gasoline underground storage
tanks, which the partnership was informed had been leaking. From November of
1992 through the end of 1995, the partnership has spent $164,578 on efforts
to remediate the soil contamination by gasoline and other hydrocarbons which
is alleged to have occurred from operation of the service station. The
Company has hired consultants and engineers and is following their
recommendations to remediate the property as required by Utah law and
regulations. Recently, the Company received notice from St. George Inn, L.C.
that it intends to develop its property located adjacent to the service
station property along with a demand that the partnership accelerate clean-up
efforts on the property owned by St. George Inn, L.C. Negotiations to settle
the matter with St. George Inn, L.C. are continuing.
The Company leased the service station property to St. George Inn, L.C.,
for a term of two years, commencing June 24, 1993, for the sum of $1.00 per
month. In return, St. George Inn, L.C. agreed to maintain the care of the
property and keep the property in a clean and good condition. The Company
was responsible for all expenses associated with the property, including
utilities under the lease and environmental clean-up expenses. The lease
expired in 1995.
Morgan Gas & Oil Co., a limited partner of the Service Station
Partnership #2, holds notes in the total principal amount of $110,932
from the Service Station Partnership #2, ostensibly representing loans made by
Morgan Gas & Oil Co. to the partnership. Morgan Gas & Oil Co. claims the loans
are overdue. However, since the transactions were between related parties, all
of whom were controlled by John H. Morgan, Jr. at the times of the transactions,
and since the Company also advanced funds to the Service Station, the Company is
performing an internal audit to verify the legitimacy of the loans and
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their proper characterization, before it determines whether to acknowledge and
pay the debt. These notes payable are included in net assets of discontinued
operations.
SOUTHGATE PARTNERSHIPS
The Company is a general partner in three separate Utah limited
partnerships, Southgate Palms, Southgate Resort and Southgate Plaza,
respectively, each of which is (or was) a partner in one of three separate
general partnerships having the same names, whose initial purpose was the
development of certain real property located near the St. George Hilton Inn.
This property consisted of the present Southgate Golf Course (formerly the Lava
Hills Resort Golf Course) and certain property acquired from Tonaquint
contiguous to or located near the Southgate Golf Course.
Southgate Palms General Partnership constructed the Fairway Hills
subdivision. During 1994, the homeowners association for the subdivision,
demanded the partnership build a tennis court, or pay an amount to each
homeowner constituting the value of a tennis court, claiming the partnership's
agents represented that one of the amenities in the project would be a tennis
court. The partnership denied liability but, in May of 1995, settled the
dispute by paying the homeowners $32,000 and forgiving a disputed debt of
approximately $11,000. The Company paid its 1/3rd share of the settlement.
Southgate Plaza General Partnership is selling parcels of its property,
primarily for commercial development. In 1995, the partnership sold two parcels
totalling 2.4 acres, with proceeds to URI in the amount of $183,992. Sales of
23 acres occurred in 1994, where the Company's portion of the proceeds totaled
$658,612. In 1993, no sales were made. The Company intends to dissolve
Southgate Palms and Southgate Resort partnerships.
OVERRIDING ROYALTIES IN OIL AND GAS LEASES
URI has overriding royalty interests in oil and gas properties held by
various other parties. All revenues from the Company's interests in the
properties have been received in cash. The Company received royalties in the
amount of $61,000 in 1995 as compared to $92,000 in 1994. URI has not engaged
in the acquisition and sale of oil and gas leases for many years and has no
intention of doing so in the future, nor does it have facilities or means to
perform the exploration, development and operation of oil and gas wells on
properties in which it has interests. Mineral or oil and gas exploration and
development is undertaken by third parties. If production is realized on any
properties in which URI has an interest, it receives a share of gross production
revenues based upon the percentage overriding royalty interest it has retained.
EMPLOYEES
In 1995, the Company employed two full-time employees and six part-time
employees. Currently, the Company employs two full-time employees and no
part-time employees. Pursuant to the Stock Purchase Agreement, the Company
and John Fife have agreed to enter into an employment agreement which would
provide for, among other things, (i) the employment of Mr. Fife as President,
CEO, Chairman of the Board of the Company and (ii) an
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annual salary to be paid to Mr. Fife of no more than $200,000 for any year
during the employment period. At this time no employment agreement has been
entered into with Mr. Fife. The Company's Board, in a 3-2 vote passed a
resolution delaying the negotiation of the terms of the John Fife employment
agreement until after the shareholders vote on the proposed reverse stock
split. To date, John Fife has received no compensation from the Company for
his services as President. URI and its subsidiary currently employ Gerry
Brown on a full-time basis, to act as the Vice President of the Company,
where he provides real estate planning, development and sales services for
the Company, Tonaquint, Inc., the Company's wholly-owned subsidiary, and
various affiliated partnerships. Mr. Brown is currently the President of
Tonaquint, Inc., where he assists in land use planning, negotiating sales and
financing arrangements, obtaining government approvals, arranging for
construction contracts, and supervising the performance of engineering
services as have been required. The Company entered into a three year
employment agreement with Mr. Brown on June 28, 1995. Ladd Worth Eldredge is
employed by the Company as its Secretary, Treasurer, CFO and office manager.
Robert D. Wolff, Gerry Brown and Ladd Worth Eldredge served as employees of
the Company in 1995. From June 1995 through April 1996, Robert D. Wolff
served as the CEO of the Company, with an annual salary of $125,000 and
quarterly bonus of $25,000. Gerry Brown served as President of the Company.
Ladd Worth Eldredge was employed as the Company's Secretary, Treasurer, CFO
and Office Manager. No employees are party to a collective bargaining
agreement with URI.
ITEM 2. DESCRIPTION OF PROPERTY
ST. GEORGE PROPERTIES
As of December 31, 1995, Tonaquint, Inc., a wholly-owned subsidiary of the
Company, owned approximately 394 acres of undeveloped land in the general area
of the St. George Hilton Inn and the Southgate Golf Course in St. George, Utah,
353 acres of which are developable. As of December 31, 1995, approximately
45.51 acres remained under option to Kay Traveler, at prices ranging from
$22,000 to $50,000 per acre.
The Company intends to develop its property, primarily through subdividing
and selling improved lots for residential construction, although sales of
undeveloped parcels to other developers are also occurring. Additionally,
management believes that approximately 25 acres of the Company's lands are
suitable for commercial development. URI owns a combined 27% interest in 7.5
acres of land owned by the partnerships identified above, primarily Southgate
Plaza General Partnership.
OIL & GAS INTERESTS
The Company has overriding royalty interests in oil and gas wells producing
primarily in the Unitah Basin, Unitah County, Utah, and Sublette County,
Wyoming. URI owns overriding royalty interests of from .025 of 1% to 3% of
production.
URI was not the original lessee on several of the oil and gas property
leases. The original lessees were affiliates of, or related parties to, the
Company. As to those lessees, the Company's royalty interest was obtained by
assignment from the original lessees. In some cases, the assignments have not
been recorded. As to some royalty interests, the precise acreage held by the
Company cannot be determined without unreasonable effort and expense. The
Company does not have available to it reserve reports on the properties. Any
reserve analyses
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that have been made on the properties were made by third parties, who view such
information as confidential, making it unavailable to the Company.
Many oil, gas and hydrocarbon leases issued by the State of Utah or the
United States are issued for definite periods of time, often from five to ten
years. If, at the end of the lease period, production has been realized and is
continuing on the property subject to the lease, the term of the lease continues
for the period of commercial production. Thus, the continuing interest of URI
in state and federal leases is dependent upon the ability of the third party
operators to develop significant production on the properties subject to those
leases. The expense of compliance with environmental regulations on lands in
which the Company may have overriding royalty interests is not borne by the
Company.
Through its wholly-owned subsidiary, New Mercur Gold Exploration, Inc., the
Company holds a 50% joint interest in ten patented lode mining claims covering
approximately 137 acres in Tooele County, Utah. The claims have been leased to
Barrick Mercur Gold Mines for a nominal amount. There is presently no
production on the properties. Development of the Company's mineral properties
may be affected by federal and state regulation relating to the protection of
the environment. Such regulation may prevent the development of properties
owned by the Company, or those in which it retains an overriding royalty
interest.
OFFICE SPACE
URI leases an office for its headquarters at 297 W. Hilton Drive, Suite
#4, St. George, Utah. Until April of 1995, it also shared in the expenses of
an office at 1604 Walker Center, Salt Lake City, Utah, in which John H.
Morgan, Jr., the Company's co-founder, former director, and shareholder
maintains his offices, along with Morgan Gas & Oil Co., a Utah corporation
which had been under the control of Mr. Morgan and in which he currently
serves as both an officer and director, and the Huntsman World Senior Games,
of which Mr. Morgan is the President.
ITEM 3. LEGAL PROCEEDINGS
Over the past nine years, the Company has been involved in various
disputes and controversies involving its ownership, operation and management.
A shareholders derivative action captioned as ERNEST MUTH, ET AL. V. JOHN H.
MORGAN, JR., ET AL., was filed as Civil Number C-87-1632 in the Third
Judicial District Court of Salt Lake County, Utah (the "First State Action"),
alleging among other things that the officers and directors of the Company
committed various breaches of their fiduciary duties to the Company. A
settlement agreement was entered into in the First State Action on April 6,
1993 (the "1993 Settlement Agreement"), wherein, among other things, parties
to the lawsuit agreed to the manner in which directors of the Company would
be selected until such time as the 1993 Settlement Agreement was terminated.
On or about July 21, 1995, attorneys for the Company on behalf of the
Company filed an action against John H. Morgan, Jr. and Daisy R. Morgan to
enforce the 1993 Settlement Agreement in the First State Action which
resulted in certain findings of fact and conclusions of law and an order
enforcing the 1993 Settlement Agreement, entered by Judge Michael R. Murphy
on October 4, 1995 (the "Murphy Order"). The Murphy Order was appealed by
John H. Morgan, Jr. and Daisy R. Morgan and cross-
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appealed by the Company. An Order to Show Cause was subsequently filed in the
First State Action on behalf of the Company by attorneys for the Company
against John H. Morgan, Jr. and Daisy R. Morgan (the "Order to Show Cause").
On or about February 16, 1995, pursuant to a Plan of Share Exchange
Agreement by and among the Company, Midwest Railroad Construction and
Maintenance Corporation of Wyoming, a Wyoming corporation ("Midwest"), Robert D.
Wolff ("RD Wolff") and Judith J. Wolff ("JJ Wolff") (the "Share Exchange
Agreement"), the Company acquired all of the outstanding shares of Midwest from
RD Wolff and JJ Wolff in exchange for 590,000 restricted shares of authorized
but unissued shares of the Company. Pursuant to the Share Exchange Agreement,
RD Wolff became the President of the Company. For a more detailed description
of the Share Exchange Agreement see "ITEM 1 DESCRIPTION OF BUSINESS/(a) Business
Development Share Exchange Agreement" and Form 8-K filed July 20, 1995. A
shareholders derivative action captioned as ANNE MORGAN ET AL. V. R. DEE
ERICKSON, ET AL., was filed as Case Number 2:95CV-0661C in the United States
District Court for the District of Utah, Central Division (the "First Federal
Action"), alleging that the defendants had, among other things, violated
proxy solicitation rules, violated disclosure rules under the Exchange Act of
1934, breached their fiduciary duties to the Company's shareholders, breached
professional duties, committed fraud, wasted and looted the Company's assets,
converted Company property, engaged in self-dealing, mismanaged the
corporation and breached the duty of loyalty. The complaint sought, among
other things, rescission of the Share Exchange Agreement. In April 1996, the
Company, Midwest, RD Wolff and JJ Wolff entered into a Split-Off Agreement
whereby, among other things, the Share Exchange Agreement was rescinded (the
"Recision Agreement") and the shares of Midwest acquired by the Company were
returned to RD Wolff and JJ Wolff.
On April 5, 1996, the Company entered into a letter of intent ("Letter
of Intent") with IMCC to sell a controlling interest in the Company to IMCC,
at a purchase price equal to $3.35 per share. On May 17, 1996, a
shareholders derivative suit captioned as MARK TECHNOLOGIES CORP. ET AL. V.
UTAH RESOURCES INTERNATIONAL, INC., ET AL., was filed as Civil No.
96-090-3332CV in the Third Judicial Court of Salt Lake County, Utah (the
"Second State Action"). Mark G. Jones, a director of the Company, is the
controlling shareholder of Mark Technologies Corporation. The Second State
Action included, among other things, a request for the issuance of a
temporary restraining order and injunction against the transactions
contemplated in the Letter of Intent. On June 26, 1996, the Company entered
into two settlement agreements. The first settlement agreement was by and
among the Company, John H. Morgan, Jr., Daisy R. Morgan, IMCC, John Fife,
Robinson & Sheen, L.L.C., R. Dee Erickson, Lyle D. Hurd and E. Jay Sheen
("Morgan Settlement Agreement"), whereby certain disputes among the parties
were resolved and settled and the parties agreed to use their best efforts to
terminate the 1993 Settlement Agreement. The second settlement agreement was
among the Company, R. Dee Erickson, E. Jay Sheen, Lyle D. Hurd, Mark G.
Jones, Mark Technologies Corporation, Anne Morgan, Victoria Morgan, IMCC,
John Fife and Robinson & Sheen, L.L.C. (the "1996 Settlement Agreement"),
whereby the parties agreed, among other things, agreed to dismiss the First
Federal Action, the Order to Show Cause, the Second State Action and to use
their best efforts to terminate the 1993 Settlement Agreement. On July 19,
1996, the notice of hearing on proposed settlement of the Second State
Action, the First State Action and the First Federal Action and the notice of
hearing on petition to terminate the 1993 Settlement Agreement was mailed to
all the Company's shareholders of record as of June 24, 1996. Among other
things, the notice provided that the 1996 Settlement Agreement and the Morgan
Settlement Agreement (together the "Settlement Agreements") were to be
considered approved by the court on August 12, 1996, and that all objections
to the Settlement Agreements had to be presented at that time. On August 9,
1996, shareholders Jenny T. Morgan, Gerard E. Morgan, John C. Morgan and
Karen J. Morgan ("Objectors") filed an objection to the hearing and requested
that the court continue the settlement approval hearing until after a URI
shareholders' vote on the Settlement Agreements and the IMCC Stock Purchase
Agreement. In their objections and request for continuance of hearing, the
Objectors, among other things, claimed that they had insufficient information
with which to evaluate the Stock Purchase Agreement between IMCC and URI;
that they had insufficient information regarding John Fife, the sole
shareholder of IMCC, and that they needed additional time and information to
evaluate the fairness of the Stock Purchase Agreement and to solicit bids to
sell the Company. Further, the Objectors alleged that URI had refused to
provide documentation relating to the Stock Purchase Agreement to them.
After considering the Objectors' and the parties' initial arguments, the
court granted both the parties and the Objectors an additional seven days,
through August 19, 1996 to submit written memoranda in support of their
positions. Both the Objectors and the parties submitted written memoranda
supporting their positions in regard to the Settlement Agreements and the
Stock Purchase Agreement. After considering the written memoranda and
arguments presented by both sides, on or about August 23, 1996 the court
denied the Objector's petition, and entered an order approving the Settlement
Agreements. As required by the Transaction Agreements, as defined below, the
1996
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Settlement Agreement and the Morgan Settlement Agreement were approved by the
Third Judicial District Court of Salt Lake County, West Valley Department
Utah, on or about August 28, 1996. The Order to Show Cause was dismissed
with prejudice and the 1993 Settlement Agreement was terminated on August 29,
1996.
On July 3, 1996, following the execution of the Letter of Intent, the
Morgan Settlement Agreement and the 1996 Settlement Agreement, the Company
and IMCC entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement") (the Letter of Intent, the Morgan Settlement Agreement, the 1996
Settlement Agreement and the Stock Purchase Agreement are hereinafter
collectively referred to as the "Transaction Agreements") whereby the Company
issued and sold 1,275,912 shares (the "Purchased Shares") of common, $.10 par
value per share stock (the "Common Stock") to IMCC, which is wholly owned by
John Fife, so that IMCC owned a 50.5% interest in the Company. IMCC acquired
the Purchased Shares at a price equal to $3.35 per share for an aggregate
purchase price of $4,274,305.20 (the "Purchase Price"), of which $641,145.78
was paid in cash by IMCC to the Company at the closing. The remaining
$3,633,159.42 was evidenced by IMCC's promissory note (the "Note"). The Note
bears interest at a rate equal to the short-term applicable federal rate
published by the Internal Revenue Service in effect at the time of closing,
and is adjusted on each anniversary of the Note to the applicable short-term
federal rate in effect on such anniversary date. Interest on the Note is
paid currently in arrears on each anniversary of the Note. At the closing,
IMCC paid $197,872.52 to the Company which amount represented the present
value first year of interest due under the Note. The principal and any
unpaid interest accrued under the Note is due and payable August 1, 2001.
The Note is secured by the Purchased Shares as evidenced by a stock pledge
agreement, dated as of July 3, 1996, by and between IMCC and the Company (the
"Stock Pledge Agreement"). Pursuant to a separate written guaranty
agreement, John Fife personally guaranteed payment of 25% of all amounts due
under the Note. For a more detailed description of the Stock Purchase
Agreement, see Form 8-K filed by the Company on July 18, 1996, and to review
a copy of the Stock Purchase Agreement, see Schedule 13D-A filed by IMCC on
September 9, 1996.
As required by the Stock Purchase Agreement, E. Jay Sheen and R. Dee
Erickson submitted their resignations as directors of the Company, effective
July 13, 1996. As further required by the Stock Purchase Agreement, John
Fife was appointed a director of the Company. David Fife, the brother of
John Fife, was also appointed a director of the Company. John Fife and David
Fife were appointed as directors of the Company by the Muth Group pursuant to
the 1993 Settlement Agreement, effective July 13, 1996. As required by the
Stock Purchase Agreement, John Fife was elected President and Chief Executive
Officer of the Company in July, 1996, pursuant to a 3-2 vote of the Board.
John Fife also serves as Chairman of the Board of the Company pursuant to a
3-2 vote of the Board.
The Letter of Intent as modified by the Transaction Agreements, including
the Stock Purchase Agreement, contemplated that subject to applicable state and
federal securities and state corporate law, the Company would cause a 1,000 to 1
share reverse split of the Company's Common Stock to the shareholders of record
at $3.35 per share (the "Reverse Split"), with fractional shareholders given the
option to either purchase additional fractional shares to round up to one whole
share following the reverse split or sell their fractional shares for cash to
the
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Company. IMCC was granted a ten year option to purchase 150,000 or more
additional shares of stock at a price equal to $3.35 per share and on the
same terms and conditions as those provided under the Stock Purchase
Agreement, so that after the Reverse Split IMCC may maintain its 50.5%
majority interest in the Company. Subsequent to the Reverse Split and subject
to applicable state and federal securities and state corporate law, any
Company shares redeemed by the Company pursuant to the Reverse Split (the
"Returned Shares") may be acquired by the remaining shareholders, other than
IMCC or its affiliates, in increments of 1,000 shares (the "Returned Share
Option") at a purchase price equal to the pre-Reverse-Split $3.35 per share
(the "Returned Share Purchase Price"). Only those shares for which the
Company has received a fully and properly executed letter of transmittal,
accompanied by the required documents, will qualify as Returned Shares for
the purposes of this Returned Share Option. Such Common Stock shall be
purchased in blocks of 1,000 shares of Common Stock such that each purchase
of a 1,000 share block of Common Stock shall be converted into 1 share of
common, $100.00 par value per share stock of the Company (the "New Stock").
In the event the Returned Share Option is over-subscribed, then each of the
exercising shareholders may purchase the Returned Shares on a pro-rata basis.
Twenty-five percent (25%) of the Returned Share Purchase Price will be
payable in cash upon exercise, with the remaining balance of $2.51 per share
being evidenced by the Return Share Note. The terms and conditions of the
Reverse Split are described in greater detail in "ITEM 1 DESCRIPTION OF
BUSINESS/Stock Purchase Agreement July 3, 1996."
In December, 1995, Mark Technologies Corporation received 201,210 shares
of the Company's Common Stock from Morgan Gas & Oil Co., as partial payment
of a promissory note. The promissory note was in consideration of the sale
to Morgan Gas & Oil Co. from Mark Technologies Corporation of a limited
partnership interest in Alta Mesa Wind Partners, a California limited
partnership in the wind generated power business. The Company is a
shareholder of Morgan Gas & Oil Co. The Company brought a shareholders
derivative action against Morgan Gas & Oil Co. and its directors and against
Mark Jones, Mark Technologies Corporation, Alta Mesa Wind Partners, John
H. Morgan, Jr., Daisy R. Morgan, Sylvia Wunderly, John Wunderly, and
Melbourne Romney, III, alleging among other things, that in connection with
the sale of Alta Mesa Wind Partners limited partnership interest to
Morgan Gas & Oil Co., Mark Jones, Mark Technologies Corporation and Alta Mesa
Wind Partners concealed and misrepresented material information to be
provided to Morgan Gas & Oil Co. directors and that the Morgan Gas & Oil Co.
directors committed a breach of fiduciary duty and a wasting of corporate
assets. The suit was dismissed without prejudice.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the National Association of
Securities Dealers bulletin board system and is traded in the over-the-counter
securities through the Automated Quotation System, under the NASDAQ symbol UTRS.
The following table sets forth the quarterly high and low bid prices for the
Company's Common Stock during the last two fiscal years of the Company, as
reported by the National Quotations Bureau. The quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.
Since September 15, 1993, the Company's Common Stock has been re-listed for
trading in the over-the-counter market. Trading in the stock has been sporadic.
The trading information provided should not be construed as a representation by
the Company or its management that there is an established public trading market
for the Company's Common Stock. Prior to September 15, 1993, there had not been
a public market for the Company's Common Stock for more than the prior two
fiscal years.
1996 1995 1994
LOW HIGH LOW HIGH LOW HIGH
--- ---- --- ---- --- ----
1st quarter $.625 $1.00 $2.00 $4.00 $2.125 $3.00
2nd quarter $.75 $1.50 $1.50 $2.00 $1.50 $2.25
3rd quarter $.875 $1.00 $1.00 $1.75 $1.25 $1.75
4th quarter $.875 $.875 $ .75 $1.00 $1.50 $2.00
Except for certain transactions including: (i) the Splitoff Agreement by
and between Midwest and the Company, wherein the Company returned its Midwest
shares to RD Wolff and JJ Wolff in exchange for the 590,000 shares of the
Company's stock held by the Wolffs; (ii) the 1996 Settlement Agreement, wherein
the Company redeemed 22,950 shares of Anne Morgan's URI stock and 17,602 shares
of Victoria Morgan's URI stock, in cash, at $3.35 per share; and (iii) the
conclusion of the exchange of 10.6 acres of land and 34,150 shares of C.E.C.
Industries Corporation stock for 103,488 shares of the Company's stock, the
Company has made no repurchases of its stock during the Company's second full
fiscal year preceding this Form 10-KSB. The Splitoff Agreement and the 1996
Settlement Agreement are described in greater detail in "ITEM 3 LEGAL
PROCEEDINGS." The Company did declare a $.10 cash dividend payable January 26,
1995, to shareholders of record January 12, 1995. A decision to pay dividends
in the future will depend upon the Company's profitability, need for liquidity
and other financial considerations. There are approximately 558 shareholders of
the 2,522,808 outstanding shares of the Company's Common Stock.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
The Company had land sales of $587,163 in 1995 as compared with land
sales of $2,274,222 in 1994. Management attributes the reduced sales in 1995
to a slowdown in the sale of high-end market lots as well as there being only
a limited amount of developed lots available. Interest income was higher in
1995 due to the fact that the Company held more money in interest bearing
accounts. Income on royalties from production under oil and gas and mineral
leases amounted to $61,006 and $92,455 for 1995 and 1994, respectively.
Decline in royalties income reflects the decline in oil and gas prices during
this period due to production fluctuations. Twelve Thousand Five Hundred
Dollars ($12,500) in revenue was received from leases on commercial signs
adjacent to the interstate freeway.
Cost of land sold decreased from $567,453 in 1994 to $156,250 in 1995,
reflecting a decline in sales from 1994 to 1995. General and administrative
expenses increased by approximately 55% from 1994 to 1995, due to the cost of
acquiring Midwest and the cost of litigating subsequent lawsuits. For a more
detailed description of the Company's lawsuits see "ITEM 3 LEGAL PROCEEDINGS."
1995 reflects an income tax benefit of $179,000 which resulted from the
utilization of the 1995 Net Operating Loss.
LIQUIDITY AND CAPITAL RESOURCES
Cash requirements of URI are met by funds provided from operations
consisting of (a) the sale of improved lots and undeveloped property; (b)
royalty income; and (c) interest income earned on money held in interest bearing
accounts. The ratio of current assets to current liabilities at December 31,
1995 was approximately 2.16 to 1, down from the ratio at December 31, 1994 of
4.7 to 1. The Company's current assets as of December 31, 1995 were valued at
$1,350,781, as against current liabilities of $624,920.
The Company presently anticipated that cash from land sales and royalties
will be the primary sources for future additional liquidity for the Company.
From January, 1995, through July, 1996, litigation expenses imposed a
significant drain on the Company's liquidity. The litigation which occasioned
such expenses has been terminated by settlement, and management expects future
legal fees will decrease dramatically. For a more detailed description of the
Company's litigation, see "ITEM 3 LEGAL PROCEEDINGS."
The Company also expects to be required to expend funds for the cleanup
of gasoline which has apparently leaked from tanks owned by the Service
Station Partnership, which have been replaced. Engineering estimates of
total cleanup costs are not determinable due to uncertainties with respect to
State compliance requirements and the, as yet unknown, extent of the
contamination. In 1995, approximately $55,000 was expended toward this
clean-up operation and more than $164,000 has been expended by the Company to
date.
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<PAGE>
It is anticipated that the Company's need for cash in excess of its present
resources will be met through revenues and real estate secured borrowings. No
firm financing commitment has been obtained for the purpose of completing the
1,000 to 1 reverse stock split. The Company does not have backup lines of
credit.
URI has no plans for major capital expenditures beyond the cost of
improving portions of its real property.
The Company's business is influenced by interest rates, inflation and
market demands. Its royalty income from oil and gas interests affected by
fluctuations in the price of oil and the related decisions to drill new wells
and the rates at which well are pumped. The Company has no control over the
oil and gas field operations.
As of July 3, 1996, the Company holds a promissory note from IMCC in the
original principal amount of $3,633,159.42 (the "Note"). The Note bears
interest at a rate equal to the short-term applicable federal rate published
by the Internal Revenue Service in effect at the time of closing the Stock
Purchase Agreement, and is adjusted on each anniversary of the Note to the
applicable short-term federal rate in effect on such anniversary date.
Interest on the Note is expected to be paid currently in arrears on each
anniversary of the Note. At the closing, IMCC paid the Company $197,872.52,
which amount represented the present value first year of interest due under
the Note. The principal and any unpaid interest accrued under the Note is
due and payable August 1, 2001. The Note is secured by the 1,275,912 shares
purchased by IMCC as evidenced by a stock pledge agreement, dated as of July
3, 1996 between IMCC and the Company (the "Stock Pledge Agreement").
Pursuant to a separate written guaranty agreement, John Fife personally
guaranteed payment of 25% of all amounts due under the Note.
DISCONTINUED OPERATIONS
On June 13, 1995, the Company consummated the exchange of 590,000 shares
of its common stock, representing approximately 33% following the
transaction, of the total issued and outstanding shares of the Company's
common stock in return for receipt of all of the issued and outstanding stock
of Midwest Railroad Construction and Maintenance Corporation ("Midwest")
pursuant to a Plan of Share Exchange Agreement, dated February 16, 1995 (the
"Share Exchange Agreement"). All of the common stock of Midwest was owned by
Robert D. Wolff ("RD Wolff") and Judith J. Wolff ("JJ Wolff"). The Share
Exchange Agreement was accomplished as a tax free reorganization pursuant to
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the
"Code"). Midwest, headquartered in Salt Lake City, Utah, is in the railroad
construction and maintenance business, operating out of five regional offices
located in Utah, Wyoming, Colorado, Nebraska and New Mexico. Midwest also
provides railroad engineering, surveying, bridge and structural maintenance,
grade crossing and in-plant switching services. Pursuant to the terms of the
Share Exchange Agreement, the Company agreed to: (i) indemnify Midwest and
the Wolffs from any liability to the Company's shareholders, its officers or
directors, whether brought directly by the person or in a derivative capacity
arising from Midwest's or the Wolffs' negotiation, execution, or consummation
of the Share Exchange
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<PAGE>
Agreement; (ii) execute a three year employment agreement between RD Wolff
and the Company, where RD Wolff would act as the President of Midwest; (iii)
apply for a listing of Midwest's stock on the NASDAQ; and (iv) lend Midwest,
in the form of a line of credit, a sum not to exceed $250,000, with the first
draw available after February 15, 1995, evidenced by a promissory note in
standard form, bearing an interest rate of 1% over the posted prime lending
rate at First Security Bank of Utah, N.A., as of February 15, 1995, and
adjusted each three months thereafter. Prior to closing, Midwest borrowed a
total of $100,000 against the line of credit. Pursuant to the terms and
conditions of the Share Exchange Agreement, the line of credit from the
Company became subordinate to Midwest's existing credit line of $350,000,
following the closing. The line of credit was secured by the assets and
equipment of Midwest. In order to carry out the above listed covenants, the
Company entered into an employment agreement with RD Wolff, dated as of June
13, 1995 (the "Wolff Employment Agreement"), and an operating agreement with
Midwest and RD Wolff, dated as of June 13, 1995 (the "Operating Agreement").
Pursuant to the terms of the Operating Agreement and for services performed
by R. Dee Erickson and E. Jay Sheen in connection with the consummation of
the Share Exchange Agreement, the Company paid to each of R. Dee Erickson and
E. Jay Sheen, both of whom were directors of the Company at the time of the
execution of the Share Exchange Agreement, as compensation, 38,000 shares
each of the Company's Common Stock and $104,000 in cash. For a more detailed
description of the Share Exchange Agreement, see Form 8-K filed July 20,
1995.
On July 18, 1995, Anne Morgan and Victoria Morgan, at the time shareholders
of the Company and the adult daughters of John H. Morgan, Jr. and Daisy R.
Morgan, former directors and shareholders of the Company, filed a shareholders
derivative action against R. Dee Erickson ("Erickson"), E. Jay Sheen ("Sheen"),
Lyle D. Hurd ("Hurd") (Messrs. Erickson, Sheen and Hurd were three of the five
directors of the Company at the time the suit was filed, with JH Morgan and DR
Morgan being the remaining two directors), the Company, Midwest, RD Wolff and JJ
Wolff, in the United States District Court for the Central District of Utah,
Case Number 2:95CV 661J, captioned as ANNE MORGAN ET AL. V. R. DEE ERICKSON, ET
AL. (the "First Federal Action"). The complainants alleged, among other things
that the defendants had, among other things, violated proxy solicitation rules,
violated disclosure rules under the Exchange Act of 1934, breached their
fiduciary duties to the Company's shareholders, breached professional duties,
committed fraud, wasted and looted the Company's assets, converted Company
property and engaged in self-dealing, mismanaged the corporation and breached
the duty of loyalty. The complaint sought, among other things, the rescission
of the Share Exchange Agreement.
The terms of the Letter of Intent between IMCC and the Company required
that the Company rescind the Share Exchange Agreement. For the foregoing
reason, Midwest and the Company entered into a Splitoff Agreement, dated as
of April 25, 1996 (the "Splitoff
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<PAGE>
Agreement"), whereby the Share Exchange Agreement was rescinded. According to
the terms of the Splitoff Agreement, URI transferred all of the outstanding
shares of Midwest Stock to the Wolffs in exchange for the 590,000 shares of URI
stock then held by the Wolffs which transfer was accomplished tax free in
accordance with Section 355 of the Code. Furthermore, the Share Exchange
Agreement, the Wolff Employment Agreement and the Operating Agreement were
cancelled. RD Wolff ceased to be the President of URI. Midwest received a net
intercompany transfer of approximately $316,974.17 through March 31, 1996, which
Midwest retained. Furthermore, the parties to the Splitoff Agreement agreed
that in the event intercompany transfers for the period from July 1, 1995
through March 31, 1996 were: (i) less than $316,974.17, then URI would pay
Midwest the difference; and (ii) more than $316,974.17, then Midwest would pay
URI the difference.
Pursuant to the Splitoff Agreement, the Company agreed to indemnify Midwest
and the Wolffs and their respective agents, employees, attorneys, officers,
directors and assigns from any and all claims, causes of action, liabilities,
damages, costs, expenses and attorneys' fees arising from or relating in any way
to URI or the Share Exchange Agreement. This indemnification provision would
not apply to acts of fraud, gross negligence or willful misconduct done by RD
Wolff. The Wolffs and Midwest agreed to indemnify URI and its respective
agents, employees, attorneys, officers, directors, successors and assigns from
any and all claims, causes of action, liabilities, and damages arising from or
relating in any way to the Splitoff Agreement, which indemnification obligation
is limited to $312,000. Within 30 days from the date of execution of that
Splitoff Agreement, the Company's accountants are to have calculated the
federal, state and local income taxes attributable to Midwest's business
operations (excluding any impact of salary payable or paid to RD Wolff or any
intercompany charges to the Company for rent, overhead and administrative
expenses) for the period commencing June 1, 1995 and terminating on December 31,
1995. Such taxes are to be determined on the basis as if the Company and
Midwest were not filing a consolidated tax return for the same period or part
thereof (whether or not a consolidated return is filed). The amount of such
taxes would be considered an intercompany receivable between the Company and
Midwest. Midwest agreed to pay such tax amount to the Company in 12
installments. Simultaneous with the execution of the Splitoff Agreement,
Midwest paid the Company the sum of $10,000 as an initial tax payment. The
balance due the Company was to be paid in 11 additional equal monthly
installments, each such installment due on the first day of each month until all
11 installments have been paid in full. The first of the 11 monthly
installments is due and payable on the first day of the month following the
determination of the taxes owed by Midwest to the Company. The taxes to be
paid have not yet been determined.
For 1995 reporting purposes, Midwest's operations are classified as
discontinued operations, with income of approximately $93,000 from operations
and a net loss on disposal of discontinued items of approximately $684,000 to
the Company. For a more detailed description of both the acquisition of Midwest
and its subsequent Splitoff, see "ITEM 3 LEGAL PROCEEDINGS," and Form 8-K filed
July 20, 1996.
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS
See Index to Financial Statements appearing on page F-1B of this Form
10-KSB Annual Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Tanner + Co. of Salt Lake City, Utah has been the independent public
accountant for the Company's December 31, 1993, 1994, and 1995 financial
statements.
During the Company's two most recent fiscal years, there were no
disagreements between the Company and Tanner + Co. on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure that, if not resolved to the satisfaction of Tanner + Co., would have
caused Tanner + Co. to make a reference to the subject matter of the
disagreement in connection with its reports on the Company's financial
statements.
The Company currently engages the independent public accounting firm of
Tanner + Co.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CENTRAL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Certain information regarding the Company's directors and executive
officers and their backgrounds is set out below. The Company has been provided
with the information from certain of the people listed below. In addition to
the primary affiliations noted below, the nominees are active in various
cultural, charitable, professional and trade associations and organizations.
Current Directors
-----------------
DAVID FIFE, 33, was appointed a director of the Company effective
July 13, 1996 by the Muth Group pursuant to the terms of the 1993
Settlement Agreement. Mr. Fife is currently the President and sole
beneficial owner of Home Equity Lending L.L.C. a mortgage origination and
finance company located in Salt Lake City, Utah. Prior to 1993, Mr. Fife
was the President of Property Tax Assessor Records Corp., a Chicago based
real estate tax consulting company. David Fife and John Fife are brothers.
JOHN FIFE, 35, was appointed as a director of the Company effective
July 13, 1996, by the Muth Group pursuant to the 1993 Settlement Agreement.
Mr. Fife was appointed the President and Chief Executive Officer of the
Company in July, 1996. He was named Chairman of the Board of the Company
on October 10, 1996. He is an investor and venture capitalist and has
pursued this course since July, 1990. Mr. Fife is the President and sole
shareholder of J.F. Venture, Inc. and IMCC, both of which are investment
companies. IMCC acquired a 50.5% (majority interest) in the Company on
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<PAGE>
July 3, 1996. For a more detailed description of IMCC's acquisition of
a majority interest in the Company, see "ITEM 3 LEGAL PROCEEDINGS." He
also serves as President of Property Tax Assessor Records Corp., a
Chicago-based real estate tax consulting company. Mr. Fife also serves
as a director of Hyatt Research Corporation, a magazine publisher in
Middlebury, Vermont and as a director of Trans-Wasatch Company, L.L.C.,
which is a land development company in Park City, Utah. Prior to 1993,
Mr. Fife held the position of Assistant Vice President of Continental
Equity Capital Corp. ("CECC"), a subsidiary of Continental Bank. At
CECC, he negotiated, structured and financed LBO's and later stage
venture capital investments in the Mortgage Banking, Retail, Cable and
Cellular Telephone industries. Prior to CECC, Mr. Fife worked as a
financial analyst in the commercial real estate department of Trammel
Crow Company. Mr. Fife earned his M.B.A. degree from Harvard in 1990
and his B.S. in statistics and computer science from Brigham Young
University in 1986. John Fife and David Fife are brothers.
LYLE D. HURD, 60, is a director of the Company and has performed
services as Marketing Consultant/Assistant to the President. He is
president of Hurd Owens Hafen Inc., a publisher of magazines and
periodicals located in St. George, Utah, since December of 1990. Hurd
Owens Hafen Inc. is the publisher of the St. George Magazine and various
other magazines and periodicals. For approximately 16 years prior to
December, 1990, Mr. Hurd provided marketing consulting services to
magazine publishers through Hurd & Associates, Inc., a privately owned
consulting firm. Mr. Hurd was appointed as an independent director of
the Company in May, 1993, pursuant to the terms of the 1993 Settlement
Agreement.
MARK JONES, 43, is a director of the Company and was designated as
such in January, 1996 by the Morgan Group pursuant to the 1993 Settlement
Agreement. Mr. Jones is President of Mark Technologies Corporation in San
Francisco, California, a real estate and alternative energy development
firm, and has held that position for 16 years.
JENNY TATE MORGAN, 41, was appointed as a director of the Company,
effective January, 1996, by John H. Morgan, Jr., her relative, pursuant to
the terms of the 1993 Settlement Agreement. From 1992 to the present, Ms.
Morgan, through JT Morgan Financial Consulting Services, has provided
financial consulting services to clients in the areas of investments,
liquidity management, financial strategy, tactical asset allocation, plan
design, re-engineering an entire retirement plan structure, analysis of
securities portfolio, strategic analysis and workouts. From 1993 to 1996,
she served as Vice President/Institutional Trust Services for First
Interstate Bank of California. Before that, Ms. Morgan worked for one year
as a Financial Services/Account Executive for Citibank, F.S.B. From July,
1982 to April, 1992, Ms. Morgan was the Director of Sales and Marketing for
Purcell International, Inc. Ms. Morgan earned her M.B.A. from the
University of Southern California, Los Angeles in 1995, where her course-
work included providing consulting services to Munchkin Bottling Company,
Inc. and Reebok, International. Ms. Morgan earned her B.S. from the
University of Arizona, in 1978.
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<PAGE>
Ms. Morgan is a licensed California Life and Disability Agent and has
published articles addressing 401(K) Plans in the Los Angeles Business
Journal.
Directors for the Period Covered by this Report
-----------------------------------------------
E. JAY SHEEN, 42, was appointed a director of the Company by the Muth
Group in June, 1993, pursuant to the terms of the 1993 Settlement
Agreement, and Secretary of the Company in January, 1994. He resigned as a
director and Secretary of the Company, effective July 13, 1996, pursuant to
the terms of the Stock Purchase Agreement. He is a member of the law firm
of Robinson & Sheen, L.L.C. Prior to April 1995, he was a partner in the
law firm of Moyle & Draper, P.C. in Salt Lake City, where he had practiced
law since 1982.
R. DEE ERICKSON, 53, was appointed a director of the Company by the
Muth Group in May, 1993 pursuant to the terms of the 1993 Settlement
Agreement, and appointed Chairman of the Board in March, 1995. He served
in these capacities for the Company until his resignation, effective July
13, 1996, which took place pursuant to the terms of the Stock Purchase
Agreement. He is a self-employed real estate developer and property
manager, and has been so engaged since June 1, 1987. From February, 1974
to May, 1987, he was employed by Hercules Incorporated in the Hercules
Aerospace Products Group variously as a manager, superintendent and
supervisor directing technical personnel in the planning, development,
implementation and enhancement of computer systems for manufacturing and
engineering.
JOHN H. MORGAN, JR., 72, served as the President and Chief Executive
Officer of the Company from the date of its incorporation until January,
1993 and October 1994, respectively. He served as the Chairman of the
Board until March of 1995 and served as a director until January, 1996, at
which time he appointed Jenny Morgan to serve as his replacement pursuant
to the terms of the 1993 Settlement Agreement. Mr. Morgan is the husband
of Daisy Morgan. He is the controlling shareholder, President and a member
of the board of directors of Morgan Gas & Oil Co. Until May 7, 1993, Mr.
Morgan was also a general partner in Resources Limited Partnership (the
former owner of the St. George Hilton Inn), and Service Station Limited
Partnership #2, and a limited partner in the Tonaquint-Indian Hills
Partnership. Until May 7, 1993, Mr. Morgan was also a general and/or
limited partner in most of the partnerships owned by the Company for the
development of the Company's real property in St. George, Utah. Mr. Morgan
is President of the Huntsman Senior World Games, which sponsors athletic
events for persons over the age 55 in St. George, Utah in the fall.
Currently, Mr. Morgan serves as chairman emeritus for the Company, and has
done so since July 3, 1996, pursuant to the terms of the Morgan Settlement
Agreement.
DAISY R. MORGAN is the wife of John H. Morgan, Jr. Until April, 1995
she served as the Vice President of the Company. From 1982 to January,
1996 she served as a director of the Company, at which time she appointed
Mark Jones as a replacement director, pursuant to the terms of the 1993
Settlement Agreement. Ms. Morgan served as manager of the St. George
Hilton Inn for Resources Limited Partnership from
LYLE D. HURD, See Description Above.
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<PAGE>
November, 1979 through December, 1984. Until May, 1993, Ms. Morgan was
also a co-general partner in the Tonaquint Indian Hills Limited
Partnership. Ms. Morgan is the Vice President and member of the Board of
Directors of Morgan Gas & Oil Co., a former affiliate and shareholder of
the Company.
Executive Officers for the Period Covered by this Report
--------------------------------------------------------
GERRY T. BROWN, 56, was appointed Vice President of the Company
July 3, 1996. He served as President of the Company from June 19, 1993 to
July 3, 1996. Mr. Brown has been employed by the Company or its affiliates
and related parties since March, 1985. He has provided real estate
planning, development and sales services for the Company, Tonaquint, Inc.,
the Company's wholly-owned subsidiary, and various affiliated partnerships.
Mr. Brown is currently the President of Tonaquint, Inc. Mr. Brown has
assisted in land use planning, negotiating sales and financing
arrangements, obtaining government approvals, arranging for construction
contracts, and supervising the performance of engineering services as have
been required in connection with the Company's property development and
sales.
LADD WORTH ELDREDGE, 44, has been employed by the Company since July,
1994, and is the Secretary, Treasurer, CFO and office manager for the
Company. Mr. Eldredge was appointed Treasurer of the Company in November,
1994 and Secretary and CFO of the Company in November, 1995. Prior to his
employment by the Company, Mr. Eldredge was the Chief Accountant at the
Peppermill Resort in Mesquite, Nevada, a position he held for two years.
Mr. Eldredge has a Masters of Accountancy degree from Southern Utah
University.
ROBERT D. WOLFF, 56 became CEO of the Company on or about July 1,
1995, pursuant to the terms of the Wolff Employment Agreement. Mr. Wolff
ceased to be the CEO of the Company when the Share Exchange Agreement was
rescinded on April 25, 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10
percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than 10 percent shareholders
are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representaions that no other
reports were required, during the two fiscal years ended December 15, 1995,
the Company's officers, directors and greater than ten-percent beneficial
owners complied with all applicable Section 16(a) filing requirements, except
for the following individuals with respect to the following forms.
R. Dee Erickson, Forms 4 and 5;
E. Jay Sheen, Forms 4 and 5;
Robert D. Wolff, Forms 4 and 5;
Lyle Hurd, Form 5; and
Gerry Brown, Form 5.
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
- ------------------
NAME POSITION AGE
- ---- -------- ---
John Fife Chairman of the Board, 35
Chief Executive Officer
and President
Robert D. Wolff Former CEO 56
E. Jay Sheen Former Recorder of Minutes 42
and Former Director
R. Dee Erickson Former Chairman of the 53
Board and Former Director
Lyle Hurd Former Director of 60
Marketing and Director
Ladd Worth Eldredge CFO, Secretary Treasurer 44
Gerry T. Brown Former President and 56
current Vice President
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<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation for Robert D. Wolff as the
CEO of the Company in 1995 and John Fife as the CEO of the Company in 1996,
E. Jay Sheen, R. Dee Erickson, Lyle Hurd, Ladd Worth Eldredge and Gerry T.
Brown.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION AWARDS
------------------- ------
SHARES
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ------------------ ---- ------ ----- ------- --
<S> <C> <C> <C> <C> <C>
John Fife, CEO, 1996 $200,000(1)
President and
Chairman of the
Board
Robert D. Wolff, June 1995-
Former CEO(2) April 1996 $125,000(2a) $25,000/(2(b))
quarter
E. Jay Sheen, 1995 $ 6,000 -- 8,000 $298,066(3) (3(a))
Former Recorder 1994 $ 6,000 -- 9,000 $101,704(4)
of Minutes and 1993 -- -- -- --
Former Director
R. Dee Erickson, 1995 $ 6,000 -- 8,000 $106,600(5) (5(a))
Former 1994 -- -- 9,000 $ 12,400(6)
Chairman of the 1993 -- -- -- --
Board and
Former Director
Lyle Hurd, 1995 $ 30,000 -- 8,000 $ 24,615(7)
Former Director 1994 -- -- 9,000 $ 18,340(8)
of Marketing and 1993 -- -- -- --
Director
Ladd Worth 1995 $ 34,583 -- -- --
Eldredge, CFO, 1994 $ 12,550 $ 500 -- --
Secretary and 1993 -- -- -- --
Treasurer
Gerry T. Brown, 1995 $ 70,000 -- 8,000 $ 8,237(9)
Former President 1994 $ 70,000 $ 1,000 9,000 $ 14,412(10)
and Vice President 1993 $ 70,000 -- -- $ 9,766(11)
</TABLE>
(1) Pursuant to the terms of the Stock Purchase Agreement, the Company
and Mr. Fife agreed to enter into an employment agreement to provide for,
among other things, (i) the employment of Mr. Fife as President, Chief
Executive Officer, and Chairman of the Board of the Company, and (ii) an
annual salary to be paid to Mr. Fife of no more than $200,000 for any year
during the employment period. At this time no employment agreement has been
entered into with Mr. Fife.
(2) Mr. Wolff served as the CEO of the Company during the term that the
Share Exchange Agreement was in place, July 1, 1995 through April 25, 1996.
(2a) Mr. Wolff actually received approximately $57,292 as his pro-rated
portion for 1995.
(2b) Mr. Wolff actually received approximately $45,833 as his pro-rated
portion for 1995.
(3) Mr. Sheen, in addition to providing services as a recorder of the
minutes, served as a director of the Company, for which he received fees in
the amount of $2,600; and his law firms served as legal counsel to the
Company, for which his respective law firms were paid approximately $191,466
in 1995. Mr. Sheen also received 38,000 shares of the Company's stock and
$104,000 for services performed with respect to the Share Exchange Agreement.
(3a) The market value of the 38,000 shares of the Company's stock received
by Mr. Sheen in 1995 is not included in this column.
(4) Mr. Sheen received fees as director of the Company in the amount of
$2,400. Mr. Sheen's law firm also served as legal counsel to the Company for
which his law firm was paid approximately $99,304 in 1994.
(5) Mr. Erickson received $2,600 in directors fees and 38,000 shares of
the Company's stock and $104,000 for services performed with respect to the
Share Exchange Agreement in 1995.
(5a) The market value of the 38,000 shares of the Company's stock
received by Mr. Erickson in 1995 is not included in this column.
(6) Mr. Erickson received $2,400 in directors fees and $10,000 for
consulting services rendered.
(7) In 1995, Mr. Hurd received $2,600 in directors fees, $13,750 in
consulting fees and an additional $8,265 was paid by the Company to ST.
GEORGE MAGAZINE for advertising. Mr. Hurd is the owner of Hurd Owens Hafen
Inc., which publishes ST. GEORGE MAGAZINE.
(8) In 1994, Mr. Hurd received $2,400 in directors' fees, $12,500 in
consulting fees and $3,440 was paid to ST. GEORGE MAGAZINE for advertising.
Mr. Hurd is the owner of Hurd Owens Hafen, Inc., which published ST. GEORGE
MAGAZINE.
(9) Mr. Brown received $8,237 in commissions from sales of real estate.
(10) Mr. Brown received $14,412 in commissions from sales of real estate.
(11) Mr. Brown received $9,766 in commissions from sales of real estate.
The following table shows the total number of options granted to each of
the named persons during 1995 (both as the number of shares of Common Stock
subject to such options and as a percentage of all options granted to
employees during 1995) and, for each of these grants, the exercise price per
share of Common Stock and option expiration date.
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<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE
- ---- ----------- ----------- ------ ----
IMCC(1) 150,000 or (3) $3.35 2006
more (50.5%
interest)(2)
Robert D. Wolff -- -- -- --
R. Dee Erickson 8,000(4) 16.7% $2.50 4/17/2004
Lyle Hurd 8,000(4) 16.7% $2.50 4/17/2004
Ladd Worth -- -- -- --
Eldredge
Gerry Brown 8,000(4) 16.7% $2.50 4/17/2004
E. Jay Sheen 8,000(4) 16.7% $2.50 4/17/2004
- ---------------------------
(1) John Fife, CEO of the Company is the sole shareholder of IMCC.
(2) For a more detailed description of the IMCC Option, see "ITEM 1 DESCRIPTION
OF BUSINESS/Stock Purchase Agreement - July 3, 1993."
(3) This option was not granted as a part of John Fife's employment.
(4) The option granted was made pursuant to the Company's 1994 Stock Option
Plan, described below. The plan was approved by the shareholders in
January 1995. None of these options were exercised during 1995. All of
these presently exercisable options are above the market price of the
underlying Common Stock.
No SARs were outstanding in 1995 and 1996.
The Company has no long-term incentive compensation plans other than the
1994 Stock Option Plan described herein. Gerry Brown, as the former President
of the Company, is a participant in the Company's 1994 Stock Option Plan. Under
the Plan, each of the six individuals were granted options for 25,000 shares of
the Company's Common Stock, pursuant to the terms of a Non-Qualified Stock
Option Agreement between each person and the Company, dated April 7, 1994. The
option exercise price is $2.50 per share, the market price of the stock on the
date of grant. Each of the granted options vest as follows: (a) 9,000 shares on
the date of the Option Agreement; and (b) 8,000 shares on each of the next two
anniversary dates of the Agreement (April 7, 1995, and April 7, 1996).
Gerry Brown has an employment contract with the Company. The Company
entered into a three year employment agreement with Mr. Brown on June 28, 1995.
DIRECTORS COMPENSATION
Each director receives $200 per director's meeting. Also, directors who
travel out of town to attend the meetings are, upon Board approval,
reimbursed for their travel, lodging and meals. During 1995 through August
24, 1996, the directors served pursuant to the 1993 Settlement Agreement. The
1993 Settlement Agreement was terminated on August 29, 1996.
-29-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 8, 1996, certain
information regarding the beneficial ownership of the Company's Common Stock by:
(1) each of the current directors of the Company; (2) each of the Company's
current executive officers; and (3) the Company's directors and officers as a
group.
- --------------------------------------------------------------------------------
UTAH RESOURCES INTERNATIONAL, INC.
COMMON STOCK OWNERSHIP BY DIRECTORS AND NAMED EXECUTIVE OFFICERS
AS OF OCTOBER 8, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
BEFORE STOCK SPLIT AFTER STOCK SPLIT*
- --------------------------------------------------------------------------------------------
PERCENT OF PERCENT OF
NAME OF BENEFICIAL NUMBER OF OUTSTANDING NUMBER OF OUTSTANDING
OWNER POSITION SHARES SHARES SHARES SHARES
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
David Fife Director 0 0% 0 0%
- --------------------------------------------------------------------------------------------
John Fife, as sole Director, 1,275,912(1) 50.5% 1276** 52%
shareholder of IMCC Chief
Executive
Officer,
President and
Chairman of
the Board
- --------------------------------------------------------------------------------------------
Lyle Hurd Director 2,000(2) .08% 2(3) .08%
- --------------------------------------------------------------------------------------------
Mark Jones Director 326,310 13% 327**(3) 13%
- --------------------------------------------------------------------------------------------
Jenny Morgan Director 9,523 .38% 10**(3) .41%
- --------------------------------------------------------------------------------------------
Gerry Brown Vice President 2,000(2) .08% 2(3) .08%
- --------------------------------------------------------------------------------------------
Ladd Worth Eldredge CFO, Secretary, 0 0% 0 0%
Treasurer
- --------------------------------------------------------------------------------------------
DIRECTORS AND Directors & 1,613,745(2) 64% 1,617 66%
OFFICERS AS A Officers
GROUP (7 persons)
- --------------------------------------------------------------------------------------------
</TABLE>
* Assumes No Small-Lot Shareholder exercises the Round Up Option, and no
remaining shareholder elects to purchase the Returned Shares.
** Assumes that Roundup Option is exercised by fractional shareholders.
(1) IMCC also holds a ten year option to purchase 150,000 or more additional
shares of stock, so as to maintain its 50.5% interest in URI.
(2) Lyle Hurd and Gerry Brown each contend that he was granted an option for
25,000 shares pursuant to the Share Exchange Agreement. There is a dispute as
to whether the option was granted. This issue will be resolved following an
investigation in the coming year.
(3) In the event the proposed reverse split is effected, each of these
individuals will be granted an option to purchase additional shares of URI's
stock pursuant to the terms of the Returned Shares Option. For a more detailed
description of this Returned Shares Option, see ITEM 1 DESCRIPTION OF
BUSINESS/Stock Purchase Agreement - July 3, 1996.
The following table sets forth, as of December 31, 1995, certain
information regarding the beneficial ownership of the Company's Common Stock
by: (1) each of the current directors of the Company; (2) each of the
Company's current executive officers; and (3) the Company's directors and
officers as a group.
- ------------------------------------------------------------------------------
UTAH RESOURCES INTERNATIONAL, INC.
COMMON STOCK OWNERSHIP BY DIRECTORS AND NAMED EXECUTIVE OFFICERS
AS OF DECEMBER 31, 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
PERCENT OF
NUMBER OF OUTSTANDING
NAME OF BENEFICIAL OWNER POSITION SHARES SHARES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
E. Jay Sheen Director 40,000 2.161%
- ------------------------------------------------------------------------------------------
R. Dee Erickson Director 48,100 2.598%
- ------------------------------------------------------------------------------------------
Lyle Hurd Director 2,000(1) .108%
- ------------------------------------------------------------------------------------------
John H. Morgan, Jr. Director 1,916(2) .104%
- ------------------------------------------------------------------------------------------
Daisy R. Morgan Director 38,617 2.086%
- ------------------------------------------------------------------------------------------
Robert D. Wolff CEO 590,000(3) 31.871%
- ------------------------------------------------------------------------------------------
Gerry Brown President 2,000(1) .108%
- ------------------------------------------------------------------------------------------
Ladd Worth Eldredge CFO, Secretary, 0 0%
Treasurer
- ------------------------------------------------------------------------------------------
DIRECTORS AND OFFICERS Directors & Officers 722,633 39.036%
AS A GROUP (8 persons)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Lyle Hurd and Gerry Brown each contend that he was granted an option for
25,000 shares pursuant to the Share Exchange Agreement. There is a dispute as
to whether the option was granted. This issue will be resolved following an
investigation in the coming year.
(2) As a record holder only.
(3) Mr. Wolff held these shares in joint tenancy with his wife, Judith J. Wolff.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of October 8, 1996
regarding each person other than directors of the Company who were known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock. Each person named has sole voting and investment power with respect to
the shares beneficially owned by such person.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UTAH RESOURCES INTERNATIONAL, INC.
5% OR GREATER BENEFICIAL OWNERS
AS OF OCTOBER 8, 1996
- --------------------------------------------------------------------------------
NUMBER OF SHARES AND
NAME AND ADDRESS OF NATURE OF PERCENT OF COMPANY
BENEFICIAL OWNER BENEFICIAL OWNER SHARES OUTSTANDING
- --------------------------------------------------------------------------------
Inter-Mountain Capital 1,275,912 50.5%
Corporation (1)
- --------------------------------------------------------------------------------
Mark Technologies 326,310 13%
Corporation (2)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) John Fife, Director, President, CEO and Chairman of the Board of the
Company, is the sole shareholder of Inter-Mountain Capital Corporation.
(2) Mark Jones, Director of the Company, holds 100 shares individually and an
additional 326,210 shares in his capacity as the controlling shareholder of
Mark Technologies Corporation.
The following table sets forth information as of December 31, 1995
regarding each person other than directors of the Company who were known by
the Company to own beneficially more than 5% of the outstanding shares of
Common Stock. Each person named has sole voting and investment power with
respect to the shares beneficially owned by such person.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UTAH RESOURCES INTERNATIONAL, INC.
5% OR GREATER BENEFICIAL OWNERS
AS OF DECEMBER 31, 1995
- --------------------------------------------------------------------------------
NUMBER OF SHARES AND
NAME AND ADDRESS OF NATURE OF PERCENT OF COMPANY
BENEFICIAL OWNER BENEFICIAL OWNER SHARES OUTSTANDING
- --------------------------------------------------------------------------------
Mark Technologies 201,210 10.869%
Corporation
- --------------------------------------------------------------------------------
Robert D. Wolff and 590,000 31.871%
Judith J. Wolff, as Joint
Tenants
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
John H. Morgan, Jr., his wife, Daisy Morgan, the Estate of John H. Morgan,
Sr. and Morgan Gas & Oil Co., a company controlled by John H. Morgan, Jr., and
other members of Mr. Morgan's family, have owned interests in several entities
(mostly partnerships) in which the Company also owns interests or with which the
Company has engaged in certain transactions. Mr. Morgan is a co-personal
representative of the Estate of John H. Morgan, Sr. The sole beneficiary of the
Estate of John H. Morgan, Sr. is the John H. Morgan Sr. Sheltered Trust, of
which Mr. Morgan is a co-trustee and a beneficiary. The Morgans and their
affiliates' ownership in these partnerships was one of the subjects of the
shareholders derivative lawsuit captioned as ERNEST MUTH, ET AL. V. JOHN
MORGAN, JR. ET AL., which was filed as Civil Number L-87-1632 in the Third
Judicial District Court of Salt Lake County, Utal (the "First State Action").
-31-
<PAGE>
TONAQUINT-INDIAN HILLS LIMITED PARTNERSHIP
Tonaquint-Indian Hills was involved in developing condominiums in St.
George in the 1980's. It has been inactive since before 1990, although it
continues to hold liquid assets of approximately $15,500, which will be
distributed when the partnership is dissolved. Effective May 7, 1993, all of
the partnership interests held by John H. Morgan, Jr., Daisy R. Morgan, Dawn
Delvie, and the Estate of John H. Morgan, Sr. were transferred to Utah Resources
pursuant to the 1993 Settlement Agreement, aggregating 7.66% of the total
partnership interests. After that, Mr. and Mrs. Morgan's daughters and Mr.
Morgan's other sisters continued to own approximately 8.5% of the partnership
interests, the Estate of John H. Morgan, Sr. owned 1.255%, and Morgan Gas & Oil
Co. owned 8.46%.
In the settlement of the shareholder's derivative lawsuit in 1993,
approximately $120,000 of the amounts paid to the plaintiffs for their attorneys
fees came from the liquidation of the remaining assets in Tonaquint-Indian Hills
Limited Partnership. The partnership will be dissolved.
RESOURCES LIMITED PARTNERSHIP (ST. GEORGE HILTON INN)
Effective May 1, 1993, URI owned 83.62% of Resources Limited
Partnership, which owned and operated the St. George Hilton Inn. On that
date, all of the partnership interests held by John H. Morgan, Jr., Daisy R.
Morgan, Dawn Delvie, and the Estate of John H. Morgan, Sr. were transferred
to URI pursuant to the 1993 Settlement Agreement aggregating 10.2955% of the
total partnership interests. After that, Mr. and Mrs. Morgan's other sisters
continued to own approximately .2% of the partnership interests, the Estate
of John H. Morgan, Sr. owned .9765%, and Morgan Gas & Oil owned 7.49%
Effective May 1, 1993, the St. George Hilton Inn was sold to St. George Inn
L.C., an independent party. From the proceeds of the sale allocable to the sale
of the St. George Hilton Inn, Resources Limited Partnership has paid all of the
monies owned to the Company for the various loans and advances made to Resources
Limited Partnership by the Company. Also, a portion of the purchase price was
paid through the assumption by St. George Inn L.C. of the remaining obligations
of Resources Limited Partnership on the notes described in the proceeding
paragraph, and the Company and the other co-makers and guarantors were released.
Resources Limited Partnership will be dissolved.
SERVICE STATION LIMITED PARTNERSHIP #2
Effective May 1, 1993, URI owned 79% of Service Station Limited
Partnership, which owned and operated the Texaco Service Station next to the St.
George Hilton Inn. On that date, all of the partnership interests held by John
H. Morgan, Jr. and one-half interests held by the Estate of John H. Morgan, Sr.
were transferred to URI pursuant to the settlement of the shareholders
derivative lawsuit, aggregating 12% of the total partnership interests. After
that,
-32-
<PAGE>
the Estate of John H. Morgan, Sr. continues to own 7% of the partnership
interests and Morgan Gas & Oil Co. owns 14%
Morgan Gas & Oil Co. holds notes in the total principal amount of $110,932
from the Service Station Partnership #2, ostensibly representing loans made by
Morgan Gas & Oil to the partnership. Morgan Gas & Oil claims the loans are
overdue. However, since the transactions were between related parties, all of
whom were controlled by John H. Morgan, Jr. at the time of the transactions, and
since the Company also advanced funds to the Service Station, the Company is
performing an internal audit to verify the legitimacy of the losses and their
proper characterization, before it determines whether to acknowledge and pay the
debt. These notes payable are included in net assets of discontinued
operations.
COUNTRY CLUB PARTNERSHIP
In the mid-1980s, the Country Club Partnership, together with a partnership
owned by two unrelated persons, owned approximately 6.9 acres of real property
contiguous to the Southgate Golf Course, next to the St. George Hilton Inn.
Effective May 1, 1993, all of the partnership interests held by John H. Morgan,
Jr., Daisy R. Morgan, Dawn Delvic, and the Estate of John H. Morgan, Sr. were
transferred to URI pursuant to the 1993 Settlement Agreement, aggregating 9.2%
of the total partnership interests. Thereafter, the John H. Morgan, Sr.
Sheltered Trust continued to own 4.2% of the partnership interests, and Morgan
Gas & Oil Co. owned 8.4%. The partnership is in dissolution.
SOUTHGATE PLAZA
URI owns 52.5% of the partnership interests in Southgate Plaza Limited
Partnership, which is one of three general partners in Southgate Plaza General
Partnership. The general partnership is involved in real property development
activities in St. George, comprised mostly of selling its undeveloped properties
for commercial development. Before May 1, 1993, the Company's ownership
interest was 33.33%. After that date, interests held by John H. Morgan, Jr.,
Daisy R. Morgan, Dawn Delvic, and the John H. Morgan, Sr. Sheltered Trust were
transferred to URI pursuant to the 1993 Settlement Agreement, aggregating 19.16%
of the total partnership interests.
SOUTHGATE PALMS
Prior to May 1, 1993, URI and Tonaquint, Inc. owned 98% of the partnership
interests in Southgate Palms Limited Partnership, which was one of the three
general partners of the Southgate Palms General Partnership, formed to conduct
real property development activities in St. George in the mid-1980s. Effective
May 1, 1993, the 2% partnership interests held by Mr. and Mrs. Morgan were
transferred to URI pursuant to the 1993 Settlement Agreement, resulting in the
dissolution of the partnership.
-33-
<PAGE>
SOUTHGATE PARTNERSHIP TRANSACTIONS
The Company, John H. Morgan, Jr. and Daisy R. Morgan have signed a number
of notes as general partner, co-makers or guarantors, the proceeds of which were
used by the three Southgate general partnerships discussed above. The balance
of the only remaining bank note of approximately $396,000 was paid in full
during 1993, and was extinguished during 1994. Payments on this note, as well
as other expenses of the Southgate general partnerships are made in equal thirds
between the respective limited partnerships, and Mike Hughes and the Estate of
Ralph O. Brown, the other two general partners in the Southgate general
partnerships. The limited partnerships' shares of such payments are made by the
Company and its subsidiary.
MARK G. JONES TRANSACTIONS
On December 22, 1995, Mark Technologies Corporation, a California
corporation ("MTC") which is a wholly owned subsidiary of METC, Inc., a
California corporation ("METC") whose controlling shareholder and board
member is Mark G. Jones (a director of the Company), acquired 201,210 shares
of common stock of the Company from Morgan Gas & Oil Co., in consideration
for the pay down of a promissory note dated as of January 1, 1995 associated
with the sale of a limited partnership interest in a California limited
partnership owned by MTC. The promissory note issued by Morgan Gas & Oil Co.
to MTC was credited by the amount of $603,630 ($3.00 per share) as
consideration of the transfer of the 201,210 shares of URI Common Stock to
MTC. One hundred (100) shares of URI Common Stock were previously acquired
by Mark G. Jones, by gift from JH Morgan and DR Morgan on May 9, 1995.
Subsequent to the period covered by this report, on April 20, 1996, Mark
Technologies Corporation, a California corporation ("MTC") which is a wholly
owned subsidiary of METC, Inc., a California corporation ("METC") whose
controlling shareholder and board member is Mark G. Jones, acquired 125,000
shares of URI stock from the Morgan Charitable Trust. A promissory note was
issued to the Morgan Family Charitable Trust by MTC in the principal amount of
$375,000 ($3.00 per share) as the entire consideration received for the transfer
of the 125,000 shares of URI stock. The promissory note is secured by certain
project revenues otherwise payable to a wholly-owned subsidiary of METC.
JOHN FIFE TRANSACTION
Subsequent to the period covered by this report, John Fife, as the sole
shareholder of IMCC, acquired a 50.5% interest in the Company on July 3, 1996.
For a more detailed description of this acquisition see "ITEM 1 DESCRIPTION OF
BUSINESS/Stock Purchase Agreement -- July 3, 1996."
SHARE EXCHANGE AGREEMENT TRANSACTION
On June 13, 1995 the Company consummated the exchange of 590,000 shares of
its common stock in exchange for the receipt of all issued and outstanding stock
of Midwest (the
-34-
<PAGE>
"Share Exchange Agreement"). Midwest was wholly owned by Robert D. Wolff,
subsequent CEO of the Company, and Judith J. Wolff. Among other things, the
Share Exchange Agreement provided for the payment of compensation, for services
rendered, by the Company to R. Dee Erickson and E. Jay Sheen (both directors of
the Company) in the amount of 38,000 shares each of the Company's Common Stock
and $104,000 each. For a more detailed description of the Share Exchange
Agreement, see "ITEM 1 DESCRIPTION OF BUSINESS/Share Exchange Agreement."
1996 SETTLEMENT AGREEMENT TRANSACTION AND RELATED TRANSACTIONS
The following amounts were paid through August 14, 1996 by the Company
in connection with the 1996 Settlement Agreement, the Morgan Settlement
Agreement and the IMCC Stock Purchase Agreement:
Hunter & Brown, approximately $34,843.08, as legal counsel for Mark
Jones, Director of the Company;
Campbell, Maack & Sessions, approximately $167,987.68, as legal counsel,
as follows, $81,000 for legal services performed for Anne and Victoria
Morgan, daughters of John H. Morgan, Jr. and Daisy R. Morgan, both Directors
of the Company in 1995, pursuant to the 1996 Settlement Agreement with the
balance of $86,987.68 for services performed as legal counsel for Mark
Technologies Corporation, a corporation controlled by Mark Jones, Director of
the Company;
Dorton, Jones, Nicolatus & Stuart Inc., approximately $4,225, as experts
for Mark Technologies Corporation, a corporation controlled by Mark Jones;
Mark Technologies Corporation, approximately $10,090.03 a corporation
controlled by Mark Jones, a Director of the Company, for a retainer paid to
Dorton, Jones, Nicolatus & Stuart, Inc. and for certain out-of-pocket
expenses;
Victoria Morgan, daugher of John H. Morgan, Jr. and Daisy R. Morgan, in
the amount of $58,966.70 for repurchase of all shares owned in the Company by
Ms. Morgan;
Anne Morgan, daughter of John H. Morgan, Jr. and Daisy R. Morgan, in the
amount of $76,882.50 for a repurchase of all shares owned in the Company by
Ms. Morgan;
John H. Morgan, Jr., in the amount of $89,229.81, representing the total
monetary judgment collected from him by the Company pursuant to the Murphy
Order and all amounts covered by the Order regarding Stay of Execution and
Acceptance of Undertaking under the Murphy Order;
Robinson & Sheen, L.L.C. $76,133.54, as counsel for the Company;
Jardine, Linebaugh & Dunn, approximately $22,732.97, as counsel for the
Company;
Wildman, Harrold, Allen & Dixon, approximately $72,433.52, as counsel
for IMCC, a company wholly owned by John Fife, Director, CEO, President and
Chairman of the Board of the Company;
Giauque, Crockett, Bendinger & Peterson, $22,391.68, as counsel for
IMCC, IMCC, a company wholly owned by John Fife, Director, CEO, President and
Chairman of the Board of the Company;
IMCC, a company wholly owned by John Fife, Director, CEO, President and
Chairman of the Board of the Company, approximately $5,014.79 for
reimbursement of the retainer to Giaugue, Crockett, Bedirger; and
Brown Wright & Associates, approximately $19,937.45 as experts for the
Company.
LEGAL REPRESENTATION OF THE COMPANY
During 1994 and 1995, the law firms of Moyle Draper and Robinson &
Sheen, L.L.C. provided legal representation to the Company. E. Jay Sheen, a
former director of the Company, was a partner at Moyle Draper and currently
is a partner at Robinson & Sheen. During 1994, Moyle Draper received
approximately $99,304 in legal fees. During 1995, Robinson & Sheen received
approximately $144,800.29 in legal fees and Moyle Draper received
approximately $46,666 in legal fees.
COMMISSION AND CONSULTING FEES
1994
During 1994, Lyle Hurd, and R. Dee Erickson, both directors of the
Company, received consulting fees from the Company in the amounts of $12,500
and $10,000 respectively. An additional $3,440 was paid by the Company to ST.
GEORGE MAGAZINE for advertising. Mr. Hurd, who also served as Director of
Marketing of the Company, is the owner of Hurd Owens Hafen, Inc., which
publishes ST. GEORGE MAGAZINE. In 1994, Gerry Brown, President of the
Company, received $14,412 in commissions for sales of real estate.
1995
During 1995, Lyle Hurd, a director of the Company and Director of
Marketing, received $13,750 in consulting fees. An additional $8,265 was paid
by the Company to ST. GEORGE MAGAZINE for advertising. Mr. Hurd, who also
served as Director of Marketing of the Company, is the owner of Hurd Owens
Hafen, Inc., which publishes ST. GEORGE MAGAZINE, among others. In 1995,
Gerry Brown, the President of the Company, received $8,327 in commissions.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibit Index below.
(b) Reports on Form 8-K -- The registrant filed no reports on Form 8-K
during the last quarter of the fiscal year ended December 31, 1995.
-35-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
ANNUAL REPORT ON FORM 10-KSB - 1995
UTAH RESOURCES INTERNATIONAL, INC.
SEC FILE NO.
EXHIBIT NO. EXHIBIT DESCRIPTION LOCATION/INCORPORATION BY REFERENCE
<S> <C> <C>
2.1 Share Exchange Agreement Incorporated by reference to Exhibit 3 to Form 8-K as filed July 20, 1995
2.2 Stock Purchase Agreement Incorporated by reference to Exhibit 1 to Form 13D-A as filed
September 9, 1996
3.1 Articles of Incorporation of Utah Incorporated by reference to Exhibit 3.A to the Company's registration
Resources International, Inc. statement on Form 10 as filed June 22, 1981
3.2 Bylaws of Utah Resources Incorporated by reference to Exhibit 3.B to the Company's registration
International, Inc. statement on Form 10KSB as filed June 22, 1981
Amendment of Bylaws dated Incorporated by reference to Exhibit 3.3 to the Company's Annual Report of
November 17, 1992 Form 10-KSB for the year ended December 31, 1992
3.4 Amendment of Bylaws - Incorporated by reference to Exhibit 3.4 to the Company's Annual Report of
December, 1994 Form 10-KSB for the year ended December 31, 1994
3.5 Amendment to Articles of Incorporated by reference to Exhibit 3.5 to the Company's Annual Report of
Incorporation adopted by Form 10-KSB for the year year ended December 31, 1994
shareholders January 26, 1995
10.1 B & E Securities Profit Sharing Incorporated by reference to Exhibit 10 to the Company's registration
Agreement statement on Form 10 as amended and filed May 20, 1982
10.2 Southgate Palms Partnership Incorporated by reference to Exhibit 10.2 to the Company's Annual Report on
Agreement Form 10-KSB for the year ended December 31, 1986
10.3 Southgate Palms Plaza Limited Incorporated by reference to Exhibit 10.3 to the Company's Annual Report on
Partnership Agreement Form 10-KSB for the year ended December 31, 1986
10.4 Southgate Plaza Partnership Incorporated by reference to Exhibit 10.4 to the Company's Annual Report on
Agreement Form 10-KSB for the year ended December 31, 1986
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION LOCATION/INCORPORATION BY REFERENCE
<S> <C> <C>
10.5 Southgate Plaza Limited Incorporated by reference to Exhibit 10.5 to the Company's Annual Report on
Partnership Agreement Form 10-KSB for the year ended December 31, 1985
10.6 Southgate Resort Partnership Incorporated by reference to Exhibit 10.6 to the Company's Annual Report on
Agreement Form 10-KSB for the year ended December 31, 1985
10.7 Southgate Resort Limited Incorporated by reference to Exhibit 10.7 to the Company's Annual Report on
Partnership Agreement Form 10-KSB for the year ended December 31, 1985
10.8 Resources Limited Partnership Incorporated by reference to Exhibit 10.8 to the Company's Annual Report on
Agreement with amendments Form 10-KSB for the year ended December 31, 1985
10.9 Tonaquint-Indian Hills Limited Incorporated by reference to Exhibit 10.9 to the Company's Annual Report on
Partnership Agreement Form 10-KSB for the year ended December 31, 1985
10.10 Lease Agreement - Court Club Incorporated by reference to Exhibit 10.10 to the Company's Annual Report on
Property Form 10-KSB for the year ended December 31, 1985
10.11 Service Station Limited Partnership Incorporated by reference to Exhibit 10.11 to the Company's Annual Report on
#2 - Partnership Agreement Form 10-KSB for the year ended December 31, 1986
10.20 Settlement Agreement dated Incorporated by reference to Exhibit 10.20 to the Company's Annual Report on
July 31, 1989, with C.E.C. Form 10-KSB for the year ended December 31, 1989
Industries Corp.
10.21 Addendum to Settlement Agreement Incorporated by reference to Exhibit 10.21 to the Company's Annual Report on
with C.E.C. Industries Corp Form 10-KSB for the year ended December 31, 1989
10.22 Option Agreement dated Incorporated by reference to Exhibit 10.22 to the Company's Annual Report on
November 29, 1989 re: C.E.C. Form 10-KSB for the year ended December 31, 1989
Industries Corp.
10.23 Trust Deed Note dated November Incorporated by reference to Exhibit 10.23 to the Company's Annual Report on
29, 1989 re: C.E.C. Industries Corp. Form 10-KSB for the year ended December 31, 1989
10.24 Trust Deed dated November 29, Incorporated by reference to Exhibit 10.24 to the Company's Annual Report on
1989 re: C.E.C. Industries Corp. Form 10-KSB for the year ended December 31, 1989
10.25 Mutual Releases re: C.E.C. Incorporated by reference to Exhibit 10.25 to the Company's Annual Report on
Industries Corp. Form 10-KSB for the year ended December 31, 1989
10.26 Mutual Release re: Counterclaim Incorporated by reference to Exhibit 10.26 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1989
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION LOCATION/INCORPORATION BY REFERENCE
<S> <C> <C>
10.27 Dissolution Agreement dated Incorporated by reference to Exhibit 10.27 to the Company's Annual Report on
April 28, 1989 re: Southgate Palms Form 10-KSB for the year ended December 31, 1989
10.28 Promissory Note dated March 29, Incorporated by reference to Exhibit 10.28 to the Company's Annual Report on
1991 executed by Resources Form 10-KSB for the year ended December 31, 1990
Limited Partnership
10.29 Deed of Trust dated March 29, 1991 Incorporated by reference to Exhibit 10.29 to the Company's Annual Report on
executed by Resources Limited Form 10-KSB for the year ended December 31, 1990
Partnership
10.30 Settlement Agreement dated April Incorporated by reference to Exhibit 10.30 to the Company's Annual Report on
6, 1993 ** Form 10-KSB for the year ended December 31, 1992
10.31 Real Estate Contract dated May 3, Incorporated by reference to Exhibit 10.31 to the Company's Annual Report on
1993 between Resources Limited Form 10-KSB for the year ended December 31, 1992
Partnership, Tonaquint, Inc., and
St. George Inn, L.C.
10.32 Options Contract dated May 21, Incorporated by reference to Exhibit 10.32 to the Company's Annual Report on
1993, between Service Station Form 10-KSB for the year ended December 31, 1992
Limited Partnership #2 and St.
George Inn, L.C.
10.33 Assignment of Partnership and Incorporated by reference to Exhibit 10.33 to the Company's Annual Report on
Limited Partnership Interests Form 10-KSB for the year ended December 31, 1992
dated May 7, 1993
10.34 Share Exchange Agreement Incorporated by reference to Exhibit 3 to Form 8-K as filed July 20, 1995
10.35 Stock Purchase Agreement Incorporated by reference to Exhibit 1 to Form 13D-A as filed
September 9, 1996
10.36 Splitoff Agreement Filed Herein
10.37 Morgan Settlement Agreement Filed Herein
10.38 1996 Settlement Agreement Filed Herein
21 List of Subsidiaries Incorporated by reference to Exhibit 21 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1992
</TABLE>
______________
** Confidential treatment has been granted with respect to information
contained in this exhibit.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Utah Resources International, Inc.
Date: 1/8/97 By: /s/ John Fife
----------- ---------------------------------------
John Fife
Its Director, President and Chairman of
the Board, and CEO
Date: 1/8/97 By: /s/ Gerry T. Brown
----------- ---------------------------------------
Gerry T. Brown
Its Vice President
Date: 1/8/97 By: /s/ Ladd Worth Eldredge
----------- ---------------------------------------
Ladd Worth Eldredge
Its Treasurer, Secretary and CFO
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date: 1/8/97 By: /s/ John H. Morgan, Jr.
----------- ---------------------------------------
John H. Morgan, Jr.
Former Director
Date: 1/8/97 By: /s/ Lyle D. Hurd
----------- ---------------------------------------
Lyle D. Hurd
Director
Date: 1/8/97 By: /s/ Daisy R. Morgan
----------- ---------------------------------------
Daisy R. Morgan
Former Director
-36-
<PAGE>
Date: By:
----------- ---------------------------------------
E. Jay Sheen
Former Director
Date: By:
----------- ---------------------------------------
R. Dee Erickson
Former Director
Date: By:
----------- ---------------------------------------
Jenny Morgan
Director
Date: By:
----------- ---------------------------------------
Mark G. Jones
Director
Date: 1/8/97 By: /s/ David Fife
----------- ---------------------------------------
David Fife
Director
-37-
<PAGE>
UTAH RESOURCES
INTERNATIONAL, INC.
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
PAGE
----
Independent Auditors' Report F-1
Balance sheet, December 31, 1994 F-2
Statements of operations for the years
ended December 31, 1994 and 1993 F-3
Statement of stockholders' equity for the
years ended December 31, 1994 and 1993 F-4
Statement of cash flows for the years ended
December 31, 1994 and 1993 F-5
Notes to consolidated financial statements F-7
Independent Auditors' Report F-18
Balance Sheet, December 31, 1995 F-19
Statements of operations for the years
ended December 31, 1995 and 1994 F-20
Statements of stockholders' equity for
the years ended December 31, 1995 and 1994 F-21
Statement of cash flows for the years ended
December 31, 1995 and 1994 F-22
Notes to consolidated financial statements F-24
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF
UTAH RESOURCES INTERNATIONAL, INC.,
AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheet of Utah
Resources International, Inc., and subsidiaries at December 31, 1994 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the two years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Utah Resources International, Inc., and subsidiaries as of December 31, 1994 and
the results of their operations and their cash flows for the two years ended
December 31, 1994, in conformity with generally accepted accounting principles.
March 24, 1995
F-1
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
DECEMBER 31, 1994
ASSETS
Cash and cash equivalents $2,138,795
Accounts receivable 254,312
Note receivable from related party 10,899
Notes receivable 200,267
Property and equipment, net of
accumulated depreciation and
amortization of $42,098 30,027
Real estate held for resale 627,214
Royalty interest in petroleum and mineral
production, net of amortization of $37,687 12,523
Other assets 19,799
----------
$3,293,836
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 160,534
Accrued expenses 291,331
Earnest money deposits 36,000
Notes payable 657,545
Income taxes payable 201
Deferred income taxes 300,000
----------
Total liabilities 1,445,611
----------
Minority interest 183,121
Commitment and contingencies -
Stockholders' equity:
Common stock; par value $.10 per share,
5,000,000 shares authorized,
1,284,027 shares issued and outstanding 128,403
Additional paid-in capital 127,174
Retained earnings 1,409,527
----------
Total stockholders' equity 1,665,104
----------
$3,293,836
----------
----------
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED
DECEMBER 31,
-------------
1994 1993
---- ----
Sales $2,274,222 758,114
Cost of sales 567,453 113,396
---------- ---------
Gross profit 1,706,769 644,718
General and administrative expenses 678,368 628,462
---------- ---------
Income from operations 1,028,401 16,256
---------- ---------
Other income (expense):
Rental income 32,183 87,904
Royalty income 92,455 98,554
Interest and dividend income 50,458 52,109
Interest expense (60,020) (64,837)
Litigation settlement - (690,000)
Other income (expense) (18,074) 9,430
---------- ---------
Total other income (expense) 97,002 (506,840)
---------- ---------
Income (loss) before minority interest and
provision for income taxes 1,125,403 (490,584)
Minority interest in net income of subsidiaries 29,109 380
---------- ---------
Income (loss) before provision for income taxes 1,154,512 (490,204)
Income tax (provision) benefit (436,000) 144,000
---------- ---------
Income (loss) from continuing operations 718,512 (346,204)
Discontinued operations:
Income from discontinued operations - 7,878
(Loss) income from disposal of discontinued
operations net of income taxes (benefit)
expense of $(16,000) and $82,000 (31,416) 160,867
---------- ---------
Total discontinued operations (31,416) 168,745
---------- ---------
Net income (loss) $ 687,096 (177,459)
---------- ---------
---------- ---------
Earnings (loss) per share $.54 (.12)
---- ----
---- ----
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
---------------- PAID-IN RETAINED ---------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
------ ------ ---------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 2,205,822 $220,582 730,913 899,890 654,795 713,918
Treasury shares cancelled (654,795) (65,479) (648,439) - (654,795) (713,918)
Common stock acquired in
litigation and cancelled (285,000) (28,500) 28,500 - - -
Common stock issued for
services 18,000 1,800 16,200 - - -
Net (loss) - - - (177,459) - -
--------- -------- -------- -------- -------- --------
Balance, December 31, 1993 1,284,027 128,403 127,174 722,431 - -
Net income - - - 687,096 - -
--------- -------- -------- -------- -------- --------
Balance, December 31, 1994 1,284,027 $128,403 127,174 1,409,527 - -
--------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED
DECEMBER 31,
-------------
1994 1993
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 687,096 (177,459)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 22,756 40,667
Minority interest in net (income)
of subsidiaries (29,109) (380)
(Gain) loss on disposition of assets (36,267) 5,890
Bad debt expense - 22,003
Loss on marketable securities - 6,194
Common stock issued for services - 18,000
(Increase) decrease in:
Accounts receivable (238,503) 29,748
Prepaid expenses 76,403 (15,702)
Real estate held for resale 100,263 (157,879)
Refundable income taxes 443,201 (443,000)
(Decrease) increase in:
Accounts payable 8,302 108,304
Accrued expenses 171,488 (7,777)
Ernest money deposits (10,000) (65,141)
Deferred income tax 300,000 (88,052)
--------- --------
Net cash provided by (used in)
operating activities 1,495,630 (724,584)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from marketable securities 29,920 329,038
Proceeds from disposition of assets 390,000 4,155
Payments on notes receivable 160,989 121,413
Decrease (increase) in net assets of
discontinued operations - 264,833
Purchase of property and equipment (7,601) (3,560)
Increase in notes receivable (206,843) (151,836)
Increase (decrease) in minority interest (51,126) 178,103
Decrease (increase) in other assets 3,289 (8,363)
--------- --------
Net cash provided by
Investing activities 318,628 733,783
--------- --------
F-5
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
YEARS ENDED
DECEMBER 31,
-------------
1994 1993
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 27,249 400,000
Payments on notes payable (72,315) (89,346)
---------- --------
Net cash provided by (used
in) financing activities (45,066) 310,654
---------- --------
Increase in cash 1,769,192 319,853
Cash and cash equivalents, beginning of year 369,603 49,750
---------- --------
Cash and cash equivalents, end of year $2,138,795 369,603
---------- --------
---------- --------
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
1993
The Company acquired a vehicle for a note payable of $23,049
The Company retired its treasury stock
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for
1994 1993
---- ----
Interest $36,992 64,837
------- ------
------- ------
Income taxes $ - -
------ -----
------ -----
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Utah Resources International, Inc., and consolidated entities (the
Company) is engaged primarily in the development of real estate including
the sale of developed and undeveloped real estate. The Company's assets
are located in the Rocky Mountain West.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements
of Utah Resources, Inc., Tonaquint Inc. and a number of general
partnerships of which the Company has ownership in excess of 50 percent and
has management responsibility. All material intercompany transactions and
balances have been eliminated in consolidation of the Companies and
partnerships.
Effective April 30, 1993, the Company sold the St. George Hilton Inn
(Hilton) for cash and closed the service station adjacent to the Hilton.
The financial statements reflect the operations of the Hilton and the
service station as discontinued operations for the period January 1, 1993
through April 30, 1993. The net assets of discontinued entities are
included on the balance sheet in other assets.
METHOD OF RECOGNITION OF INCOME
Real Estate
Profits on sale of developed lots, developed land and raw land are
recognized in accordance with standards established for the real estate
industry which generally provide for deferral of all or part of the profit
on a sale if the buyer does not meet certain down payment requirements or
certain other tests of the buyer's financial commitment to the purchase, or
the seller is required to perform significant obligations subsequent to the
sale.
Cost of sales include a pro rata portion of acquisition and
development costs (including estimated costs to complete) along with sales
commissions, closing costs and other costs specifically related to the
sale.
F-7
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
METHOD OF RECOGNITION OF INCOME - CONTINUED
Other
Royalty income is recognized when received. The Company has
overriding mineral and oil and gas royalty interests and thus exercises no
control over the activities of the royalty payors and is notified of the
amounts or royalties due when the cash is received.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is computed
using the straight-line method based upon the following useful lives:
Building 15-30 years
Furniture and equipment 3-10 years
REAL ESTATE HELD FOR RESALE
Real estate held for resale includes developed lots, land
underdeveloped and raw land. Real estate held for resale is carried at the
lower of cost or market. The cost of development of building lots includes
the land and the related costs of development (planning, survey,
engineering and other) which are capitalized. The cost of interest and
property taxes are expensed.
INTANGIBLE ASSETS
The cost of identifiable intangible assets, consisting of royalties,
is being amortized on a straight-line basis over the expected productive
life of the asset, 15 years. The intangible costs during the construction
of the Hilton were being amortized over 40 years on a straight line basis.
The unamortized intangible costs of construction were offset in determining
the gain on disposal of discontinued operations.
INCOME TAXES
Deferred income taxes are provided for temporary differences in
reporting income for financial statement and tax purposes arising primarily
from differences between financial reporting and income tax reporting in
the methods of accounting for depreciation of property and equipment and
construction contracts.
F-8
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES - CONTINUED
Effective January 1, 1993, the Company adopted the provision of SFAS
109 "Accounting for Income Taxes." The adoption of SFAS 109 changed the
Company's method of accounting for income taxes from the deferred method
(APB 11) to an asset and liability method. The asset and liability method
requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between tax bases
and financial reporting bases of other assets and liabilities.
EARNINGS PER SHARE
The weighted average of outstanding common shares is approximately
1,284,000 shares and 1,418,000 shares for the years ended December 31, 1994
and 1993, respectively.
STATEMENT OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of trade receivables. In
the normal course of business, the Company provides credit terms to its
customers. Accordingly, the Company performs ongoing credit evaluations of
its customers and maintains allowances for possible losses which, when
realized, have been within the range of management's expectations.
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such account and believes it is not exposed to
any significant credit risk on cash and cash equivalents.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to be consistent
with the current year presentation.
(2) ACCOUNTS RECEIVABLE
The Company has included in accounts receivable $130,963 which is from
a company controlled by the majority shareholder of the Company and
$121,854 which is from various related partnerships.
F-9
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(3) NOTE RECEIVABLE FROM RELATED PARTY
The Company has the following note receivable from a related party at
December 31, 1994:
Note receivable from a stockholder and director
requiring monthly payment of $500 including
interest at 8%, secured by real estate $10,899
-------
-------
Future maturities of the note receivable from a related party are as
follows:
YEAR AMOUNT
---- ------
1994 $ 8,029
1995 2,870
-------
Total $10,899
-------
-------
(4) NOTES RECEIVABLE
The Company has the following notes receivable at December 31, 1994:
Note receivable from an individual at
9.0% interest, due in March, 1996,
secured by real estate $175,267
Note receivable from an individual at
8% interest, due in January 1995 25,000
-------
$200,267
--------
--------
Future maturities of notes receivable are as follows:
YEAR AMOUNT
1995 $ 25,000
1996 175,267
--------
Total $200,267
--------
--------
F-10
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(5) REAL ESTATE HELD FOR RESALE
Real estate held for resale consists of the following real estate in
the St. George, Utah area at December 31, 1994:
DEVELOPED
The Company has 7 developed residential lots along with approximately
3.5 acres of commercial developed real estate with an aggregate cost of
$152,924.
RAW LAND AND PARTIALLY DEVELOPED LAND
The Company has approximately 410 acres of real estate that is
currently planned for single family dwelling lots, commercial development
and multiple housing. The aggregate cost of the raw land and partially
developed land is $474,290.
(6) ACCRUED EXPENSES
Accrued expenses at December 31, 1994 consist of the following:
Deficit in investment in partnership $180,993
Accrued interest 33,036
Other accrued expenses 77,302
--------
Total $291,331
--------
--------
(7) NOTES PAYABLE
The Company has the following notes payable at December 31, 1994:
Note payable to a trust requiring quarterly
interest payments at 10%, principal due
in 1996 secured by certain real estate held
for resale $400,000
F-11
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(7) NOTES PAYABLE - CONTINUED
Notes payable to a governmental entity
requiring annual payments of approximately
$21,000 plus interest at 5.94%, secured
by real estate 164,576
Note payable to entity requiring annual
payments of $10,386 including interest
at 9%, secured by real estate 74,372
Note payable to a financial institution
requiring monthly payments of $477
including interest at 8.75%, secured
by a vehicle 18,597
--------
Total $657,545
--------
--------
Future maturities of notes payable are as follows:
YEAR AMOUNT
---- ------
1995 $ 49,964
1996 429,346
1997 30,441
1998 30,796
1999 20,940
Thereafter 96,058
--------
Total $657,545
--------
--------
(8) DISCONTINUED OPERATIONS
Effective May 1, 1993, the Company sold the Hilton Inn in St. George,
Utah, along with four acres of adjoining land. The Company realized gross
cash proceeds of $1,700,000. At December 31, 1994 and 1993, net assets
(liabilities) of discontinued assets were $9,975 and $(12,509),
respectively. The consolidated statements of operations have been restated
to report the operations of the Hilton Inn as income from discontinued
operations.
F-12
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(8) DISCONTINUED OPERATIONS - CONTINUED
The service station adjacent to the Hilton Inn was also closed and has
been included in discontinued operations.
The results of operations for the period January 1, to April 30, 1993
of these businesses are summarized as follows:
Net sales $1,191,591
----------
----------
Income from operations before income taxes 7,878
Income taxes -
------
Income from discontinued operations $7,878
------
------
(9) INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS 109 "Accounting
for Income Taxes." Under provisions of SFAS 109 the Company elected not to
restate prior years and has determined that the cumulative implementation
was immaterial. The effect of this change in the 1993 operations was also
not material.
The (provision) benefit for income taxes is as follows:
1994 1993
---- ----
Current $(136,000) 55,948
Deferred (300,000) 88,052
--------- -------
$(436,000) 144,000
--------- -------
--------- -------
F-13
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(9) INCOME TAXES - CONTINUED
The (provision) benefit for income taxes differs from the amount
computed at the federal statutory rate as follows:
1994 1993
---- ----
Income tax (expense) benefit at federal
statutory rates $(392,000) 60,000
State income taxes (50,000) 10,000
Common stock received in settlement - (26,000)
Income taxes for discontinued operations 16,000 82,000
Other (10,000) 18,000
--------- -------
$(436,000) 144,000
--------- -------
--------- -------
Deferred income taxes have been established to reflect timing
differences between financial reporting and income tax purposes. The
primary differences are as follows:
1994 1993
---- ----
Condemnation sales $300,000 -
-------- -----
-------- -----
(10) STOCKHOLDERS' EQUITY
In 1993 the Company settled litigation (see note 11). As part of the
settlement, the Company's largest stockholder and other individuals
contributed to the Company 285,000 shares of the Company's common stock
which were then retired by the Company. No value was recorded on the
receipt of the common stock.
In 1993 the Company also retired the 654,795 shares it held in
treasury stock.
In 1989 the Company settled litigation with another entity which
provided the other entity the right to purchase up to 42.4 acres of real
estate from the Company in exchange for 409,716 shares of common stock of
the Company. Under terms of the settlement agreement, the other entity
could purchase up to 10.6 acres per year in exchange for 102,429 shares of
common stock. As of December 31, 1994, the other entity has the option to
acquire a total of 10.6 acres for 102,429 shares of the Company's common
stock.
F-14
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(11) LITIGATION
In 1993 the Company settled litigation between certain shareholders
and the Company and its board of directors relating to breaches of
fiduciary responsibility and wasting of the Company's assets. The
litigation had been on going for several years. Under terms of the
settlement agreement, the Company received 285,000 shares of the Company's
common stock along with $100,000 cash. In addition, certain minority
partnership interests were transferred to the Company. The shareholders
were also allocated two members on the Company's five member board of
directors. The Company in turn was required to pay the stockholders
related legal expenses and out-of-pocket costs. The Company realized a
loss of $690,000 in 1993 as a result of the litigation settlement.
The Company is involved in certain other litigation where the Company
has prevailed. The opposing side has filed an appeal of the decision. It
is not known the final outcome but the Company is vigorously defending its
position. Management believes that the final outcome will not have a
material effect on the financial position of the Company.
(12) CONTINGENCIES
The Company, through predessor entities, has understandings where
certain individuals may be entitled to an interest in the ownership or
profits on unidentified projects. This contingency is currently in
litigation on appeal.
In addition, the Company has accrued amounts totaling $82,969 for
potential amounts owing from transactions which took place a number of
years ago. It cannot be determined if and when such amounts will be paid.
That balance is included in accrued expenses.
The Company is aware of certain unasserted claims which could result
in claims in excess of amounts accrued in the financial statements.
Management believes that any such claim, if asserted, will not result in
any adverse affect on the financial position of the Company.
The Company is in the process of remediation of the service station
property. It is not known if any additional costs over what the Company
has accrued will be needed to complete the remediation.
F-15
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(13) COMMITMENTS
The Company leases its office facility under a year lease requiring
monthly payments of $950 which expires in August 1995. Lease expense was
$4,750 in 1994.
The Company leases certain office equipment under operating lease
agreements. Those agreements require monthly payments of $198 which expire
between 1995 and 1996. Annual lease expense under these agreements is
$2,375 and $1,974 for the years ended December 31, 1994 and 1993. Minimum
payments under the noncancellable operating leases are as follows:
YEAR AMOUNT
---- ------
1995 $2,375
1996 395
------
Total $2,770
------
------
(14) SIGNIFICANT CUSTOMERS
The Company had land sales to the following significant customers in
1994 and 1993:
1994 1993
---- ----
Customer A $979,000 -
Customer B $254,000 352,000
(15) STOCK OPTION PLAN
In 1994, the Company established a stock option plan wherein the five
directors and the Company's president were each granted options to acquire
25,000 shares of the Company's stock at $2.50 per share. The options vest
as follows: 9,000 shares at the option date and 8,000 shares in 1995 and
8,000 shares in 1996.
F-16
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(16) SUBSEQUENT EVENTS
ACQUISITION
The Company has entered into a preliminary agreement where it has
agreed to acquire Midwest Construction and Maintenance through a stock for
stock transactions. Completion of the transaction is dependent upon
certain future events including a valuation analysis and appraisal of both
company's boards of directors and shareholders.
DIVIDENDS
The Company declared a paid a cash dividend of $.10 per share on
January 26, 1995. The total cash paid for the dividends was approximately
$128,000.
F-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Utah Resources International, Inc.,
and Subsidiaries
We have audited the accompanying consolidated balance sheet of Utah
Resources International, Inc., and subsidiaries at December 31, 1995 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the two years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Utah Resources International, Inc., and subsidiaries as of December 31, 1995 and
the results of their operations and their cash flows for the two years ended
December 31, 1995, in conformity with generally accepted accounting principles.
June 21, 1996 except for note 15,
which is dated July 10, 1996
F-18
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
DECEMBER 31, 1995
ASSETS
------
Cash and cash equivalents $ 765,831
Accounts receivable from related parties 372,622
Notes receivable 178,989
Income tax receivable 212,328
Property and equipment, net of
accumulated depreciation and
amortization of $36,409 36,959
Real estate held for resale 854,821
Royalty interest in petroleum and mineral
production, net of amortization of $41,034 9,176
Other assets 10,599
Net assets of discontinued operations 657
---------
$ 2,441,982
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Accounts payable $ 276,446
Accrued expenses 312,474
Earnest money deposits 36,000
Notes payable 599,627
---------
Total liabilities 1,224,547
---------
Minority interest 152,113
Commitment and contingencies -
Stockholders' equity:
Common stock; par value $.10 per share,
5,000,000 shares authorized,
1,851,198 shares issued and outstanding 185,120
Additional paid-in capital 348,757
Retained earnings 531,445
---------
Total stockholders' equity 1,065,322
---------
$ 2,441,982
---------
---------
See accompanying notes to consolidated financial statements.
F-19
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED
DECEMBER 31,
---------------------
1995 1994
----- ----
Sales $ 587,663 2,274,222
Cost of sales 156,250 567,453
----------- ----------
Gross profit 431,413 1,706,769
General and administrative expenses 1,045,854 678,368
----------- ----------
Income (loss) from operations (614,441) 1,028,401
----------- ----------
Other income (expense):
Rental income - 32,183
Royalty income 61,006 92,455
Interest and dividend income 102,794 50,458
Interest expense (51,279) (60,020)
Other income (expense) 35,906 (18,074)
----------- ----------
Total other income (expense) 148,427 97,002
----------- ----------
Income (loss) before minority interest and
provision for income taxes (466,014) 1,125,403
Minority interest in net (loss) of subsidiaries 26,988 29,109
----------- ----------
Income (loss) before provision for income taxes
and discontinued operations (439,026) 1,154,512
Income tax (provision) benefit 179,000 (436,000)
----------- ----------
Income (loss) from continuing operations (260,026) 718,512
Discontinued operations:
Income from discontinued operations net of
income taxes of $48,000 93,407 -
Loss from disposal of discontinued
operations net of income taxes benefit
of $275,000 and $16,000 (583,000) (31,416)
----------- ----------
Total discontinued operations (489,593) (31,416)
----------- ----------
Net income (loss) $ (749,619) 687,096
----------- ----------
----------- ----------
Earnings (loss) per share $(.46) .54
----- ----
----- ----
See accompanying notes to consolidated financial statements.
F-20
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
ADDITIONAL
COMMON STOCK PAID-IN RETAINED
---------------------
SHARES AMOUNT CAPITAL EARNINGS
------ ------- ------- --------
Balance, January 1, 1993 1,284,027 $128,403 127,174 722,431
Net income - - - 687,096
--------- -------- ------- ---------
Balance, December 31, 1994 1,284,027 128,403 127,174 1,409,527
Common stock issued to
purchase subsidiary valued
at book value of subsidiary
($.43 per share) 590,000 59,000 196,503 -
Common stock issued for
services in acquisition
of subsidiary valued at
$.43 per share 76,000 7,600 25,080 -
Repurchase of stock
through land issuance at
$.10 per share (102,429) (10,243) - -
Common stock issued in
settlement of dispute valued
at $.10 per share 3,600 360 - -
Dividends - - - (128,463)
Net loss - - - (749,619)
--------- -------- ------- ---------
Balance, December 31, 1995 1,851,198 $185,120 348,757 531,445
--------- -------- ------- ---------
--------- -------- ------- ---------
See accompanying notes to consolidated financial statements.
F-21
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED
DECEMBER 31,
-------------------
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (749,619) 687,096
Less income from discontinued operation (93,407) -
Add loss from disposition of discontinued
operation 583,000 -
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 12,349 22,756
Minority interest in net income
of subsidiaries (26,988) (29,109)
Gain on disposition of assets (3,106) (36,267)
Bad debt expense 10,899 -
Common stock issued for services 33,040 -
(Increase) decrease in:
Accounts receivable (118,310) (238,503)
Other assets (775) 76,403
Real estate held for resale (237,850) 100,263
Income tax receivable (212,529) 443,201
(Decrease) increase in:
Accounts payable 115,912 8,302
Accrued expenses 21,143 171,488
Ernest money deposits - (10,000)
Deferred income tax (300,000) 300,000
--------- ---------
Net cash provided by (used in)
continued operation (966,241) 1,495,630
Net cash used in discontinued
operations (104,846) -
--------- ---------
Net cash provided by (used in)
operating activities (1,071,087) 1,495,630
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from marketable securities - 29,920
Proceeds from disposition of assets 18,140 390,000
Payments on notes receivable 137,348 160,989
Purchase of property and equipment (2,690) (7,601)
Increase in notes receivable (112,137) (206,843)
Decrease in minority interest (4,020) (51,126)
Decrease in other assets - 3,289
--------- ---------
Cash from investing activities -
continuing operation 36,641 318,628
Cash from investing activities -
discontinued operation 76,839 -
--------- ---------
Net cash provided by
Investing activities 113,480 318,628
--------- ---------
F-22
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
YEARS ENDED
DECEMBER 31,
------------------
1995 1994
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of dividends (128,463) 27,249
Payments on notes payable (90,129) (72,315)
--------- ---------
Cash for financing activities - continued
operation (218,592) (45,066)
Cash for financing activities - discontinued
operation (196,765) -
--------- ---------
Net cash (used in)
financing activities (415,357) (45,066)
--------- ---------
(Decrease) increase in cash (1,372,964) 1,769,192
Cash and cash equivalents, beginning of year 2,138,795 369,603
--------- ---------
Cash and cash equivalents, end of year $ 765,831 2,138,795
--------- ---------
--------- ---------
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
1995
The Company purchased the assets of another company for common stock valued
at $255,503.
The Company financed the purchase of equipment with debt in the amount of
$28,278.
The Company purchased and retired 102,429 shares of common stock through
the issuance of 10.6 acres of land under the terms of a prior year agreement.
The Company disposed of debt in the amount of $3,933, which was assumed in
the sale of land for which the Company received a note receivable.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for
1995 1994
Interest $62,427 36,992
------- ------
------- ------
Income taxes - -
------- ------
------- ------
See accompanying notes to consolidated financial statements.
F-23
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Utah Resources International, Inc., and consolidated entities (the
Company) is engaged primarily in the development of real estate including
the sale of developed and undeveloped real estate. The Company's assets
are located in the Rocky Mountain West.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements
of Utah Resources, Inc., Tonaquint, Inc. and a number of limited
partnerships of which the Company has ownership in excess of 50 percent and
has management responsibility. All material intercompany transactions and
balances have been eliminated in consolidation of the Companies and
partnerships.
Discontinued operations include Midwest Railroad Construction and
Maintenance Corporation (Midwest) from June 13, 1995 ( date of acquisition)
through December 31, 1995. The Company disposed of Midwest effective March
31, 1996, see note 7. Discontinued operations also included those of a
Service Station which was closed in 1993. The Service Station has
continued to incur costs to resolve certain environmental issues since the
closing of the station.
METHOD OF RECOGNITION OF INCOME
Real Estate
Profits on sale of developed lots, developed land and raw land are
recognized in accordance with standards established for the real estate
industry which generally provide for deferral of all or part of the profit
on a sale if the buyer does not meet certain down payment requirements or
certain other tests of the buyer's financial commitment to the purchase, or
the seller is required to perform significant obligations subsequent to the
sale.
Cost of sales include a pro rata portion of acquisition and
development costs (including estimated costs to complete) along with sales
commissions, closing costs and other costs specifically related to the
sale.
F-24
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
METHOD OF RECOGNITION OF INCOME - CONTINUED
Other
Royalty income is recognized when received. The Company has
overriding mineral and oil and gas royalty interests and thus exercises no
control over the activities of the royalty payers and is notified of the
amounts or royalties due when the cash is received.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is computed
using the straight-line method based upon the following useful lives:
Building 15-30 years
Furniture and equipment 3-10 years
REAL ESTATE HELD FOR RESALE
Real estate held for resale includes developed lots, land under
development and raw land. Real estate held for resale is carried at the
lower of cost or market. The cost of development of building lots includes
the land and the related costs of development (planning, survey,
engineering and other) which are capitalized. The cost of interest and
property taxes are expensed.
INTANGIBLE ASSETS
The cost of identifiable intangible assets, consisting of royalties,
is being amortized on a straight-line basis over the expected productive
life of the asset, 15 years.
INCOME TAXES
Deferred income taxes are provided in amounts sufficient to give
effect to temporary differences between financial statement and tax
reporting purposes. The differences are primarily a result of differing
methods of accounting for land sales and depreciation of property and
equipment.
EARNINGS PER SHARE
The weighted average of outstanding common shares is approximately
1,619,000 shares and 1,284,000 shares for the years ended December 31, 1995
and 1994, respectively. Common stock equivalents have not been included as
the exercise price is in excess of the market price and the amounts are
antidilutive in 1995.
F-25
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
STATEMENT OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of trade receivables. In
the normal course of business, the Company provides credit terms to its
customers. Accordingly, the Company performs ongoing credit evaluations of
its customers and maintains allowances for possible losses which, when
realized, have been within the range of management's expectations.
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such account and believes it is not exposed to
any significant credit risk on cash and cash equivalents.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
principally related to estimated costs to complete uncompleted contracts
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 amount of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(2) ACCOUNTS RECEIVABLE FROM RELATED PARTIES
Accounts receivable include $132,843 which is due from an entity which
has some shareholders in common with the Company and $131,573 which is due
from various related partnerships. Also included is $87,263 due from one
of the shareholders of the Company.
F-26
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(3) NOTES RECEIVABLE
The Company has the following notes receivable at December 31, 1995:
Note receivable from an individual
due in March, 1996, with interest at
9%, secured by real estate $138,989
Note receivable from an individual
due in September 1995, with interest at
8% 40,000
---------
$178,989
---------
---------
Future maturities of notes receivable are as follows:
YEAR AMOUNT
---- ------
1996 $ 40,000
1997 138,989
---------
Total $178,989
---------
---------
(4) REAL ESTATE HELD FOR RESALE
Real estate held for resale consists of the following real estate
located in the St. George, Utah area at December 31, 1995:
DEVELOPED
The Company has three developed residential lots with an aggregate
cost of $67,106.
RAW LAND AND PARTIALLY DEVELOPED LAND
The Company has approximately 390 acres of real estate of which
approximately 350 acres is currently planned for single family dwelling
lots, commercial development and multiple housing. The aggregate cost of
the raw land and partially developed land is $797,958.
F-27
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(5) ACCRUED EXPENSES
Accrued expenses at December 31, 1995 consist of the following:
Deficit in investment in partnership $168,857
Accrued interest 34,775
Other accrued expenses 108,842
-------
Total $312,474
-------
-------
(6) NOTES PAYABLE
The Company has the following notes payable at December 31, 1995:
Note payable to a trust requiring quarterly
interest payments at 10%, principal due
in 1996 secured by certain real estate held
for resale $400,000
Notes payable to a governmental entity
requiring annual payments of approximately
$15,000 plus interest at 5.94%, secured
by real estate 106,810
Note payable to entity requiring annual
payments of $10,386 including interest
at 9%, secured by real estate 67,282
Note payable to a financial institution
requiring monthly payments of $491
including interest at 10.5%, secured
by a vehicle 23,600
Other 1,935
-------
Total $599,627
-------
-------
F-28
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(6) NOTES PAYABLE - CONTINUED
Future maturities of notes payable are as follows:
YEAR AMOUNT
---- ------
1996 $425,849
1997 24,949
1998 25,490
1999 25,992
2000 27,057
Thereafter 70,290
-------
Total $599,627
-------
None of the Company's debt instruments are held for trading purposes.
The Company estimates that the fair value of all financial instruments at
December 31, 1995, does not differ materially from the aggregate carrying
values of its financial instruments recorded in the accompanying balance
sheet.
(7) INVESTMENT IN MIDWEST
Effective June 13, 1995, the Company acquired 100% ownership of
Midwest through the issuance of 590,000 shares of the Company's common
stock for all of the outstanding stock of Midwest. The acquisition was
accounted for as a purchase. The fair market value of the Midwest assets
and liabilities approximated the historical cost of the assets and
liabilities and no goodwill was therefore recorded.
Effective March 31, 1996, the Company sold Midwest to its former
owner. The Company received 590,000 shares of common stock and agreed to
forgive $317,000 due from Midwest as a result of net cash advances made to
Midwest by the Company. The 1995 financial statements reflect a write down
of approximately $780,000 for its investment in Midwest to its estimated
realizable value.
F-29
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(8) DISCONTINUED OPERATIONS
The Company has included in net assets of discontinued operations
those of Midwest and the Service Station.
Condensed financial information for Midwest is as follows at December
31, 1995 and for the period June 13, 1995 (date of acquisition) through
December 31, 1995:
BALANCE SHEET
DECEMBER 31, 1995
ELIMINATIONS
AND
ADJUSTMENT
SERVICE TO
MIDWEST STATION REALIZABILITY TOTAL
------- ------- ------------- -----
Assets $3,836,017 - (731,994) 3,104,023
Liabilities 3,439,107 159,077 (542,818) 3,055,366
Equity 396,910 (159,077) (237,176) 657
---------- ------- ------- ---------
Total liabilities
and equity $3,836,017 - (779,994) 3,056,023
---------- ------- ------- ---------
---------- ------- ------- ---------
Included in the adjustment is $731,994 loss recognized on disposition
of discontinued operations.
STATEMENT OF OPERATIONS
PERIOD ENDING DECEMBER 31, 1995
MIDWEST
-------
JUNE 13, 1995 SERVICE
(DATE OF STATION
ACQUISITION)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1995 TOTAL
---- ---- -----
Revenues $5,598,542 - 5,598,542
---------- ------- ---------
Costs and expenses 5,457,135 - 5,457,135
---------- ------- ---------
Net income before income tax 141,407 - 141,107
---------- ------- ---------
Income tax expense 48,000 - 48,000
---------- ------- ---------
Net income $ 93,407 - 93,407
---------- ------- ---------
---------- ------- ---------
F-30
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(8) DISCONTINUED OPERATIONS - CONTINUED
At December 31, 1995, the net loss from disposal of discontinued operations
was $731,994 from Midwest and $78,006 from Service Station less $275,000 of
income tax benefit. For the year ended December 31, 1994, the net loss was
$47,416 from disposal of the Service Station less income tax benefit of
approximately $16,000.
(9) INCOME TAXES
The (provision) benefit for income taxes is as follows:
CONTINUING OPERATIONS
1995 1994
---- ----
Current $106,000 (136,000)
Deferred 73,000 (300,000)
-------- -------
Total continuing operations $179,000 (436,000)
-------- -------
-------- -------
DISCONTINUED OPERATIONS
1995 1994
---- ----
Current $ - (16,000)
Deferred 227,000 -
Total continuing operations $227,000 (16,000)
-------- -------
-------- -------
The (provision) benefit for income taxes differs from the amount computed
at the federal statutory rate as follows:
CONTINUING OPERATIONS
1995 1994
---- ----
Income tax (expense) benefit at
federal statutory rates $158,000 (392,000)
State income taxes 23,000 (50,000)
Other (2,000) 6,000
-------- -------
Total current income taxes $179,000 (436,000)
-------- -------
-------- -------
F-31
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(9) INCOME TAXES - CONTINUED
DISCONTINUED OPERATIONS
1995 1994
---- ----
Income tax (expense) benefit at federal
statutory rates $227,000 (7,000)
State income taxes 20,000 (2,000)
Other (20,000) (7,000)
-------- -------
Total $227,000 (16,000)
-------- -------
-------- -------
Deferred income taxes have been established to reflect timing
differences between financial reporting and income tax purposes. The primary
differences are as follows:
1995 1994
---- ----
Condemnation sales $ 300,000 300,000
Discontinued operations (227,000) -
Net operating loss carryforward (73,000) -
-------- -------
$ - 300,000
-------- -------
-------- -------
(10) LITIGATION
The Company is involved in certain litigation where the Company has
prevailed. The opposing side has filed an appeal of the decision. It is
not known the final outcome but the Company is vigorously defending its
position. Management believes that the final outcome will not have a
material effect on the financial position of the Company.
The Company in June 1996, entered into a settlement agreement with
shareholders and former officers of the Company which had filed litigation
against certain of the Company's Board of Directors and officers and who
the Company had filed litigation against. The terms of the settlement
provide that the Company pay all legal costs related to the legal action
for all parties with the exception of the majority shareholder which will
receive reimbursement up to $81,000. The Company will sell 1,275,912
shares of its common stock for $3.35 per share to an other entity with the
Company providing limited recourse financing for a portion of the purchase
price and the purchase 40,552 shares at $3.35 per share from certain
existing shareholders. Certain existing employment agreements are
terminated and the Company will enter into new employment agreements with a
former shareholder and the new majority shareholder.
F-32
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(11) CONTINGENCIES
The Company, through predecessor entities, has understandings where
certain individuals may be entitled to an interest in the ownership or
profits on unidentified projects. This contingency is currently in
litigation on appeal.
In addition, the Company has accrued amounts totaling $37,771 for
potential amounts owing from transactions which took place a number of
years ago. It cannot be determined if and when such amounts will be paid.
That balance is included in accrued expenses.
The Company is aware of certain unasserted claims which could result
in claims in excess of amounts accrued in the financial statements.
Management believes that any such claim, if asserted, will not result in
any adverse affect on the financial position of the Company.
The Company is in the process of remediation of the service station
property. It is not known if any additional costs over what the Company
has accrued will be needed to complete the remediation.
(12) COMMITMENTS
The Company leases its office facility under a year lease requiring
monthly payments of $950 which expires in August 1996. Lease expense was
$11,400 in 1995.
The Company leases certain equipment under operating lease agreements.
Those agreements require monthly payments of $531 which expire between 1996
and 1998. Annual lease expense under these agreements is $6,089 and $2,375
for the years ended December 31, 1995 and 1994. Minimum payments under the
noncancellable operating leases are as follows:
YEAR AMOUNT
---- --------
1996 $ 6,761
1997 6,366
1998 2,653
--------
Total $ 15,780
--------
--------
F-33
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(13) SIGNIFICANT CUSTOMERS
The Company had land sales to the following significant customers in 1995
and 1994:
1995 1994
Customer A $ - 979,000
Customer B $152,000 254,000
(14) STOCK OPTION PLAN
In 1994, the Company established a stock option plan wherein the five
directors and the Company's president were each granted options to acquire
25,000 shares of the Company's stock at $2.50 per share. The options vest
as follows: 9,000 shares at the option date and 8,000 shares in 1995 and
8,000 shares in 1996.
(15) SUBSEQUENT EVENTS
The Company had the following material subsequent events:
- Effective March 31, 1996, the Company disposed of Midwest Railroad
which was a wholly owned subsidiary. See note 7.
- The Company settled certain litigation relating to shareholders and
members of the Board of Directors. See note 11.
- The Company entered into an agreement where it agreed to purchase
40,552 shares of the Company stock for a cash price of $3.35 per
share.
- The Company entered into an agreement where it sold 1,275,912 shares
of the Company at $3.35 per share or $4,274,305. The stock sell price
included $641,146 cash plus a note receivable of $3,633,159. The note
requires interest based upon the federal rate published by the
Internal Revenue Service. Interest on the note for the first year is
paid at closing with the remaining interest to be paid annually
commencing on the second anniversary date of the note. All principal
and unpaid interest is due August 1, 2001. The note is secured by the
stock sold plus a guarantee from the purchaser of 25% of the original
outstanding note.
F-34
<PAGE>
SPLITOFF AGREEMENT
This Splitoff Agreement ("Agreement") is dated as of April 25, 1996, among
Utah Resources International, Inc., a Utah corporation ("URI"), MidWest Railroad
Construction and Maintenance Corporation, a Wyoming corporation ("MWR"),
Robert D. Wolff ("Bob") and Judith Wolff (Bob and Judith Wolff are collectively
referred to as the "Wolffs").
RECITALS
A. URI, MWR and the Wolffs are parties to a Plan of Share Exchange and
Share Exchange Agreement, dated February 16, 1995 (the "Share Exchange
Agreement"), pursuant to which the Wolffs exchanged all of their stock in MWR
for 590,000 shares of restricted stock of URI, making MWR a wholly-owned
subsidiary of URI. The share exchange was accomplished as a tax free
reorganization pursuant to Section 368(a)(1)(B) of the Internal Revenue Code of
1986, as amended (the "Code").
B. The Share Exchange Agreement was consummated in June, 1995, after
issuance of a fairness opinion by Brown, Wright & Associates, stating the Share
Exchange Agreement was fair, from a financial point of view, to URI and its
shareholders. Articles of Share Exchange were filed with the State of Utah in
June of 1995.
C. In August, 1995, a shareholders derivative action captioned as ANNE
MORGAN ET AL. V. R. DEE ERICKSON, ET AL. was filed as Case No. 2:95CV-0661C in
the United States District Court for the District of Utah (the "Lawsuit")
seeking, primarily, a rescission of the Share Exchange Agreement.
D. The Lawsuit has required much time and attention from the officers and
directors of both URI and MWR, and neither company has been able to effectively
conduct business since the commencement of the Lawsuit. In addition, the
uncertainty created by the Lawsuit has rendered it impossible to make major
business decisions which are critical for the continued growth of URI and MWR.
Extensive negotiations have been conducted in an effort to settle the Lawsuit,
which negotiations have proved unsuccessful. Therefore, the disruption of URI's
and MWR's business would, absent this Agreement, continue indefinitely.
E. URI, MWR, the Wolffs and each of them, therefore, desire to provide
for the splitoff by URI of its stock in MWR, in compliance with Section 355 of
the Code, on the terms and conditions set forth in this Agreement.
F. The Wolffs allege that they and MWR have been extensively damaged by
URI and URI denies such allegations.
In consideration of the Recitals and the mutual promises made herein, the
parties agree as follows:
1. INCORPORATION OF RECITALS. The parties mutually acknowledge that the
Recitals are true to the best of their knowledge and agree that the Recitals
correctly describe generally and in summary fashion the factual underpinning for
this Agreement.
2. SPLITOFF OF MWR. Simultaneously with execution of this Agreement, URI
shall transfer all of the outstanding shares of MWR stock to the Wolffs in
exchange for the 590,000 shares of URI stock currently owned by the Wolffs.
Such transfer shall be made tax free in accordance with Section 355 of the Code.
Each party agrees to make such endorsements and execute such documentation as
are reasonably necessary to complete the splitoff contemplated hereby.
<PAGE>
3. RECONCILIATION. The Share Exchange Agreement, the June 13, 1995
Employment Agreement between URI and Bob and the June 13, 1995 Operating
Agreement between URI, MWR and Bob are each hereby canceled entirely and of no
further effect. Bob hereby relinquishes and waives any and all rights he may
have to acquire shares of URI, be an officer or director of URI or any other
rights to compensation, benefits, termination payments or other payments
provided for in the Share Exchange Agreement, the Operating Agreement and the
June 13, 1995 Employment Agreement. Bob represents that the gross intercompany
transfer from URI to MWR is $528,000.00 as reflected on Exhibit "A", with MWR
receiving a net intercompany transfer through March 31, 1996 of $316,974.17 as
also reflected on Exhibit "A". The net intercompany transfers of approximately
$316,974.17 in favor of MWR as reflected on Exhibit "A" shall be retained by
MWR. Within thirty (30) days from the date hereof, the accountants for URI
shall review all intercompany transfers and charges between URI and MWR for the
period July 1, 1995 through March 31, 1996 and verify the exact amount of such
transfers and charges. Such verification shall include the review of items on
Exhibit "A" and all other intercompany transfers and charges. In the event such
intercompany transfers and charges in favor of MWR exceed $316,974.17 for the
period July 1, 1995 through March 31, 1996, MWR shall immediately pay such
difference to URI. In the event such intercompany transfers and charges in
favor of MWR are less than $316,974.17 for the period July 1, 1995 through
March 31, 1996, URI shall pay such difference to MWR. URI shall reimburse MWR
and the Wolffs for all attorneys' fees incurred through March 31, 1996 by the
Wolffs in connection with the negotiation and documentation of this Agreement.
Except as provided in the previous sentence, each party shall bear its own costs
incurred in connection with the negotiation and implementation of this
Agreement. MWR and URI shall each be entitled to retain their respective
assets, free of any further claim. URI may continue to use MWR's offices and
employees and the services of Bob in connection with the separation of the
businesses of URI and MWR, without compensation for a period of 60 days after
the date hereof. URI shall compensate MWR for all out-of-pocket expenses
incurred by MWR on URI's behalf during such 60 day period.
4. MUTUAL RELEASES. Except for those matters specifically set forth in
this Agreement which create continuing future obligations of the Parties,
including but not limited to URI's indemnity obligations pursuant to Section 5
below and Wolffs' and MWR's obligations pursuant to Section 6 below, the Parties
hereto, and each of them, for themselves, their respective heirs, assigns and
successors in interest, predecessors, subsidiaries, controlled and affiliated
corporations and entities, past and present, as well as the respective
directors, officers, partners, agents, attorneys, servants, and employees, past
and present, and each of them, do hereby acknowledge full and complete
satisfaction of, and do hereby release and discharge the others of them,
including their respective heirs, assigns and successors in interest,
predecessors, subsidiaries, controlled and affiliated corporations and entities,
past and present, as well as the respective directors, officers, partners,
agents, attorneys, servants, and employees, past and present, and each of them,
from any and all claims, demands, and causes or sources of action of whatever
kind or nature, known or unknown, suspected or unsuspected, including all rights
of and claims for contribution and indemnification, and judgments, which any of
them now owns or holds or has at any time heretofore owned or held through the
date hereof against any of the other of them, including, but not limited to,
those which (i) are or could have been alleged or set forth in any of the
pleadings, any interlocutory or final orders, rulings, file, or papers in the
Lawsuit; or (ii) arise out of, or are related to, or are in any way connected
with any transactions, occurrences, acts or omissions set forth, or facts
alleged in the papers on file in the Lawsuit; or (iii) arise out of, are related
to, or are in any way connected with the Share Exchange Agreement or the
Promissory Note, executed in connection therewith. Specifically excluded from
this mutual release are rights, claims, liabilities, causes of action, damages
or expenses arising from
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<PAGE>
the parties' warranties, representations and covenants in, and their performance
of their obligations under this Agreement, including but not limited to, the
parties' payment obligations, if any, set forth in Section 3 above, URI's
indemnity obligations set forth in Section 5 below, Wolffs' and MWR's indemnity
obligations set forth in Section 6 below and MWR's payment obligations set forth
in Section 9 below.
The releases made pursuant to this Section 4 are mutual and are given in
consideration for, among other things, the releases made in return by each party
being released. Each party expressly reserves any and all claims, demands and
cause of action against any and all individuals and entities not expressly
released pursuant to this Section 4, including, but not limited to, John H.
Morgan, Jr., Daisy R. Morgan, Mark G. Jones, Mark Technologies Corporation, its
officers, directors, employees, agents, successors and assigns, Jenny Morgan,
Anne Morgan, Victoria Morgan, Morgan Gas and Oil Inc., its officers, directors,
employees, agents, successors and assigns, John H. Morgan, Sr. Estate and its
beneficiaries, employees and agents, Erma Todt, Helen Leech, Dawn Delvie,
Patricia Morgan, Morgan Limited Partnership, its partners, employees, agents,
successors and assigns, Morgan Family Charitable Trust, its beneficiaries,
employees, agents, successors and assigns, and Alta Mesa Wind Partners, its
partners, employees, agents, successors and assigns and the J&M Trust, its
beneficiaries, employees, agents, successors and assigns.
5. INDEMNIFICATION OF MWR AND THE WOLFFS. URI agrees to indemnify and
hold harmless MWR and the Wolffs and their respective agents, employees,
attorneys, officers, directors, successors and assigns, from any and all claims,
causes of action, liabilities, damages, costs, expenses and attorneys' fees
arising from or relating in any way to URI or the Share Exchange Agreement,
including but not limited to (a) claims which have been or which are asserted by
shareholders of URI; (b) claims which are or could have been asserted in the
Lawsuit; (c) claims which arise out of or are connected in any way with the
transactions, occurrences, acts or omissions set forth in the papers on file in
the Lawsuit; and (d) claims which arise from or are connected in any way with
Bob's employment as CEO of URI, including but not limited to claims relating to
reports which have been or which should have been filed with the Securities and
Exchange Commission; provided, however, that the indemnification hereof in favor
of Bob shall not apply to any acts of fraud, gross negligence or willful
misconduct by Bob. URI may select independent counsel for MWR and the Wolffs,
which counsel must be acceptable to MWR and the Wolffs in their reasonable
discretion, with respect to the defense of any claim covered by this
indemnification and URI agrees to indemnify MWR and the Wolffs with respect to
the legal fees and costs associated with such defense. Notwithstanding the
above, this indemnification shall not apply to any expenses or damages incurred
by MWR prior to the date hereof or any tax liability accruing to MWR and the
Wolffs from the transactions contemplated by this Agreement. Upon a demand for
payment, URI shall pay any amount owed pursuant to this Section 5 in thirty-six
(36) equal monthly installments.
6. INDEMNIFICATION OF URI. The Wolffs and MWR agree to indemnify and
hold URI and its respective agents, employees, attorneys, officers, directors,
successors and assigns harmless, from any and all claims, causes of action,
liabilities and damages arising from or relating in any way to this Agreement
and the transactions contemplated hereunder. Notwithstanding the above, the
indemnification obligations of the Wolffs and MWR hereunder shall be limited to
$312,000.00. Upon a demand for payment, MWR and the Wolffs may elect to pay any
such amount in thirty-six (36) equal monthly installments.
7. RESIGNATION. Bob hereby resigns from all positions with URI effective
immediately and Bob shall immediately cease to be a signatory on any URI bank
accounts.
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<PAGE>
8. WITHDRAWAL AND COOPERATION. Bob agrees to withdraw from all
activities, if any, with respect to Mark Jones and Mark Technologies
Corporation, a California corporation. In addition Bob agrees to fully
cooperate with URI with regard to any litigation involving URI, any member of
the Morgan family and any matter involving URI and Inter-Mountain Capital Corp.
If required to provide testimony in any such proceeding, Bob agrees to testify
truthfully in all such matters.
9. TAX PAYMENT. Within thirty (30) days from the date hereof, the
accountants for URI shall calculate the federal, state and local income taxes
attributable to MWR's business operations (excluding any impact of salary
payable or paid to Bob or any intercompany charges to URI for rent, overhead and
administrative expenses) for the period commencing June 1, 1995 and terminating
on December 31, 1995. Such taxes shall be determined on the basis as if URI and
MWR are not filing a consolidated tax return for the same period or part thereof
(whether or not a consolidated return is filed). The amount of such taxes shall
be considered an intercompany receivable between URI and MWR. MWR shall pay
such tax amount to URI in twelve (12) installments. Simultaneous with the
execution of this Agreement, MWR shall pay to URI the sum of $10,000.00 as an
initial tax payment. Such payment shall be credited against the amounts owed to
URI by MWR pursuant to this Section 9. The balance due to URI shall be paid in
eleven (11) additional equal monthly installments, each such installment due on
the first day of each month until all eleven installments have been paid in
full. The first of the eleven monthly installments shall be due and payable on
the first day of the month following the determination of the taxes owed by MWR
to URI pursuant to this Section 9.
10. REPRESENTATIONS AND WARRANTIES OF URI. URI represents and warrants to
MWR and the Wolffs (a) that it intends to and shall continue to carry on the
business that it has historically conducted; (b) that it owns and controls the
assets necessary to conduct its historical line of business; and (c) that it has
been an SEC reporting company since 1982.
11. REPRESENTATIONS AND WARRANTIES OF MWR AND THE WOLFFS. MWR and the
Wolffs hereby represent and warrant to URI (a) that MWR intends to and shall
continue to carry on the business that it has historically conducted; (b) that
MWR owns and controls the assets necessary to conduct its historical line of
business; and (c) the Wolffs hereby represent and warrant that the shares of MWR
stock which were the subject of the Share Exchange Agreement were not acquired
by them within the five year period preceding the date of the Share Exchange
Agreement.
12. OWNERSHIP COVENANT. The Wolffs covenant and agree that they will not
knowingly, individually, collectively, or through an affiliate, own shares or
other ownership interests in any entity in which Inter-Mountain Capital Corp. or
an affiliate thereof has a five percent (5%) ownership interest.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties, their heirs, devisees, personal representatives, legal representatives,
successors and assigns.
14. GOVERNING LAW. All questions with respect to the construction of this
Agreement and the rights and liabilities of the parties hereto shall be governed
by the laws of the State of Utah.
15. ATTORNEYS' FEES. If any action is brought because of any breach of or
to enforce or interpret any of the provisions of this Agreement, the prevailing
party shall be entitled to recover from the other party reasonable attorney's
fees and court costs incurred in connection
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<PAGE>
therewith, the amount of which shall be fixed by the Court and made a part of
any judgment rendered thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above appearing.
UTAH RESOURCES INTERNATIONAL, INC.,
a Utah corporation
By: /s/ R. Dee Erickson
---------------------------------------
Its: R. Dee Erickson, Chairman of the Board
---------------------------------------
MIDWEST RAILROAD CONSTRUCTION AND
MAINTENANCE CORPORATION,
a Wyoming corporation
By: /s/ Robert D. Wolff
---------------------------------------
Its: Robert D. Wolff, President
---------------------------------------
/s/ Robert D. Wolff
-------------------------------------------
Robert D. Wolff
/s/ Judith Wolff
-------------------------------------------
Judith Wolff
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<PAGE>
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (the "Agreement") is entered into the 26 day
of June, 1996 among the following parties (collectively referred to herein as
the "Parties"):
1. Utah Resources International, Inc., a Utah corporation ("URI").
2. John H. Morgan, Jr. ("JH Morgan").
3. Daisy R. Morgan ("DR Morgan").
4. Inter-Mountain Capital Corp. ("Inter-Mountain").
5. John Fife ("Fife").
R E C I T A L S :
A. The Parties are involved in various disputes and controversies
involving the operation, management, ownership of and business activities of
URI, including, but not limited to, matters which are the subject of the State
Action and the Federal Action (collectively, the "Pending Litigation").
B. A shareholders derivative action captioned as ERNEST MUTH, ET AL. V.
JOHN H. MORGAN, JR. ET AL., was filed as Civil Number C-87-1632 in the Third
Judicial District Court of Salt Lake County, Utah (the "State Action").
C. A settlement agreement was entered into in the State Action on
April 6, 1993 (the "1993 Settlement Agreement").
D. Subsequently, URI brought an action to enforce the 1993 Settlement
Agreement in the State Action which resulted in certain findings of fact and
conclusions of law and an order enforcing the Settlement Agreement entered by
Judge Michael R. Murphy on October 4, 1995 (the "Murphy Order"). The Murphy
Order has been appealed by JH Morgan and DR Morgan and cross-appealed by URI.
E. An Order to Show Cause has been filed in the First State Court Action
by URI against JH Morgan, DR Morgan, and others, which is pending.
F. A shareholders derivative action captioned as UTAH RESOURCES
INTERNATIONAL, INC. V. MARK G. JONES, ET AL., was filed as Case Number 2:96 CV
427C in the United States District Court for the District of Utah, Central
Division (the "Federal Action"), which is pending.
G. On April 5, 1996 URI entered into a letter of intent with IMC to sell
a controlling interest in URI to IMC upon terms and conditions set forth therein
(the "IMC Letter of Intent"). The IMC Letter of Intent is modified pursuant to
the terms and conditions of this Agreement. Fife is the sole shareholder of
IMC.
H. The Parties believe this Agreement is fair to and in the best interest
of URI and all shareholders of URI.
I. The Parties have agreed to compromise and settle all of their disputes
and claims known or unknown, now existing or hereafter accruing, including, but
not limited to, those which are the subject of the Pending Litigation, upon the
terms and conditions set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Parties agree as follows:
1. Unless otherwise provided, the following events shall occur at Closing
(as defined herein):
a. The Parties agree they will use best efforts following the
Closing to petition the Court in the State Action to terminate the
1993 Settlement Agreement. Pending such termination, the Parties
agree the 1993 Settlement Agreement and the Murphy Order shall
continue in accordance with their respective terms and provisions.
b. The closing of the transactions contemplated herein
("Closing") shall occur at the offices of Robinson & Sheen in Salt
Lake City, Utah, no later than 10 days from the date of this
Agreement.
c. Except for those matters specifically set forth in this
Agreement which create continuing future rights and obligations of the
Parties, the Parties hereto, and each of them, for themselves, their
respective predecessors, subsidiaries, controlled and affiliated
corporations and entities, past and present, as well as the respective
directors, officers, stockholders, partners, agents, attorneys,
servants, and employees, past and present, and affiliates or nominees
of parties (as defined under the Securities Act of 1933), heirs,
assigns, predecessors and successors in interest, and each of them,
effective upon execution of this Agreement, hereby acknowledge full
and complete satisfaction of, and do hereby release and discharge and
covenant not to sue the other of them, including their respective
heirs, assigns and successors in interest, parents, predecessors,
subsidiaries, controlled and affiliated corporations and entities,
past and present, as well as the respective directors, officers,
stockholders, partners, agents, attorneys, servants, and employees,
past and present, and affiliates or nominees of parties (as defined
under the Securities Act of 1933), and each of them, from any and all
claims, demands, and causes or sources of action of whatever kind or
nature, known or unknown, suspected or unsuspected, including all
rights of and claims for contribution and indemnification, and
judgments, which any of them now owns or holds or has at any time
heretofore owned or held through the date of the execution of this
Agreement against any of the other of them, including, but not limited
to, those which: (i) are or could have been alleged or set forth in
any of the pleadings, any interlocutory or final orders, rulings,
file, or papers in the Pending Litigation; or (ii) arising out of, or
are related to, or are in any way connected directly or indirectly
with any transactions, occurrences, acts or omissions set forth, or
facts alleged, in the papers on file in the Pending Litigation. This
provision shall receive the broadest possible interpretation as a
general and complete release.
d. The Parties agree that JH Morgan shall recover from URI the
total amount of the monetary judgment collected from him by URI
pursuant to the Murphy Order and that all amounts covered by the Order
Re: Stay of Execution and Acceptance of Undertaking under the Murphy
Order shall be released.
e. The Parties agree that JH Morgan shall be appointed "Founder
and Chairman Emeritus" of URI, and that an acceptable job description
shall be
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<PAGE>
established for JH Morgan, and the Parties shall take all actions necessary
to maintain JH Morgan in his position for the rest of his life.
f. The Parties agree that JH Morgan, beginning as soon as
practicable but no later than one year after the date hereof, shall be
compensated for services he shall thereafter perform for URI, in
amounts agreed upon between JH Morgan and the Company and Fife,
established through good faith negotiations and in consultation with
Dr. Arben O. Clark, or someone of similar expertise, taking into
account Mr. Morgan's duties, the Company's then financial condition
and future prospects, and all other factors deemed appropriate.
g. JH Morgan covenants and agrees to use his best efforts to
resolve all remaining disputes of whatever kind or nature, known or
unknown, suspected or unsuspected, including claims on accounts,
between Morgan Gas Oil Co. and URI.
2. REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
a. The corporate Parties, URI, and IMC represent and warrant
that they are validly existing and in good standing in the state of
their organization and have the full legal right, power and authority
to execute and deliver this Agreement and to carry out all
transactions contemplated herein. Each individual signing this
Agreement on behalf of a corporation, partnership, trust, or other
entity, represents and warrants that he or she has the authority to do
so.
b. All Parties represent and warrant that they have negotiated
at arms-length with a view to arriving at a fair and equitable
settlement of their differences.
c. All Parties represent and warrant that, to the best of their
belief, the terms of this Agreement are fair to and in the best
interests of URI and its shareholders.
d. All Parties covenant that no actions of any kind shall be
undertaken by the Parties to affirmatively prosecute the Pending
Litigation, nor will the Parties instigate any new legal proceedings
against any of the other Parties.
3. This Agreement has been freely and voluntarily executed by all Parties
hereto after having been apprised of all relevant information and having been
represented by counsel. No party hereto has relied upon any inducements,
promises or representations made by any other party or other party's attorney,
other than those specifically set out in this Agreement, which constitutes the
entire, integrated understanding among the Parties.
4. Each party agrees to perform such other further acts and to execute
and deliver such further documents as may be necessary to effectuate the
purposes of this Agreement.
5. The Parties hereto, and each of them, acknowledge that this Agreement
is the compromise and settlement of the claims and demands which are denied and
contested and nothing contained herein shall be construed as an admission of
their validity or invalidity against the interests of the Parties hereto, or any
of them, except that this disclaimer does not affect the validity or
truthfulness of the affirmative statements, admissions, affidavits, filings,
notices, and writings made and agreed to be made under the terms of this
Agreement.
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<PAGE>
6. Except as to continuing covenants and obligations set forth in the
1993 Settlement Agreement and the Murphy Order, all claims, rights, causes of
action, or defenses of the Parties raised in the Pending Litigation are herewith
merged into and fully resolved as a part of this Agreement.
7. All Parties to this Agreement have read and fully comprehend and
understand the terms and provisions of this Agreement and of the ancillary
exhibits and documents incorporated herein. All Parties have been advised by
legal counsel who presently represent them in connection with this settlement as
to the content, meaning and execution of this Agreement. All Parties to this
Agreement have voluntarily and without coercion signed the same and understand
and agree to each and every paragraph hereof.
8. Each of the Parties hereto individually covenants and agrees that he
or she will not directly or indirectly attempt in any way to defeat or interfere
with any of the goals or intentions of this Agreement at any time after the date
hereof nor shall any Party hereto solicit or seek to solicit any person to
challenge any provision hereof or to file suit comparable to any suit dismissed
hereunder. This covenant of good faith shall be central to this Agreement and
any Party damaged by a breach thereof shall be entitled to all remedies
available at law or in equity as well as a recovery of reasonable attorney's
fees and costs.
9. GENERAL PROVISIONS.
a. BINDING AGREEMENT. This Agreement shall be binding upon and
shall inure to the benefit of the heirs, legal representatives,
successors and assigns, as applicable, of the respective parties
hereto, and any entities resulting from the reorganization,
consolidation or merger of any party hereto.
b. HEADINGS. The headings used in this Agreement are inserted
for reference purposes only and shall not be deemed to limit or affect
in any way the meaning or interpretation of any of the terms or
provisions of this Agreement.
c. COUNTERPARTS. This Agreement may be signed upon any number
of counterparts with the same effect as if the signature to any
counterpart were upon the same instrument.
d. ENTIRE AGREEMENT. This Agreement, together with the
exhibits and schedules hereto (which are incorporated herein by this
reference), constitutes the entire agreement and understanding between
and among the parties with respect to the subject matter hereof and
shall supersede any prior agreements and understandings among the
parties with respect to such subject matter.
e. SEVERABILITY. The provisions of this Agreement are
severable, and should any provision hereof be found to be void,
voidable or unenforceable, such void, voidable or unenforceable
provision shall not affect any other portion or provision of this
Agreement.
f. WAIVER. Any waiver by any party hereto of any breach of any
kind or character whatsoever by any other party, whether such waiver
be direct or implied, shall not be construed as a continuing waiver or
consent to any subsequent breach of this Agreement on the part of the
other party.
g. MODIFICATION. This Agreement may not be modified except by
an instrument in writing signed by the parties hereto.
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<PAGE>
h. GOVERNING LAW. This Agreement shall be interpreted,
construed and enforced according to the laws of the State of Utah.
i. ATTORNEY'S FEES. In the event any action or proceeding is
brought by any Party against any other Party under this Agreement, the
prevailing party shall be entitled to recover attorney's fees and
costs in such amount as the court may adjudge reasonable.
j. NOTICE. All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing
and shall be considered as properly given when personally served or
deposited in the United States mail, postage prepaid, registered or
certified, with return receipt requested, or by prepaid telegram,
telecopy or deposited with a recognized courier for overnight
delivery. Notice given in any such manner shall be effective when
received or three (3) days after mailing or sending. The addresses of
the parties shall be as set forth on Schedule 9.j. attached hereto.
Each Party shall have the right to change its address for purposes of this
section to any other location within the continental United States by giving
thirty (30) days' notice to the other Parties in the manner set forth in this
section.
10. In the event that Closing does not occur for any reason, the term of
the 1993 Settlement Agreement shall be extended by the number of days elapsing
between the date hereof and the date of the event causing the failure to close.
DATED the date and year first set forth above.
URI:
Utah Resources
International, Inc.,
a Utah corporation
By: /s/
------------------------------------
Its:
------------------------------------
JH MORGAN:
/s/ John H. Morgan, Jr.
---------------------------------------
John H. Morgan, Jr.
DR MORGAN:
/s/ Daisy R. Morgan
---------------------------------------
Daisy R. Morgan
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<PAGE>
INTER-MOUNTAIN CAPITAL CORP., a
Delaware corporation
By: /s/ John Fife
-----------------------------------
Its: John Fife, President
-----------------------------------
FIFE:
/s/ John Fife
---------------------------------------
John Fife
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<PAGE>
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (the "Agreement") is entered into the 26 day
of June, 1996 among the following parties (collectively referred to herein as
the "Parties"):
1. Utah Resources International, Inc., a Utah corporation ("URI").
2. R. Dee Erickson ("Erickson").
3. E. Jay Sheen ("Sheen").
4. Lyle D. Hurd ("Hurd").
5. Mark G. Jones ("Jones").
6. Mark Technologies Corporation, a California corporation ("MTC").
7. Anne Morgan ("A Morgan").
8. Victoria Morgan ("V Morgan").
9. Inter-Mountain Capital Corp., a Delaware corporation ("IMC").
10. John Fife ("Fife").
11. Robinson & Sheen, L.L.C.
<PAGE>
R E C I T A L S
A. The Parties are involved in various disputes and controversies
involving the operation, management, ownership of and business activities of
URI, including, but not limited to, matters which are the subject of the First
State Action, the Second State Action and the First Federal Action as defined
below (collectively, the "Pending Litigation").
B. A shareholders derivative action captioned as ERNEST MUTH, ET AL. V.
JOHN H. MORGAN, JR. ET AL. was filed as Civil Number C-87-1632 in the Third
Judicial District Court of Salt Lake County, Utah (the "First State Action").
C. A settlement agreement was entered into in the First State Action on
April 6, 1993 (the "1993 Settlement Agreement").
D. Subsequently, URI brought an action to enforce the 1993 Settlement
Agreement in the First State Action which resulted in certain findings of fact
and conclusions of law and an order enforcing the Settlement Agreement entered
by Judge Michael R. Murphy on October 4, 1995 (the "Murphy Order"). The Murphy
Order has been appealed by JH Morgan and DR Morgan and cross-appealed by URI.
E. An Order to Show Cause has been filed in the First State Action by URI
against JH Morgan, DR Morgan, Mark Jones, MTC, Anne Morgan and Victoria Morgan,
which is pending.
F. A shareholders derivative action captioned as ANNE MORGAN ET. AL V. R.
DEE ERICKSON ET. AL was filed as Case Number 2:95CV-0661C in the United States
District Court for the District of Utah, Central Division (the "First Federal
Action").
G. Pursuant to a Plan of Share Exchange and Share Exchange Agreement
dated February 16, 1995 among URI, Midwest Railroad Construction and Maintenance
Corporation of Wyoming, a Wyoming corporation ("Midwest"), Robert D. Wolff ("RD
Wolff") and Judith J. Wolff ("JJ Wolff"), URI acquired all outstanding shares of
Midwest from RD Wolff and JJ Wolff in exchange for 590,000 restricted shares of
authorized but unissued shares of URI (the "Share Exchange Agreement").
H. In April of 1996 URI and Midwest, RD Wolff and JJ Wolff entered into a
Split-Off Agreement pursuant to which the Share Exchange Agreement was rescinded
in a transaction intended to qualify as a tax-free spin-off under the provisions
of Section 355 of the INTERNAL REVENUE CODE OF 1986 (the "Recision Agreement").
I. On April 5, 1996 URI entered into a letter of intent with IMC to sell
a controlling interest in URI to IMC upon terms and conditions set forth therein
(the "IMC Letter of Intent"), attached as Exhibit A and by this reference made a
part hereof. The IMC Letter of Intent was modified pursuant to a letter of
May 31, 1996, a copy of which is attached as Exhibit B and by this reference
made a part hereof. The IMC Letter of Intent is modified pursuant to the terms
and conditions of this Agreement.
J. Fife is the sole shareholder of IMC.
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<PAGE>
K. On May 17, 1996, a Complaint captioned as MARK TECHNOLOGY CORP., ET.
AL. V. UTAH RESOURCES INTERNATIONAL, INC., ET. AL. was filed as Civil No. 96 090
3332CV in the Third Judicial Court of Salt Lake County, Utah (the "Second State
Action").
L. The Second State Action included a request by MTC and others for a
temporary restraining order and injunction against the transactions contemplated
in the IMC Letter of Intent, which request shall be rescinded in accordance with
the terms and conditions of this Agreement.
M. The Parties believe this Agreement is fair to and in the best interest
of URI and all shareholders of URI.
N. The Parties have agreed to compromise and settle all of their disputes
and claims known or unknown, now existing or hereafter accruing, including, but
not limited to, those which are the subject of the Pending Litigation, upon the
terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants set forth herein
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Parties agree as follows:
1. Unless otherwise provided, the following events shall occur at Closing
(as defined herein):
a. The Parties agree they will use best efforts immediately
following the Closing to petition the Court in the First State Action for
the purpose of terminating the 1993 Settlement Agreement. Pending such
termination, the Parties agree the 1993 Settlement Agreement and the Murphy
Order shall continue in accordance with their respective terms and
provisions.
b. The Parties agree to dismiss the Pending Litigation with
prejudice, to dismiss the Order to Show Cause referenced in the Recitals
above, and agree to request the Court to remove the temporary restraining
order granted in the Second State Action on the date of execution of this
Agreement. The Parties agree, upon execution of this Agreement, to take
immediate steps to file for dismissal of the Pending Litigation. The
Parties will use their best efforts, in good faith, to obtain the dimissals
within 60 days of the date hereof. Notice shall be given to shareholders of
URI in such manner as each court directs.
c. The closing of the transactions contemplated herein ("Closing")
shall occur at the offices Robinson & Sheen in Salt Lake City, Utah, no
later than seven (7) calendar days after the date hereof.
d. Except for those matters specifically set forth in this Agreement
which create continuing future rights and obligations of the Parties, the
Parties hereto, and each of them, for themselves, their respective
predecessors, subsidiaries, controlled and controlling affiliated
corporations and entities, past and present, as well as the respective
directors, officers, stockholders, partners, agents, attorneys, servants,
and employees, past and present, and affiliates or nominees of parties (as
defined under the Securities Exchange Act of 1934), heirs, assigns,
predecessors and successors in interest, and each of them, effective upon
Closing of this Agreement, hereby acknowledge full and complete
satisfaction of, and do hereby release and discharge and covenant not to
sue the other of
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<PAGE>
them, including their respective heirs, assigns and successors in interest,
parents, predecessors, subsidiaries, controlled and controlling affiliated
corporations and entities, past and present, as well as the respective
directors, officers, stockholders, partners, agents, attorneys, servants,
and employees, past and present, and affiliates or nominees of parties (as
defined under the Securities Exchange Act of 1934), and each of them, from
any and all claims, demands, and causes or sources of action of whatever
kind or nature, known or unknown, suspected or unsuspected, including all
rights of and claims for contribution and indemnification, and judgments,
which any of them now owns or holds or has at any time heretofore owned or
held through the date of the Closing of this Agreement against any of the
other of them, including, but not limited to, those which: (i) are or could
have been alleged or set forth in any of the pleadings, any interlocutory
or final orders, rulings, file, or papers in the Pending Litigation; or
(ii) arise out of, or are related to, or are in any way connected directly
or indirectly with any transactions, occurrences, acts or omissions set
forth, or facts alleged, in the papers on file in the Pending Litigation.
This provision shall receive the broadest possible interpretation as a
general and complete release.
URI agrees to and shall fully indemnify hold harmless, and defend all
other Parties to this Agreement including their respective heirs, assigns
and successors in interest, parents, predecessors, subsidiaries, controlled
and affiliated corporations and entities, past and present, as well as the
respective directors, officers, stockholders, partners, agents, attorneys,
servants, and employees, past and present, and affiliates or nominees of
parties (as defined under the Securities Exchange Act of 1934), and each of
them, from and against any and all claims, demands, and causes or sources
of action of whatever kind or nature, known or unknown, suspected or
unsuspected, including all rights of and claims for contribution and
indemnification, and judgments, which Midwest, RD Wolff or JJ Wolff now
owns or holds or has at any time heretofore owned or held through the date
of the Closing of this Agreement against any of the Parties hereto other
than URI, including, but not limited to, those which (i) are or could have
been alleged or set forth in any of the pleadings, any interlocutory or
final orders, rulings, file, or papers in the First State Action; or (ii)
arise out of, or are related to, or are in any way connected directly or
indirectly with any transactions, occurrences, acts or omissions set forth,
or facts alleged, in the papers on file in the First State Action; (iii)
are or could have been alleged or set forth in any of the pleadings, any
interlocutory or final orders, rulings, file, or papers in the Second State
action; or (iv) arise out of or are related or are in any way connected
directly or indirectly with any transaction, occurrences, acts or omissions
set forth, or facts alleged, in the papers on file in the Second State
Action; or (v) arise out of, or are related to, or are in any way connected
with any transactions, occurrences, acts or omissions set forth, or facts
alleged, in the papers on file in said Federal Action; (vi) arise out of,
are related to, or are in any way connected directly or indirectly with the
Share Exchange Agreement or the Recision Agreement; (vii) arise out of, are
related to, or are in any way connected or indirectly with the 1993
Settlement Agreement; or (viii) arise out of, or are related to, or are in
any way connected directly or indirectly with the IMC Letter of Intent.
e. The Parties agree that Jones shall serve as a director of URI for
no less than one year from the date of Closing, and the Parties agree to
take all actions necessary to maintain Jones as a director for said one
year period. Sheen and Erickson shall resign as members of the Board of
Directors of URI as of the date of Closing. The successors to Sheen and
Erickson as members of the Board of Directors of URI shall be appointed in
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accordance with the terms of the 1993 Settlement Agreement. That Board
shall elect Fife President and the other appropriate officers of URI.
Erickson and Sheen agree that they will not seek election as, and will not
accept any future nominations to serve as, an officer or director of URI or
Morgan Gas & Oil Co.
f. The transactions contemplated in the IMC Letter of Intent shall
close in accordance with the provisions of that contemplated Stock Purchase
Agreement between URI and IMC (the "Stock Purchase Agreement"), the current
form of which is attached hereto and incorporated herein by this reference
as Exhibit "C," subject to negotiation and execution of the definitive
Stock Purchase Agreement and approval of its terms by the URI Board of
Directors; provided, however, that the definitive Stock Purchase Agreement
must contain the following material provisions:
i. IMC shall purchase and URI shall issue and sell shares at the Closing
so that IMC will own following the purchase 50.5% of the total outstanding
common stock of URI at $3.35 per share as of the Closing, and URI shall issue an
option for one hundred fifty thousand (150,000) or more additional shares of the
capital stock of the Company at an exercise price of $3.35 per share, payable in
the same fashion as the shares purchased by IMC to obtain 50.5% of the total
outstanding stock of URI, such that IMC shall have at all times the right to own
50.5% of the outstanding common stock of URI; provided, however, that the
options may only be exercised as corresponding outstanding options held by
others are exercised; and further provided that IMC shall be entitled to
maintain its 50.5% ownership of the outstanding common stock of URI in
connection with any stock split, recapitalization, combination, or
reorganization; and further provided that IMC shall be entitled to maintain its
50.5% ownership of the outstanding common stock of URI in connection with any
new issuance of stock or the issuance of instruments convertible into stock, at
the offering price of such new issuance, on payment terms
similar to those set forth herein;
ii. IMC shall pay 15% of the purchase price in cash at closing;
iii. the balance of the purchase price shall be evidenced by a note
("Note") which bears interest at a rate equal to the short-term applicable
federal rate published by the Internal Revenue Service, pursuant to
Section 1274(d) of the Internal Revenue Code of 1986, as amended, in effect at
the time of the Closing, adjusted on each anniversary date of this Agreement
until the purchase price has been paid in full.
iv. IMC shall pay the first year's interest in cash at Closing,
discounted at the interest rate noted in (iii) above, and interest shall be
paid annually in arrears on each anniversary of the Note thereafter,
beginning with the second year's anniversary date, with the principal due and
payable August 1, 2001;
v. the Note shall be secured by a pledge of IMC's URI stock;
vi. John Fife, the sole shareholder and president of IMC, will personally
guarantee twenty-five percent (25%) of the outstanding balance of the Note;
vii. after closing, any distributions and other payments otherwise payable
to IMC on its URI stock will be applied to reduce the outstanding principal
balance of the Note;
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viii. subsequent to closing, IMC shall cause URI to cause a 1,000 to l
share reverse split at $3.35 per share;
ix. fractional shareholders of record as of the date of the reverse split
shall be given the option to purchase additional fractional shares to round up
to the next whole share;
x. URI indemnifies IMC, its shareholders, officers, directors, agents,
employees and attorneys, including but not limited to those arising out of the
negotiation, execution and consummation of this Agreement, and including
advancement of their legal fees and costs, and from and against liability
arising out of the IMC Letter of Intent, the Stock Purchase Agreement and
transactions contemplated hereby;
xi. IMC shall take all actions necessary to cause URI to honor its
obligations to indemnify its officers and directors, agents, employees and
attorneys, including but not limited to those arising out of the negotiation,
execution and consummation of this Agreement, and including advancement of their
legal fees and costs, in connection with all present and future litigation.
xii. URI shall hire Fife under a written employment agreement which shall
provide reasonable compensation for services rendered, which compensation in any
year shall not exceed $200,000. The payment of compensation in excess of that
provided in the employment agreement shall be used to reduce any obligations due
or to become due under the Note.
xiii. The Parties covenant to provide a copy of the definitive Stock
Purchase Agreement to Jones and counsel of his choosing at least two days prior
to the Closing, to review for consistency with the provisions above.
f. The number of shares acquired by URI in the reverse split
contemplated in the Stock Purchase Agreement shall be available for
purchase by all remaining shareholders of URI, other than IMC, as of a
record date five days prior to the effectuation of the reverse split at a
price of $3.35 per share; provided, however, that URI shall not be required
to make the shares available for purchase if to do so would be in violation
of federal or state securities laws after URI has taken all actions
necessary to comply. Notice shall be given to the shareholders of the
availability of such purchase and to the extent the amount of shares
available is oversubscribed, each person subscribing for such shares shall
be allowed to purchase a pro-rata portion of the available shares. The
terms of the purchase of such shares by each shareholder shall be a cash
down payment of 25% with the balance payable in three years with simple
interest at the short term applicable federal rate for the month of this
Agreement which interest shall be payable annually in arrears. The
obligation shall be secured by a pledge of the stock acquired pursuant to a
stock pledge agreement to be drafted by counsel for URI. Any distributions
to shareholders of URI shall first be applied to the unpaid balance of any
amounts owing URI hereunder.
g. The 40,552 outstanding shares of URI stock owned by A Morgan and
V Morgan, which they represent and warrant are all the URI shares they own,
shall be purchased by URI for a cash price of $3.35 per share which
purchase shall occur at Closing of this Agreement.
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h. Legal fees and expenses and other costs associated with the
Pending Litigation and the documents and negotiations to complete and
implement the settlement contemplated by this Agreement shall be paid as
follows:
(i) All legal fees, costs and out-of-pocket expenses incurred or
paid by Jones, IMC, Fife, Erickson, Sheen, Hurd and MTC from
January 1, 1996 to Closing shall be reimbursed or paid by URI.
(ii) All legal fees, costs and out-of-pocket expenses incurred or
paid by V. Morgan and A Morgan, subject to a dollar limitation of
$81,000, shall be reimbursed or paid by URI.
(iii) All other expenses incurred, except as provided above,
shall be paid by the Party incurring such expense.
i. From the date of this Agreement URI shall be allowed to conduct
its affairs in the normal course of business, except as otherwise limited
or modified by the First State Action, the 1993 Settlement Agreement and
the Murphy Order.
j. All employment agreements contemplated, negotiated or executed
between URI and Sheen, Hurd, and Erickson shall not be effectuated and, if
effectuated, shall be terminated.
k. Except for completion of pending matters approved by the Board,
Robinson & Sheen, L.L.C. shall resign as legal counsel for URI effective at
Closing.
1. The Parties hereto shall exercise their best efforts to account
for, pay, compromise, unwind, and/or terminate all existing contractual
relationships between URI and Morgan Gas & Oil Co.
4. REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
a. The corporate Parties, URI, MTC, and IMC represent and warrant
that they are validly existing and in good standing in the state of their
organization and have the full legal right, power and authority to execute
and deliver this Agreement and to carry out all transactions contemplated
herein. Each individual signing this Agreement on behalf of a corporation,
partnership, trust, or other entity, represents and warrants that he or she
has the authority to do so.
b. All Parties represent and warrant that they have negotiated at
arms-length with a view to arriving at a fair and equitable settlement of
their differences.
c. All Parties represent and warrant that, to the best of their
belief, the terms of this Agreement are fair to and in the best interests
of URI and its shareholders.
d. All Parties covenant that no actions of any kind shall be
undertaken by the Parties to affirmatively prosecute the Pending
Litigation, nor will the Parties instigate any new legal proceedings
against any of the other Parties.
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e. All Parties represent and warrant that they have not assigned or
transferred any claims against any of the other Parties, including any
interest in the Pending Litigation, to any third party not a party to this
Agreement.
5. This Agreement has been freely and voluntarily executed by all Parties
hereto after having been apprised of all relevant information and having been
represented by counsel. No party hereto has relied upon any inducements,
promises or representations made by any other party or other party's attorney,
other than those specifically set out in this Agreement, which constitutes the
entire, integrated understanding among the Parties.
6. Each party agrees to perform such other further acts and to execute
and deliver such further documents as may be necessary to effectuate the
purposes of this Agreement.
7. The Parties hereto, and each of them, acknowledge that this Agreement
is the compromise and settlement of the claims and demands between and among the
Parties and nothing contained herein shall be construed as an admission of their
validity or invalidity against the interests of the Parties hereto, or any of
them, except that this disclaimer does not affect the validity or truthfulness
of the affirmative statements, admissions, affidavits, filings, notices, and
writings made and agreed to be made under the terms of this Agreement.
8. Except as to continuing covenants and obligations set forth in the
1993 Settlement Agreement and the Murphy Order, all claims, rights, causes of
action, or defenses of the Parties raised in the Pending Litigation are herewith
merged into and fully resolved as a part of this Agreement.
9. All Parties to this Agreement have read and fully comprehend and
understand the terms and provisions of this Agreement and of the ancillary
exhibits and documents incorporated herein. All Parties have been advised by
legal counsel who presently represent them in connection with this settlement as
to the content, meaning and execution of this Agreement. All Parties to this
Agreement have voluntarily and without coercion signed the same and understand
and agree to each and every paragraph hereof.
10. No Party hereto shall, directly or indirectly, solicit or seek to
solicit any person to challenge any provision hereof or to file suit comparable
to any suit dismissed hereunder or to contest the dismissal of the Pending
Litigation. This covenant of good faith shall be central to this Agreement and
any Party damaged by a breach thereof shall be entitled to all remedies
available at law or in equity as well as a recovery of reasonable attorney's
fees and costs.
11. GENERAL PROVISIONS.
a. BINDING AGREEMENT. This Agreement shall be binding upon and
shall inure to the benefit of the heirs, legal representatives, successors
and assigns, as applicable, of the respective parties hereto, and any
entities resulting from the reorganization, consolidation or merger of any
party hereto.
b. HEADINGS. The headings used in this Agreement are inserted for
reference purposes only and shall not be deemed to limit or affect in any
way the meaning or interpretation of any of the terms or provisions of this
Agreement.
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c. COUNTERPARTS. This Agreement may be signed upon any number of
counterparts with the same effect as if the signature to any counterpart
were upon the same instrument.
d. ENTIRE AGREEMENT. This Agreement, together with the exhibits and
schedules hereto (which are incorporated herein by this reference),
constitutes the entire agreement and understanding between and among the
parties with respect to the subject matter hereof and shall supersede any
prior agreements and understandings among the parties with respect to such
subject matter.
e. SEVERABILITY. The provisions of this Agreement are severable, and
should any provision hereof be found to be void, voidable or unenforceable,
such void, voidable or unenforceable provision shall not affect any other
portion or provision of this Agreement.
f. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants of the Parties shall survive the
Closing.
g. WAIVER. Any waiver by any party hereto of any breach of any kind
or character whatsoever by any other party, whether such waiver be direct
or implied, shall not be construed as a continuing waiver or consent to any
subsequent breach of this Agreement on the part of the other party.
h. MODIFICATION. This Agreement may not be modified except by an
instrument in writing signed by all of the parties hereto.
i. GOVERNING LAW. This Agreement shall be interpreted, construed and
enforced according to the laws of the State of Utah.
j. ATTORNEY'S FEES. In the event any action or proceeding is
brought by any Party against any other Party under this Agreement, the
prevailing party shall be entitled to recover attorney's fees and costs in
such amount as the court may adjudge reasonable.
k. NOTICE. All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and
shall be considered as properly given when personally served or deposited
in the United States mail, postage prepaid, registered or certified, with
return receipt requested, or by prepaid telegram, telecopy or deposited
with a recognized courier for overnight delivery. Notice given in any such
manner shall be effective when received or three (3) days after mailing or
sending. The addresses of the parties shall be as set forth on Schedule
II j. attached hereto.
Each Party shall have the right to change its address for purposes of this
section to any other location within the continental United States by giving
thirty (30) days' notice to the other Parties in the manner set forth in this
section.
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11. In the event that Closing does not occur for any reason, the term of
the 1993 Settlement Agreement shall be extended by the number of days elapsing
between the date hereof and the date of the event causing the failure to close.
DATED the date and year first set forth above.
URI:
Utah Resources International, Inc., a Utah
corporation
By: /s/
---------------------------------
Its:
--------------------------------
ERICKSON:
/s/ R. Dee Erickson
-------------------------------------
R. Dee Erickson
SHEEN:
/s/ E. Jay Sheen
-------------------------------------
E. Jay Sheen
HURD:
/s/ Lyle D. Hurd
-------------------------------------
Lyle D. Hurd
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JONES:
/s/ Mark G. Jones
-------------------------------------
Mark G. Jones
MTC:
Mark Technologies Corporation, a California
corporation
By: /s/ Mark G. Jones
---------------------------------
Its: /s/ Mark G. Jones, President
--------------------------------
A MORGAN:
/s/ Anne Morgan
-------------------------------------
Anne Morgan, individually
V MORGAN:
/s/ Victoria Morgan
--------------------------------------
Victoria Morgan
INTER-MOUNTAIN CAPITAL CORP, a Delaware
corporation
By: /s/ John Fife
---------------------------------
Its: John Fife, President
--------------------------------
FIFE
/s/ John Fife
-------------------------------------
John Fife
ROBINSON & SHEEN:
ROBINSON & SHEEN, L.L.C.
By: /s/ Jay Sheen
---------------------------------
Its: /s/ Jay Sheen, Member
--------------------------------
APPROVED:
-------------------
Jenny T. Morgan
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