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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934
and Rule 13e-3 (Section 240.13e-3) thereunder)
UTAH RESOURCES INTERNATIONAL, INC.
(Name of the Issuer)
UTAH RESOURCES INTERNATIONAL, INC.
(Name of Person Filing Statement)
Common Stock $.10 par value 917518102-2,522,808
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(Title of Class of Securities) (CUSIP Number of Class of Securities)
Alan B. Roth
Wildman, Harrold, Allen & Dixon
225 West Wacker Drive
Chicago, Illinois 60606
(312) 201-2000
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(Name, Address, and Telephone Number of Persons Authorized to Receive Notice
and Communications on Behalf of Persons Filing Statement)
This statement is filed in connection with (check the appropriate
box):
a. [X] The filing of solicitation materials or an
information statement subject to Regulation 14A,
Regulation 14C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. [ ] The filing of a registration statement under the
Securities Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [X]
Calculation of Filing Fee
Transaction valuation $________ Amount of filing fee $________
*Based on the cash value of the fractional shares expected to be created by the
Rule 13e-3 transaction.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1
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Amount Previously Paid: ________________________
Form or Registration No: ________________________
Filing Party: ________________________
Date Filed: ________________________
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INTRODUCTION
This Rule 13e-3 Transaction Statement ("Statement") relates to a
solicitation of proxies by Utah Resources International, Inc. (the "Company") to
be used at special meeting ("Special Meeting") of shareholders of the Company to
consider and vote upon a proposal to amend the Company's Articles of
Incorporation ("Amendment"), to effect a reverse split of the Company's issued
and outstanding common stock as of 4:30 p.m., M.S.T., on the date of filing of
the Amendment on the basis that each 1,000 shares of common stock then
outstanding will be converted into one share, at $3.35 per share
pre-reverse-split price, with fractional shareholders given the option to either
receive cash in lieu of their resulting fractional share or purchase additional
fractional shares to round up to one whole share following the reverse split
(the "Transaction").
Simultaneously with the filing of this Statement, the Company is filing
a Preliminary Proxy Statement ("Preliminary Proxy Statement") and Schedule 14A,
with exhibits with the Securities and Exchange Commission. The Preliminary
Proxy Statement describes and requires a vote on the Transaction. The cross
reference sheet herein is being supplied pursuant to General Instruction F to
Schedule 13E-3 and shows the location in the Preliminary Proxy Statement of the
information required to be included in response to the items of this Statement.
The information in the Preliminary Proxy Statement is hereby expressly
incorporated herein by reference and the responses to each item are qualified in
their entirety by the contents thereof.
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CROSS REFERENCE SHEET
Pursuant to General Instruction F of Schedule 13E-3, the following table
sets forth the location in the Preliminary Proxy Statement of the registrant
dated March 26, 1998 (which has been filed in preliminary form with the
Securities and Exchange Commission and is attached hereto as Exhibit 1), of the
information required by Schedule 13E-3 which is incorporated herein from such
Preliminary Proxy Statement.
Location in
Schedule 13E-3 Item and Caption Preliminary Proxy Statement
- ------------------------------- ---------------------------
Item 1. Issuer and Class of Security
Subject to the Transaction.
(a)-(b) PROCEDURAL MATTERS
(c) PROPOSED REVERSE SPLIT/
Market Price
(d) SPECIAL FACTORS/Reasons for
the Proposed Reverse Split
(e) Not applicable
(f) PROPOSED REVERSE SPLIT/
Market Price
Item 2. Identity and Background. This Preliminary Proxy
Statement is being filed by
the issuers of the class of
equity securities which is
the subject of this Rule
13e-3 transaction.
(a)-(g) Not applicable
Item 3. Past Contacts, Transactions
or Negotiations. Not applicable
Item 4. Terms of the Transaction. PROCEDURAL MATTERS,
PROPOSED REVERSE
SPLIT/Summary of the Proposed
Reverse Split, Option to
Round Up Stock Holdings, Cash
Payment in Lieu of Fractional
Shares, Market Price,
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Amendment to Articles of Incorporation,
Exercise of Round Up Option and
Exchange of Stock Certificates, Voting
Requirements, Dissenters' Rights,
Regulatory Requirements and Purchase of
Returned Shares, SPECIAL FACTORS/Effect
of the Proposed Reverse Split, Reasons
for the Proposed Reverse Split and
Recommendation of the Board of
Directors
Item 5. Plans or Proposals of the
Issuer or Affiliate.
(a)-(e) Not applicable
(f)-(g) PROCEDURAL MATTERS, PROPOSED REVERSE
SPLIT/Summary of the Proposed Reverse
Split, SPECIAL FACTORS/Effect of the
Proposed Reverse Split, Background of
the Proposed Reverse Split, Reasons
for the Proposed Reverse Split,
Recommendation of the Board of
Directors and Conduct of the
Company's Business after
the Proposed Reverse Split
Item 6. Source and Amount of Funds
or Other Consideration.
(a)-(b) SPECIAL FACTORS/Financing
the Proposed Reverse Split
(c)-(d) Not applicable
Item 7. Purpose(s), Alternatives,
Reasons and Effects.
(a) PROCEDURAL MATTERS, PROPOSED REVERSE
SPLIT/Summary of the Proposed
Reverse Split, SPECIAL FACTORS/
Effect of the Proposed Reverse Split,
Background of the Proposed Reverse
Split, IMCC Transaction and Settlement
Agreements, Reasons for the Proposed
Reverse Split, Recommendation of the
Board of Directors and Conduct of the
Company's Business After the Proposed
Reverse Split
(b) SPECIAL FACTORS/Recommendation of
the Board of Directors
(c) SPECIAL FACTORS/Background
of the Proposed Reverse
Split, IMCC Transaction and
Settlement Agreements,
Reasons for the
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Proposed Reverse Split and
Recommendation of the Board of
Directors
(d) SPECIAL FACTORS/Effect of the
Proposed Reverse Split and FINANCIAL
MATTERS/Federal Income Tax
Consequences
Item 8. Fairness of the Transaction.
(a) SPECIAL FACTORS/Effect of the
Proposed Reverse Split, Fairness
Opinion and Recommendation of
the Board of Directors
(b) SPECIAL FACTORS/Background of the
Proposed Reverse Split, IMCC
Transaction and Settlement
Agreements, Reasons for the Proposed
Reverse Split, Fairness Opinion,
Recommendation of the Board of
Directors and Conduct of the
Company's Business After the Proposed
Reverse Split
(c) PROPOSED REVERSE SPLIT/Voting
Requirements and SPECIAL FACTORS/
Recommendation of the Board of
Directors
(d) SPECIAL FACTORS/Background of the
Proposed Reverse Split and
Recommendation of the Board of
Directors
(e) SPECIAL FACTORS/Recommendation of the
Board of Directors
(f) Not applicable
Item 9. Reports, Opinions, Appraisals
and Certain Negotiations.
(a) SPECIAL FACTORS/Fairness Opinion
(b) SPECIAL FACTORS/Fairness Opinion
(c) LETTER TO THE SHAREHOLDERS, SPECIAL
FACTORS/Fairness Opinion
Item 10. Interest in Securities of
the Issuer.
(a) VOTING SECURITIES AND PRINCIPAL
HOLDERS THEREOF
(b) Not applicable
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Item 11. Contracts, Arrangements or SPECIAL FACTORS/Background
Understandings with Respect of the Proposed Reverse
to the Issuer's Securities. Split and Reasons for the
Proposed Reverse Split
Item 12. Present Intention and Recommen- SPECIAL FACTORS/Reasons
dation of Certain Persons with for the Proposed Reverse
Regard to the Transaction. Split and Recommendation
of the Board of Directors
Item 13. Other Provisions of the
Transaction.
(a) PROPOSED REVERSE SPLIT/
Dissenters' Rights
(b)-(c) Not applicable
Item 14. Financial Information. FINANCIAL MATTERS/Financial
Statements
Item 15. Persons and Assets Employed, SPECIAL FACTORS/Persons and
Retained or Utilized. Assets Employed, Retained or
Utilized
Item 16. Additional Information. Not applicable
Item 17. Material to be Filed as Exhibit Index attached hereto
Exhibits.
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Item 1. Issuer and Class of Security Subject to the Transaction.
(a) Information in response to these sub-items is incorporated
herein by reference to "PROCEDURAL MATTERS" on the cover page of registrant's
Proxy Statement dated March 26, 1998 which has been filed in preliminary form
with the Securities and Exchange Commission ("SEC") (referred to herein as the
"Preliminary Proxy Statement").
(b) Information in response to this sub-item is incorporated
herein by reference to "PROCEDURAL MATTERS" in the Preliminary Proxy Statement.
(c) Information in response to this sub-item is incorporated
herein by reference to "PROPOSED REVERSE SPLIT/Market Price" in the Preliminary
Proxy Statement.
(d) Information in response to this sub-item is incorporated
herein by reference to "SPECIAL FACTORS/Reasons for the Proposed Reverse Split"
in the Preliminary Proxy Statement.
(e) Not applicable.
(f) Information in response to this sub-item is incorporated
herein by reference to "PROPOSED REVERSE SPLIT/Market Price" in the Preliminary
Proxy Statement.
Item 2. Identity and Background.
This Proxy Statement is being filed by the Issuer of the class of
equity security which is the subject of this Rule 13e-3 transaction.
(a)-(d) Not applicable.
(e) No executive officer, director, control person, or executive
officer or director of any corporation ultimately in control of the registrant
has been convicted during the last five years in a criminal proceeding
(excluding traffic violations and similar misdemeanors).
(f) No executive officer, director, control person, or executive
officer or director of any corporation ultimately in control of the registrant
during the past five years has been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
further violations of, or prohibiting activities subject to, federal or state
securities laws or a finding of any violation of such laws.
(g) Not applicable.
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Item 3. Past Contacts, Transactions or Negotiations.
Not applicable.
Item 4. Terms of the Transaction.
Information in response to this sub-item is incorporated herein by
reference to "PROCEDURAL MATTERS" and "PROPOSED REVERSE SPLIT/Summary of the
Proposed Reverse Split, Option to Round Up Stock Holdings, Cash Payment in
Lieu of Fractional Shares, Market Price, Amendments to Articles of
Incorporation, Exercise of Round Up Option and Exchange of Stock Certificates,
Voting Requirements, Dissenters' Rights, Regulatory Requirements and Purchase
of Returned Shares" and "SPECIAL FACTORS/Effect of the Proposed Reverse
Split, Reasons for the Proposed Reverse Split and Recommendation of the Board
of Directors" in the Preliminary Proxy Statement.
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a)-(b) Not applicable.
(c) Information in response to this sub-item is incorporated
herein by reference to "PROCEDURAL MATTERS" and "AMENDMENT
TO BY-LAWS" in the Preliminary Proxy Statement.
(d)-(e) Not applicable.
(f)-(g) Information in response to these sub-items is incorporated
herein by reference to "PROCEDURAL MATTERS", "PROPOSED REVERSE SPLIT/Summary of
the Proposed Reverse Split", "SPECIAL FACTORS/Effect of the Proposed Reverse
Split, Background of the Proposed Reverse Split, Reasons for the Proposed
Reverse Split, Recommendation of the Board of Directors and Conduct of the
Company's Business After the Proposed Reverse Split" in the Preliminary Proxy
Statement.
Item 6. Source and Amounts of Funds or Other Consideration.
(a)-(c) Information in response to these sub-items is incorporated
herein by reference to "SPECIAL FACTORS/Financing the Proposed Reverse Split" in
the Preliminary Proxy Statement.
(d) Not applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a) Information in response to this sub-item is incorporated
herein by reference to "PROCEDURAL MATTERS", "PROPOSED REVERSE SPLIT/Summary of
the Proposed Reverse Split", "SPECIAL FACTORS/Effect of the Proposed Reverse
Split and Reasons for the Proposed Reverse Split, Recommendation of the Board of
Directors, and Conduct of the Company's Business After the Proposed Reverse
Split" in the Preliminary Proxy Statement.
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(b) Information in response to this sub-item is incorporated
herein by reference to "SPECIAL FACTORS/Recommendation of the Board of
Directors" in the Preliminary Proxy Statement.
(c) Information in response to this sub-item is incorporated
herein by reference to "SPECIAL FACTORS/Background of the Proposed Reverse
Split, IMCC Transaction and Settlement Agreements, Reasons for the Proposed
Reverse Split and Recommendation of the Board of Directors" in the Preliminary
Proxy Statement.
(d) Information in response to this sub-item is incorporated
herein by reference to "SPECIAL FACTORS/Effect of the Proposed Reverse Split and
FINANCIAL MATTERS/Federal Income Tax Consequences" in the Preliminary Proxy
Statement.
Item 8. Fairness of the Transaction.
(a) Information in response to this sub-item is incorporated
herein by reference to "SPECIAL FACTORS/Effect of the Proposed Reverse Split,
Fairness Opinion and Recommendation of the Board of Directors" in the
Preliminary Proxy Statement.
(b) Information in response to this sub-item is incorporated
herein by reference to "SPECIAL FACTORS/Background of the Proposed Reverse
Split, IMCC Transaction and Settlement Agreements, Reasons for the Proposed
Reverse Split, Fairness Opinion, Recommendation of the Board of Directors and
Conduct of the Company's Business After the Proposed Reverse Split" in the
Preliminary Proxy Statement.
(c) Information in response to this sub-item is incorporated
herein by reference to "PROPOSED REVERSE SPLIT/Voting Requirements" and
"SPECIAL FACTORS/Recommendation of the Board of Directors" in the
Preliminary Proxy Statement.
(d) Information in response to this sub-item is incorporated
herein by reference to "SPECIAL FACTORS/Background of the Proposed Reverse
Split and Recommendation of the Board of Directors" in the Preliminary Proxy
Statement.
(e) Information in response to this sub-item is incorporated
herein by reference to "SPECIAL FACTORS/Recommendation of the Board of
Directors" in the Preliminary Proxy Statement.
(f) Not applicable.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a) Information in response to this sub-item is incorporated
herein by reference to "SPECIAL FACTORS/Fairness Opinion" and Exhibit b.
(b) Information in response to this sub-item is incorporated
herein by reference to "SPECIAL FACTORS/Fairness Opinion" and Exhibit b.
(c) Information in response to this sub-item is incorporated
herein by reference to "SPECIAL FACTORS/Fairness Opinion" and Exhibit b.
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Item 10. Interest in Securities of the Issuer.
(a) Information in response to this sub-item is incorporated
herein by reference to "VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF" in the
Preliminary Proxy Statement.
(b) Not applicable.
Item 11. Contracts, Arrangements or Understandings with Respect to the
Issuer's Securities.
Information in response to this item is incorporated herein by
reference to "SPECIAL FACTORS/Background of the Proposed Reverse Split and
Reasons for the Proposed Reverse Split" in the Preliminary Proxy Statement.
Item 12. Present Intention and Recommendation of Certain Persons with
Regard to the Transaction.
Information in response to this item is incorporated herein by
reference to "SPECIAL FACTORS/Reasons for the Proposed Reverse Split and
Recommendation of the Board of Directors" in the Preliminary Proxy Statement.
Item 13. Other Provisions of the Transaction.
(a) Information in response to this sub-item is incorporated
herein by reference to "PROPOSED REVERSE SPLIT/Dissenters' Rights" in the
Preliminary Proxy Statement.
(b)-(c) Not applicable.
Item 14. Financial Information.
Information in response to this item is incorporated herein by
reference to "FINANCIAL MATTERS/Financial Statements" in the Preliminary Proxy
Statement.
Item 15. Persons and Assets Employed, Retained or Utilized.
Information in response to this item is incorporated herein by
reference to "SPECIAL FACTORS/Persons or Assets Employed, Retained or Utilized"
in the Preliminary Proxy Statement.
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Item 16. Additional Information.
Not applicable.
Item 17. Material to be Filed as Exhibits.
See the Exhibit Index attached hereto.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
UTAH RESOURCES INTERNATIONAL, INC.
Date: March 26, 1998 By: /s/ John Fife
--------------------------------
John Fife, Director, Chairman of
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EXHIBIT INDEX
TO
RULE 13E-3 TRANSACTION STATEMENT
UTAH RESOURCES INTERNATIONAL, INC.
SEQUENTIALLY
NUMBERED
PAGE *
------------
99.1. Preliminary copy of Transmittal Letter to Shareholders
of Utah Resources International, Inc. regarding Special
Meeting of Shareholders.
99.2. Preliminary copy of Notice of Special Meeting of
Shareholders of Utah Resources International, Inc.
99.3. Preliminary copy of Proxy Statement of Utah Resources
International, Inc. filed with the Securities and Exchange
Commission on March 26, 1998.
99.4. Preliminary copy of Shareholder Proxy.
* INCLUDED ONLY ON ORIGINAL SCHEDULE 13E-3 FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 1
EXHIBIT 99.1
<PAGE> 2
PRELIMINARY COPY DATED MARCH 26, 1998
FOR REVIEW ONLY
UTAH RESOURCES INTERNATIONAL, INC.
297 West Hilton Drive
Suite #4
St. George, Utah 84770
________________, 1998
Dear Shareholder:
You are cordially invited to attend an Annual Meeting of Shareholders of
Utah Resources International, Inc. (the "Company"), to be held in the
___________________________________ on ____________, ______________, 1998 at
1:00 p.m, M.S.T.
The Company was organized in Utah in 1966 as Utah Industrial, Inc. It was
renamed Utah Resources International, Inc. in 1969. In 1981, the Company became
a "reporting company" requiring it to file various reports with the Securities
and Exchange Commission. On July 3, 1996, the Company consummated a transaction
with Inter-Mountain Capital Corporation ("IMCC"), whereby common stock
representing 50.5% of the outstanding stock of the Company was transferred to
IMCC for $3.35 per share, payable in accordance with the terms of the Stock
Purchase Agreement by and between the Company and IMCC (the "Stock Purchase
Agreement"). The transfer of such shares to IMCC was the product of the
consummation of a Letter of Intent dated April 5, 1996, as amended (the "Letter
of Intent"), the Stock Purchase Agreement, a settlement agreement 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") and a settlement
agreement, 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, Jr. and E.
Jay Sheen (the "Morgan Settlement Agreement") (the Letter of Intent, Stock
Purchase Agreement, 1996 Settlement Agreement and Morgan Settlement Agreement
together are the "Transaction Agreements").
On the basis that: (i) the Company is contractually required to cause a
reverse stock split to occur pursuant to the terms of the Transaction
Agreements; (ii) the belief of all of the Board of Directors that the cost of
being a "reporting company" is not economically justified as the Company's
Common Stock is thinly traded; and (iii) the Company does not presently
anticipate raising capital through a public offering, the Board of Directors is
presenting this transaction for a vote of the shareholders. Among other
things, the Transaction Agreements required the Company to cause a reverse
stock split to occur on the terms as provided therein and herein. In addition
to the contractual requirement that a reverse stock split occur as required by
the Transaction Agreements, the Company's senior management and its Board of
Directors have assessed the advantages and disadvantages of the Company being a
"reporting company" under the Securities and Exchange Act of 1934, as amended.
First, such reporting is very costly. Furthermore, the Board of Directors does
not believe that being a "reporting company" has given the Company any
significant advantage the Company would not 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
<PAGE> 3
Letter to Shareholders of
Utah Resources International, Inc.
____________________, 1998
Page 2
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. Of the
approximate 558 shareholders, approximately 479 shareholders of record own
fewer than 1,000 shares. These same shareholders have received only a $.10
dividend per share over the entire history of the Company.
A company with assets of over $10 million becomes a "reporting company"
when its shareholders number 500 or more and it complies with applicable
securities laws. To thereafter be allowed to become a "non-SEC reporting
company" and cease reporting to the Securities and Exchange Commission, the
number of shareholders must decline to less than 300. The proposed transaction
is designed to result in reducing the number of the Company's shareholders to
less than 300, so that the Company will no longer be required to be a reporting
company. After considering the transaction, all of the Board of Directors voted
in favor of the transaction, and believe that the $3.35 per share price to be
paid to participating shareholders is fair to both the recipients of cash and
the remaining shareholders. The Board of Directors recommends your affirmative
vote. The company obtained a fairness opinion with respect the reverse stock
split transaction described herein including the $3.35 per share reverse stock
split purchase price, from Centerpoint Advisors, Inc., dated as of February 17,
1998 (the "Fairness Opinion"), which indicated that the proposed reverse split
is fair from a financial point of view to the Company's shareholders. A copy of
the Fairness Opinion is attached to the Schedule 13e-3 and Preliminary Proxy
Statement as Exhibit b.
The accompanying Notice of Special Meeting of Shareholders and Proxy
Statement describe the formal matters to be acted upon at the meeting. Prior
to any vote to be taken at the meeting, an opportunity will be provided for
questions and discussion by the shareholders. At the meeting, shareholders
will be asked to consider and vote upon a proposal to amend the Company's
Articles of Incorporation to effect a reverse split of the Company's issued and
outstanding common stock as of 4:30 p.m., M.S.T., on ______________, 1998 (the
"Effective Date") on the basis that each 1,000 shares of common, $.10 par value
per share stock then outstanding ("Common Stock") will be converted into one
share of common $100.00 par value per share stock (the "New Stock"), with
shareholders holding less than 1,000 shares or any increment thereof (after
being given an opportunity to purchase additional shares as needed to "round
up" to the equivalent of 1,000 shares at a purchase price of $3.35 per share)
being paid cash in exchange for their fractional shares at a pre-reverse-split
price of $3.35 per share for each share outstanding as of __________ __, 1998
(the "Record Date").
<PAGE> 4
Letter to Shareholders of
Utah Resources International, Inc.
____________________, 1998
Page 3
IMCC, the holder of 50.5% of the Company's Common Stock, has indicated that it
will vote in favor of the proposal to amend the Company's Articles of
Incorporation.
If the reverse stock split is approved, any shareholder of the Company
holding fewer than 1,000 shares of Common Stock or any increment thereof, may
(i) purchase additional shares in order to "round up" to the equivalent of 1,000
shares at a purchase price of $3.35 per share or (ii) sell such shares to the
Company based upon a pre-reverse-split price of $3.35 per share.
Also, as indicated above, a shareholder holding 1,000 shares or more (a
"Non-Exercising Shareholder") will have such shares converted into one share of
New Stock of the Company for each 1,000 shares of the Company's Common Stock
owned, with Non-Exercising Shareholders given the option to (i) purchase
additional shares in order to round-up to the next increment of 1,000 shares at
a purchase price of $3.35 per share or (ii) sell such fractional shares to the
Company based upon a pre-reverse-split price of $3.35 per share.
In addition, any shareholder holding fewer than 1,000 shares or any
increment thereof that does not approve the reverse stock split transaction and
believes that such shares have a value in excess of $3.35 per share may, upon
following the procedures outlined in the Proxy and Part 13 of the Utah Business
Corporation Act, demand payment for the value of the shares believed by such
shareholders to be the fair value of such shares.
As required by the terms of the Transaction Agreements, subsequent to the
proposed reverse split, and subject to applicable state and federal securities
and state corporate law, any Common Stock redeemed through the reverse split
(the "Returned Shares") may be acquired by the remaining shareholders of the
Company, other than IMCC or any of its affiliates, as of a record date five
days prior to the effectuation of the Reverse Split (the "Returned Shares
Record Date"), in increments of 1,000 shares (the "Returned Shares Option"), at
a purchase price equal to the pre-reverse-split price of $3.35 per share (the
"Returned Shares Purchase Price"). Only those shares for which the Company has
received, within 80 days following the Effective Date, a fully and properly
executed letter of transmittal accompanied by the required documents will
qualify as Returned Shares for purposes of this Returned Shares 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 New Stock. In the event the Returned Shares Option is
over-subscribed, then each of the remaining 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 Returned Shares
Record Date less those shares
<PAGE> 5
Letter to Shareholders of
Utah Resources International, Inc.
____________________, 1998
Page 4
held by IMCC) in blocks of not less than 1,000 shares. 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 New Stock
shares owned by IMCC. Twenty-five percent (25%) of the Returned Shares Purchase
Price shall be payable in cash upon exercise, with the remaining balance of
$2.51 per share being evidenced by a promissory note, payable in three years
(the "Returned Shares Note"). Subject to applicable Internal Revenue Service
rules, the Returned Shares 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 Shares 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 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 Shares Note. Returned Shares 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 Shares Note.
Set forth in the table below is an illustration of the results of this
proposal for hypothetical shareholders owning, immediately prior to the
effective date of the transaction, the following numbers of shares of Common
Stock: (i) 10,001 shares (assuming no round up), (ii) 10,001 shares (assuming
round up), (iii) 1,000 shares, (iv) 300 shares (assuming no round up), and (v)
300 shares (assuming round up):
<PAGE> 6
Letter to Shareholders of
Utah Resources International, Inc.
____________________, 1998
Page 5
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SHARES OWNED BEFORE STOCK SPLITS
10,001 SHARES 10,001 SHARES 300 SHARES 300 SHARES
RESULTS OF (ELECTS NOT TO (ELECT TO ROUND (ELECTS NOT TO (ELECTS TO
STOCK SPLIT ROUND UP)* UP)* 1,000 SHARES* ROUND UP) ROUND UP)*
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Number of shares held 10 Shares 11 Share 1 Share 0 Shares Shareholder
immediately following purchases
Reverse Stock Split at 1 fractional share
for 1,000 needed to round-
up holdings to 1
whole share
- ------------------------------------------------------------------------------------------------------------------------
Cash to be paid as a $3.35 cash to $3,346.65 cash No cash paid to $1,005 cash to $2,345 cash to be
result of completed be paid by the to be paid by shareholder, as be paid by the paid by
transaction Company to shareholder to no fractional Company to shareholder to the
shareholder in the Company in shares resulted shareholder Company in order to
lieu of order to round in lieu of round up to
fractional share up to the next fractional 1,000 shares
increment of shares
1,000 shares
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Said shareholder is also entitled to participate in the Returned Shares
Option offering.
The foregoing information is qualified in its entirety by the contents
of the Notice of Special Meeting of Shareholders and the Proxy Statement
which are enclosed with this letter. If you have any questions regarding
the proposed transactions, you may contact Alan B. Roth at (312) 201-2633,
Ladd Eldredge at (801) 628-8080, or the undersigned at (312) 565-1569.
It is important that your shares be represented at the meeting
regardless of the number of shares you hold. Please take a moment to
review the Proxy Statement and complete, sign, and mail the enclosed proxy
card in the accompanying return envelope promptly, regardless of whether
you intend to be present at the meeting. Your proxy is revocable at any
time prior to its use. If you have multiple accounts and receive more than
one set of these materials, please be sure to vote each proxy received.
WE LOOK FORWARD TO SEEING YOU AT THE MEETING.
Sincerely,
UTAH RESOURCES INTERNATIONAL, INC.
JOHN FIFE,
Director, Chairman of the Board, CEO
and President
<PAGE> 1
EXHIBIT 99.2
<PAGE> 2
PRELIMINARY COPY
MARCH 26, 1998
FOR REVIEW ONLY
UTAH RESOURCES INTERNATIONAL, INC.
297 West Hilton Drive, Suite #4
St. George, Utah 84770
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _______________, 1998
To the Shareholders of Utah Resources International, Inc.
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders ("Special
Meeting") of Utah Resources International, Inc., a Utah corporation (the
"Company"), will be held at _____________________________ on
_________________________, 1998 at 1:00 p.m., M.S.T., for the following
purposes:
1. To consider and vote upon a proposal to amend the Company's
Articles of Incorporation to effect a reverse split of the Company's issued and
outstanding common, $.10 par value per share stock (the "Common Stock"), as of
4:30 p.m., M.S.T., on __________________, 1998 (the "Effective Date") on the
basis that each 1,000 shares of Common Stock then outstanding will be converted
into 1 share of common, $100.00 par value per share stock (the "New Stock"),
with shareholders holding less than 1,000 shares of Common Stock or any
increment thereof (after being given an option to purchase additional shares as
needed to "round up" to the equivalent of 1,000 shares at a purchase price of
$3.35 per share) being paid cash in exchange for their fractional shares at a
price of $3.35 per share for each share outstanding immediately prior to such
reverse split (the "Reverse Split").
<PAGE> 3
2. To transact such other business as may properly come before
the meeting and any adjournment thereof.
Additional information relating to these matters is set forth in the
attached proxy statement. The Board of Directors has fixed the close of
business on __________________, 1998, as the record date (the "Record Date") for
the determination of shareholders entitled to notice of and to vote at the
Special Meeting or any adjournment thereof. Only shareholders of record at the
close of business on the Record Date are entitled to notice of and to vote at
the Special Meeting. A list of shareholders entitled to vote at the Special
Meeting will be available for examination at the offices of the Company for at
least 10 days prior to the Special Meeting.
Pursuant to a resolution approved by the Board of Directors, the
Company has agreed to provide dissenters' rights to those shareholders holding
less than 1,000 shares or any increment thereof that do not approve the Reverse
Split, and believe that such shares have a value in excess of $3.35 per share,
for those fractional shares only, pursuant to the terms of Part 13 of the Utah
Business Corporation Act. Any holder of less than 1,000 shares or any increment
thereof of the Company's Common Stock who is a shareholder of the Company as of
the Record Date and does not assent to the Reverse Split and who believes that
such shares have a value in excess of $3.35 per share will have the right, upon
compliance with specific procedures, to demand from the Company payment of the
fair value of such shareholder's fractional shares only. Such shareholder must,
among other things, not vote for the approval of the Reverse Split (which
approval would include submitting a signed proxy form without voting
instructions), believe that such shares have a value in excess of $3.35 per
share and timely deliver to the Company a written demand for appraisal of their
shares prior to the Special Meeting and strictly comply with certain other
requirements. For a more complete description of such rights, reference is made
to "Dissenters' Rights" in the Proxy Statement and to Part 13 of the Utah
Business Corporation Act, a copy of which is attached to the Proxy Statement as
Exhibit e.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. HOWEVER,
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, YOU ARE URGED
TO PROMPTLY MARK, SIGN, DATE AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE
ENCLOSED, SELF-ADDRESSED, STAMPED ENVELOPE SO THAT YOUR SHARES OF STOCK MAY BE
REPRESENTED AND VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE
PRESENCE OF A QUORUM MAY BE ASSURED AT THE MEETING. YOUR PROXY
-2-
<PAGE> 4
WILL BE RETURNED TO YOU IF YOU SHOULD BE PRESENT AT THE SPECIAL MEETING AND
SHOULD REQUEST SUCH RETURN OR IF YOU SHOULD REQUEST SUCH RETURN IN THE MANNER
PROVIDED FOR REVOCATION OF PROXIES ON THE INITIAL PAGES OF THE ENCLOSED PROXY
STATEMENT. PROMPT RESPONSE BY OUR SHAREHOLDERS WILL REDUCE THE TIME AND
EXPENSE OF SOLICITATION.
_____________________, 1998 BY ORDER OF THE BOARD OF DIRECTORS
JOHN FIFE
Director, Chairman of the Board,
CEO and President
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
-3-
<PAGE> 1
EXHIBIT 99.3
<PAGE> 2
TABLE OF CONTENTS
PAGE
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PROCEDURAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PROPOSED REVERSE SPLIT . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Summary of the Proposed Reverse Split . . . . . . . . . . . . . . 3
Option to Round Up Stock Holdings . . . . . . . . . . . . . . . . 5
Cash Payment in Lieu of Fractional Shares . . . . . . . . . . . . 5
Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Amendment to Articles of Incorporation . . . . . . . . . . . . . . 7
Exercise of Round Up Option and Exchange of Stock Certificates . . 7
Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . 8
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . 9
Exchange of Stock Certificates for Cash . . . . . . . . . . . . . 10
Regulatory Requirements . . . . . . . . . . . . . . . . . . . . . 10
Purchase of Returned Shares . . . . . . . . . . . . . . . . . . . 10
SPECIAL FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Effect of the Proposed Reverse Split . . . . . . . . . . . . . . . 11
Background of the Proposed Reverse Split . . . . . . . . . . . . . 12
IMCC Transaction and Settlement Agreements . . . . . . . . . . . . 14
Reasons for the Proposed Reverse Split . . . . . . . . . . . . . . 18
Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . .
Recommendation of the Board of Directors . . . . . . . . . . . . . 19
Interests of Certain Persons and Potential Conflicts of Interest . 21
Conduct of the Company's Business After the Proposed Reverse
Split . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Persons and Assets Employed, Retained or Utilized . . . . . . . . 22
Financing the Proposed Reverse Split . . . . . . . . . . . . . . . 23
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF . . . . . . . . . . . . . . 23
Security Ownership of Certain Beneficial Owners . . . . . . . . . 23
Security Ownership of Management . . . . . . . . . . . . . . . . . 24
FINANCIAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . 26
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . 26
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 27
-i-
<PAGE> 3
PAGE
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
EXHIBITS
Exhibit 1 - Amendment to Articles of Incorporation
Exhibit b - Fairness Opinion Issued by Centerpoint Advisors, Inc.,
dated as of February 17, 1998
Exhibit e - Part 13 of the Utah Business Corporation Act
-ii-
<PAGE> 4
PRELIMINARY COPY DATED MARCH 26, 1998
FOR REVIEW ONLY
UTAH RESOURCES INTERNATIONAL, INC.
297 West Hilton Drive, Suite #4
St. George, Utah 84770
PROXY STATEMENT
Special Meeting of the Shareholders to be
Held on _______________, 1998
INTRODUCTION
This Proxy Statement is furnished to the shareholders of Utah
Resources International, Inc. (the "Company") in connection with the
solicitation by the Board of Directors of the Company of proxies to be used at
the Special Meeting of the Shareholders of the Company (the "Special Meeting").
The Special Meeting will be held on ___________________, 1998, at ___________
p.m., M.S.T., at _____________________________________________ for the purpose
specified in the accompanying Notice of Meeting of Shareholders. This Proxy
Statement and enclosed form of proxy ("Proxy") were first sent to shareholders
on or about ____________________, 1998.
PROCEDURAL MATTERS
The Board of Directors of the Company is solicitying proxiees from the
shareholders of the Company in connection with the Special Meeting. The
enclosed Proxy enables shareholders to vote on all matters scheduled to come
before the Special Meeting. The matters scheduled to come before the Special
Meeting include: (i) considering and voting upon a proposal to amend the
Company's Articles of Incorporation to effect a reverse split of the Company's
issued and outstanding common, $.10 par value per share stock (the "Common
Stock"), as of 4:30 p.m., M.S.T., on _______________________ __, 1998 (the
Effective Date") on the basis that each 1,000 shares of Common Stock then
outstanding will be converted into 1 share of common, $100.00 par value per
share stock (the "New Stock"), with shareholders holding less than 1,000 shares
of Common Stock or any increment thereof (after being given an option to
purchase additional shares as needed to "round up" to the equivalent of 1,000
shares at a purchase price of $3.35 per share) being paid cash in exchange for
their fractional shares at a price of $3.35 per share for each share
outstanding on ________ __, 1998 (the "Record Date");
<PAGE> 5
and (ii) transacting such other business as may properly come before the meeting
and any adjournment thereof, as more fully described below:
PROPOSAL - EFFECT THE REVERSE SPLIT
Proposal
To consider and vote upon a proposal to amend the Company's Articles of
Incorporation to effect a reverse split of the Company's issued and outstanding
common, $.10 par value per share stock (the "Common Stock"), as of p.m.,
M.S.T., on 1998 on the basis that each 1,000 shares of Common Stock then
outstanding will be converted into 1 share of common, $100.00 par value per
share stock (the "New Stock"), with shareholders holding less than 1,000 shares
of Common Stock or any increment thereof (after being given an option to
purchase additional shares as needed to "round up" to the equivalent of 1,000
shares at a purchase price of $3.35 per share) being paid in cash in exchange
for their fractional shares at a price of $3.35 per share for each share
outstanding immediately prior to such reverse split (the "Reverse Split"). As
a result of the Reverse Split, the Company is expected to take such actions as
are necessary and lawful to become a non-SEC reporting Company. For a more
detailed description of the actions the Company plans to take following the
Reverse Split, see the Section entitled "SPECIAL FACTORS/Conduct of the
Company's Business After the Proposed Reverse Split."
Advantages
The advantages of the Company effecting the Reverse Split are as follows:
1. The Company is contractually obligated to cause the Reverse Split.
such obligation arose in connection with IMCC's acquisition of 50.5% of the
outstanding shares of the Company's Common Stock and the settlement of
protracted and expensive litigation. For a more detailed description of the
litigation which led to the settlement agreement, see the Section entitled
"MATERIAL PROCEEDINGS AND TRANSACTIONS." For a more detailed description of
the history of the contractual obligation, see the Section entitled "SPECIAL
FACTORS/Reasons for the Proposed Split."
2. The Board of Directors believes that the financial terms of the
Reverse Split are fair both to shareholders who will receive shares of New Stock
and to shareholders who will receive the $3.35 per share, because:
(a) IMCC paid $3.35 per share with respect to its
acquisition of a 50.5% interest in the Company on
July 3, 1996:
(b) The Company redeemed on July 3, 1996 Anne Morgan
and Victoria Morgan's shares for $3.35 per share,
pursuant to the settlement agreement 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"). The court in the Second
State Action reviewed and considered the 1996
Settlement Agreement, the Stock Purchase Agreement
and the 1993 Settlement Agreement as those terms
are defined herein, the written memoranda submitted
by various parties and other comments and
objections and ordered that: (1) the notice given
pursuant to Rule 23.1 of the applicable rules of
civil procedure for the State of Utah was adequate,
fair and proper; (2) the procedural and substantive
objections of Jenny T. Morgan (a director of the
Company at the time and shareholder of the Company),
Gerard E. Morgan, John C. Morgan and Karen J. Morgan
be overruled; (3) the 1996 Settlement Agreement was
fair, adequate and reasonable; (4) the Petition to
Terminate the 1993 Settlement Agreement was fair,
adequate and reasonable; and (5) the 1996 Settlement
Agreement and Petition to Terminate the 1993
Settlement Agreement was approved. For a more
detailed description of the litigation which led to
the 1996 Settlement Agreement, see the Section
entitled "MATERIAL PROCEEDINGS AND TRANSACTIONS."
For a more detailed description of the contractual
obligation for the $3.35 per share Reverse Split
price, see the Section entitled "SPECIAL
FACTORS/Reasons for the Proposed Reverse Split":
(c) The closing bid price of the Company's Common Stock
for the fourth quarter of 1997 was $.875, which is
far below the $3.35 per share purchase price being
offered by the Company:
(d) The Reverse Split provides fractional shareholders
with the opportunity to liquidate their holdings at
a price substantially above market trades and
without incurring brokerage costs, particularly
given the absence of an active market for the
Common Stock reflective of the Company's operations
and earning potential: and
(e) The Reverse Split provides fractional shareholders
who wish to continue to be shareholders of the
Company the option to exercise the round-up
option at a purchase price of $3.35 per share.
3. The Company will realize cost savings in its cessation as a
reporting company under the Exchange Act.
4. The Company has obtained a fairness opinion with respect to the
Reverse Split transaction, including the $3.35 per share Reverse Split purchase
price, from Centerpoint Advisors, Inc., dated as of February 17, 1998 (the
"Fairness Opinion"), which indicated that the proposed Reverse Split is fair
from a financial point of view to the Company's shareholders. For a more
detailed description of the Fairness Opinion, see the Section entitled,
"SPECIAL FACTORS/ Fairness Opinion," and in order to review the Fairness
Opinion see Exhibit b.
For a more detailed description of the proposed Reverse Split and its
advantages, see the Sections entitled "PROPOSED REVERSE SPLIT/Summary of the
Proposed Reverse Split," and "SPECIAL FACTORS/Effect of the Proposed Reverse
Split, Reasons for the Proposed Reverse Split and Recommendation of the Board
of Directors."
Disadvantages and Risks
The disadvantages and risks to the Company and its shareholders associated
with the Company effecting the Reverse Split are as follows:
1. Deregistration eliminates the Company's obligation to provide
detailed information to the Company's shareholders concerning the Company's
principal shareholders, directors and executive officers, compensation paid the
Company's executives, audited financial statements and certain relationships in
related transactions between the Company's insiders and the Company, which
under certain circumstances could better enable the Company's shareholders to
assess the financial operations and policies of a corporation.
2. There will likely be a loss of prestige that being a reporting
company provides.
3. The potential loss of ease of valuation of stock where there is
active trading of such shares on an established securities exchange
(shareholders should note, however, that there has been no such active trading
with the Company's Common Stock).
4. There will likely be decreased liquidity to the remaining
shareholders due to the fact that there is a less public market for the
Company's stock.
5. When the Reverse Split is effected and the Company elects to cease
to be an SEC reporting company, the Company will lose the potential flexibility
for current or future financing of corporate expansion through the building of a
more broad equity base through publicly offered sales of securities.
For a more detailed description of the disadvantages of the proposed
Reverse Split, see the Sections entitled "PROPOSED REVERSE SPLIT/Summary of the
Proposed Reverse Split", and "SPECIAL FACTORS/Effect of the Proposed Reverse
Split, Reasons for the Proposed Reverse Split, Recommendation of the Board of
Directors, and Conduct of the Company's Business After the Proposed Reverse
Split."
Vote Required
In order for the Reverse Split to become effective, a majority of the
shareholders must vote in favor of the Reverse Split. Approval by a majority of
the non-affiliated shareholders is not required.
Board of Directors Recommendation
The Board of Directors recommends voting "FOR" this Proposal.
The proposal requires the affirmative vote by the holders of a majority
of the Common Stock of the Company. Proxies marked "abstain" and broker
non-votes will be considered present at the meeting for quorum purposes, but
will not be counted for the purpose of determining the number of votes cast with
respect to any matter. However, abstentions and broker non-votes will have the
effect of a "no" vote if the vote required is a majority of the shares
outstanding and entitled to be voted.
Inter-Mountain Capital Corp.("IMCC"), the holder of 50.5% of the
Company's Common Stock, has indicated that it will vote in favor of the proposal
to amend the Company's Articles of Incorporation to effect a reverse split of
the Company's Common Stock as discussed above. When Proxies are returned
properly executed, the shares represented thereby will be voted by the persons
named in the Proxy in accordance with the shareholder's directions.
Shareholders are urged to specify their choices by marking the enclosed Proxy;
if no choice has been specified, the shares will be voted "FOR" the proposal
set forth in the Notice of Special Meeting and further described in this Proxy
Statement. The Company encourages the personal attendance of its shareholders
at the Special Meeting. Execution of the accompanying Proxy may be revoked at
any time before it is voted. Revocation may be effected by (i) a subsequently
dated Proxy, (ii) written notice to the Company at its principal offices at 297
West Hilton Drive, Suite #4, St. George, Utah 84770, Attention: Gerry Brown, or
(iii) by attending the Special Meeting and voting your shares in person. No
such notice of revocation of Proxy or later dated Proxy shall be effective,
however, until and unless such notice or subsequent Proxy has been received by
the secretary of the Company at or prior to the Special Meeting. A revocation
will not affect a vote on any matters taken prior to the receipt of such
revocation. Your attendance at the Special Meeting will not of itself revoke a
Proxy.
The Board of Directors of the Company has fixed ____________________,
1998, as the record date (the "Record Date") for the determination of
shareholders entitled to notice of and vote at the Special Meeting. At the
close of business on the Record Date, 2,522,808 shares of the Company's common
stock, par value $.10 per share (the "Common Stock") were issued and
outstanding, and are, therefore, entitled to vote at the Special Meeting. Such
shares are held by approximately 558 shareholders of record. Approximately 479
shareholders hold less than 1,000 shares of the Company's Common Stock. Common
Stock constitutes the only class of voting securities entitled to vote at the
Special Meeting. Holders of record of Common Stock on the Record Date are
entitled to one vote per share, exercisable by Proxy or at the Special Meeting.
-2-
<PAGE> 6
The Company is a Utah corporation and directly owns approximately 401
acres of undeveloped land in St. George, Utah, approximately 355 acres of which
are developable, on which it conducts its real property development business,
primarily through its wholly owned subsidiary, Tonaquint, Inc. ("Tonaquint").
The principal executive offices of the Company are located at 297 West Hilton
Drive, Suite #4, St. George, Utah 84770; the Company's telephone number at such
office is (801) 628-8080.
PROPOSED REVERSE SPLIT
SUMMARY OF THE PROPOSED REVERSE SPLIT
The Company was organized in Utah in 1966 as Utah Industrial, Inc. It was
renamed Utah Resources International, Inc. in 1969. In 1981, the Company became
a "reporting company" requiring it to file various reports with the Securities
and Exchange Commission. On July 3, 1996, the Company consummated a transaction
with Inter-Mountain Capital Corporation ("IMCC"), whereby common stock
representing 50.5% of the outstanding stock of the Company was transferred to
IMCC for $3.35 per share, payable in accordance with the terms of the Stock
Purchase Agreement by and between the Company and IMCC (the "Stock Purchase
Agreement"). The transfer of such shares to IMCC was the product of the
consummation of a Letter of Intent dated April 5, 1996, as amended (the "Letter
of Intent"), the Stock Purchase Agreement, a settlement agreement 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, Jr. and E. Jay Sheen (the "Morgan
Settlement Agreement") and a second settlement agreement 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") (the Letter of
Intent, the Stock Purchase Agreement, the 1996 Settlement Agreement and the
Morgan Settlement Agreement together are the "Transaction Agreements"). On the
basis that: (i) the Company is contractually required to cause a reverse stock
split to occur pursuant to the terms of the Transaction Agreements: (ii) the
belief of a majority of the Board of Directors that the cost of being a
"reporting company" is not economically justified as the Company's Common
Stock is thinly traded; and (iii) the Company does not presently anticipate
raising capital through a public offering, the Board of Directors is presenting
this transaction for a vote of the shareholders.
The Board of Directors has adopted a resolution which sets forth a single
proposal to amend (the "Amendment") the Articles of Incorporation (the "Articles
of Incorporation") of the Company to (i) effect a reverse stock split (the
"Reverse Split") of the Company's outstanding Common Stock as of 4:30 p.m.,
M.S.T., on ______________, 1998 (the "Effective Date") on the basis that each
1,000 shares of Common Stock then outstanding will be converted into one share
of common $100.00 par value stock of the Company (the "New Stock"), with
fractional shareholders given the option to (A) receive cash in the amount of
$3.35 per share of Common Stock in lieu of fractional shares of stock, or (B)
purchase from the Company at a purchase price of $3.35 per share of Common Stock
that portion of fractional shares of Common Stock needed to increase their share
holdings to the next one whole share of New Stock; each shareholder holding less
than one whole share of New Stock as of the Effective Date shall be eliminated
as a shareholder by receiving $3.35 per share in cash in lieu of such fractional
shares of stock.
The Company believes the Reverse Split, if effected, may cause the
following disadvantages and risks to the Company and its shareholders:
1. Deregistration eliminates the Company's obligation to provide
detailed information to the Company's shareholders concerning the
Company's principal shareholders, directors and executive
officers, compensation paid the Company's executives, audited
financial statements and certain relationships in related
transactions between the Company's insiders and the Company,
which under certain circumstances could better enable the
Company's shareholders to assess the financial operations and
policies of a corporation.
2. There will likely be a loss of prestige that being a reporting
company provides.
3. The potential loss of ease of valuation of stock where there is
active trading of such shares on an established securities
exchange (shareholders should note, however, that there has been
no such active trading with the Company's stock).
4. There will likely be decreased liquidity to the remaining
shareholders due to the fact that there is a less public market
for the Company's stock.
5. When the Reverse Split is effected and the Company elects to
cease to be an SEC reporting company, the Company will lose the
potential flexibility for current or future financing of
corporate expansion through the building of a more broad equity
base through publicly offered sales of securities.
For a more detailed description of the disadvantages of the proposed
Reverse Split, see the Section entitled "PROCEDURAL MATTERS," "SPECIAL
FACTORS/Effect of the Proposed Reverse Split, Reasons for the Proposed Reverse
Split, Recommendation of the Board of Directors, and Conduct of the Company's
Business After the Proposed Reverse Split."
The Company believes the Reverse Split, if effected will provide the
following advantages to the Company;
1. The Company is contractually obligated to cause the Reverse Split.
Such obligation arose in connection with IMCC's acquisition of
50.5% of the outstanding shares of the Company's Common
Stock and the settlement of protracted and expensive litigation.
For a more detailed description of the litigation which led to
the settlement agreements, see the Section entitled "MATERIAL
PROCEEDINGS AND TRANSACTIONS." For a more detailed description
of the history of the contractual obligation, see the Sections
entitled "PROCEDURAL MATTERS," "SPECIAL FACTORS/ Effect of the
Proposed Reverse Split, Reasons for the Proposed Reverse Split
and Recommendation of the Board of Directors.
2. The Board of Directors believes that the financial terms of the
Reverse Split are fair both to shareholders who will receive
shares of New Stock and to shareholders who will receive the $3.35
per share because:
(a) IMCC paid $3.35 per share with respect to its acquisition
of a 50.5% interest in the Company on July 3, 1996:
(b) The Company redeemed on July 3, 1996 Anne Morgan and
Victoria Morgan's shares for $3.35 per share, pursuant to
the Settlement Agreement 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"). The court in the Second State Action
reviewed and considered the 1996 Settlement Agreement, the
Stock Purchase Agreement and the 1993 Settlement Agreement,
written memoranda submitted by various parties and other
comments and objections and ordered that: (1) the notice
given pursuant to Rule 23.1 of the applicable rules of civil
procedure for the State of Utah was adequate, fair and
proper; (2) the procedural and substantive objections of
Jenny T. Morgan (a director of the Company at the time and
shareholder of the Company), Gerard E. Morgan, John C.
Morgan and Karen J. Morgan be overruled; (3) the 1996
Settlement Agreement was fair, adequate and reasonable; (4)
the Petition to Terminate the 1993 Settlement Agreement was
fair, adequate and reasonable; and (5) the 1996 Settlement
Agreement and Petition to Terminate the 1993 Settlement
Agreement was approved. For a more detailed description of
the litigation which led to the 1996 Settlement Agreement,
see the Section entitled "MATERIAL PROCEEDINGS AND
TRANSACTIONS." For a more detailed description of the
contractual obligation for the $3.35 per share Reverse Split
price, see the Section entitled "SPECIAL FACTORS/Reasons for
the Proposed Reverse Split";
(c) The closing bid price of the Company's Common Stock for the
fourth quarter of 1997 was $.875, which is far below the
$3.35 per share purchase price being offered by the
Company:
(d) The Reverse Split provides fractional shareholders with the
opportunity to liquidate their holdings at a price
substantially above market trades and without incurring
brokerage costs, particularly given the absence of an active
market for the Common Stock reflective of the Company's
operations and earning potential; and
(e) The Reverse Split provides fractional shareholders who wish
to continue to be shareholders of the Company the option
to elect to exercise the round-up option at a purchase
price of $3.35 per share.
3. The Company will realize cost savings in its cessation as a reporting
company under the Exchange Act.
4. The Company has obtained a fairness opinion with respect to the Reverse
Split transaction, including the $3.35 per share Reverse Split purchase price,
from Centerpoint Advisors, Inc., dated as of February 17, 1998 (the "Fairness
Opinion"), which indicated that the proposed Reverse Split is fair from a
financial point of view to the Company's shareholders. For a more detailed
description of the Fairness Opinion, see the Section entitled, "SPECIAL FACTORS/
Fairness Opinion," and in order to review the Fairness Opinion see Exhibit b.
For a more detailed description of the proposed Reverse Split and its
advantages see the Sections entitled "PROCEDURAL MATTERS", "SPECIAL
FACTORS/Effect of the Proposed Reverse Split, Reasons for the Proposed Reverse
Split and Recommendation of the Board of Directors."
Subsequent to the Reverse Split and after compliance with all
applicable federal and state securities and state corporate laws, the Company
will permit any Common Stock redeemed through the Reverse Split (the "Returned
Shares") to be acquired by the remaining shareholders of the Company, other
than IMCC or its affiliates, as of a record date five days prior to the
effectuation of the Reverse Split (the "Returned Shares Record Date")in 1,000
share increments (the "Returned Shares Option"), at a purchase price equal to
the pre-Reverse Split price of $3.35 per share (the "Returned Shares Purchase
Price"). Pursuant to the Stock Purchase Agreement, 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% interest in the Company. Only those shares for which the Company has
received, within 80 days following the Effective Date, a fully and properly
executed letter of transmittal accompanied by the required documents will
qualify as Returned Shares for purposes of this Returned Shares Option. Such
Common Stock shall be purchased in blocks of 1,000 shares of Common Stock such
that for each purchase of a 1,000 share block of Common Stock shall be
converted into 1 share of New Stock. In the event the Returned Shares Option is
over-subscribed, then each of the remaining 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 Returned Shares
Record Date less those shares held by IMCC), but in no circumstances 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
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<PAGE> 7
"z" equals the number of issued shares of New Stock Shares owned by IMCC.
Twenty-five percent (25%) of the Returned Shares Purchase Price shall be
payable in cash upon exercise, with the remaining balance of $2.51 per share
being evidenced by a promissory note, payable in three years (the "Returned
Shares Note"). Subject to applicable Internal Revenue Service rules, the
Returned Shares 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 Shares 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 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 Shares 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 Shares Note.
The Reverse Split would be effected by the filing of the Amendment
with the Utah Division of Corporations and Commercial Code and the occurrence
of the Effective Date. The form of the Amendment is set forth in full on
Exhibit A to this Proxy Statement. The Reverse Split will increase and
decrease, respectively, the existing par value per share of the Company's stock
and the total shares outstanding of such stock.
The effect of the Reverse Split on the holders of Common Stock will be
as follows:
1. Fractional Shareholders who DO NOT elect to "round up" their
holdings at least 10 days prior to the Effective Date will
have their fractional shares automatically converted into the
right to receive cash in lieu of the fractional shares of New
Stock otherwise issuable to such holder in the amount set
forth herein. Shareholders who hold fewer than 1,000 shares of
Common Stock who do not elect to "round up" their holdings at
least 10 days prior to the Effective Date will on the Effective
Date be eliminated as shareholders of the Company. (See
"PROPOSED REVERSE SPLIT/Option to Round Up Stock Holdings and
Cash Payment in Lieu of Fractional Shares").
2. Fractional Shareholders who DO elect to "round up" their
holdings to aggregate one whole share of New Stock will have,
subject to their full compliance with all provisions applicable
to rounding up, on the Effective Date their (then) whole
shares of Common Stock automatically converted into shares of New
Stock. (See "PROPOSED REVERSE SPLIT/Option to Round Up Stock
Holdings").
3. Holders of record of 1,000 or more shares of Common Stock on
the _________ __, 1998 (the "Record Date") will have their
shares automatically converted after the Reverse Split into
the number of whole and fractional shares of New Stock equal
to the number of shares of Common Stock outstanding and
-4-
<PAGE> 8
held by them immediately prior to the Effective Date divided
by 1,000. Such shareholders may also elect no later than 10 days
prior to the Effective Date to have their fractional shares of
Common Stock "rounded up" to aggregate one whole share of New
Stock. (See "PROPOSED REVERSE SPLIT/Option to Round Up Stock
Holdings and Cash Payment in Lieu of Fractional Shares").
OPTION TO ROUND UP STOCK HOLDINGS
The Board of Directors of the Company determined that it would be
appropriate to give each existing shareholder of the Company the opportunity to
remain as a shareholder of the Company. Without this opportunity, all holders
of less than 1,000 shares of Common Stock (the "Small-Lot Shareholders") would,
as a result of the Reverse Split, receive cash in exchange for their shares of
Common Stock and would cease to be shareholders of the Company. To allow any
Small-Lot Shareholder to avoid that result, the Company is offering Small-Lot
Shareholders and fractional shareholders the option to "round up" their holdings
of shares of stock in the Company to aggregate one whole share of New Stock
after completion of the Reverse Split by purchasing additional fractional shares
of Common Stock in full and in cash (at $3.35 per share, which price is
equivalent to the per share price the Company will pay to shareholders electing
to "cash out" their fractional share holdings) necessary to round-up to
aggregate one whole share of New Stock.
A Small-Lot Shareholder and fractional shareholder will, as a result
of the Reverse Split, have such fractional shares automatically converted into
the right to receive ONLY cash (the "Cash Consideration") IF THE SMALL-LOT
SHAREHOLDER OR FRACTIONAL SHAREHOLDER DOES NOT TIMELY EXERCISE THE FOLLOWING
OPTION TO ROUND UP THE SMALL-LOT SHAREHOLDER'S OR FRACTIONAL SHAREHOLDER'S
HOLDINGS OF STOCK OF THE COMPANY. In order to round up (and forego the Cash
Consideration), a shareholder must: (a) provide notice to the Company of their
intent to exercise their option to "round up" no later than 10 days prior to the
Effective Date, and (b) within 30 days after the Effective Date each Small-Lot
Shareholder and fractional shareholder must elect to round up by paying $3.35 in
full and in cash for each 1/1000th share needed to round up the Small-Lot
Shareholder's holdings and the fractional shareholder's holdings to equal an
aggregate of one whole share of New Stock (the "Round Up Option"). In other
words, a holder of less than 1,000 shares or any increment thereof of Common
Stock before the Reverse Split would be required to give notice to the Company
of its intent to "round up" at least 10 days prior to the Effective Date, and
purchase, within 30 days after the Effective Date, in full and in cash the
fractional shares of Common Stock needed to increase his or her holdings to the
equivalent of 1,000 shares or the next increment of 1,000 shares of Common Stock
before the Reverse Split. The amount of cash required to "round up" will be
equal to the product of 1,000 minus the number of shares initially owned or that
number of shares in excess of a multiple of 1,000 shares multiplied by $3.35
(For example, if a shareholder currently owns 500, 1,500, or 2,500 shares, the
cost to "round up" would be $1,675 (500 x $3.35 = $1,675)). A Small-Lot
Shareholder or fractional shareholder desiring to take advantage of the Round Up
Option must both: (a) give notice to the Company of its election to exercise the
"round up" option no later than 10 days prior to the Effective Date, and (b)
exercise the Round Up Option within 30 days after the Effective Date. (See
"SPECIAL FACTORS/Exercise of Round Up Option and Exchange of Stock
Certificates"). A Small-Lot Shareholder or fractional shareholder who does not
provide notice to the Company of his/her/its intent to exercise the "round up"
option at least 10 days prior to the Effective Date shall only be entitled to
receive Cash Consideration and the Small-Lot Shareholders will be eliminated as
shareholders of the Company. After expiration of such 30-day period, each
Small-Lot Shareholder who properly gave notice to the Company of his/her/its
intent to exercise the "round up" option but who has not paid the full Cash
Consideration will be eliminated as a shareholder of the Company and shall only
be entitled to receive the Cash Consideration. After expiration of such 30-day
period, each fractional shareholder who has not exercised the Round Up Option
shall remain as a
-5-
<PAGE> 9
shareholder of the Company and shall be entitled to receive Cash Consideration
for such fractional shares.
CASH PAYMENT IN LIEU OF FRACTIONAL SHARES
In lieu of issuing fractional shares of Common Stock resulting from
the Reverse Split, the Company will pay Cash Consideration to Small-Lot
Shareholders and fractional shareholders who fail to timely exercise the Round
Up Option based upon a value per outstanding share of Common Stock immediately
prior to the Effective Date of $3.35 per share. (For a discussion of the
fairness of the price of $3.35 per share for the Common Stock, see "SPECIAL
FACTORS/Recommendation of the Board of Directors").
In the event the Reverse Split is adopted, shareholders will receive a
letter of transmittal regarding surrender of certificates formerly representing
Common Stock of the Company for certificates evidencing shares of New Stock,
cash in lieu of fractional shares and exercise of the Round Up Option. (See
"PROPOSED REVERSE SPLIT/Exercise of Round Up Option and Exchange of Stock
Certificates").
MARKET PRICE
In lieu of issuing fractional shares resulting from the Reverse Split, the
Company will pay cash to certain shareholders based upon a value per outstanding
share of Common Stock held immediately prior to the Effective Date of $3.35 per
share. The Company's Common Stock is listed on the OTC Bulletin Board
through the Automated Quotation System, under the symbol "UTRS." The following
table sets forth the closing bid prices for 1996 and 1997, for the Company's
Common Stock as reported by National Quotation Bureau, Inc. The quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and do not represent actual transactions and have not been adjusted for stock
dividends or splits.
-6-
<PAGE> 10
1997 1996
---- ----
Period High Low High Low
- ------ ---- --- ---- ---
First Quarter $.875 $.875 $1.00 $.625
Second Quarter $.875 $.875 $1.50 $.75
Third Quarter $.875 $.875 $1.00 $.875
Fourth Quarter $.875 $.25 $.875 $.875
Except for certain transactions including: (i) the Split-Off Agreement
by and between MidWest Railroad Construction and Maintenance Corporation
("Midwest") and the Company (the "Split-Off Agreement"), wherein the Company
returned its Midwest shares to Robert D. Wolff and Judith J. Wolff (together
the "Wolffs") in exchange for the 590,000 shares of the Company's stock held by
the Wolffs, (ii) the 1996 Settlement Agreement, 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"), 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 Proxy Statement. (See "SPECIAL FACTORS/IMCC Transaction and
Settlement Agreements"). The Company did declare a $.10 cash dividend which
was paid 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. Approximately 479 shareholders hold less than
1,000 shares of the Company's Common Stock.
With respect to the Reverse Split, in the event all of the fractional
shareholders elect to round up to the next whole share, then a maximum of
429,192 shares would be issued, which figure does not include the shares of the
Company's Common Stock held by brokerage firms or other third party nominees.
With respect to the mechanism whereby the shareholders may purchase the
returned shares, if the Company redeems all of the fractional shares in the
Reverse Split, then a maximum of 103,808 shares would be available for the pool,
which figure does not include the shares held by brokerage firms or other third
party nominees.
AMENDMENT TO ARTICLES OF INCORPORATION
Assuming approval of the Reverse Split by the shareholders at the Special
Meeting, the Amendment to the Articles of Incorporation in the form of Exhibit A
attached hereto will be filed with the Utah Division of Corporations and
Commercial Code and will become effective on the Effective Date thereof. Under
the Amendment, without any further action on the part of the shareholders,
shares of issued and outstanding Common Stock immediately prior to the Effective
Date, will be converted into the right to receive the number of shares of New
Stock equal to the number of shares of Common Stock held of record by a
shareholder, divided by 1,000 or, in the case of Small-Lot Shareholders and
shareholders of fractional shares who do not exercise the Round Up Option, the
right to receive the Cash Consideration, for such fractional shares
-7-
<PAGE> 11
as of 6:00 p.m., M.S.T. on the Effective Date.
The Amendment will, by its terms, decrease the number of shares of the
Company's authorized Common Stock from 5,000,000 shares at $.10 par value
per share to 5,000 shares of $100.00 par value per share to effectuate
the Reverse Split.
EXERCISE OF ROUND UP OPTION AND EXCHANGE OF STOCK CERTIFICATES
After the approval of the Reverse Split, each shareholder will be
mailed a notice of filing ("Notice of Filing") and a letter of transmittal
("Letter of Transmittal"). The Notice of Filing will indicate that the
Amendment was filed and the Effective Date thereof. The Letter of Transmittal,
and instructions relating thereto, will set forth the procedures by which
shareholders will (i) if such shareholder is a Small-Lot Shareholder or a
fractional shareholder, complete their election to exercise the Round Up Option
(or forego the Round Up Option and complete their election to receive only the
Cash Consideration of a Small-Lot Shareholder or fractional shareholder for such
shares in excess of multiples of 1,000 shares), and (ii) tender their Common
Stock stock certificates in exchange for the Cash Consideration or New Stock
stock certificates (and, if applicable, cash in lieu of fractional shares). A
shareholder will be able to receive his New Stock and/or cash only by
transmitting to the Company (A) a properly executed and completed Letter of
Transmittal, (B) stock certificate(s) for Common Stock and such evidence of
ownership of such shares as the Company may require, and (C) cash payment
necessary for exercise of a Small-Lot Shareholder's or fractional shareholder's
Round Up Option, if applicable. Payments of cash by the Company to the
shareholders will be made only upon delivery of the relevant items which will be
more specifically described in the Letter of Transmittal sent to each
shareholder after approval of the Reverse Split. Similarly, shareholders who
will remain such after the Effective Date will not receive certificates for New
Stock unless and until the certificates representing their Common Stock are
surrendered or such evidence of ownership of such shares as the Company may
require is provided.
THE NOTICE OF FILING AND THE LETTER OF TRANSMITTAL WILL BE TRANSMITTED
BY THE COMPANY TO SHAREHOLDERS ON OR AFTER THE EFFECTIVE DATE. SHAREHOLDERS
SHOULD NOT SEND IN THEIR CERTIFICATES OR PAYMENT FOR ADDITIONAL SHARES UNTIL
THE NOTICE OF FILING AND LETTER OF TRANSMITTAL ARE RECEIVED AND SHOULD
SURRENDER THEIR CERTIFICATES AND, IF APPLICABLE, PAYMENT FOR EXERCISE OF THE
ROUND UP OPTION ONLY WITH SUCH LETTER OF TRANSMITTAL.
There will be no direct service charges or sales commissions payable
by the remaining shareholders in connection with the exchange of their
certificates or by holders of fractional shares in connection with the payment
of cash in lieu of the issuance of fractional Common Stock or fractional New
Stock. These costs will be borne by the Company.
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<PAGE> 12
VOTING REQUIREMENTS
Only holders of record of shares of Common Stock at the close of
business on the Record Date will be entitled to notice of and vote at the
Special Meeting. On the Record Date there were approximately 2,522,808 shares
of Common Stock outstanding. Each such share will be entitled to one vote on
each matter considered at the Special Meeting. Under Utah law the affirmative
vote of a majority of all shares of Common Stock entitled to vote thereon is
required to approve the Reverse Split. Approval by a majority of the
non-affiliated shareholders is not required to approve the Reverse Split. By
virtue of a Board of Directors' resolution, the Board has agreed to make
dissenter's rights available, as more fully described in Part 13 to the Utah
Business Corporation Act, to those shareholders who: (i) possess fractional
shares which are eligible to be purchased by the Company pursuant to the
Reverse Split, (ii) do not approve the Reverse Split and believe that such
fractional shares being purchased by the Company pursuant to the Reverse Split
have a value in excess of $3.35 per share, and (iii) follow the guidelines
outlined in Part 13 to the Utah Business Corporation Act. At the Record Date,
the Company's executive officers and directors in the aggregate held with the
power to vote approximately 1,279,912 shares of Common Stock, constituting
approximately 50.65% of the shares of Common Stock entitled to vote at the
Special Meeting see the Section entitled "VOTING SECURITIES AND PRINCIPAL
HOLDERS THEREOF." IMCC, the holder of 50.5% of the shares of Common Stock, has
indicated that it will vote in favor of the Reverse Split.
The cost of soliciting Proxies will be borne by the Company. In
addition to the use of the mails, Proxies may be solicited by the directors,
officers, and employees of the Company, without additional compensation, by
personal interview, telephone, telegram or otherwise.
DISSENTERS' RIGHTS
Assuming that the Reverse Split is approved by the shareholders, by
virtue of the Board of Directors passing a resolution to the effect, the Board
has agreed to make dissenter's rights available, as more fully described in
Part 13 to the Utah Business Corporation Act (the "Utah Business Act"), to those
shareholders who: (i) possess fractional shares which are eligible to be
purchased by the Company pursuant to the Reverse Split, (ii) do not approve the
Reverse Split and believe that such fractional shares being purchased by the
Company pursuant to the Reverse Split have a value in excess of $3.35 per share,
and (iii) follow the guidelines outlined in Part 13 to the Utah Business Act.
Any holder of less than 1,000 shares or any increment thereof of Common Stock
who is a shareholder of the Company as of the Record Date and does not assent to
the Reverse Split and believes that his or her shares have a value greater than
$3.35 per share will have the right upon compliance with specific procedures, to
demand from the Company payment of the fair value of such shareholder's
fractional shares. The Board of Directors believes that $3.35 per share is the
fair value of the shares of the Company. For a detailed discussion of the
fairness of the $3.35 per share purchase price, see the Section entitled
"SPECIAL FACTORS/Recommendation of the Board of Directors."
Assuming that the Reverse Split is approved by the shareholders, a
holder of less than 1,000 shares or any increment thereof of Common Stock who
objects to the Reverse Split and who believes that such fractional shares being
purchased by the Company pursuant to the Reverse Split have a value in excess
of $3.35 per share, will have appraisal rights, only for those fractional
shares, if he or she complies with all of the provisions of Part 13 of the Utah
Business Act. Shareholders who follow the procedures ("Dissenting
Shareholders") may receive
-9-
<PAGE> 13
a cash payment equal to the fair value of their shares (to the extent such fair
value exceeds $3.35 per share), determined exclusive of any element of value
arising from accomplishment or expectation of the Reverse Split. In order for a
Dissenting Shareholder to pursue a fair value cash payment for such fractional
shares, the Reverse Split must be approved and the Dissenting Shareholder (a)
must cause the Company to receive, 10 days before the Special Meeting date,
written notice of his/her/its intent to demand payment for shares if the
proposed action is effected; (b) must not vote any of his/her/its shares in
favor of the proposed action; (c) must have been a shareholder with respect to
the Common Stock for which payment is demanded as of the Special Meeting date;
(d) must cause the Company to receive a payment demand within 45 days following
the shareholders receipt of the dissenter's notice from the Company; (e) must
deposit certificates for his/her/its certificated shares within 45 days
following the shareholders receipt of the dissenter's notice from the Company;
(f) must certify in writing, in or with the payment demand, whether or not
he/she/it or the person on whose behalf he asserts dissenters' rights acquired
beneficial ownership of the shares before the date of the first announcement to
news media or to shareholders of the terms of the proposed corporate action
creating dissenters rights; and (g) otherwise follow the procedures as set
forth in Part 13 of the Utah Business Act, which is reproduced in full as
Exhibit e to this Proxy Statement. A shareholder who does not demand payment
and deposit share certificates as required is not entitled to payment for
shares. This outline is intended to act as a brief description of what
procedures shareholders must follow in order to be entitled to receive
dissenters' rights. A return of an executed proxy card without any
specification as to the way the shares are to be voted will be treated as a
vote in favor of the Reverse Split and will constitute a waiver of his/her/its
demand rights under Part 13 of the Utah Business Act. Furthermore, a proxy
card with a vote against the Reverse Split, alone, will not serve as a written
demand for payment. Written demands must be filed with Ladd Eldredge, Utah
Resources International, Inc., 297 West Hilton Drive, Suite #4, St. George,
Utah 84770 no later than 10 days prior to the Special Meeting date. The
written demand must reasonably inform the Company of the shareholder's identity
and of the intention to demand payment of his/her/its shares thereby. Within
10 days after the Effective Date of the Reverse Split, the Company is required
to give notice that the Reverse Split has become effective to shareholders who
have made written demands. Shareholders who hold more than 1,000 shares of
Common Stock may exercise appraisal rights for only the fractional shares held
by such shareholder. For example, if a shareholder owns 1,500 shares of Common
Stock, such shareholder may only exercise his/her/its appraisal rights with
respect to 500 shares of Common Stock. Such shareholder's remaining 1,000
shares of Common Stock will be converted into 1 share of New Stock.
If a demand for payment remains unresolved, the Company shall commence
a proceeding within 60 days after receiving a payment demand from a
dissatisfied shareholder as provided under Section 16-10a-1328 of the Utah
Business Act, in the district court of county, and petition the court
to determine the fair value of the shares and the amount of interest.
The shares of any Dissenting Shareholder who subsequently withdraws or
loses these rights of appraisal with respect to the fractional shares will be
converted into cash pursuant to the terms of the Reverse Split on the same
basis as if they had made no demands for payment.
A shareholder's failure to vote on the Reverse Split will constitute a
waiver of his/her/its demand rights under Part 13 of the Utah Business Act. A
vote against the Reverse Split will not satisfy the requirements with respect
to a written demand for payment referred to above or the other actions
specified in Part 13 of the Utah Business Act to perfect such payment rights,
and such written demand for payment must be in addition to and separate from
any proxy or vote against the Reverse Split.
Only holders of record of less than 1,000 shares or any increment
thereof of Common Stock are entitled to demand rights for those fractional
shares as described above, and the procedures to perfect such rights must be
carried out by and in the name of holders of record. Persons who are
beneficial but not record owners of less than 1,000 shares or any increment
thereof and who wish to exercise payment rights with respect to these
fractional shares and the Reverse Split should consult promptly with the record
holders of their shares as to the exercise of such rights.
The foregoing does not purport to be a complete statement of the
provisions of Part 13 of the Utah Business Act and is qualified in its entirety
by reference to that Part, which is reproduced in full as Exhibit e to this
Proxy Statement.
Exchange of Stock Certificates for Cash
No later than 10 days after the Effective Date of the proposed Reverse
Split, each of the shareholders of the Company entitled to demand payment for
their shares shall be sent a written dissenters' notice for use in his/her/its
use in surrendering the fractional stock certificates to the Company, c/o Ladd
Eldredge, Utah Resources International, Inc., 297 West Hilton Drive, Suite #4,
St. George, Utah 84770. Upon such surrender, each holder will be entitled to
receive $3.35 in cash for each share represented by the surrendered
certificates. Until so surrendered, each outstanding certificate, which prior
to the Effective Date of the proposed Reverse Split shall be deemed for all
purposes to represent only the right $3.35 in cash per share.
After the Effective date of the Reverse Split, payment for the
Company's fractional shares will be made by the Company as soon as practicable
upon surrender to it of certificates representing such fractional shares.
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<PAGE> 14
REGULATORY REQUIREMENTS
The Company has concluded that the Reverse Split will not require the
approval of any government agency.
PURCHASE OF RETURNED SHARES
Subsequent to the Reverse Split and upon compliance with all applicable
federal and state securities and state corporate laws, the Company will permit
any Common Stock redeemed through the Reverse Split (the "Returned Shares") to
be acquired by the remaining shareholders of the Company, other than IMCC its
affiliates, as of a record date five days prior to the effectuation of the
Reverse Split (the "Returned Shares Record Date"), in increments of 1,000 shares
(the "Returned Shares Option"), at a purchase price per share equal to the
pre-Reverse Split share price of $3.35 per share (the "Returned Shares Purchase
Price"). Only those shares for which the Company has received, within 80 days
following the Effective Date, a fully and properly executed Letter of
Transmittal accompanied by the required documents will qualify as Returned
Shares for purposes of this Returned Shares Option. Such Common Stock shall be
purchased in blocks of 1,000 shares of Common Stock such that each shareholder
purchase of a 1,000 share block of Common Stock shall be converted into 1 share
of New Stock. In the event the Returned Shares Option is over-subscribed, then
each of the remaining 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 Returned Shares Record Date less those shares
held by IMCC) but in no circumstances 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
Shares Purchase Price shall be payable immediately in cash upon exercise of the
Returned Shares Option with the remaining balance of $2.51 per share being
evidenced by a promissory note, payable in three years (the "Returned Shares
Note"). Subject to applicable Internal Revenue Service rules, the Returned
Shares Note will 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 Shares 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 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
Shares 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 Shares Note.
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<PAGE> 15
SPECIAL FACTORS
EFFECT OF THE PROPOSED REVERSE SPLIT
The Board of Directors has requested that the shareholders consider and
vote upon a proposal to amend the Company's Articles of Incorporation to effect
a reverse split of the Company's issued and outstanding common, $.10 par value
per share stock (the "Common Stock"), as of p.m., M.S.T., on ,
1998 on the basis that each 1,000 shares of Common Stock then outstanding will
be converted into 1 share of common, $100.00 par value per share stock (the "New
Stock"), with shareholders holding less than 1,000 shares of Common Stock or any
increment thereof (after being given an option to purchase additional shares as
needed to "round up" to the equivalent of 1,000 shares at a price of $3.35 per
share) being paid in cash in exchange for their fractional shares at a price of
$3.35 per share for each share outstanding immediately prior to such reverse
split (the "Reverse Split"). As a result of the Reverse Split, the Company is
expected to become a non-SEC reporting Company. See the Section entitled
"SPECIAL FACTORS/Conduct of the Company's Business After the Proposed Reverse
Split."
Disadvantages and Risks
The disadvantages and risks to the Company and its shareholders associated
with the Company effecting the Reverse Split are as follows:
1. Deregistration eliminates the Company's obligation to provide
detailed information to the Company's shareholders concerning
the Company's principal shareholders, directors and executive
officers, compensation paid the Company's executives, audited
financial statements and certain relationships in related
transactions between the Company's insiders and the Company,
which under certain circumstances could better enable the
Company's shareholders to assess the financial operations and
policies of a corporation.
2. There will likely be a loss of prestige that being a reporting
company provides.
3. The potential loss of ease of valuation of stock where there is
active trading of such shares on an established securities
exchange (shareholders should note, however, that there has
been no such active trading with the Company's stock).
4. There will likely be decreased liquidity to the remaining
shareholders due to the fact that there is a less public market
for the corporation's stock.
5. When the Reverse Split is effected and the Company elects to
cease to be an SEC reporting company, the Company will lose the
potential flexibility for current or future financing of
corporate expansion through the building of a more broad equity
base through publicly offered sales of securities.
For a more detailed description of the disadvantages of the proposed
Reverse Split, see the Sections entitled "PROCEDURAL MATTERS," "PROPOSED
REVERSE SPLIT/Summary of the Proposed Reverse Split", and "SPECIAL
FACTORS/Reasons for the Proposed Reverse Split, Recommendation of the Board of
Directors, and Conduct of the Company's Business After the Proposed Reverse
Split."
Advantages
The advantages of the Company effecting the Reverse Split are as follows:
1. The Company is contractually obligated to cause the Reverse
Split. Such obligation arose in connection with IMCC's
acquisition of 50.5% of the outstanding shares of the Company's
Common Stock and the settlement of protracted and expensive
litigation. For a more detailed description of the litigation
which led to the settlement agreement, see the Section entitled
"MATERIAL PROCEEDINGS AND TRANSACTIONS." For a more detailed
description of the history of the contractual obligation, see
the Section entitled "SPECIAL FACTORS/Reasons for the Proposed
Reverse Split."
2. A majority of the Board of Directors believes that the
financial terms of the Reverse Split are fair both to
shareholders who will receive shares of New Stock and to
shareholders who will receive the $3.35 per share because:
(a) IMCC paid $3.35 per share with respect to its
acquisition of a 50.5% interest in the Company on July
3, 1996;
(b) The Company redeemed on July 3, 1996 Anne Morgan and
Victoria Morgan's shares for $3.35 per share, pursuant
to the Settlement Agreement 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"). The court in
the Second State Action reviewed and considered the
1996 Settlement Agreement, the Stock Purchase Agreement
and the 1993 Settlement Agreement, written memoranda
submitted by various parties and other comments and
objections and ordered that: (1) the notice given
pursuant to Rule 23.1 of the applicable rules of civil
procedure for the State of Utah was adequate, fair and
proper; (2) the procedural and substantive objections of
Jenny T. Morgan (a director of the Company at the time
and shareholder of the Company), Gerard E. Morgan, John
C. Morgan and Karen J. Morgan be overruled; (3) the 1996
Settlement Agreement was fair, adequate and reasonable;
(4) the Petition to Terminate the 1993 Settlement
Agreement was fair, adequate and reasonable; and (5) the
1996 Settlement Agreement and Petition to Terminate the
1993 Settlement Agreement was approved. For a more
detailed description of the litigation which led to the
1996 Settlement Agreement, see the Section entitled
"MATERIAL PROCEEDINGS AND TRANSACTIONS." For a more
detailed description of the contractual obligation for
the $3.35 per share Reverse Split price, see the Section
entitled "SPECIAL FACTORS/Reasons for the Proposed
Reverse Split,"
(c) The closing bid price of the Company's Common Stock for
the fourth quarter of 1997 was $.875, which is far below
the $3.35 per share purchase price being offered by
the Company;
(d) The Reverse Split provides fractional shareholders with
the opportunity to liquidate their holdings at a price
substantially above market trades and without incurring
brokerage costs, particularly given the absence of an
active market for the Common Stock reflective of the
Company's operations and earning potential; and
(e) The Reverse Split provides fractional shareholders who
wish to continue to be shareholders of the Company to
elect to exercise the round-up option at a purchase
price of $3.35 per share.
3. The Company will realize cost savings in its cessation as a
reporting company under the Exchange Act.
4. The Company has obtained a fairness opinion with respect to the
Reverse Split transaction, including the $3.35 per share Reverse
Split purchase price, from Centerpoint Advisors, Inc., dated as
of February 17, 1998 (the "Fairness Opinion"), which indicated
that the proposed Reverse Split is fair from a financial point
of view to the Company's shareholders. For a more detailed
description of the Fairness Opinion, see the Section entitled,
"SPECIAL FACTORS/ Fairness Opinion," and in order to review the
Fairness Opinion see Exhibit b.
For a more detailed description of the proposed Reverse Split and its
advantages see the Sections entitled "PROPOSED REVERSE SPLIT/Summary of the
Proposed Reverse Split", and "SPECIAL FACTORS/Reasons for the Proposed Reverse
Split and Recommendation of the Board of Directors."
The Reverse Split will be effected by means of the filing of the
Amendment and the occurrence of the Effective Date. Both affiliated and
non-affiliated shareholders will be given the option to either (a) round-up
their fractional shares to the next whole share at a purchase price of $3.35
per share, or (b) have their fractional shares redeemed by the Company at a
purchase price of $3.35 per share. Over the past ten years, the Company's
shareholders have received only $.10 in dividends. Furthermore, the Company's
stock is traded sporadically within a narrow range on the market. The Reverse
Split and round up option provide the Company's shareholders with the option to
either (1) exit the Company and receive fair value for their shares; or (2)
continue their ownership in the Company with the hope of receiving a return on
their investment in the future. Following the Effective Date, the Common Stock
owned by each Small-Lot Shareholder who does not exercise the Round Up Option
will represent solely the right to receive the Cash Consideration for such
fractional shares. The interest of each such Small-Lot Shareholder in the
Company will thereby be terminated, and such Small-Lot Shareholder will no
longer have any right to vote as a shareholder and will no longer share in the
assets or any future earnings of the Company. Each holder of 1,000 or more
shares of Common Stock before the Reverse Split that does not exercise the
Round Up Option will continue to be a shareholder of the Company with rights to
vote as a shareholder and rights to share in the assets and any future earnings
of the Company and will receive the Cash Consideration for such fractional
shares.
On the Effective Date, each shareholder of record who owns one or more
whole shares of New Stock (including holders of 1,000 or more shares of Common
Stock before the Reverse Split AND Small-Lot Shareholders who timely exercise
the Round Up Option) will continue as a shareholder of the Company with respect
to the share or shares of New Stock resulting from the Reverse Split.
The Company has authorized capital stock of 5,000,000 shares of $.10
par value per share common stock. The number of shares of authorized common
stock will, as a result of the Amendment, be decreased to 5,000 shares of
$100.00 par value per share common stock. (See "PROPOSED REVERSE
SPLIT/Amendment to Articles of Incorporation"). As of November 19, 1997, the
number of issued and outstanding shares of Common Stock was 2,522,808. Based
upon the Company's best estimates (assuming no Small-Lot Shareholders and no
fractional shareholders exercise pre-split the Round Up Option and no
shareholders elect to purchase the Returned Shares), the number of issued and
outstanding shares of Common Stock will be reduced as a result of the Reverse
Split from 2,522,808 to approximately 2,419,000, and the number of shareholders
of record will be reduced from approximately 558 to approximately 79. There
will be approximately 5,000 authorized, and 2,419 issued shares of New Stock
following the Reverse Split, if no shareholders participate in the Round Up
Option Offering or the Returned Shares Option Offering.
The Common Stock is currently registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and as a result, the Company is
subject to the periodic reporting and other requirements of the Exchange Act.
Upon consummation of the Reverse Split, if the total number of shareholders is
reduced to below 300, and filing is consistent with applicable state and federal
securities laws, the Company will file a Form 15 with the Securities and
Exchange Commission ("SEC") to deregister as a reporting company under the
Exchange Act. Deregistration of the Company under the Exchange Act will
significantly reduce the cost of legal and accounting services, in addition to
the administrative burden of compliance with the filing and other requirements
of registration under the Exchange Act. (See "SPECIAL FACTORS/Reasons for the
Proposed Reverse Split").
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<PAGE> 16
BACKGROUND OF THE PROPOSED REVERSE SPLIT
The Company was organized in Utah in 1966, as Utah Industrial Inc. It
was renamed Utah Resources International, Inc. in 1969. In 1981, the Company
became a "reporting company" requiring it to file various reports with the SEC.
The Company directly owns approximately 400 acres of undeveloped land in St.
George, Utah, approximately 354 acres of which are developable, on which it
conducts its real property development business through its wholly owned
subsidiary, Tonaquint, Inc.
As a "reporting company," the Company and its "insiders" (generally
defined to include the Company's directors, executive officers and 10% or more
shareholders) have reported to the SEC (pursuant to the Exchange Act) since it
became a public company. In general, under Section 12(g) of the Exchange Act,
a corporation and its insiders are required to file certain periodic and annual
reports with the SEC once the corporation acquires over 500 shareholders (and
maintains over $10 million in assets) and complies with applicable securities
laws. The Company currently files various periodic and annual reports with the
SEC, as mandated by Section 12(g) of the Exchange Act, although in recent years
some reports required to be filed by the Company have been filed late or not at
all. The Company's periodic and annual filings include, but are not limited to,
Form 10-KSB, Form 10-QSB, Form 8-K, Proxy Statement and Annual Reports to
shareholders. In addition, the Company's insiders are also required to file
certain periodic and annual reports with the SEC. The Company's insider
reporting requirements include, but are not limited to, Schedule 13D, Schedule
13G, Form 3, Form 4 and Form 5 filings. Finally, the Company and its insiders
may be subject to potential civil and criminal liability if actions on behalf of
the Company were found to violate the provisions of the Exchange Act and the
numerous regulations adopted thereunder.
There are certain advantages to being a "reporting company" under the
Exchange Act. The primary advantage is the potential flexibility for current
or future financing of corporate expansion through the building of a more broad
equity base through publicly offered sales of securities. Furthermore,
registration may provide greater prestige because of the "public" nature of the
corporation. In addition, the valuation of shares of a corporation's stock may
be made easier if there is active trading of such shares on an established
securities exchange.
Registration as a reporting company may also engender a more public
market for a corporation's stock, due to active trading, thus providing
increased liquidity for shareholders who desire to sell the corporation's
stock. Finally, a corporation reporting to the SEC under the Exchange Act must
provide detailed information to its shareholders concerning a corporation's
principal shareholders, directors and executive officers, compensation paid a
corporation's executives, audited financial statements and certain
relationships in related transactions between a corporation's insiders and the
corporation. Under certain circumstances, this could better enable a
corporation's shareholders to assess the financial operations and policies of a
corporation.
On July 3, 1996, the Company consummated a transaction with IMCC,
whereby Common Stock, representing 50.5% of the outstanding stock of the
Company, was transferred to IMCC at a price of $3.35 per share and payable in
accordance with the terms set forth in the
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<PAGE> 17
Stock Purchase Agreement by and between IMCC and the Company (the "Stock
Purchase Agreement"). The transfer of such shares to IMCC was made pursuant to
the transactions contemplated by a Letter of Intent dated April 5, 1996, as
amended, by and between IMCC and the Company, (the "Letter of Intent"), and a
settlement agreement 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"), a settlement agreement 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 (the "Morgan Settlement
Agreement") (collectively, the "Transaction Agreements"). (See "SPECIAL
FACTORS/IMCC Transaction and Settlement Agreements"). Among other things,
pursuant to IMCC's Stock Purchase Agreement, IMCC agreed to cause the Company
to effect the Reverse Split. In addition to the requirements of the IMCC Stock
Purchase Agreement, the Company's senior management and its Board of Directors
have assessed the advantages and disadvantages of the Company being a reporting
company under the Exchange Act. Of the approximate 558 Shareholders, it was
noted that approximately 479 Shareholders of record own fewer than 1,000 shares.
In addition, senior management and the Board of Directors of the Company noted
that there was little or no public market for the Company's Common Stock. Upon
consummation of the Reverse Split, the Company plans to eventually deregister as
a reporting company under the Exchange Act. Deregistration will significantly
reduce the cost of the Company's legal and accounting services by eliminating
the requirements that the Company make periodic and annual filings with the SEC.
Deregistration would also reduce or eliminate the potential exposure of the
Company and its insiders for possible failure to comply with Exchange Act
requirements. Finally, the Company has obtained a fairness opinion with respect
to the Reverse Split transaction, including the $3.35 per share Reverse Split
purchase price, from Centerpoint Advisors, Inc., dated as of February 17, 1998
(the "Fairness Opinion"), which indicated that the proposed Reverse Split is
fair from a financial point of view to the Company's shareholders. For a more
detailed description of the Fairness Opinion, see the Section entitled, "SPECIAL
FACTORS/ Fairness Opinion," and in order to review the Fairness Opinion see
Exhibit b.
In considering an ownership restructuring transaction, the Board of
Directors also considered the possible detrimental effects of such a
transaction. An ownership restructuring transaction might reduce the potential
flexibility for current or future financing of the Company's expansion through
the building of a more broad equity base. In addition, a public company
reporting under the Exchange Act must provide detailed information to its
shareholders concerning its principal shareholders, directors, and executive
officers, compensation paid to its executives, audited financial statements and
certain relationships and related transactions between the company's insiders
and the company. Upon consummation of the proposed ownership restructuring
transaction, the Company will cease reporting under the Exchange Act; and
therefore, less financial and other information will be available to the
shareholders with respect to the Company, and its officers, directors and
principal shareholders. This might limit a shareholder's ability to assess the
financial operations and policies of the Company. Notwithstanding such
potential detrimental effects, the Board of Directors concluded that in light of
the contractual requirements of the Transaction Agreements and the belief of the
Board of Directors that continuing as a "reporting company" was too costly, the
Board of Directors determined that an ownership restructuring, designed to
deregister the Company, was the most appropriate course of action. See "SPECIAL
FACTORS/Recommendation of the Board of Directors".
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<PAGE> 18
On January 22, 1997, a majority of the Board of Directors voted that a
restructuring of the stock ownership be accomplished through a reverse stock
split and approved the Reverse Split in the form discussed in this Proxy
Statement on _______ __, 1998, a ______________ of the Board of Directors
confirmed and ratified the action taken on January 22, 1997 and directed that a
proposal for the Reverse Split be submitted to a vote of the shareholders. On
_____________ __, 1998 the Board of Directors set the Record Date of the Special
Meeting as _________, and set ________, 1998 as the date of the Special Meeting.
IMCC TRANSACTION AND SETTLEMENT AGREEMENTS
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, (John H. Morgan, Jr. and Daisy R.
Morgan were shareholders and directors of the Company at this time), to enforce
the 1993 Settlement Agreement in the First State Action which resulted in
certain findings of fact and conclusions of law that John H. Morgan, Jr. and
Daisy R. Morgan had violated the 1993 Settlement Agreement. On October 4,
1995, the Honorable Michael R. Murphy ruled that John H. Morgan, Jr. and Daisy
R. Morgan had violated the 1993 Settlement Agreement and entered an order
enforcing the 1993 Settlement Agreement (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. and Daisy R. Morgan and others (the "Order to Show Cause").
On or about June 13, 1995, pursuant to a Plan of Share Exchange Agreement dated
as of February 16, 1995 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. 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
among other things that the defendants had, among other things, violated proxy
solicitation rules, violated disclosure rules under the Securities and 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, the rescission of the Share Exchange Agreement. In April 1996, the
Company, Midwest, RD Wolff
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<PAGE> 19
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 at the time, is the controlling shareholder of
Mark Technologies Corporation a greater than 10% shareholder of the Company. 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 (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 Settlement Agreement. In particular, the parties to the Morgan Settlement
Agreement executed full mutual releases, thereby releasing the claims that they
had asserted in the Order to Show Cause, the First State Action and the First
Federal Action and a release of approximately $89,229.81 to John H. Morgan, Jr.
previously collected from him pursuant to paragraph 8 of the Murphy Order and
other amounts covered by the Order staying the execution of the Murphy Order to
John H. Morgan, Jr. 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 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, (who
was also a director of the Company at the time), Gerard E. Morgan, John C.
Morgan and Karen J. Morgan (together the "Objectors") filed an objection to the
hearing and requested that the court continue the settlement approval hearing
until after a Company 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 the Company; that they objected to the "no-shop" provision
contained in the Letter of Intent; 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 have the opportunity to solicit other competitive bids to sell
the Company. Further, the Objectors alleged that the Company had failed 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. On or
about August 23, 1996, the court in the Second State Action reviewed and
considered the 1996 Settlement Agreement, the Stock Purchase Agreement and the
1993 Settlement Agreement, written memoranda submitted by various parties and
other comments and objections and ordered that: (1) the notice given pursuant
to Rule 23.1 of the applicable rules of civil procedure for the State of Utah
was adequate, fair and proper; (2) the procedural and substantive objections of
Jenny T. Morgan (a director of the Company at the time and shareholder of the
Company), Gerald E. Morgan, John C. Morgan and Karen J. Morgan be overruled; (3)
the 1996 Settlement Agreement was fair, adequate and reasonable; (4) the
Petition to Terminate the 1993 Settlement Agreement was fair, adequate and
reasonable; and (5) the 1996 Settlement Agreement and Petition to Terminate the
1993 Settlement Agreement was approved.
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<PAGE> 20
As required by the Transaction Agreements, as defined below, the 1996
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 and
the execution of 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 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 (who, after the acquisition became a director of the Company and
currently serves as a director of the Company), 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.
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 as 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 3-0 vote of the Board (Mark G. Jones
and Jenny Morgan former directors of the Company, were not present for the
vote). 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 and the Transaction Agreements, including the Stock
Purchase Agreement, contemplated that, subject to applicable state and federal
securities and state
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<PAGE> 21
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 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% 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, as of a record date
five days prior to the effectuation of the Reverse Split ("Returned Shares
Record Date"), in increments of 1,000 shares (the "Returned Shares Option") at
a purchase price equal to the pre-Reverse-Split price of $3.35 per share (the
"Returned Shares Purchase Price"). Only those shares for which the Company has
received, within 80 days following the Effective Date, a fully and properly
executed Letter of Transmittal, accompanied by the required documents, will
qualify as Returned Shares for the purposes of this Returned Shares 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 Shares Option is
over-subscribed, then each of the remaining exercising shareholders may
purchase the Returned Shares on a pro-rata basis as more fully described
herein. See "PROPOSED REVERSE SPLIT/Purchase of Returned Shares." Twenty-five
percent (25%) of the Returned Shares Purchase Price will be payable in cash
upon exercise, with the remaining balance of $2.51 per share being evidenced by
the Returned Shares Note on the terms and conditions as more fully described
herein. See "PROPOSED REVERSE SPLIT/Purchase of Returned Shares".
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 given 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 in the United States
District Court for the District of Utah, Central Division, against Morgan Gas &
Oil Co. and its directors and against Mark G. 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 G. 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 (including John H. Morgan, Jr., Daisy R. Morgan, Sylvia
Wunderly, John Wunderly and Melbourne Romney, III) committed a breach of
fiduciary duty and a wasting of corporate assets (the "MGO Action"). The Company
sought rescission of the sale. Legal counsel advised the Company that due to
the releases contained in the 1996 Settlement Agreement, the Company should not
continue to pursue the MGO Action against Mark G. Jones, a shareholder and
director of the Company at the time and signatory to the 1996 Settlement
Agreement and Mark Technologies Corporation, a shareholder of the Company and
signatory to the 1996 Settlement Agreement. A majority of the Board of
Directors of the Company voted to have the suit dismissed without prejudice.
Former directors Jenny Morgan and Mark G. Jones objected to the dismissal
without prejudice and proposed that the MG0 Action be dismissed with prejudice.
The suit has been dismissed without prejudice, so that other shareholders of
Morgan Gas & Oil Co. will not be precluded from seeking relief based upon the
same cause of action.
-18-
<PAGE> 22
The table below summarizes the litigation and accompanying transactions
discussed above:
DATE THE EVENT OCCURRED EVENT
March 5, 1987 First State Action is filed
April 6, 1993 First State Action is settled pursuant
to the 1993 Settlement Agreement
February 16, 1995 Company executes the Share Exchange
Agreement
June 13, 1995 Company consummates the Share Exchange
Agreement with Midwest, RD Wolff
and JJ Wolf
July 18, 1995 The First Federal Action is filed,
seeking among other things to rescind
the Share Exchange Agreement
July 21, 1995 Company files suit to enforce the 1993
Settlement Agreement
October 4, 1995 Hon. Judge Michael R. Murphy enters
an order enforcing the 1993 Settlement
Agreement (the "Murphy Order")
October 13, 1995 John H. Morgan, Jr. and Daisy Morgan
appeal the Murphy Order
January 23, 1996 Company seeks Order to Show Cause
against John H. Morgan, Jr., Daisy
Morgan, Mark G. Jones, Mark
Technologies Corporation, Anne Morgan
and Victoria Morgan for violation of
the Murphy Order
DATE THE EVENT OCCURRED EVENT
April 5, 1996 Company enters into the Letter of
Intent with IMCC
April 22, 1996 Company, Midwest, and the Wolffs
execute the Split-Off Agreement
rescinding the Share Exchange Agreement
May 10, 1996 Company files the MGO Action
May 17, 1996 The Second State Action is filed
seeking to enjoin performance of the
Letter of Intent and for damages
arising out of the execution of the
split-off Agreement
June 26, 1996 The Morgan Settlement Agreement and
the 1996 Settlement Agreement are
executed
July 3, 1996 Company and IMCC execute the Stock
Purchase Agreement and sale of stock to
IMCC is completed
July 3, 1996 Directors E. Jay Sheen and R. Dee
Erickson tender their resignations
July 13, 1996 The resignations of directors E. Jay
Sheen and R. Dee Erickson become
effective
July 19, 1996 Notices of Hearing regarding the
proposed settlement of the Second State
Action, the First State Action and the
First Federal Action are sent to the
Company's shareholders
August 9, 1996 Objectors file an objection to the
settlement of the Second State Action
August 23, 1996 The settlement of the Second State
Action is approved by the court
August 28, 1996 The order to Show Cause is dismissed
with prejudice
August 29, 1996 Termination of 1993 Settlement
Agreement
October 31, 1996 MGO Action is dismissed without
prejudice
REASONS FOR THE PROPOSED REVERSE SPLIT
The Company was organized in Utah in 1966 as Utah Industrial, Inc. It was
renamed Utah Resources International, Inc. in 1969. In 1981, the Company became
a "reporting company" requiring it to file various reports with the SEC.
In early 1994, the Company's Board of Directors, (E. Jay Sheen, R. D.
Erickson, Lyle D. Hurd, Jr., John H. Morgan, Jr., and Daisy R. Morgan) passed a
resolution that the officers and directors of the Company should actively seek
business opportunities on behalf of the Company. The Company's directors
believed that in order for the Company to go forward and provide value to its
shareholders, it either had to (a) hire a CEO to develop a business plan for
the Company for the development of the Company's assets, or (b) identify
potential buyers for purposes of taking the Company to a non-SEC reporting
status and providing value to minority shareholders. With respect to the former
the Company's Board of Directors interviewed several individuals for the
position of CEO with no success. Concurrently, the Board of Directors began
investigating potential buyers and soliciting offers. It soon became apparent
to the Board of Directors, that due to the litigation that had plagued the
Company for a period of years and the ongoing dissension among the members of
the Board of Directors it would be necessary to sell a controlling interest in
the Company in order to attract buyers. In addition, in late 1995, the Board of
Directors wished to (i) spin off the Midwest Share and Exchange Agreement and
replace Robert D. Wolff as CEO of the Company, for a more detailed description
of the Share Exchange Agreement, the subsequent litigation and the Split-Off
Agreement, see the Section entitled "SPECIAL FACTORS/IMCC Transaction and
Settlement Agreements"; (ii) provide for a mechanism for infusion of capital
into the Company; and (iii) provide a mechanism whereby the minority
shareholders would have the opportunity to receive fair value for their shares.
With respect to the Board's third goal, the Company's history of sporadic
trading in a narrow margin rendered the shares virtually illiquid and the
protracted and costly litigation consumed corporate assets and the time and
attention of the Board of Directors and the management, reducing the Company's
profits and distributions to next to nothing. In a period of ten years, the
Company made only one $.10 distribution to the shareholders which occurred in
January, 1996.
In early 1994, R. Dee Erickson, a director and Chairman of the Board of
Directors of the Company at the time contacted and met with Prowswood
Development ("Prowswood"), a privately held real property development and
management company, located in Salt Lake City, Utah, for the purposes of
discussing a possible joint venture. The Board of Directors of the Company met
with the principals of Prowswood. Prowswood provided the Company with a
written proposal to develop and manage the Company's properties in St. George,
Utah. The Company's board could not come to terms with Prowswood and no final
agreement was reached.
In April 1994, Trans-Wasatch Company ("Trans-Wasatch"), a privately held
real estate development company located in Park City, Utah, approached Jay
Sheen, a director of the Company at the time regarding a possible merger between
Trans-Wasatch and the Company. The President of Trans-Wasatch met with the
Board of Directors of the Company on several occasions. The Company's Board of
Directors toured the Trans-Wasatch property and conducted due diligence, where a
substantial amount of information was exchanged. Trans-Wasatch did not proceed
with negotiations due to Trans-Wasatch's concerns over the Company's history of
litigation and ongoing dissension among the Company's Board of Directors.
In 1994, R. Dee Erickson, a director and Chairman of the Board of Directors
of the Company at the time met with Boyer Company, a large, privately held real
estate development and property management company, located in Salt Lake City,
Utah. The Boyer Company was involved in real property ventures in St. George,
Utah and was interested in expanding its operations. Certain members of the
Company's Board of Directors met with Boyer Company. The Boyer Company reviewed
information regarding the Company and elected not to proceed due to the
Company's history of litigation and ongoing dissension among the Company's Board
of Directors.
In late 1994, R. Dee Erickson, a director and Chairman of the Board of
Directors of the Company at the time, contacted Dain Bosworth, a regional
brokerage firm, regarding representing the Company in connection with finding a
potential merger candidate or joint venture partner. Dain Bosworth declined
representing the Company due to its history of litigation, ongoing dissension
among the Company's Board of Directors and its small size.
In late 1994, the Company also conducted negotiations with Process
Instruments, Inc. Mr. Sheen, a director of the Company at the time contacted
Process Instruments, Inc. Process Instruments, Inc., headquartered in Salt Lake
City, Utah, is in the business of developing a real-time, high-tech gas and
liquid monitoring device for industrial purposes. It had received numerous
grants from federal agencies to develop the instruments but needed additional
corporate financing in order to complete the product's development and
marketing. While discussions continued over several months, no agreement with
Process Instruments, Inc. was reached.
In late 1994 and early 1995, the Company, through Mr. Sheen, a director of
the Company at the time, met with Fonix, Inc., a publicly traded company
developing a continuous voice recognition computed software product and with
Teltrust, but discussions with both of these companies did not proceed beyond
preliminary stages. The Company also negotiated with Edit Technologies, a small
company in northern Utah, involved in creating large-scale, high resolution
graphics images for advertising and billboards. Edit Technologies had done
specialty graphics work for several Fortune 100 companies and had a large
contract with American Stores. Negotiations with Edit Technologies continued
over a period of several months without any agreement being reached. The
Company also received inquiries from Custom Environmental International, a
company involved in carbon regeneration.
In addition to the negotiations described above, the Company negotiated
with seven other parties regarding the selling of the Company, forming a joint
venture involving the Company or other restructuring of the Company. These
entities included: Devcor Development Company, Scott Priest, Foreland
Corporation, Kaufman and Broad Company, PCT Holdings, Inc., Southgate Valley/Ran
Co., Inc., Sky Properties and Mark Jones.
The following is a brief description of each of the other proposals
negotiated with the above seven parties:
DEVCOR DEVELOPMENT COMPANY
In October of 1994, Jay Sheen, a director of the Company at the time,
contacted Scott Priest and Neil Wall, developers in North Davis County, Utah.
Mr. Wall owned a construction and excavating company, Devcor Development
Company, which was involved in commercial and residential real property
development. Both Mr. Wall and Mr. Priest indicated a desire to contribute real
property projects (located in northern Utah) in various stages of development to
the Company, in exchange for shares of stock of the Company, and to become
principal officers of the Company. Mr. Wall would be benefited by his ability
to conduct his construction and excavation business year round (St. George, Utah
in the winter), while the Company would diversify operations into northern Utah.
Several written proposals were exchanged between the parties and negotiations
continued for several months. While a majority of the Company's directors
expressed a desire to come to terms with Messrs. Priest and Wall, John H.
Morgan, Jr., a large shareholder and director of the Company, did not wish to
pursue the transaction and threatened litigation if the Company went forward
with a transaction with Devcor Development. Given Mr. Morgan's expressed
unwillingness to proceed, the Company's history of litigation and the ongoing
dissension among the members of the Company's Board of Directors, Mr. Wall opted
to cease negotiations. Negotiations were terminated in October 1995.
FORELAND CORPORATION.
Foreland Corporation ("Foreland") is an oil and gas exploration and
development company founded to pursue exploration projects in north-central
Nevada initiated by Gulf Oil Corporation in 1980. R. Dee Erickson, director and
Chairman of the Board of the Company at the time, contacted Bruce Decker of
Foreland in September 1994. The principals of Foreland held several meetings
with the Company's Board of Directors over a period of months. Principals of
Foreland toured the Company's property and attended Company board meetings.
Foreland made its first written proposal to the Company's Board of Directors in
fall 1994. John H. Morgan, Jr. and Daisy Morgan were opposed to the proposal
and no action was taken. In late March 1996, R. Dee Erickson contacted Bruce
Decker of Foreland and informed him that if he wished to make an offer for the
Company he must do so by April 1, 1996. A written offer was received April 3,
1996.
The terms of the offer provided for a share exchange, whereby the Company
would issue more than fifty percent (50%) of its stock to Foreland in exchange
for Foreland stock of an equivalent negotiated value. Due to the Company's
history of litigation and ongoing dissension among members of the Board of
Directors, Foreland insisted upon holding a control position following its
proposed acquisition. Foreland intended to acquire at least 80% of the Company,
thus shifting control of the Company to Foreland. Foreland offered $7.79 per
share for 1,284,027 shares of the Company's stock, with a NASDAQ thirty (30) day
valuation determination for the Foreland stock. Foreland included the condition
that it would not do the deal unless it traded above $2.25 and below $3.25 per
share. Foreland also demanded that a fairness opinion be obtained and that the
Company divest itself of Midwest Railroad Construction and Maintenance
Corporation of Wyoming. Once control shifted, Foreland planned to appoint a
majority of the Company's Board. The Foreland transaction also anticipated a
tender offer. The tender offer was conditioned upon Foreland's holding eighty
percent (80%) or more of the URI stock following such tender. Foreland would
tender a Foreland unit of stock consisting of one share of "Fixed Amount
Dividend Preferred Stock" and one share of "Convertible Preferred Stock" for
each tendered share of the Company's stock. Dividends on the Fixed Amount
Dividend Preferred Stock would be secured by a lien on the Company's property.
The Company would establish and maintain a litigation defense fund of $200,000.
The proposal also contained a "no shop" provision. Negotiations continued
between the Company and Foreland, until the decision by the Board of Directors
of the Company not to pursue the offer on April 4, 1996.
KAUFMAN AND BROAD COMPANY
During mid to late 1994 and 1995, Gerry Brown, the President of the Company
at the time, pursued various proposals to buy large blocks of the Company's
undeveloped real estate. A written proposal came from Kaufman and Broad
Company, a national residential real estate company. Kaufman and Broad Company
wanted to purchase a large parcel of the Company's property and hold an option
on a majority of the rest of the Company's land. The negotiations for the
purchase and the option continued for several months. A definitive purchase
agreement was drafted and revised. In mid-1995, Kaufman and Broad Company
declined to proceed with the purchase and option, because it chose to pursue
land development in Salt Lake County, Utah instead of St. George, Utah.
PCT HOLDINGS, INC.
PCT Holdings, Inc. ("PCT"), is a publicly-traded acquisition-oriented,
high-technology manufacturing company specializing in the manufacture of
patented ceramic based hermetic connectors, feed-through's, electronic
packaging, ceramic filters and precision machined components. PCT contacted the
Company in August 1995. During the course of negotiations, PCT flew its
principals and the Utah-based directors of the Company to see property in
Washington and to review PCT operations.
On October 11, 1995, PCT submitted a written proposal to the Company. The
proposal required that PCT acquire not less than ninety percent (90%) of the
Company's stock. PCT planned to make this acquisition through a share exchange,
whereby PCT shares of stock valued at $8.75 per share would be exchanged for the
Company's stock which would be valued at $5.91 per share, to be issued as
follows, subject to adjustment based upon market trading immediately preceding
the closing: (a) ten percent (10%) of the shares would be delivered at closing;
(b) forty percent (40%) of the shares would be issued within ninety (90) days of
the closing, with (c) fifty percent (50%) of the of shares to be issued within
one hundred eighty (180) days of the closing. PCT also placed the following
conditions on closing the transaction with the Company, that (1) the Company
divest itself of Midwest, (2) a minimum of $500,000 of cash be on hand in the
Company at the closing, (3) a fairness opinion be obtained, (4) the Company
continue to indemnify its officers and directors, and (5) the agreement contain
a "no shop" provision.
In late 1995, PCT attempted to acquire stock controlled by John H. Morgan,
Jr. (at a higher acquisition price) prior to entering into a transaction with
the Company. John H. Morgan, Jr. declined to sell his stock in the Company.
PCT backed out of the negotiations entirely when John H. Morgan, Jr.
refused PCT's offer due to concerns over the Company's history of litigation,
and the ongoing dissension among board members.
SOUTHGATE VALLEY/RAN CO., INC.
RAN CO., ("RANCO") is a real estate company and home builder in and
around St. George, Utah. Gerry Brown contacted RANCO. RANCO and the Company
began discussions regarding a joint venture with the Company in the summer of
1995.
The parties conducted due diligence and the Company's board met with the
principals of RANCO. The terms of the RANCO proposal underwent several
revisions. The final terms of the proposed transaction provided for the
organization of a limited partnership, where the Company, as a limited partner
would contribute property to the limited partnership and RANCO and Richard A.
Nelson, as the general partners of the limited partnership, would contribute
$1,000 and agree to develop and sell the property. An affiliate of RANCO, RAN
CO. HOMES, INC. would hold the exclusive contract for construction of single
family residences and improvements at an amount equal to cost plus twelve
percent (12%) of verifiable construction costs. The transaction also provided
that after the general partners were compensated for up to $30,000 in start-up
costs, including construction fees, and certain administrative expenses, the
general partners were also entitled to receive a commission as the exclusive
sales agent for the residences and would receive up to six percent (6%) of the
lot or the residence's selling price, plus a project management fee of $3,000
per month. Furthermore, ninety-nine dollars ($99) was to be received by the
Company for every one dollar ($1) to be received by the general partner, until
the capital account of the Company was reduced to zero. Once the capital
account was reduced to zero, the Company was to receive a preferential return.
Any cash balance remaining was to be divided, as determined in the future. The
proposal was rejected at the Company's April 4, 1996 board meeting.
SKY PROPERTIES.
R. Dee Erickson, a director and Chairman of the Board of the Company at the
time, approached Sky Properties, a privately held commercial and residential
real estate development firm, headquartered in Bountiful, Utah, in September
1994. Sky Properties principals toured the Company's property and discussions
were held with members of the Board of Directors. Many proposals were submitted
by Sky Properties involving a proposed joint venture where the Company would
provide the land and Sky Properties would provide the master planning
development and marketing expertise. Despite negotiations which were ongoing
for one and on-half years, and numerous written proposals, Sky Properties
proposal was rejected at the April 4, 1996 Company board meeting.
MARK JONES GLOBAL SETTLEMENT AGREEMENT.
In February 1996, Mark Jones, a director of the Company, submitted a
"Non-Binding Memorandum of Understanding" to the Company's Board with the intent
that a definitive agreement would be completed by February 28, 1996. The
definitive agreement was not completed on that date. Mark Jones presented a
draft Global Settlement Agreement to the Company's Board of Directors on April
3, 1996 and subsequently revised the Global Settlement Agreement by letter dated
April 16, 1996. At the time the Company voted to accept the IMCC offer (April 4,
1996), Mark Jones was proposing a $3.00 per share tender offer with no
commitment for the financing as opposed to IMCC's $3.35 per share reverse stock
split with financing in place.
The terms of the Mark Jones' proposal included the following: (a)
dismissal with prejudice of all outstanding litigation claims involving the
Company, (b) termination of the 1993 Settlement Agreement, (c) resignation of
all officers and directors of the Company, except Mark Jones and Jenny Morgan.
Gerry T. Brown was to act as the third director of the Company until the next
annual meeting of the shareholders, (d) R. Dee Erickson, E. Jay Sheen and Lyle
Hurd were to agree to not act as directors or officers of the Company in the
future, (e) the Share Exchange Agreement between the Company and the Wolffs was
to be rescinded, and the Wolffs were to return to the Company the 590,000 shares
of the Company's stock they had received, and the Company was to return to the
Wolffs the 1,000 shares of common stock of Midwest the Company had received, (f)
costs and expenses of the various transactions, and litigation costs incurred by
the Company, Midwest, John H. Morgan, Jr., Mark G. Jones, MTC, Anne Morgan and
Victoria Morgan, were to be borne by the Company, (g) R. Dee Erickson and E. Jay
Sheen were to deliver to the Company the stock they owned in the Company without
compensation [this provision was modified in Mr. Jones' 4/16/96 letter to the
Company and instead; E. Jay Sheen, Lyle Hurd and R. Dee Erickson were to be paid
$1.50 per share for the termination of their Company stock options for a total
of $37,500 to each of them], (h) a 10 year annuity was to be granted to John H.
Morgan, Jr., and Daisy Morgan, (i) Robinson & Sheen were to resign as legal
counsel to the Company, (j) annual charitable contributions were to be made by
the Company (including to the Huntsman World Senior Games), (k) at the earliest
possible date, Mark Jones was to exercise his best efforts to make a $3.00
tender offer for the Company [this figure was increased to $4.00 pursuant to Mr.
Jones' 4/16/96 letter], (l) the Company was to obtain a fairness opinion, (m)
the Company was to set aside property to secure the financing necessary to
complete the tender offer [Wolff had agreed to assist in obtaining the financing
and agreed to attempt to complete financing within sixty (60) days following the
closing pursuant to Mark Jones' 4/16/96 letter], (n) the tender offer price was
to increase at a rate equal to twelve percent (12%) per annum, compounded daily,
commencing 6 months from the date of the execution of the Global Settlement
Agreement until the tender offer was completed, (o) if the tender offer was not
completed within 6 months of signing the Global Settlement Agreement, the
Company was to liquidate, at ever-decreasing prices over time, until the tender
offer was completed, (p) the Company could elect to "go private", (q) John H.
Morgan, Jr., was to be precluded from ever serving as an officer or director of
the Company, but was to be granted the position of "Honorary Chairman" with a
lifetime non-voting seat on the Company's Board, (r) George Matthews was to
release his finder's fee claim. The Global Settlement Agreement was to be
subject to approval by Judge William A. Thorne and Judge Tena Campbell. The
Company was to be entitled to continue to use Midwest's offices and Robert
Wolff was to continue to provide assistance in connection with the
consummation of the transaction contemplated by the Global Settlement
Agreement, pursuant to the Mark Jones' 4/16/96 letter. Furthermore, Midwest was
to be responsible for paying the amount of one/half of the gross annual salary
of the Company's CFO, Mr. Ladd Eldridge, which obligation was to continue for
one (1) year following the closing, pursuant to Mark Jones' 4/16/96 letter.
On April 4, 1996, the Company's Board of Directors decided not to enter into
the Mark Jones Global Settlement Agreement.
IMCC TRANSACTION
In February and March of 1996, the Company had discussions with John Fife,
the President and sole shareholder of IMCC regarding a transaction or
transactions between the Company and IMCC. During the course of these
discussions, the Company communicated its goals to John Fife. Prior to entering
into the Letter of Intent (as hereinafter defined), John Fife entered into a
letter agreement by and among John Fife, Earnest Muth, a party to the 1993
Settlement Agreement ("Muth"), Thomas Ralphs, a party to the 1993 Settlement
Agreement ("Ralphs") and Precious Metals, Inc. dated as of March 30, 1996 (the
"Letter Agreement"), which Letter Agreement was assigned to IMCC. Under the
terms of the Letter Agreement, John Fife had the option to purchase all, but not
less than all, of the shares of stock of the Company held by or beneficially
owned or controlled by Muth and Ralphs (approximately 90,000 shares), at an
option exercise price of $4.00 per share. John Fife paid Muth and Ralphs an
aggregate of $15,000, which amount was a non-refundable option payment to be
applied to the ultimate purchase price. During the option period which expired
sixty (60) days after March 30, 1996, John Fife was granted a proxy to vote the
shares held by Muth and Ralphs. In addition, the Letter Agreement provided that
upon the exercise of the option to purchase the shares of the Company, Muth and
Ralphs would assign their rights and obligations under the 1993 Settlement
Agreement to John Fife. IMCC submitted its letter of intent to the Board of
Directors of the Company, dated as of April 5, 1996 (the "Letter of Intent").
The Letter of Intent provided that: (1) the Company would issue and IMCC would
purchase shares which would represent a fifty-one percent (51%) ownership
interest in the Company; (2) IMCC would pay the Company $3.35 per share for the
stock: (3) IMCC would pay ten percent (10%) of the purchase price in cash at
the closing with the balance due pursuant to a five year promissory note; (4)
the note would be secured with the stock purchased by IMCC; (5) would have a ten
(10) year option to purchase 150,000 or more additional shares of stock in order
to maintain its fifty-one percent (51%) ownership interest in the Company; (6)
following the closing of the purchase of stock, IMCC would cause the Company to
undertake a 12,500 to 1 reverse stock split at $3.35 per share with fractional
shareholders being given the option to purchase additional shares to round up to
the next whole share, or a tender offer; (7) the Company agreed to indemnify
IMCC and its shareholders and directors from and against any liability to the
Company's shareholders, officers and/or directors arising out of IMCC's
negotiation, execution and/or consummation of the Letter of Intent, the Stock
Purchase Agreement and the transactions contemplated by the Letter of Intent;
and (8) IMCC agreed to take all actions necessary to cause the Company to honor
the Company's obligations to indemnify its officers and directors to the fullest
extent permitted by law, including, but not limited to, the advancement of their
legal fees and costs in connection with all present and future litigation
involving them in their capacities as officers and directors of the Company. The
Company entered into the Letter of Intent on April 5, 1996. On April 16, 1996
IMCC filed its Schedule 13D informing the Company's shareholders of its intent
to engage in the two step transaction consisting of the acquisition of a
majority interest and conducting a reverse stock split or a tender offer. It
also gave notice of IMCC's intent to cause a class of securities of the Company
to be delisted from a national securities exchange or cause a class of
securities to cease to be authorized to be quoted in an inter-dealer quotation
system of a registered national securities association, pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934.
On April 5, 1996, the Company entered into the Letter of Intent with IMCC,
over the objections of Directors Mark G. Jones and Jenny Morgan. Thereafter,
the Company and IMCC began negotiating the terms of the stock purchase agreement
and IMCC began its due diligence investigation of the Company. On, May 17,
1996, Mark G. Jones, a shareholder and director of the Company and controlling
shareholder of Mark Technologies Corporation a greater than ten percent (10%)
shareholder of the Company, brought a shareholders derivative suit against the
Company, E. Jay Sheen, R. Dee Erickson and Lyle Hurd, directors of the Company
and IMCC, captioned as Mark Technologies Corp., et al. v. Utah Resources
International, Inc. et al., which was filed as Civil No. 96-090-3332CV in the
Third Judicial Court of Salt Lake County (the "Second State Action"), seeking a
temporary restraining order and injunction. For a more detailed description of
the Second State Action litigation, see the Section entitled "MATERIAL
PROCEEDINGS AND TRANSACTIONS."
During late May and early June of 1996, the Company and IMCC: (1) prepared
for trial in the Second State Action, which included the conduct of extensive
discovery, and (2) continued to negotiate the terms of the stock purchase
agreement. Ongoing negotiations between the Company and IMCC resulted in an
amendment to the Letter of Intent, dated as of May 31, 1996. The parties agreed
to increase the percentage of the purchase price to be paid at closing from ten
percent (10%) to fifteen percent (15%). In addition to the stock pledge
agreement which secured the five year note, John Fife agreed to personally
guarantee twenty-five percent (25%) of the outstanding balance due the Company
under the IMCC note. Ongoing negotiations among the parties to the Second State
Action led to the settlement of the Second State Action the morning of the
hearing, 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 (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 Settlement
Agreement. 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"), wherein the parties, among other
things, agreed to terms regarding IMCC's purchase of fifty and five/tenths
percent (50.5%) of the Company's outstanding stock, agreed to dismiss the First
Federal Action, the Order to Show Cause and the Second State Action, and agreed
to use their best efforts to terminate the 1993 Settlement Agreement. For a
more detailed description of the litigation and the settlement of the
litigation, see the Section entitled "MATERIAL PROCEEDINGS AND TRANSACTIONS."
Pursuant to the 1996 Settlement Agreement, the terms of the Stock Purchase
Agreement by and between the Company and IMCC were to include, among other
things, the following provisions: (1) IMCC would purchase a fifty and
five/tenths percent (50.5%) interest in the Company at a purchase price of $3.35
per share; (2) IMCC would pay fifteen percent (15%) of the purchase price at
closing with the balance due pursuant to a five year promissory note, secured by
a pledge of the Company's stock purchased by IMCC and a personal guaranty by
John Fife of twenty-five percent (25%) of the remaining balance due under the
note; (3) the Company would conduct a 1,000 to 1 reverse stock split at $3.35
per share with fractional shareholders being given the option to purchase
additional shares at $3.35 per share to round up to the next whole share, IMCC
intends to exercise the round-up option; (4) that any shares redeemed by the
Company pursuant to the reverse stock split would be made available for purchase
by the remaining shareholders, other than IMCC. Mark G. Jones has communicated
to the Company that Mark Technologies Corporation intends to exercise its right
to purchase as many additional shares pursuant to this pool as possible; (5)
IMCC would have a ten (10) year option to purchase 150,000 or more additional
shares of stock to maintain its fifty and five/tenths percent (50.5%) interest
in the Company; (6) that E. Jay Sheen and R. Dee Erickson would resign as
directors of the Company immediately; (7) that Mark G. Jones would be guaranteed
a position as director of the Company for a period of one year from the closing
of the IMCC stock purchase; (8) that the Company and John Fife would enter into
an employment agreement which would pay to Mr. Fife compensation not to exceed
$200,000 per year; and (9) any distributions and other payments otherwise
payable to IMCC on its Company stock would be applied to reduce the outstanding
principal balance of the IMCC note. For a more detailed description of the terms
of the Stock Purchase Agreement, see the Section entitled "SPECIAL FACTORS/IMCC
Transaction and Settlement Agreements." On July 3, 1996, the Company and IMCC
entered into the Stock Purchase 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. For a
more detailed description of the notice procedure for the settlement of the
actions and subsequent objections see the Section entitled, "MATERIAL
PROCEEDINGS AND TRANSACTIONS." The court in Second State Action having reviewed
and considered the 1996 Settlement Agreement, the Stock Purchase Agreement and
the 1993 Settlement Agreement, written memoranda submitted by various parties
and other comments and objections and ordered that: (1) the notice given
pursuant to Rule 23.1 of the applicable rules of civil procedure for the State
of Utah was adequate, fair and proper; (2) the procedural and substantive
objections of Jenny T. Morgan (a director of the Company at the time and
shareholder of the Company), Gerard E. Morgan, John C. Morgan and Karen J.
Morgan be overruled; (3) the 1996 Settlement Agreement was fair, adequate and
reasonable; (4) the Petition to Terminate the 1993 Settlement Agreement was
fair, adequate and reasonable; and (5) the 1996 Settlement Agreement and
Petition to Terminate the 1993 Settlement Agreement was approved.
The Board of Directors recommends voting in favor of the Reverse Split. In
addition to the contractual requirement that a reverse stock split occur as
required by the Transaction Agreements, 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, it is
the belief of the Board of Directors that such reporting is very costly.
Furthermore, the Board of Directors does not believe that being a "reporting
company" has given the Company any significant advantage the Company would not
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). 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. Even if the market provided liquidity for the shareholders'
shares, the $3.35 per share purchase price is far above the fourth quarter 1997
closing bid price of $.875. The Company has obtained a fairness opinion with
respect to the Reverse Split transaction, including the $3.35 per share Reverse
Split purchase price, from Centerpoint Advisors, Inc., dated as of February 17,
1998 (the "Fairness Opinion"), which indicated that the proposed Reverse Split
is fair from a financial point of view to the Company's shareholders. For a more
detailed description of the Fairness Opinion, see the Section entitled, "SPECIAL
FACTORS/ Fairness Opinion," and in order to review the Fairness Opinion see
Exhibit b. Of the approximately 558 shareholders, approximately 479
shareholders of record own fewer than 1,000 shares. These same shareholders
have received only a $.10 dividend over the entire history of the Company.
The Board also considered the disadvantages and risks to the Company
and its shareholders associated with the Company being a non-SEC reporting
company. By ceasing to be a reporting company, the Company loses the potential
flexibility for current or future financing of corporate expansion through the
building of a more broad equity base through publicly offered sales of
securities. Deregistration eliminates the Company's obligation to provide
detailed information to the Company's shareholders concerning the Company's
principal shareholders, directors and executive officers, compensation paid the
Company's executives, audited financial statements and certain relationships in
related transactions between the Company's insiders and the Company, which
under certain circumstances could better enable the Company's shareholders to
assess the financial operations and policies of the Company. There may be a
loss of prestige that being a reporting company provides. By ceasing to be a
reporting company the Company incurs the potential loss of ease of valuation of
stock where there is active trading of such shares on an established securities
exchange (shareholders should note, however, that there has been no such active
trading with the Company's Common Stock). There may be decreased liquidity due
to the fact that there is a less public market for the Company's Common Stock.
For a more detailed description of the disadvantages of the proposed Reverse
Split, see the Section entitled "SPECIAL FACTORS/Conduct of the Company's
Business After the Proposed Reverse Split."
The Company is not likely to make use of any advantage (for example, being
in a better position to sell securities through a public offering) that the
Company's status as a reporting company may offer. Over the past ten years, the
Company's shareholders have received only $.10 in dividends. Furthermore, the
Company's stock is thinly traded. The Reverse Split and round up option provide
the Company's shareholders with the option to either (1) exit the Company and
receive fair value for their shares; or (2) continue their ownership in the
Company with the hope of a return on their investment in the future. In
addition, the Company incurs significant direct and indirect costs associated
with compliance with SEC filing and reporting requirements imposed on reporting
companies. Although it is not possible to place an annual economic cost on the
potential liability of the Company and its insiders for inadvertent violations
of certain provisions of the Exchange Act, these burdens are substantial, given
current civil and criminal liability for violations of SEC Regulations. The
Board of Directors believes that, for the reasons set forth above, elimination
of these direct and indirect costs and other burdens are justified and in the
best interests of the Company. For a more detailed description of alternatives
to the Reverse Split, see the Sections entitled "SPECIAL FACTORS/ Recommendation
of the Board of Directors."
On the basis that: (i) the Company is contractually required to cause a
reverse stock split to occur pursuant to the terms of the Transaction Agreements
(ii) the belief of the Board of Directors that the cost of being a "reporting
company" is
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<PAGE> 23
not economically justified as the Company's Common Stock is thinly traded; and
(iii) the Company does not presently anticipate raising capital through a public
offering. The Board of Directors is presenting this transaction for a vote of
the shareholders. A company with assets of over $10 million becomes a
"reporting company" when its shareholders number 500 or more and it complies
with applicable securities laws. To thereafter be allowed to become a "non-SEC
reporting company" and cease reporting to the SEC, the number of shareholders
must decline to less than 300. The proposed transaction is designed to result
in the reduction of the number of the Company's shareholders to less than 300,
so that the Company will no longer be required to be a reporting company. The
Board of Directors voted in favor of the Reverse Split, and believes that the
$3.35 per share price to be paid to participating shareholders is fair to both
the recipients of cash and the remaining shareholders who will receive shares of
New Stock or exercise the Round Up Option. The Board has thus determined that
the Reverse Split is the most expeditious method of changing the Company's
status from that of a reporting company to that of a non-SEC reporting company.
See "SPECIAL FACTORS/Recommendation of the Board of Directors" and "Conduct of
Company's Business After the Proposed Reverse Split."
FAIRNESS OPINION
CONCLUSION. The Company has obtained a fairness opinion with respect to
the Reverse Split transaction described herein, including the $3.35 per share
Reverse Split purchase price, from Centerpoint Advisors, Inc., dated as of
February 17, 1998 (the "Fairness Opinion"), which indicated that the proposed
Reverse Split is fair from a financial point of view to the Company's
shareholders.
Centerpoint Advisors, Inc., was retained by the Company to express an
opinion as to the fairness from a financial point of view of the Reverse Split,
wherein the Company's Articles of Incorporation would be amended to effect a
reverse split of the Company's issued and outstanding common, $0.10 par value
per share stock (the "Common Stock"), on the basis that each 1,000 shares of
Common Stock then outstanding will be converted into 1 share of common, $100.00
par value per share stock (the "New Stock"), with shareholders holding less than
1,000 shares of Common Stock or any increment thereof (after being given an
option to purchase additional shares as needed to "round up" to the equivalent
of 1,000 shares at a purchase price of $3.35 per share) being paid cash in
exchange for their fractional shares at a price of $3.35 per share for each
share outstanding immediately prior to such reverse split.
SELECTION OF CENTERPOINT ADVISORS, INC. Centerpoint Advisors, Inc. was
retained by the Company for purposes of determining whether the contractually
determined $3.35 per share Reverse Split purchase price being offered to the
Company's shareholders was fair from a financial point of view. No limitations
were imposed by the Company with respect to the opinion rendered by Centerpoint
Advisors, Inc.
The Company formally engaged Centerpoint Advisors, Inc. in late December,
1997. In determining the valuation firm to be utilized, a number of factors
were considered. The valuation firm chosen would have to be independent from
the Company. In addition, the valuation firm chosen would need experience in
providing stock valuation or fairness opinion reports for land development
companies. The valuation firm should be familiar with other land development
companies and the land development market in the area. The Company also desired
an appraisal firm which was staffed by professionals with professional
credentials directly related to the discipline of business appraisal. In
addition, the valuation firm chosen should have provided expert testimony in the
context of litigation-related company valuation matters. The cost of the
valuation services to be provided was also considered. Centerpoint Advisors,
Inc. met the Company's criteria.
Centerpoint Advisors, Inc., located in Scottsdale, Arizona is a firm
specializing in the valuation of businesses and business interests for purposes
including mergers and acquisitions, gift and estate taxes, Employee Stock
Ownership Plans, corporate and partnership re-capitalizations, dissolutions, and
other objectives. The principals in Centerpoint Advisors, Inc. are experts in
valuing privately held companies, and firms with publicly traded shares.
Centerpoint Advisors, Inc. is familiar with other land development companies and
the land development market in the area. Centerpoint Advisors, Inc. has
provided expert testimony in the context of litigation-related business
valuation matters. Centerpoint Advisors, Inc. performs numerous business
valuations annually and was selected by the Company because of its expertise and
experience in rendering fairness opinions as well as its familiarity with the
land development business in which the Company operates.
INFORMATION RELIED UPON BY CENTERPOINT ADVISORS, INC. In arriving at its
opinion for the Company's shareholders, Centerpoint Advisors, Inc. considered:
the nature and history of the enterprise; the economic outlook in general; the
prospects for the industry and the market; earnings and cash flow trends;
opportunities and risks to future earnings; book value; adjusted book value;
general financial condition; management capability; dividend paying capacity;
past transactions and the market for the Company's Common Stock; the
marketability of the Common Stock; public companies in related lines of
business; and other information which was deemed pertinent.
In addition, Centerpoint Advisors, Inc., reviewed the following historical
information:
o Forms 10-KSB filed by the Company with the Securities and Exchange
Commission for the years ending December 31, 1992 through
December 31, 1996;
o Forms 10-QSB for the first, second and third quarters of 1997, as
amended, filed by the Company with the Securities and Exchange
Commission;
o Audited Financial statements of the Company for the six years
ending December 31, 1996; and the Company's internally prepared
interim financial statements for the nine months ending September
30, 1996 and 1997;
o Notice of the Annual Meeting of Shareholders to be held on
December 11, 1997 at 1:00 p.m., M.S.T., and related Proxy
Statement;
o Company's Annual Report to shareholders for the years 1992, 1993
and 1996;
o American Energy Advisors, Inc., Estimated Reserves and Future Net
Revenue Report, dated as of December 31, 1996;
o Federal Income Tax returns for the Company for the six years
ending December 31, 1996;
o Internal financial statements for Tonaquint, Inc., for 1995, 1996
and 1997;
o Telephone discussions, written correspondence and personal
interviews with: John Fife, President, CEO and Chairman of the
Board of the Company, Gerry Brown, Vice President and shareholder
of the Company, Ladd Eldredge, Secretary, Treasurer and CFO of the
Company, R. Dee Erickson, immediate past Chairman of the Board,
and shareholder; Lyle D. Hurd, director, shareholder and former
marketing manager, Stanford S. McConkie, MAI, and other
individuals knowledgeable about southern Utah real estate and
economic matters;
o Real estate appraisal of property owned by the Company, prepared
by Morley and McConkie of St. George, Utah, dated January 26,
1995;
o Stock price and share volume history of the Company's common stock
for the years 1994 through 1997;
o Moody's Investor's Service Information from the OTC Unlisted
Manual;
o Marketing and other information prepared by the Company; and
o Various economic and market data prepared by governmental and
industry sources.
Furthermore, Centerpoint Advisors, Inc. visited the business site of the
Company in St. George, Utah, toured the Company's real estate properties, toured
St. George and the surrounding county area. Centerpoint Advisors, Inc. also
researched companies with publicly traded shares engaged in similar lines of
business.
ELEMENTS OF FAIR VALUE. In determining fair value, Centerpoint Advisors,
Inc. took into consideration the elements listed in the Internal Revenue
Service's Revenue Ruling 59-60, which provides guidelines for the valuation of
companies. This pronouncement states that a sound valuation will be based upon
the relevant facts, but the elements of common sense, informed judgment and
reasonableness must enter the process of weighing those facts and determining
their aggregate significance. Among the relevant factors to be considered are
the following:
o The nature of the Company and its history since its inception;
o The economic outlook in general and the condition of the land
development business in particular;
o The book value of the Common Stock and the Company's financial
condition;
o The earnings capacity of the Company;
o The dividend-paying capacity of the Company and the Company's
history and prospects for paying dividends;
o Whether the Company has goodwill or other intangible value;
o Sales of the Common Stock and the size of the block of stock to be
valued;
o The market price of stock of other corporations engaged in the
same or similar lines of business having their stock actively
traded in a free and open market, either in an exchange or over
the counter market; and
o The marketability, or lack thereof, of the Common Stock.
Valuation is ultimately a matter of informed judgment, based on a full
consideration of all relevant data, as well as the purposes of the valuation.
In performing their valuation Centerpoint Advisors, Inc. considered several
valuation methods in determining the fair value of the stock. In rendering
their opinion, Centerpoint Advisors, Inc. did not discount the price per share
based upon a lack of marketability or lack of control issues. As described
later in this Section, indicated per share values for the Common Stock were
determined under each valuation method. Centerpoint Advisors, Inc.'s analysis
involved a review of the Company's operations and an estimate of the approximate
investment value of the Common Stock. The two principal methods of estimating
that value were Capitalized Cash Flow and Orderly Liquidation. Centerpoint
Advisors, Inc. also considered book value. The following describes the
valuation methods used by Centerpoint Advisors, Inc. in determining a range of
fair values.
BOOK VALUE. Book Value was derived by adding the reported shareholders'
equity as of September 30, 1997 of $613,894 plus the Note Receivable from IMCC
in the amount of $3,633,159 for a total of $4,247,053. The total of $4,247,053
is divided by 2,522,808, which figure represents the total number of shares
outstanding, to equal a book value of $1.68 per share.
CAPITALIZED CASH FLOW METHOD. This valuation method is based on the
assumption that the Company's real estate value on a long term development basis
is about $23 million. Using a fairly optimistic sell-out period of 15 years,
the Company would be able to generate about $1.53 million per year in revenue
from this source. After various costs and expenses, taxes, and royalty
interests income, the Company is forecast to be capable of generating
approximately $648,000 in cash flow annually. Capitalizing the annual cash flow
at 15% results in a Company value of $4.3 million, or $3.00 per share based on
1,438,283 shares of common stock. This method does not include the shares
underlying the IMCC Note receivables.
ORDERLY LIQUIDATION METHOD. The Orderly Liquidation valuation method
begins with the real estate value appraised in January, 1995 at $15,650,000, and
it is assumed that a period of 18 months would be required to liquidate the
assets. Deductions are made from appraised value for land sold in 1995 through
1997, a 10% decrease for market conditions, a 25% discount to induce developers
and investors to acquire the properties for cash, and 5% for commissions and
sales costs. Centerpoint Advisors, Inc.'s calculations derive real estate
liquidation value estimated to be near $9 million. To this is added the value
of Royalty Interests (estimated to be worth $625,000), and other assets of the
business calculated by Centerpoint Advisors, Inc. to be approximately $220,000
(Working Capital, and equity in related partnership real estate), and finally
the Note Receivable from IMCC. The total value of these assets is approximately
$13.5 million. Deducting debt of approximately $287,000 and potential
liabilities of $400,000 (for ongoing remediation of the Service Station Limited
Partnership #2 property, litigation expenses, and other items), shareholder
equity is $12.8 million. Finally, it is necessary to deduct operating expenses
for 18 months during liquidation ($450,000) and taxes of 40% on $9.5 million of
real estate gains ($3,800,000). Estimated net liquidation value is therefore
$8,578,012 or $3.40 per share. Because the proceeds will not be received for 18
months under this scenario, it is necessary to discount the per share price to a
present value. Assuming than an investor would require a 15% rate of return,
the present value is $2.76 per share.
Centerpoint Advisors, Inc. also considered the market price of the Common
Stock, which has been between $.25 per share and $1.25 per share during 1997.
Research indicates that there has been no public sale of stock for cash of more
than $1.50 per share during the past two years.
Based on these estimated indications of value, the following valuations were
made:
<TABLE>
<CAPTION>
VALUATION METHOD PER SHARE ($)
---------------- -------------
<S> <C>
Book Value 10/1/97 1.68
Orderly Liquidation Value 2.76
Capitalized Cash Flow Value 3.00
Actual Market Price .25 - 1.25
</TABLE>
DETERMINATION OF FAIR VALUE. Utilizing the valuation methods discussed
above, Centerpoint Advisors, Inc. determined as of February 17, 1998, various
per share values ranging from $.25 to $3.00, unadjusted for
marketability/liquidity/control discounts.
AVAILABILITY OF REPORT. A copy of Centerpoint Advisors, Inc.'s fairness
opinion is included as Exhibit b to this Schedule 13e-3 and Preliminary Proxy
Statement. The summary set forth above does not purport to be a complete
description of Centerpoint Advisors, Inc.'s written analysis; and selecting
portions of Centerpoint Advisors, Inc.'s analysis, without considering all
factors found in its analysis could create an incomplete view of the process
underlying Centerpoint Advisors, Inc.'s fairness opinion.
For its services, Centerpoint Advisors, Inc. will be paid a fee of
approximately $15,000, in addition to certain out-of-pocket expenses.
Jeff Wright, a principal of Centerpoint Advisors, Inc., owns approximately
2,000 shares or .08% of the Company's Common Stock. Jeff Wright, a former
principal of Brown-Wright & Associates, rendered a fairness opinion for the
Company with respect to the IMCC stock acquisition, in July, 1996. Brown-Wright
& Associates received approximately $15,000 in compensation for rendering those
services. Except as disclosed above, neither Centerpoint Advisors, Inc., nor
any of its employees or affiliates, has had any material financial, equity or
other relationship within the past two years with the Company or any of its
affiliates, nor is any material relationship contemplated.
RECOMMENDATION OF THE BOARD OF DIRECTORS
After careful consideration of the Transaction Agreements and the
background of the Company's reporting status and the advantages and
disadvantages of deregistration and the terms of the Reverse Split, the Board of
Directors believes that the Reverse Split, is fair to, and in the best interests
of, the shareholders of the Company who will receive the Cash Consideration as
well as those who will receive shares of New Stock or exercise the Round Up
Option. The Board of Directors recommends that the shareholders vote FOR
approval and adoption of the Reverse Split as embodied in the Amendment. The
Board of Directors and each executive officer of the Company who owns shares of
Common Stock has advised the Company that he or she intends to vote his or her
shares in favor of the Reverse Split.
In reaching their determination that the Reverse Split is fair to, and
in the best interests of, the shareholders and in reaching the recommendation
that the shareholders vote for approval and adoption of the Reverse Split, the
Board of Directors considered the following:
(i) the contractual obligations of the Company set forth in the
Transaction Agreements which require that the Company execute
a 1,000 to 1 reverse stock split at a purchase price of $3.35
per share. The court in the Second State Action reviewed and
considered the 1996 Settlement Agreement, the Stock Purchase
Agreement and the 1993 Settlement Agreement, written memoranda
submitted by various parties and other comments and objections and
ordered that: (1) the notice given pursuant to Rule 23.1 of the
applicable rules of civil procedure for the State of Utah was
adequate, fair and proper; (2) the procedural and substantive
objections of Jenny T. Morgan (a director of the Company at the
time and shareholder of the Company), Gerard E. Morgan, John C.
Morgan and Karen J. Morgan be overruled; (3) the 1996 Settlement
Agreement was fair, adequate and reasonable; (4) the Petition to
Terminate the 1993 Settlement Agreement was fair, adequate and
reasonable; and (5) the 1996 Settlement Agreement and Petition to
Terminate the 1993 Settlement Agreement was approved;
(ii) the purchase price of $3.35 per share paid by IMCC with
respect to its acquisition of a 50.5% interest in the Company on
July 3, 1996 which $3.35 per share purchase price was offered by
IMCC among other terms in its Letter of Intent to the Company, and
accepted by the Board of Directors through arms-length negotiations
with no additional negotiations on that issue. For a more detailed
description of the history of the $3.35 purchase price and its
approval see the Section entitled "SPECIAL FACTORS/Reasons for the
Proposed Reverse Split;"
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<PAGE> 24
(iii) the purchase price of $3.35 per share paid by the Company in
the redemption of Anne Morgan and Victoria Morgan's shares,
pursuant to the 1996 Settlement Agreement on July 3, 1996,
which $3.35 per share purchase price was offered by the
Company in the 1996 Settlement Agreement and accepted by the
parties thereto through arms-length negotiations. The court
in the Second State Action reviewed and considered the
1996 Settlement Agreement, the Stock Purchase Agreement and the
1993 Settlement Agreement, written memoranda submitted by
various parties and other comments and objections and
ordered that: (1) the notice given pursuant to Rule 23.1 of
the applicable rules of civil procedure for the State of
Utah was adequate, fair and proper; (2) the procedural
and substantive objections of Jenny T. Morgan (a director of
the Company at the time and shareholder of the Company), Gerard
E. Morgan, John C. Morgan and Karen J. Morgan be overruled; (3)
the 1996 Settlement Agreement was fair, adequate and
reasonable; (4) the Petition to Terminate the 1993 Settlement
Agreement was fair, adequate and reasonable; and (5) the 1996
Settlement Agreement and Petition to Terminate the 1993
Settlement Agreement was approved.
(iv) each of the directors' knowledge of and familiarity with the
Company's business prospects, financial condition and current
business strategy;
(v) the information with respect to the financial condition,
results of operations, assets, liabilities, business and
prospects of the Company and current real estate industry
economic and market conditions;
(vi) the opportunity presented by the Reverse Split for Small-Lot
Shareholders to liquidate their holdings at a price
substantially above market trades and without incurring
brokerage costs, particularly given the absence of an active
market for the Common Stock reflective of the Company's
operations and earnings potential;
(vii) the opportunity for Small-Lot Shareholders who wished to
continue to be shareholders of the Company to elect to
exercise the Round Up Option at a purchase price of $3.35 per
share, which offer was also made available to fractional
shareholders;
(viii) the future cost savings that will inure to the benefit of the
Company and its continuing shareholders as a result of the
Company deregistering its stock under the Exchange Act; and
(ix) The Company has obtained a fairness opinion with respect to the
Reverse Split transaction, including the $3.35 per share
Reverse Split purchase price, from Centerpoint Advisors, Inc.,
dated as of February 17, 1998 (the "Fairness Opinion"), which
indicated that the proposed Reverse Split is fair from a
financial point of view to the Company's shareholders. For a
more detailed description of the Fairness Opinion, see the
Section entitled, "SPECIAL FACTORS/ Fairness Opinion," and in
order to review the Fairness Opinion see Exhibit b.
Furthermore, the Board of Directors considered the Company's business,
its current business strategy and prospects and current real estate industry
economic and market conditions. The Board of Directors has discussed the
saturation of the St. George, Utah real estate market. The time required to
develop and sell the Company's real estate assets and turn a non-liquid asset
into a liquid one could be substantial. There have been limited opportunities
for the Company's shareholders to receive dividends or fair value for their
shares on the market. The Reverse Split provides the Company's minority
shareholders (both affiliated and non-affiliated) with the option to either (a)
liquidate their fractional shares at a price substantially above the market
trade and without incurring brokerage costs, or (b) continue as shareholders of
the Company by electing to exercise the round-up option at a purchase price of
$3.35 per share. The Board believes that the financial terms of the Reverse
Split are fair both to shareholders who will receive shares of New Stock and to
shareholders who will receive the Cash Consideration because: (i) the price to
be paid to certain shareholders who will receive the Cash Consideration is fair,
and (ii) the Company will realize cost-savings in its cessation as a reporting
company under the Exchange Act. (See "SPECIAL FACTORS/Reasons for the Proposed
Reverse Split.")
The Company is contractually required to carry out the Reverse Split at
$3.35 per share. The 1996 Settlement Agreement which required the Reverse
Split was reviewed by the court in the Second State Action. For a more detailed
description of the history of the Reverse Split, see the Section entitled
"SPECIAL FACTORS/Reasons for the Proposed Reverse Split." Therefore, the
Company has not engaged in a formal valuation of the $3.35 purchase price in
conjunction with the Reverse Split. However, the $3.35 per share purchase
price exceeds the fourth quarter of 1997 market trading price of $.875 per
share. In fact the $3.35 per share purchase price is higher than any price at
which the stock was traded over the past three years, except for a $4.00 market
trading price in the first quarter of 1995. Subsequent to final court approval
of the Transaction Agreements, the Company did not consider the Company's net
book value, going concern value or liquidation value for the reasons stated
above. IMCC acquired fifty and five/tenths percent (50.5%) of the Company's
Common Stock at $3.35 per share, on July 3, 1996, which is equal to the
purchase price being offered in the Reverse Split. Furthermore, the Company,
pursuant to the 1996 Settlement Agreement, purchased Anne and Victoria Morgan's
shares at $3.35 per share on July 3, 1996, which purchase price is equal to the
one being offered in the Reverse Split. The Company has obtained a fairness
opinion with respect to the Reverse Split transaction, including the $3.35 per
share Reverse Split purchase price, from Centerpoint Advisors, Inc., dated as
of February 17, 1998 (the "Fairness Opinion"), which indicated that the
proposed Reverse Split is fair from a financial point of view to the Company's
shareholders. For a more detailed description of the Fairness Opinion, see the
Section entitled, "SPECIAL FACTORS/ Fairness Opinion," and in order to review
the Fairness Opinion see Exhibit b. The Reverse Split requires the approval of
a majority of the Common Stock of the Company. IMCC holds fifty and five/tenths
percent (50.5%) of the Company's Common Stock and it has indicated that it
intends to vote in favor of the Reverse Split. The directors have not retained
an unaffiliated representative to act solely on behalf of unaffiliated security
holders for the purpose of negotiating the Reverse Split and preparing a report
concerning the fairness of such a transaction. Non-employee directors David
Fife, Lyle Hurd, Stuart B. Peterson and Gregory White voted in favor of the
Reverse Split.
The Board of Directors determined that the terms of the Reverse Split are
procedurally and substantively fair to shareholders because: (i) the transaction
has been structured as a result of arms-length negotiations as embodied in the
Transaction Agreements, (ii) the court in the Second State Action reviewed and
considered the 1996 Settlement Agreement, the Stock Purchase Agreement and the
1993 Settlement Agreement, written memoranda submitted by various parties and
other comments and objections and ordered that: (1) the notice given pursuant to
Rule 23.1 of the applicable rules of civil procedure for the State of Utah was
adequate, fair and proper; (2) the procedural and substantive objections of
Jenny T. Morgan (a director of the Company at the time and shareholder of the
Company), Gerard E. Morgan, John C. Morgan and Karen J. Morgan be overruled; (3)
the 1996 Settlement Agreement was fair, adequate and reasonable; (4) the
Petition to Terminate the 1993 Settlement Agreement was fair, adequate and
reasonable; and (5) the 1996 Settlement Agreement and Petition to Terminate the
1993 Settlement Agreement was approved, (iii) the requirement that the holders
of at least a majority of the shares entitled to vote on the Reverse Split must
approve the transaction, and (iv) the Company has obtained a fairness opinion
with respect to the Reverse Split transaction, including the $3.35 per share
Reverse Split purchase price, from Centerpoint Advisors, Inc., dated as of
February 17, 1998 (the "Fairness Opinion"), which indicated that the proposed
Reverse Split is fair from a financial point of view to the Company's
shareholders. For a more detailed description of the Fairness Opinion, see the
Section entitled, "SPECIAL FACTORS/ Fairness Opinion," and in order to review
the Fairness Opinion see Exhibit b. Approval by a majority of the non-affiliated
shareholders is not required to effect the Reverse Split. IMCC a majority
shareholder of the Company has indicated to the Board that it intends to approve
the transaction. The transaction is also structured so that each of the
Small-Lot Shareholders may elect to remain a shareholder by purchasing from the
Company the additional shares of Common Stock necessary to increase the
shareholder's holdings to the equivalent of 1,000 shares of Common Stock such
that any Small-Lot Shareholder would not be "cashed out" as a result of the
Reverse Split. Furthermore, by Board resolution, the Company has granted
Small-Lot Shareholders and fractional shareholders the right to exercise
dissenters rights as set forth in Part 13 of the Utah Business Act for said
fractional shares.
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<PAGE> 25
In view of the circumstances and the wide variety of factors considered in
connection with its evaluation of the fairness of the Reverse Split, the Board
did not find it practicable to assign relative weights to the factors considered
in reaching its determination that the Reverse Split was fair to, and in the
best interests of, the shareholders. The Company's Board of Directors
considered and voted upon the Reverse Split as a group. No special committees
were formed. The Reverse Split has been approved by the Company's Board of
Directors. For a description of insider ownership following the Reverse Split,
see the table on page 40 of the Proxy Statement.
INTERESTS OF CERTAIN PERSONS AND POTENTIAL CONFLICTS OF INTEREST
In considering the recommendation of the Board of Directors with respect to
the Reverse Split, shareholders should be aware that the Company's directors and
executive officers have interests which may present them with conflicts of
interest in connection with the Reverse Split. Specifically, two of the
directors and two of the executive officers of the Company own Common Stock and,
after the Reverse Split, all will exchange such shares for shares of New Stock
if the Reverse Split is approved by the shareholders. In addition, the equity
percentage ownership of all shareholders remaining after the Reverse Split will
most likely be increased. Thus, directors and executive officers, in addition
to all other shareholders who remain shareholders after the Reverse Split, may
realize an increase in their relative equity ownership of the Company. (See
"VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF"). Furthermore, these remaining
shareholders, except for IMCC, shall have the opportunity to increase their
shareholdings by participating in the Returned Shares Option. (See "PROPOSED
REVERSE SPLIT/Summary of Proposed Reverse Split and Purchase of Returned
Shares"). Finally IMCC possesses a ten year option which enables it to maintain
its 50.5% ownership interest in the Company following the Reverse Split. (See
"SPECIAL FACTORS/IMCC Transaction and Settlement Agreements"). Other than the
stock ownership the directors and executives officers have in the Company, there
are no special relationships or transactions between the Company and any of its
officers or directors with respect to the Reverse Split. For a description of
insider ownership following the Reverse Split, see the table on page 40.
CONDUCT OF THE COMPANY'S BUSINESS AFTER THE PROPOSED REVERSE SPLIT
After the Reverse Split, the Company expects to conduct its business
and operations in the same manner as is currently being conducted by the
Company. If the Reverse Split is consummated, Small-Lot Shareholders who do
not exercise the Round Up Option will no longer have any interest in, and will
not be shareholders of the Company.
As a result of the Reverse Split, the Company is expected to become a
non-SEC reporting company. In that case, the registration of New Stock under
the Exchange Act will then be terminated. In addition, because the New Stock
would not be registered, the Company would be relieved of the obligation to
comply with the proxy rules of Regulation 14A under Section 14 of the Exchange
Act, and its executive officers, directors and shareholders owning more than
10% of New Stock would be relieved of the reporting requirements and "short
swing" trading restrictions under Section 16 of the Exchange Act. Short swing
profits are profits made by an insider through a prohibited sale or other
disposition of corporate stock within six months after purchase. Furthermore,
the Company would no longer be subject to the periodic reporting requirements
of the Exchange Act and would cease filing
-22-
<PAGE> 26
information with the SEC. Among other things, the effect of this change would
be a direct and indirect cost savings to the Company in not having to comply
with the requirements of the Exchange Act. However, this change would also
mean that less information would be publicly available concerning the Company
and its executive officers, directors and five percent (5%) or more
shareholders.
If the Reverse Split is effected (and no Small-Lot Shareholders and no
fractional shareholders Round Up) and no remaining shareholders purchase
Returned Shares, the executive officers and directors of the Company will
beneficially own approximately 50.7% of the Company's outstanding New Stock.
As of November 17, 1997, such individuals beneficially owned approximately
50.65%. See "VOTING REQUIREMENTS AND PRINCIPAL HOLDERS THEREOF/Security
Ownership of Management."
PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED
The Company has not employed any additional personnel with respect to the
Proxy and Rule 13e-3 transactions.
FINANCING THE PROPOSED REVERSE SPLIT
The Company has incurred or estimates the incurrence of the following
expenses in connection with the Reverse Split:
Filing fees $ 500
Accounting fees 15,000
Legal fees
Fairness Opinion 15,000
Solicitation and
printing fees [400]
Miscellaneous and
administrative expenses 20,000
Total estimated fees
and expenses $_______
The Company has paid/or will be responsible for paying all of these
expenses with its working capital.
-23-
<PAGE> 27
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of November 19, 1997, the following shareholders were the only
beneficial owners, known to management of the Company, of more than five
percent (5%) of the Company's outstanding Common Stock:
- -----------------------------------------------------------------------------
UTAH RESOURCES INTERNATIONAL, INC.
5% OR GREATER BENEFICIAL OWNERS
AS OF NOVEMBER 19, 1997
- -----------------------------------------------------------------------------
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 50.6%
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 G. Jones, former director of the Company, holds 100 shares
individually and an additional 326,210 in his capacity as the controlling
shareholder of Mark Technologies Corporation.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of November 19, 1997, the shares of
Common Stock beneficially owned by (i) each director of the Company, (ii) the
Company's Chief Executive Officer, and (iii) the Company's directors and
executive officer as a group. This information is based on public filings
made with the Securities and Exchange Commission through November 19, 1997 and
certain information supplied to the Company by the persons listed below. The
persons named below have sole voting and investment power with respect to all
shares owned, unless otherwise noted.
-24-
<PAGE> 28
UTAH RESOURCES INTERNATIONAL, INC.
COMMON STOCK OWNERSHIP BY DIRECTORS AND NAMED EXECUTIVE OFFICERS
AS OF NOVEMBER 19, 1997
<TABLE>
<CAPTION>
============================================================================================================
BEFORE STOCK SPLIT AFTER STOCK SPLIT*
- ------------------------------------------------------------------------------------------------------------
PERCENT OF PERCENT OF
NUMBER OF OUTSTANDING NUMBER OF OUTSTANDING
NAME OF BENEFICIAL POSITION SHARES SHARES SHARES SHARES
OWNER
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
David Fife Director 0 0% 0 0%
- ------------------------------------------------------------------------------------------------------------
John Fife, as the sole Director, 1,275,912(1) 50.6% 1275** 5O.6%
shareholder of IMCC Chief
Executive
Officer,
President and
Chairman of
the Board
- ------------------------------------------------------------------------------------------------------------
Lyle Hurd Director 2,000 .08% 2(2) .08%
- ------------------------------------------------------------------------------------------------------------
Stuart B. Peterson Director 0 0% 0 0%
- ------------------------------------------------------------------------------------------------------------
Gregory White Director 0 0% 0 0%
- ------------------------------------------------------------------------------------------------------------
DIRECTORS AND Directors & 1,277,912 50.65% 1,277 50.7%
OFFICERS AS A Officers
GROUP (5 persons)
- -----------------------------------------------------------------------------------------------------------
SEE FOLLOWING PAGE FOR NOTES
- -----------------------------------------------------------------------------------------------------------
* Assumes No Small-Lot Shareholder exercises the Round Up Option, and no
remaining shareholder elects to purchase the Returned Shares.
(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 the Company.
(2) In the event the proposed reverse split is effected, this individual will
be granted an option to purchase additional shares of the Company's stock
pursuant to the terms of the Returned Shares Option. For a more detailed
description of the Returned Shares Option, See "PROPOSED REVERSE SPLIT/Summary
of Proposed Reverse Split and Purchase of Returned Shares."
============================================================================================================
</TABLE>
-25-
<PAGE> 29
FINANCIAL MATTERS
ACCOUNTING TREATMENT
In connection with the Reverse Split, the payment of cash to Small-Lot
Shareholders (and holders of fractional shares of New Stock receiving cash in
lieu of fractional shares) will be treated as a repurchase of outstanding stock
of the Company. The repurchased stock will be recorded as treasury stock which
will result in a reduction of stockholders' equity. In addition, the Amendment
will result in the par value per share of the Company's common stock increasing
from $.10 to $100.00 and a reduction in the number of authorized shares of such
stock from 5,000,000 to 5,000.
FEDERAL INCOME TAX CONSEQUENCES
The following description of federal income tax consequences is based
on the Internal Revenue Code of 1986, as amended (the "Code"), the applicable
treasury regulations promulgated thereunder, judicial authority and current
administrative rulings and practices as in effect on the date of this Proxy
Statement. The federal income tax consequences to any particular shareholder
may be affected by matters not discussed below. There also may be state, local
or foreign tax considerations applicable to each shareholder.
THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION
ONLY. EACH SHAREHOLDER IS URGED TO CONSULT HIS OWN TAX ADVISOR AS TO THE
MATTERS DISCUSSED HEREIN AND ANY ADDITIONAL FEDERAL AND ALL STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES THAT COULD RESULT FROM THE SUBJECT TRANSACTION.
(i) The Reverse Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E) of the Code and the Company
will not recognize gain or loss as a result of the Reverse
Split.
(ii) A shareholder who receives cash in lieu of fractional shares
of Common Stock will be treated as if the Company had issued
fractional shares to him and then immediately redeemed such
shares for cash. Such shareholder should recognize gain or
loss, as the case may be, measured by the difference between
the amount of cash received and the adjusted basis of his
stock allocable to such redeemed shares. Such gain or loss
will generally be capital gain or loss if such shareholder's
stock was held as a capital asset, and any such capital gain
or loss will generally be long-term capital gain or loss to
the extent such shareholder's holding period for his stock
exceeds twelve months.
(iii) A shareholder who owns more than 1,000 shares in the aggregate
immediately before the Reverse Split will not recognize a gain
or loss in respect of the exchange of shares of Common Stock
for shares of New Stock. In the aggregate, the shareholder's
basis in the shares of New Stock will equal the holder's
adjusted
-26-
<PAGE> 30
basis in the shares of Common Stock, less the portion of the
adjusted basis attributable to any fractional shares for which
the shareholder received cash from the Company.
(iv) Any shareholder who purchases fractional shares of Common
Stock pursuant to the Round Up Option will not recognize a
gain or loss on the acquisition of such shares. The amount
paid for such shares will be the holder's initial cost basis
in the fractional shares purchased.
Notwithstanding the foregoing, the federal tax laws significantly
limit the deductibility of capital losses. For corporate taxpayers, capital
losses can be deducted only to the extent of capital gains. For individual
taxpayers, capital losses are similarly deductible up to the extent of the
capital gains, but may further be deductible up to a maximum of $3,000 in any
one taxable year. Carryovers and carrybacks of unused capital losses to other
taxable years may be permitted in certain limited circumstances. Additionally,
the ultimate tax consequences to a shareholder may be effected by the
provisions regarding taxes resulting from alternative minimum taxable income.
FINANCIAL STATEMENTS
See Pages F-1 to F-6 for the Company's audited consolidated balance
sheets as of December 31, 1997, 1996 and 1995, and related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three year period ended December 31, 1997.
The Company's book value per share as of December 31, 1997 is $.113/share.
-27-
<PAGE> 31
OTHER MATTERS
Management knows of no other business likely to be brought before the
meeting. If other matters do come before the meeting, the persons named in the
form of proxy or their substitute will vote said proxy according to their best
judgment.
The Company shall provide, without charge, to each person to whom a
proxy statement is delivered, upon written or oral request of such person and
by first class mail or other equally prompt means within one business day of
receipt of such requests, a copy of any and all of the information that has
been incorporated by reference in this proxy statement. Please contact Ladd
Eldredge at (801) 628-8080 with any oral requests and at ________________
Utah Resources International, Inc., 297 West Hilton Drive, Suite #4, St.
George, Utah 84770 with any written requests.
By order of the Board of Directors
John Fife
Director, Chairman of the Board and President
- 28 -
<PAGE> 32
UTAH RESOURCES INTERNATIONAL, INC.
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<PAGE> 33
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-1
Consolidated balance sheet, December 31, 1997, 1996, and
1995...................................................... F-2
Consolidated statements of operations for the years ended
December 31, 1997, 1996, and 1995......................... F-3
Consolidated statement of stockholders' equity for the years
ended December 31, 1997, 1996, and 1995................... F-4
Consolidated statement of cash flows for the years ended
December 31, 1997, 1996, and 1995......................... F-5
Notes to consolidated financial statements.................. F-7
</TABLE>
<PAGE> 34
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, 1997, 1996, and
1995 and the related consolidated statements of operations, stockholders' equity
and cash flows for the three 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, 1997,
1996, and 1995 and the results of their operations and their cash flows for the
three years then ended, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
the Schedule of Supplementary Information on oil and gas operations is presented
for the purposes of additional analysis and is not a required part of the basic
financial statements. Such information, except for that portion marked
"unaudited," on which we express no opinion, has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
TANNER + CO.
Salt Lake City, Utah
January 28, 1998 except for Note 16, which
is dated February 27, 1998
F-1
<PAGE> 35
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................. $ 163,230 $ 517,858 $ 765,831
Accounts receivable from related parties.............. 372,757 262,668 372,622
Notes receivable...................................... 235,746 140,672 178,989
Income tax receivable................................. -- -- 212,328
Property and equipment, net of accumulated
depreciation and amortization of $52,312, $43,408,
$36,409............................................. 17,512 26,019 36,959
Real estate held for resale........................... 855,007 876,088 854,821
Royalty interest in petroleum and mineral production,
net of amortization of $47,729, $44,382, $41,034.... 2,481 5,828 9,176
Other assets.......................................... 53,287 137,011 10,599
Net assets of discontinued operations................. -- -- 657
----------- ----------- ----------
$ 1,700,020 $ 1,966,144 $2,441,982
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable...................................... $ 280,802 $ 252,464 $ 276,446
Accrued expenses...................................... 722,652 546,070 312,474
Earnest money deposits................................ 36,000 36,000 36,000
Notes payable......................................... 285,794 291,110 599,627
----------- ----------- ----------
Total liabilities................................ 1,325,248 1,125,644 1,224,547
----------- ----------- ----------
Minority interest..................................... 89,798 110,903 152,113
Commitment and contingencies.......................... -- -- --
Stockholders' equity:
Common stock; par value $.10 per share, 5,000,000
shares authorized, 2,522,808 shares, 2,522,808
shares, 1,851,198 shares, issued and
outstanding...................................... 252,281 252,281 185,120
Additional paid-in capital.......................... 4,431,232 4,431,232 348,757
Note receivable from stock sale..................... (3,633,159) (3,633,159) --
Retained (deficit) earnings......................... (765,380) (320,757) 531,445
----------- ----------- ----------
Total stockholders' equity....................... 284,974 729,597 1,065,322
----------- ----------- ----------
$ 1,700,020 $ 1,966,144 $2,441,982
=========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 36
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995
---------- ----------- ----------
<S> <C> <C> <C>
Sales................................................. $ 530,553 $ 451,406 $ 587,663
Cost of sales......................................... 207,691 139,175 156,250
---------- ----------- ----------
Gross profit..................................... 322,862 312,231 431,413
General and administrative expenses................... 1,222,040 1,530,288 1,045,854
---------- ----------- ----------
Loss from operations............................. (899,178) (1,218,057) (614,441)
---------- ----------- ----------
Other income (expense):
Royalty income...................................... 176,572 153,051 61,006
Interest and dividend income........................ 247,295 156,895 102,794
Interest expense.................................... (22,517) (86,405) (51,279)
Other income (expense).............................. (18,900) (8,772) 35,906
---------- ----------- ----------
Total other income (expense)..................... 382,450 214,769 148,427
---------- ----------- ----------
Loss before minority interest and provision for income
taxes............................................... (516,728) (1,003,288) (466,014)
Minority interest in net loss of subsidiaries......... 21,105 23,385 26,988
---------- ----------- ----------
Loss before provision for income taxes and
discontinued operations............................. (495,623) (979,903) (439,026)
Income tax benefit.................................... 51,000 54,000 179,000
---------- ----------- ----------
Loss from continuing operations....................... (444,623) (925,903) (260,026)
Discontinued operations:
(Loss) income from discontinued operations net of
income taxes of $-0-, $-0-, and $48,000.......... -- (19,365) 93,407
Income (loss) from disposal of discontinued
operations net of income taxes benefit of $-0-,
$-0-, and $227,000............................... -- 93,066 (583,000)
---------- ----------- ----------
Total discontinued operations.................... -- 73,701 (489,593)
---------- ----------- ----------
Net loss......................................... $ (444,623) $ (852,202) $ (749,619)
========== =========== ==========
Loss per share -- continued operations.............. $ (0.18) $ (0.45) $ (0.16)
Income (loss) per share -- discontinued
operations....................................... -- 0.04 (0.30)
---------- ----------- ----------
Total loss per share............................. $ (0.18) $ (0.41) $ (0.46)
========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 37
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
NOTES
COMMON SHARES ADDITIONAL RECEIVABLE
-------------------- PAID-IN FROM STOCK RETAINED
SHARES AMOUNT CAPITAL SALES EARNINGS
--------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995.......... 1,284,027 $128,403 $ 127,174 $ -- $ 1,409,527
Common stock issued to purchase
subsidiary valued at book value
of subsidiary................... 590,000 59,000 196,503 -- --
--------- -------- ---------- ----------- -----------
Common stock issued for services
in acquisition of subsidiary.... 76,000 7,600 25,080 -- --
Repurchase of stock through land
issuance........................ (102,429) (10,243) -- -- --
Common stock issued in settlement
of dispute...................... 3,600 360 -- -- --
Dividends......................... -- -- -- -- (128,463)
Net loss.......................... -- -- -- -- (749,619)
--------- -------- ---------- ----------- -----------
Balance, December 31, 1995........ 1,851,198 185,120 348,757 -- 531,445
Common stock retired through
split-off of subsidiary......... (590,000) (59,000) 59,000 -- --
Repurchase of common stock........ (40,552) (4,055) (131,794) -- --
Common stock issued for:
Cash and note receivable........ 1,275,912 127,591 4,146,714 (3,633,159) --
Accounts payable................ 26,250 2,625 8,555 -- --
Net loss.......................... -- -- -- -- (852,202)
--------- -------- ---------- ----------- -----------
Balance, December 31, 1996........ 2,522,808 252,281 4,431,232 (3,633,159) (320,757)
Net loss.......................... -- -- -- -- (444,623)
--------- -------- ---------- ----------- -----------
Balance, December 31, 1997........ 2,522,808 $252,281 $4,431,232 $(3,633,159) $ (765,380)
========= ======== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 38
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $(444,623) $(852,202) $ (749,619)
Loss (income) from discontinued operations............... -- 19,365 (93,407)
Loss (gain) from disposition of discontinued operation... -- (93,066) 583,000
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization......................... 12,253 12,567 12,349
Minority interest in net loss of subsidiaries......... (21,105) (23,385) (26,988)
Loss (gain) on disposition of assets.................. -- 1,221 (3,106)
Bad debt expense...................................... -- -- 10,899
Common stock issued for services...................... -- -- 33,040
(Increase) decrease in:
Accounts receivable................................. (110,089) 109,954 (118,310)
Other assets........................................ 83,724 (32,935) (775)
Real estate held for resale......................... 21,081 87,834 (237,850)
Income tax receivable............................... -- 212,328 (212,328)
(Decrease) increase in:
Accounts payable.................................... 28,338 (23,982) 115,912
Accrued expenses.................................... 176,562 153,787 20,942
Deferred income tax................................. -- -- (300,000)
--------- --------- -----------
Net cash used in continued operations............ (253,839) (428,514) (966,241)
Net cash provided by (used in) discontinued
operations..................................... -- 136,993 (104,846)
--------- --------- -----------
Net cash used in operating activities............ (253,839) (291,521) (1,071,087)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of assets...................... -- 500 18,140
Payments on notes receivable............................. 63,459 189,367 137,348
Purchase of property and equipment....................... (399) -- (2,690)
Increase (decrease) in notes receivable.................. (158,333) (151,050) (112,137)
Decrease in minority interest............................ -- (17,825) (4,020)
--------- --------- -----------
Cash for investing activities -- continuing operations... (95,473) 20,992 36,641
Cash for investing activities -- discontinued
operations............................................ -- (38) 76,839
--------- --------- -----------
Net cash (used in) provided by investing
activities..................................... (95,473) 20,954 113,480
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of dividends.................................... -- -- (128,463)
Payments on notes payable................................ (5,316) (419,449) (90,129)
Issuance of common stock................................. -- 641,146 --
Retirement of common stock............................... -- (135,849) --
--------- --------- -----------
Cash for financing activities -- continued operations.... (5,316) 85,848 (218,592)
Cash for financing activities -- discontinued
operations............................................ -- (63,254) (196,765)
--------- --------- -----------
Net cash (used in) provided by financing
activities....................................... (5,316) 22,594 (415,357)
--------- --------- -----------
Decrease in cash........................................... (354,628) (247,973) (1,372,964)
Cash and cash equivalents, beginning of period............. 517,858 765,831 2,138,795
--------- --------- -----------
Cash and cash equivalents, end of period................... $ 163,230 $ 517,858 $ 765,831
========= ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 39
1996
The Company issued 1,275,912 shares of stock in exchange for cash and a note
receivable in the amount of $3,633,159.
The Company issued 26,250 shares of stock as payment of a liability in the
amount of $11,180
The Company redeemed and retired 590,000 shares of stock in conjunction with the
split-off of Midwest Railroad at no value.
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:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash paid for:
Interest.................................................. $2,259 $51,301 $62,427
------ ------- -------
Income taxes.............................................. $ -- $ -- $ --
------ ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 40
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Utah Resources International, Inc., and consolidated Accounting 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.
The Company is both a general and limited partner in the following limited
partnerships.
<TABLE>
<CAPTION>
PERCENT
PARTNERSHIP OWNED
----------- -------
<S> <C>
Country Club Partnership.................................... 84.04%
URI -- MGO Partnership...................................... 70.00%
Southgate Palms Ltd. Partnership............................ 100.00%
Southgate Plaza Ltd. Partnership............................ 52.50%
Southgate Resort Partnership................................ 100.00%
Resources Limited Partnership............................... 83.63%
Tonaquint Indian Hills Partnership.......................... 75.86%
Service Station Partnership................................. 79.00%
</TABLE>
Discontinued operations include Midwest Railroad Construction and
Maintenance Corporation (Midwest) from June 13, 1995 (date of acquisition)
through March 31, 1996 (date of disposition). The Company disposed of Midwest
effective March 31, 1996, see notes 7 and 8. Net assets of discontinued
operations in 1995 also included those of a service station, which was closed in
1993.
METHOD OF RECOGNITION OF INCOME
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.
METHOD OF RECOGNITION OF INCOME
Oil and Gas
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.
The Company follows the full-cost accounting method of capitalizing all
exploration and development costs including nonproductive drilling expenses,
lease abandonments, and other related costs. Under this method of
F-7
<PAGE> 41
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- (CONTINUED)
accounting, no gains or losses are recognized from the sale or disposition of
properties with insignificant proved oil and gas reserves. If capitalized costs
exceed the present value of future net operations, the excess is charged to
expense.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is computed using
the straight-line method based upon the following useful lives of 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.
ROYALTY INTEREST IN PETROLEUM AND MINERAL PRODUCTION
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 of 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 Computation of basic earnings per common share is based on the weighted
average number of shares outstanding during each year.
The computation of diluted earnings per common share is based on the
weighted average number of shares outstanding during the year plus the common
stock equivalents which would arise from the exercise of stock options and
warrants outstanding using the treasury stock method and the average market
price per share during the year. Common stock equivalents have not been included
as the exercise price is in excess of the market price and the amounts are
antidilutive.
STATEMENT OF CASH FLOWS
For purposes of the statement 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.
F-8
<PAGE> 42
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- (CONTINUED)
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 Continued management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
RECLASSIFICATION
Certain balances in the 1996 and 1997 financial statements have been
reclassified to conform to the 1997 presentation.
2. ACCOUNTS RECEIVABLE FROM RELATED PARTIES
Accounts receivable from related parties are as follows at December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Entity with shareholders in common.......................... $120,086 $120,086 $132,843
Related party partnership with common ownership............. 153,875 142,582 152,516
Stockholders and directors.................................. 98,796 -- 87,263
-------- -------- --------
$372,757 $262,668 $372,622
======== ======== ========
</TABLE>
3. NOTES RECEIVABLE
The Company has the following notes receivable at Receivable December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Note receivable from an individual with interest at 9%,
secured by real estate and due when real estate is sold... $231,225 $131,642 $138,989
Note receivable from a company due in 1997 with interest at
8.5%...................................................... 4,521 9,030 40,000
-------- -------- --------
$235,746 $140,672 $178,989
======== ======== ========
</TABLE>
Future maturities of notes receivable are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1998........................................................ $ 4,521
1999........................................................ 231,225
--------
Total....................................................... $235,746
========
</TABLE>
4. REAL ESTATE HELD FOR RESALE
Real estate held for resale consists of approximately for 403 acres of real
estate at December 31, 1997, of which approximately 383 acres is currently
planned for single family dwelling lots, commercial development and
F-9
<PAGE> 43
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- (CONTINUED)
multiple housing in St. George, Utah. The aggregate cost of the raw land and
partially developed land is $855,007, $876,088, and $854,821 at December 31,
1997, 1996, and 1995, respectively.
Property related to the Service Station, which was sold with its fixtures
in 1997, amounts to $109,101 and is included in real estate held for investment
at December 31, 1996. At December 31, 1995, the Service Station assets were
included in net assets of discontinued operations. Included in other assets is
$92,773 of fixtures relating to the Service Station at December 31, 1996.
5. ACCRUED EXPENSES
Accrued expenses at December 31, consist of the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Deficit in investment in partnerships....................... $231,842 $225,661 $168,857
Accrued interest............................................ 145,134 120,358 34,775
Unearned interest received.................................. -- 98,869 --
Accrued costs for clean up.................................. 50,533 50,533 50,533
Accrued payroll and payroll taxes........................... 288,022 -- --
Other accrued expenses...................................... 7,121 50,649 58,309
-------- -------- --------
Total.................................................. $722,652 $546,070 $312,474
======== ======== ========
</TABLE>
6. NOTES PAYABLE
The Company has the following notes payable at December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Notes payable to a shareholder of the Company with interest
rates ranging from 7.5% to 9.5%........................... $110,932 $110,932 $ --
Notes payable to a governmental entity requiring annual
payments of approximately $15,000 plus interest at 5.94%,
secured by real estate.................................... 91,551 91,551 106,810
Note payable to entity requiring annual payments of $10,386
including interest at 9%, secured by real estate.......... 67,282 67,282 67,282
Note payable to a financial institution requiring monthly
payments of $491 including interest at 10.5%, secured by a
vehicle................................................... 16,029 20,074 23,600
Note payable to a trust requiring quarterly interest
payments at 10%, principal due in 1996, secured by real
estate.................................................... -- -- 400,000
Other....................................................... -- 1,271 1,935
-------- -------- --------
Total.................................................. $285,794 $291,110 $599,627
======== ======== ========
</TABLE>
F-10
<PAGE> 44
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- (CONTINUED)
Future maturities of notes payable at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1998........................................................ $162,454
1999........................................................ 25,992
2000........................................................ 27,057
2001........................................................ 23,421
2002........................................................ 22,799
Thereafter.................................................. 24,071
--------
$285,794
========
</TABLE>
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, 1997 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. The net equity
of Midwest at the date of acquisition was $255,503.
Effective March 31, 1996, the Company distributed Midwest to its former
owner. The Company returned to the former Midwest owner all of the common stock
of Midwest and in return received 590,000 shares of its restricted common stock
and agreed to forgive net cash advances made to Midwest over the ownership
period. The return of the 590,000 shares of common stock to the Company was
recorded at no value as the Company exchanged its ownership in Midwest for the
return of the shares of the Company. The 1995 financial statements reflect a
pretax write-down of approximately $752,000 for its investment in Midwest to its
estimated realizable value. The write-down in 1995, was a result of the
forgiveness of approximately $384,000 of intercompany debt from 1995 and the
write-off of the approximate $368,000 of Midwest investment at December 31,
1995.
In 1996, the aggregate loss on the disposal of Midwest was reduced by
$93,066 due primarily to the offsetting of certain costs against the advances
made to Midwest incurred on behalf of Midwest.
For the three months ended March 31, 1996, Midwest had a loss of $19,365
resulting in a net gain on disposition in 1996 of $73,701. The Company realized
an aggregate total loss of $659,934 on the disposal of Midwest.
F-11
<PAGE> 45
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- (CONTINUED)
8. DISCONTINUED OPERATIONS
Condensed financial information for Midwest, which was discontinued, is as
follows for the periods June 13, 1995 (date of acquisition) through December 31,
1995 and January 1, 1996 through March 31, 1996 (date of disposition). The
Service Station had no operations subsequent to 1994.
<TABLE>
<CAPTION>
JUNE 13,
JANUARY 1, 1995 (DATE OF
1996 THROUGH ACQUISITION)
MARCH 31, THROUGH
1996 (DATE OF DECEMBER 31,
DISPOSITION) 1995
-------------- -------------
<S> <C> <C>
Revenues.................................................... $2,690,730 $5,598,542
Costs and expenses.......................................... 2,710,095 5,457,135
---------- ----------
Net (loss) income before income tax......................... (19,365) 141,407
Income tax expense.......................................... -- 48,000
---------- ----------
Net income (loss) $ (19,365) $ 93,407
========== ==========
</TABLE>
9. INCOME TAXES
The benefit (expense) for income taxes is as follows:
CONTINUING OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Current..................................................... $51,000 $54,000 $106,000
Deferred.................................................... -- -- 73,000
------- ------- --------
Total continuing operations................................. $51,000 $54,000 $179,000
======= ======= ========
</TABLE>
DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Current..................................................... $ -- $ -- $ --
Deferred.................................................... -- -- 227,000
------- ------- --------
Total discontinued operations $ -- $ -- $
======= ======= ========
</TABLE>
F-12
<PAGE> 46
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- (CONTINUED)
The benefit (provision) for income taxes differs from the amount computed
at the federal statutory rate as follows:
CONTINUING OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Income tax benefit at federal statutory rates............... $ 151,000 $ 333,000 $158,000
State income taxes.......................................... 5,000 49,000 23,000
Valuation allowance......................................... (105,000) (328,000) --
Other....................................................... -- -- (2,000)
--------- --------- --------
Total current income taxes.................................. $ 51,000 $ 54,000 $179,000
========= ========= ========
</TABLE>
DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income tax (expense) benefit at federal statutory rates..... $-- $(11,000) $227,000
State income taxes.......................................... -- (4,000) 20,000
Other....................................................... -- 15,000 (20,000)
--- -------- --------
Total.................................................. $-- $ -- $227,000
=== ======== ========
</TABLE>
Deferred income taxes have been established to reflect timing differences
between financial reporting and income tax purposes. The primary differences are
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Condemnation sales.......................................... $ -- $ -- $ 300,000
Discontinued operations..................................... -- -- (227,000)
Net operating loss carryforward............................. (433,000) (328,000) (73,000)
Valuation allowance......................................... 433,000 328,000 --
--------- --------- ---------
Total.................................................. $ -- $ -- $ --
========= ========= =========
</TABLE>
The Company has a net operating loss carryforward of approximately
$1,447,000, which expires between 2011 and 2012. The benefit of the net
operating loss (NOL) carryforwards available to offset future taxes will be
limited by the tax laws in effect at the time such NOL's can be utilized.
Significant changes in the ownership of the Company or tax laws could limit the
amount of NOL benefit.
10. STOCK SUBSCRIPTION RECEIVABLE
The Company has a promissory note receivable at December 31, 1997 and 1996
in the amount of $3,633,159. The note bears interest at the short-term Federal
Internal Revenue Service rate (6.77% at December 31, 1997). Interest is due
annually in July of each year with the principal balance due August 1, 2001. The
note is secured by 1,285,912 shares of the Company's common stock.
11. LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS 128) "Earnings Per Share," which
requires companies to present basic earnings per share (EPS) and diluted
earnings per share, instead of the primary and fully diluted EPS that was
previously
F-13
<PAGE> 47
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- (CONTINUED)
required. The new standard also requires additional informational disclosures,
and makes certain modifications to the previously applicable EPS calculations
defined in Accounting Principles Board No. 15. The new standard is required to
be adopted by all public companies for reporting periods ending after December
15, 1997, and requires presentation of EPS for all prior periods reported.
During the year ended December 31, 1997, the Company adopted this standard.
Loss per share information in accordance with SFAS 128 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Net loss................................................... $(444,623)
Less preferred stock dividends............................. --
---------
BASIC EPS
Income available to common stockholders.................... (444,623) 2,522,808 $(.18)
-----
EFFECT OF DILUTIVE SECURITIES
Stock options.............................................. -- --
--------- ---------
DILUTED EPS
Income available to common stockholders plus assumed
conversions.............................................. $(444,623) 2,522,808 $(.18)
========= ========= =====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Net loss................................................... $(852,202)
Less preferred stock dividends............................. --
---------
BASIC EPS
Income available to common stockholders.................... (852,202) 2,072,105 $(.41)
-----
EFFECT OF DILUTIVE SECURITIES
Stock options.............................................. -- --
--------- ---------
DILUTED EPS
Income available to common stockholders plus assumed
conversions.............................................. $(852,202) 2,072,105 $(.41)
========= ========= =====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Net loss................................................... $(749,619)
Less preferred stock dividends............................. --
---------
BASIC EPS
Income available to common stockholders.................... (749,619) 1,619,000 $(.46)
-----
EFFECT OF DILUTIVE SECURITIES
Stock options.............................................. -- --
--------- ---------
DILUTED EPS
Income available to common stockholders plus assumed
conversions.............................................. $(749,619) 1,619,000 $(.46)
========= ========= =====
</TABLE>
F-14
<PAGE> 48
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- (CONTINUED)
12. CONTINGENCIES
The Company is aware of certain claims made against the Company, which
could result in liabilities in excess of amounts accrued in the financial
statements. Management believes that any such claim will not result in any
adverse effect 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.
13. COMMITMENTS
The Company leases its office facility under a year lease requiring monthly
payments of $500 which expires in 1998. Lease expense was $6,000 in 1997.
On February 27, 1998, the Company, in connection with the execution of the
stock purchase agreement in 1996, entered into an employment agreement with the
president of the Company for a salary of $195,000 per year. The agreement
commences the salary on July 13, 1996. Accrued and expensed salary to the
president for the year ended December 31, 1997 is $286,356.
14. SIGNIFICANT CUSTOMERS
The Company had land sales of $331,000, $106,000, and $152,000 to a
significant customer in 1997, 1996, and 1995, respectively.
15. RECENTLY ISSUED ACCOUNTING STATEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 (SFAS 130), "Reporting Comprehensive Income." SFAS 130 requires entities
presenting a complete set of financial statements to include details of
comprehensive income that arise in the reporting period. Comprehensive income
consists of net income or loss for the current period and other comprehensive
income, which consists of revenue, expenses, gains, and losses that bypass the
income statement and are reported directly in a separate component of equity.
This statement is effective for fiscal years beginning after December 15, 1997,
and requires restatement of prior period financial statements presented for
comparative purposes. Management believes that it will not have a material
effect on the Company.
16. SUBSEQUENT EVENT
The Company filed with the Securities and Exchange Commission in February
1997, documents to have the shareholders of the Company consider and vote upon a
proposal to amend the Company's Articles of Incorporation to effect a reverse
split of the Company's issued and outstanding stock on the basis that each 1,000
shares of common stock then outstanding will be converted into one share, at
$3.35 per share prereverse-split price, with fractional shareholders given the
option to either receive cash in lieu of their resulting fractional share or
purchase additional fractional shares to round up to one whole share following
the reverse split.
F-15
<PAGE> 49
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF SUPPLEMENTARY INFORMATION ON OIL AND GAS OPERATIONS
The information on the Company's oil and gas operations as shown in this
schedule is based on the full-cost method of accounting and is presented in
conformity with the disclosure requirements of Statement of Financial Accounting
Standards NO. 69 "Disclosures about Oil and Gas Producing Activities."
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION,
EXPLORATION AND DEVELOPMENT ACTIVITIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Acquisition of proved properties............................ $ -- $ --
-------- --------
Exploration and affiliate costs............................. $ -- $ --
-------- --------
Development costs........................................... $ -- $ --
======== ========
</TABLE>
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Royalty income.............................................. $176,572 $153,051
Production costs............................................ -- --
Exploration costs........................................... -- --
Depreciation, depletion, amortization, and valuation
provisions................................................ (3,347) (3,348)
-------- --------
Results of operations from producing activities before
taxes..................................................... 173,225 149,703
Income tax expense.......................................... (59,000) (51,000)
-------- --------
Results of operations from producing activities (excluding
corporate overhead and interest costs).................... $114,225 $ 98,703
======== ========
</TABLE>
CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Proved oil and gas properties............................... $ 50,210 $ 50,210
Accumulated depreciation, depletion, amortization and
valuation allowances...................................... (47,729) (44,382)
-------- --------
Net capitalized costs....................................... $ 2,481 $ 5,828
======== ========
</TABLE>
ESTIMATED QUANTITIES OF RESERVES (UNAUDITED)
The estimated quantities of proved oil and gas reserves disclosed in the
table below are based upon estimates prepared by American Energy Advisors, Inc.,
petroleum engineers. Such estimates are inherently imprecise and may be subject
to substantial revisions.
F-16
<PAGE> 50
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF SUPPLEMENTARY INFORMATION ON OIL AND GAS OPERATIONS --
(CONTINUED)
All quantities shown in the table are proved developed reserves and are
located within the United States.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
BARRELS MCF
------- --------
<S> <C> <C>
Proved oil and gas reserves:
Balance at beginning of year.............................. $45,000 $437,000
Revisions of previous estimates........................... -- --
Improved recovery and acquisition of minerals in place.... -- --
Extensions and discoveries................................ -- --
Production................................................ (2,000) (51,000)
------- --------
Balance at end of year...................................... $43,000 $386,000
======= ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
------------------
BARRELS MCF
------- ---
<S> <C> <C>
Proved oil and gas reserves:
Balance at beginning of year.............................. $51,000 $488,000
Revisions of previous estimates........................... -- (40,000)
Improved recovery and acquisition of minerals in place.... -- --
Extensions and discoveries.................................. -- --
Production.................................................. (6,000) (11,000)
------- --------
Balance at end of year...................................... $45,000 $437,000
======= ========
</TABLE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
RELATING TO PROVED OIL AND GAS RESERVES (UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Future cash in flows........................................ $1,651,000 $1,830,000
Future production and development costs..................... (62,000) (70,000)
Future income tax expenses.................................. (540,000) (598,000)
---------- ----------
Future net cash flows....................................... 1,049,000 1,162,000
10% annual discount for estimated timing of cash flows...... (529,000) (508,000)
---------- ----------
Standardized measure of discounted future net cash flows.... $ 520,000 $ 654,000
========== ==========
</TABLE>
F-17
<PAGE> 51
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF SUPPLEMENTARY INFORMATION ON OIL AND GAS OPERATIONS --
(CONTINUED)
CHANGES RELATING TO STANDARDIZED MEASURE OF DISCOUNTED
FUTURE NET CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------
1997 1996
---- ----
<S> <C> <C>
Sales, net of production costs.............................. $(177,000 $(153,000)
Net changes in prices....................................... (80,000) --
Acquisition and improved recover, less related costs........ -- --
Revisions of previous quantity estimates.................... -- (85,000)
Accretion of discount....................................... 65,000 74,000
Net change in income taxes.................................. 58,000 80,000
--------- ---------
Net change................................................ $(134,000) $ (84,000)
========= =========
</TABLE>
F-18
<PAGE> 52
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ITEM NUMBER
---- ------
<S> <C>
PROSPECTUS SUMMARY.......................................... 1
The Company............................................... 1
The Offering.............................................. 1
Round Up Option Offering............................... 2
Returned Shares Option Offering........................ 2
Use of Proceeds........................................ 3
SUMMARY FINANCIAL DATA...................................... 4
RISK FACTORS................................................ 5
THE COMPANY................................................. 6
USE OF PROCEEDS............................................. 7
DETERMINATION OF OFFERING PRICE............................. 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 8
Introduction.............................................. 8
Description of Business................................... 8
(a) Business Development............................. 8
Form and Year of Organization.................... 8
(b) Business of Company.............................. 8
Real Property Development Activities............. 8
Real Property Development, Industry Overview,
Government Regulation, and Competition............ 9
Partnerships..................................... 10
Overriding Royalties in Oil and Gas Leases....... 10
Employees........................................ 10
Description of Property................................... 10
St. George Properties Industry Segment #6552........... 10
Oil & Gas Interests Industry Segment #1311............. 11
Office Space........................................... 11
Material Historical Events................................ 11
Stock Purchase Agreement -- July 3, 1996 and Change in
Control............................................... 11
Share Exchange Agreement............................... 14
Market for Common Equity and Related Stockholder
Matters................................................ 16
Management's Discussion and Analysis or Plan of
Operation.............................................. 16
Results of Operations.................................. 16
Liquidity and Capital Resources........................ 17
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 17
Current Directors......................................... 18
Current Directors...................................... 18
Named Executive Officers............................... 20
Executive Officers..................................... 20
Executive Compensation................................. 20
Compensation Of Directors.............................. 21
Employment Contracts and Termination of Employment and
Change-in-Control Arrangements........................ 21
Stock Plans............................................ 21
Stock Ownership of Management.......................... 22
Security Ownership of Certain Beneficial Owners........ 22
DESCRIPTION OF COMMON STOCK PURSUANT TO THE OFFERINGS....... 23
Round Up Option Offering.................................. 23
Returned Shares Option Offering........................... 23
Common Stock.............................................. 24
IMCC OPTION................................................. 25
Utah Law and Certain Articles of Incorporation and
By-laws................................................ 26
Provisions Limitation of Liability and Indemnification.... 26
Transfer Agent and Registrar.............................. 26
</TABLE>
<PAGE> 53
EXHIBITS
Exhibit 1: Amendment to Articles of Incorporation
Exhibit b: Fairness Opinion Issued by Centerpoint Advisors, Inc., dated as of
February 17, 1998
Exhibit e: Part 13 of the Utah Business Corporation Act
<PAGE> 54
EXHIBIT 1
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
UTAH RESOURCES INTERNATIONAL, INC.
To the Secretary of State:
Pursuant to the provisions of the Utah Business Corporation Act,
Section 16-10a-1003, the undersigned corporation hereby amends its Articles of
Incorporation, and for that purpose submits the following statement:
(1) The name of the corporation is: Utah Resources International,
Inc.;
(2) The text of each amendment adopted is:
The Articles of Incorporation of Utah Resources International, Inc.
(the "Company"), are hereby amended as follows. Article Fourth of the
Company's Articles of Incorporation is hereby deleted and replaced with the
following:
FOURTH. THAT THE TOTAL AUTHORIZED CAPITAL STOCK OF THIS
CORPORATION IS FIVE HUNDRED THOUSAND DOLLARS ($500,000)
DIVIDED INTO 5,000 SHARES OF THE COMMON CAPITAL STOCK WITH A
PAR VALUE OF ONE HUNDRED DOLLARS ($100) PER SHARE.
SHAREHOLDERS SHALL HAVE NO PREEMPTIVE RIGHTS TO ACQUIRE
ADDITIONAL SHARES OF THIS CORPORATION.
The manner (if not set forth in the amendment) of implementation of
any exchange, reclassification, or cancellation of issued shares
is as follows:
Immediately prior to the filing of the Articles of Amendment, the
total number of shares of all classes of stock which the Company has
authority to issue is 5,000,000 shares of common, $.10 par value per share
stock (the "Common Stock"). As of _____ p.m., on the date of the filing of
this Amendment with the Secretary of State of Utah (the "Filing Date"), and
subject to majority approval by the Company's shareholders, each 1,000 shares
of common, $.10 par value per share stock then outstanding shall be converted
into one share of common $100.00 par value per share stock of the Company
(the "New Stock"), with shareholders holding fewer than 1,000 shares or any
increment thereof (the "Fractional Shareholders") being given the option to
either (A) receive cash in lieu of fractional shares of stock, or (B)
purchase from the Company that portion of fractional shares of the Common
Stock needed to increase their share holdings to the next one whole share of
New Stock (the "Reverse Split"). The Company will then have 5,000 authorized
shares of common, $100.00 par value per share stock. The Reverse Split is
designed to result in reducing the number of the Company's shareholders to
less than 300, so that the Company will no longer be required to be an
SEC-reporting company. These Articles of Amendment will not effect a change
in the amount of stated capital in the Company.
<PAGE> 55
Fractional Shareholders who do not elect to round up their holdings at
least ten days prior to ______________ __, 1998 (the "Special Meeting Date")
will have their fractional shares automatically converted into the right to
receive cash in lieu of the fractional shares of New Stock otherwise issuable
to such holder at $3.35 per share.
Fractional shareholders who do elect to round up their holdings to
aggregate one whole share of New Stock at least ten days prior to the Special
Meeting Date will, on the Special Meeting Date, have their then whole shares
of Common Stock automatically converted into shares of New Stock.
Holders of record of 1,000 or more shares of Common Stock on _________
__, 1998 (the "Record Date") will have their shares automatically converted
after the Reverse Split into the number of whole and fractional shares of New
Stock equal to the number of shares of Common Stock outstanding and held by
them on the Record Date, prior to the Effective Date divided by 1,000.
Amendment's Adoption:
The Company's Board approved the Amendment on January 22, 1997, which
action was ratified by a ____________ of the Board of Directors on,
_______________ ___, 1998 the Shareholders approved the Amendment at their
Annual Meeting on ______________ __, 1998, to be effective immediately.
There are approximately 2,522,808 issued shares of the Company's
stock. Of this, at least 1,275,912 or 50.5% was voted in favor of the
Amendment, which was sufficient for its approval.
Dated as of______________
UTAH RESOURCES INTERNATIONAL, INC.
________________________________________
John Fife, President and CEO
<PAGE> 56
EXHIBIT b
Fairness Opinion
UTAH RESOURCES INTERNATIONAL
Reverse Stock Split
February 17,1998
CENTERPOINT ADVISORS, INC.
9449 N. 90th Street, Suite 108
Scottsdale, AZ 85258
(602) 657-6220
<PAGE> 57
[CENTERPOINT ADVISORS LETTERHEAD]
FAIRNESS OPINION
February 17, 1998
Mr. John Fife, Chairman
Board of Directors
Utah Resources International, Inc.
360 East Randolph Street Suite 2401
Chicago, Illinois 60601
You have requested our opinion as to the fairness, from a financial point
of view, to the common stock shareholders of Utah Resources International, Inc.
(URI) of the terms of the proposed Reverse Stock Split as described in the
corporate Annual Report for year-end 1996 and the Proxy Statement for the
Shareholders Meeting on December 11, 1997. Under terms of the proposal,
shareholders owning less than 1,000 shares, or any increment thereof, will be
offered $3.35 per share in cash to redeem their shares. If the cash offer is
not accepted, a shareholder can elect to round up to 1,000 shares by providing
notice to the company and purchasing additional shares. Furthermore, under
terms of the Reverse Stock Split, shareholders holding 1,000 shares or any
increment thereof would receive one new share for each one thousand shares
held. URI is planning to become a non-SEC reporting company.
Centerpoint Advisors, Inc. is a firm specializing in the valuation of
businesses and business interests for purposes including mergers and
acquisitions, gift and estate taxes, Employee Stock Ownership Plans, corporate
and partnership re-capitalizations, dissolutions and other objectives. The
principals in Centerpoint Advisors are experts in valuing privately held
companies, and also in analyzing firms with publicly traded shares.
In arriving at our opinion for URI shareholders, we have considered: the
nature and history of the enterprise; the economic outlook in general; the
prospects for the industry and the market; earnings and cash flow trends;
opportunities and risks to future earnings; book value; adjusted book value;
general financial condition; management capability; dividend paying capacity;
past transactions and the market for URI's common stock; the marketability of
the shares; public companies in related lines of business; and other
information which was deemed pertinent.
<PAGE> 58
Utah Resources International, Inc.
February 17, 1998
Page 2
Specific documents and information relied upon in arriving at our opinion
include:
1. Forms 10-KSB filed with the Securities and Exchange Commission by Utah
Resources International, Inc. for the years ending December 31, 1992,
through December 31, 1996, and the 10-QSB for the first, second and third
quarters of 1997;
2. Audited financial statements of Utah Resources International, Inc., for
the six years ending December 31, 1996; and the company's internally
prepared interim financial statements for the nine months ending
September 30, 1996 and 1997;
3. Federal Income Tax returns of Utah Resources International, Inc. for the
six years ending December 31, 1996;
4. Corporate Annual Report to shareholders for the years 1992, 1993, and
1996;
5. Notice of Annual Meeting of Shareholders To Be Held on December 11, 1997
at 1:00 PM MST, and related Proxy Statement;
6. Telephone discussions, written correspondence and interviews with: John
Fife, President, CEO, Chairman of the Board, and shareholder; R. Dee
Erickson, Immediate Past Chairman of the Board, and shareholder; Gerry T.
Brown, Vice President, and shareholder; Ladd Eldredge, Secretary,
Treasurer and Chief Financial Officer; Lyle D. Hurd, Director,
shareholder, and former marketing manager; Stanford S. McConkie, MAI; and
other individuals knowledgeable about southern Utah real estate and
economic matters;
7. Real estate appraisal of property owned by URI, prepared by Morley &
McConkie of St. George, Utah, dated January 26, 1995;
8. Stock price and trading volume history of URI common stock for the years
1994 through 1997;
9. Moody's Investor's Service information from the OTC Unlisted Manual for
1995 and 1997.
10. Marketing and other information prepared by URI;
11. Various economic and market data prepared by governmental and industry
sources; and
12. American Energy Advisors, Inc. Estimated Reserves and Future Net Revenue
Report, dated as of December 31, 1996.
In addition, we visited the business site of the company in St. George,
Utah, toured URI's real estate properties, and toured the city and surrounding
Washington County area. We also researched companies with publicly traded
shares that are in similar lines of business.
Our study involved analysis of URI's operations and an estimate of the
approximate investment value of the corporate shares. The two primary methods
of estimating that value were Capitalized Cash Flow and Orderly Liquidation.
We also considered book value.
Book value was derived by adding the reported stockholders' equity as of
September 30, 1997, in the amount of $613,894, and the Note Receivable from
Inter-Mountain Capital Corporation (IMCC) in the amount of $3,633,159, for a
total of $4,247,053. Dividing the total $4,247,053 by 2,522,808, which
represents the total number of shares outstanding, a book value of $1.68 per
share is derived.
The Capitalized Cash Flow method is based on the assumption that URI's
real estate value on a long-term development basis is about $23 million. Using
a fairly optimistic sell-out period of 15 years, URI would be able to generate
about $1.53 million per year in revenue from this source. After various costs
and expenses, taxes and royalty income, URI is forecast to be capable of
generating
<PAGE> 59
Utah Resources International, Inc.
February 17, 1998
Page 3
approximately $648,000 in cash flow annually. Capitalizing the annual cash flow
at 15% results in a company value of $4.3 million. This amount converts to
$3.00 per share based on 1,438,283 shares of common stock. This method does not
include the shares underlying the IMCC Note Receivable.
The Orderly Liquidation method begins with the real estate value
appraised in January, 1995, at $15,650,000, and it is assumed that a period of
18 months would be required to liquidate the assets. Deductions are made from
appraised value for land sold in 1995 through 1997, a 10% decrease for market
conditions, a 25% discount to induce developers and investors to acquire the
properties for cash, and 5% for commissions and sales costs. Our calculations
derive real estate liquidation value estimated to be near $9 million. To this
is added the value of royalty interests (estimated to be worth $625,000), other
assets of URI calculated by us to be approximately $220,000 (Working Capital,
and equity in real estate owned by a related partnership), and the Note
Receivable from IMCC. The total value of these assets is about $13.5 million.
Deducting debt of some $287,000, and potential liabilities of $400,000 (ongoing
remediation of the Service Station Limited Partnership #2 property, and
corporate litigation expenses), stockholder equity is $12.8 million. Finally,
it is necessary to deduct operating expenses for 18 months during liquidation
($450,000), and taxes of 40% on $9.5 million of real estate gains ($3,800,000).
The net liquidation value is estimated at $8,578,012, or $3.40 per share.
Because the proceeds would not be received for 18 months under this scenario,
it is necessary to discount the per share price to a present value. Assuming
that an investor would require a 15% rate of return, the present value is $2.76
per share.
We also considered the market trading price of the stock, which was
between twenty five cents per share and $1.25 per share during 1997. Our
research indicates that there were no public sales of stock for cash of more
than $1.50 per share in the past two years.
Based on these estimated indications of value, the following was found:
<TABLE>
<CAPTION>
Per Share ($)
<S> <C>
Book Value 10/1/97 1.68
Orderly Liquidation Value 2.76
Capitalized Cash Flow Value 3.00
Actual Market Price Range .25 - 1.25
</TABLE>
<PAGE> 60
Utah Resources International, Inc.
February 17, 1998
Page 4
After our study of the company, and the analysis of this information on
prices and values, it was determined that the proposed Reverse Stock Split
price of $3.35 per share is reasonable and fair to the shareholders of URI. We
also considered perspectives on fairness which are provided by other sources,
including the following:
Per Weinberger v. UOP considerations:
Market Value - $.25-$1.25/share
Asset Value - $2.76/share
Dividends - nil
Earnings Prospects - very poor
Nature of Enterprise - speculative, volatile
Other Pertinent Factors - new CEO, weak real estate market
Future Prospects - poor, based on past results
CONCLUSION: PROPOSED TRANSACTION IS FAIR.
Per Simpson considerations: "The Emerging Role of the Special Committee -
Ensuing Business Judgment Rule Protection in Context of Management LBO & Other
Corporate Transactions Involving Conflicts of Interest", 43 Business Law 665,
672 (1988).
Current business conditions at URI:
A. Historic financial results - very poor
B. Present financial condition - poor
C. Cash flow and income projections - poor
D. Stock performance historically - very poor
E. Ability to fund expenditures - poor
F. R&D, new products - very poor
G. Market and replacement value of assets - good
H. Depth of management - small management team
CONCLUSION: PROPOSED TRANSACTION IS FAIR.
It should be noted that it was necessary to use a number of estimates in
this study because corporate administrative practices have not produced
consistent information with reliable detail over the years. However, the lack
of extensive detailed financial information does not limit the validity of the
conclusions in this study. The issues most important to the value of the common
stock are the underlying real estate assets, the low market trading price, and
the history of internal dissension and litigation. These issues have been
carefully analyzed to provide a sound basis for the conclusion reached herein.
<PAGE> 61
Utah Resources International, Inc.
February 17, 1998
Page 5
Based on our analysis of the factors deemed relevant, it is our opinion
that the proposed Reverse Stock Split price of $3.35 per share is fair from a
financial point of view to the shareholders of Utah Resources International,
Inc.
Centerpoint Advisors, Inc.
by /s/ JEFFREY P. WRIGHT
-------------------------------
Jeffrey P. Wright, ASA, CFA
<PAGE> 62
Utah Resources International__________________________________February 17, 1998
UTAH RESOURCES INTERNATIONAL, INC.
VALUATION METHODS
VALUATION ESTIMATE 1: ORDERLY LIQUIDATION
<TABLE>
Real Estate Value:
<S> <C> <C> <C>
Per appraisal 1/1/95 $15,650,000
Sales during 1995 - 1997 - 1,556,135
14,093,865
Less 10% for market conditions - 1,409,387
------------
12,684,478
Less 25% discount for cash - 3,171,120
------------
9,513,358
Less 5% commissions and costs - 475,668
-------------
9,037,690
Royalty Interests ($125,000 inc. x 5) 625,000
Working Capital and Other Assets (1) 220,000
Note Receivable from IMCC 3,633,159
---------
ESTIMATED TOTAL ASSETS 13,515,849
Notes Payable - 287,838
Other Liabilities (gas station, litigation, etc.) - 400,000
------------
NET ASSETS 12,828,011
Operating costs for 18 months (liquidation period) - 450,000
Taxes at 40% on $9.5 million gain - 3,800,000
-----------
ESTIMATED NET LIQUIDATION VALUE $ 8,578,011
Outstanding shares: 2,522,808 = $3.40/share
PRESENT VALUE DISCOUNTED AT 15% FOR 18 MONTHS $2.76/SHARE
(1) Working Capital 9/30/97 per 10-QSB $135,000
Reserves and adjustments - 65,000
----------
Net Working Capital 70,000
Equity in Partnership real estate (net) 150,000
$220,000
</TABLE>
CENTERPOINT ADVISORS, INC. PAGE 1
<PAGE> 63
Utah Resources International__________________________________February 17, 1998
VALUATION ESTIMATE 2: CAPITALIZED CASH FLOW
<TABLE>
<S> <C>
Real estate value assuming a sell-out over 15 years(1) $23,000,000
: 15
-----------
Annual revenue from real estate sales 1,533,333
Commissions and costs at 5% - 78,000
Annual operating expenses - 500,000
Royalty income + 125,000
-----------
Estimated Operating Income 1,080,333
Taxes at 40% - 432,133
-----------
ANNUAL CASH FLOW ESTIMATE $ 648,200
Capitalization:
Discount rate 21%(2)
Less: annual growth - 6
---
Cap rate 15%
COMPANY VALUE (Cash Flow of $648,200/Cap Rate .15) $ 4,321,333
Assuming 1,438,283 shares outstanding(3) $ 3.00/SHARE
</TABLE>
(1) See page 3.
(2) Safe rate 6%, plus 12% equity risk premium, plus 3% small business risk
premium (which is low because of the substantial asset base).
(3) Excludes 85% of shares acquired by Inter-Mountain Capital Corporation. Only
15% of the shares have been paid for in cash. Calculation of cash flow also
excludes interest earnings on the IMCC Note Receivable. If the cash flow
included interest earnings, and if all IMCC shares were used in the
calculations, the per share value would be lower.
CENTERPOINT ADVISORS, INC. PAGE 2
<PAGE> 64
Utah Resources International__________________________________February 17, 1998
URI REAL ESTATE VALUE ESTIMATES
<TABLE>
<S> <C>
1. Remaining sale options to developer (37 acres) $ 1,700,000
2. Southgate Valley (220 acres)
- 35 acres = 140 lots x $17,000/lot net of development cost 2,380,000
- 185 acres = 500 lots x $30,000/lot net of development cost 15,000,000
3. Two commercial properties off Dixie Drive (2.9 acres) 430,000
4. Commercial property near golf driving-range (.6 acre) 60,000
5. Southgate Hills (37 acres) 1,100,000
6. Expired option contract to developer (9.5 acres) 300,000
7. Land under option to developer (4 acres) 120,000
8. 42 acres at airport - (20 potentially viable for development) 1,000,000
9. To be zoned commercial - NE of Southgate Valley (10.13 acres) 450,000
10. Site near freeway (4 acres) 160,000
11. 52.5% Partnership interest: Promissory note and real estate 300,000
-------------
TOTAL $ 23,000,000
</TABLE>
Above are estimates of the values of URI's real estate parcels based on
discussions with management. Our assumption is that most of the parcels would be
sold in the next 12 to 24 months in order to generate part of the funding to
develop the Southgate Valley site over a 15 to 18 year selling period. We
consider the projected selling period, which was developed by a qualified real
estate appraiser in 1995, as very optimistic. The dollar amount for each parcel
should not be taken as an appraised value, but an estimate only. Some estimates
may be too high, and some may be too low. It is likely that the total amount is
the approximate value of the total assets. The same analysis in May, 1996, which
was developed through discussions with the company's President at that time,
resulted in an estimated asset value of $25,855,000. If the 1996 figure is
reduced by 10% for changes in market conditions to the present time, that
estimated value would become $23,269,500 today. We believe that this information
provides a reasonable basis for estimating the value of the URI's real estate at
$23 million under the scenario of a going-concern development company.
CENTERPOINT ADVISORS, INC. PAGE 3
<PAGE> 65
Utah Resources International__________________________________February 17, 1998
CASE ANALYSIS
1. SUMMARY OF VALUATION ESTIMATES
<TABLE>
<CAPTION>
Per Share ($)
<S> <C>
Book Value 10/1/97* 1.68
Orderly Liquidation Value (see p. 1) 2.76
Capitalized Cash Flow (see p. 2) 3.00
Actual Market Price .25 - 1.25
</TABLE>
* Includes IMCC shares, and includes IMCC Note Receivable as an asset.
2. ADDITIONAL PERSPECTIVES
A. PER WEINBERGER V. UOP
Market Value - $.25-$1.25/share
Asset Value (Orderly Liquidation) - $2.76/share
Dividend - nil
Earnings Prospects - very poor
Nature of Enterprise - speculative, volatile
Other Pertinent Factors - new management soft real estate
market
Future Prospects - poor, based on past results
CONCLUSION: PROPOSED OFFER IS FAIR AT $3.35.
B. PER SIMPSON - "The Emerging Role of Special Committee and Ensuing
Business Judgment Rule Protection in Context of Management LBO and
other Corporate Transactions Involving Conflicts of Interest", 43
Business Law 665, 672 (1988).
Current business conditions at URI:
Historic financial results - very poor
Present financial condition - poor
Cash flow and income projections - poor
Stock performance historically - very poor
Ability to fund expenditures - poor
R & D, new products - very poor
Market and replacement value of assets - good
Depth of management - small management team
CONCLUSION: PROPOSED BID IS FAIR AT $3.35.
CENTERPOINT ADVISORS, INC. PAGE 4
<PAGE> 66
Utah Resources International__________________________________February 17, 1998
3. PROPOSED REVERSE STOCK SPLIT FOR URI COMMON STOCK - $3.35 PER SHARE
A. NEGATIVE FACTORS
1. A sustained surge in real estate prices in the near future
could raise the value of the underlying properties.
B. POSITIVE FACTORS
1. Payment is in cash.
2. Price is at or above the underlying asset value, and at 350%
premium to market price.
3. A shareholder does not have to sell shares, but instead can
purchase additional shares to round up to 1,000 shares, and
remain a shareholder.
4. This is the first opportunity for shareholders to achieve
liquidity at a realistic price for many years.
5. The asset base is likely to be further dissipated if the
history of extreme litigation continues.
4. ADDITIONAL INFORMATION
A. URI RISK MEASUREMENT CONSIDERATIONS
1. SIZE: URI is small compared to other publicly-traded
companies and compared to many other closely-held businesses
on the basis of income, earnings, cash flow, and so forth.
Due to the small size, URI is less attractive to most
investors.
2. ACCESS TO CAPITAL MARKETS: essentially no access. Due to
URI's long history of conflict, mismanagement, litigation
and turmoil, and due to the lack of any meaningful earnings
or cash flow that can be sustained, URI has no practical
access to capital markets as it is presently structured.
3. BREADTH OF CUSTOMER BASE: very limited to buyers of
subdivided residential lots in a small town. Although some
commercial real estate is sold, the customer base consists
realistically of buyers of subdivision lots only. This is a
market which is very narrow and small in southern Utah.
4. GEOGRAPHIC AREA: very limited to a small portion of one
small town, in a lightly populated county, in a lightly
populated state.
CENTERPOINT ADVISORS, INC. PAGE 5
<PAGE> 67
Utah Resources International__________________________________February 17, 1998
A. URI RISK MEASUREMENT CONSIDERATIONS (CONT.)
5. MANAGEMENT: management team is small.
6. BREADTH OF PRODUCT LINE: very narrow, relying almost totally
on single family building lots in one part of a small town.
Commercial property does not offer any significant
diversification.
7. LITIGATION/REGULATORY RISK: poor record of constant
litigation that has been very expensive and debilitating.
Regulatory circumstances in the industry are currently at
rest, but the trend is for greater oversight of real estate
practices by public authorities.
8. VOLATILITY OF THE INDUSTRY: above average volatility. URI is
completely dependent on real estate market conditions in a
small geographic area. For the past few years, the trend has
been downward.
B. NATURE AND HISTORY OF THE BUSINESS.
Beginning in the 1960s, URI acquired and assembled parcels of real
estate in southern Utah. Some of that work resulted in contentious
relationships and subsequent litigation. As St. George became a
popular development area in Utah, URI built and tried to operate a
Hilton hotel. Prior to the consummation of the IMCC transaction,
management was very poor, the hotel was sold, and some of the real
estate was sold to others who were more capable of development
activities. The company is in a slow liquidation mode. A large
block of stock has been held by shareholders who have burdened the
company with litigation. The only remaining value to the business
is some of the underlying real estate, which unfortunately is
being consumed by operating costs and litigation expenses.
C. ECONOMIC OUTLOOK IN GENERAL.
The national economy is in the seventh year of expansion, and
while a recession is not predicted in the near future by most
economists, this expansion is likely to come to an end in the next
two to three years. The national economy is a neutral factor in
this study, but it requires an element of caution: as soon as the
economy enters recession, the sale of real estate to retirees is
likely to slow down. The regional economy has been very good.
Utah, Nevada and Arizona are among the fastest growing states in
the nation. St. George, Utah, where the company has its real
estate, also grew very fast in the past three decades, until about
1994. The growth has now slowed and surrounding towns are
competing for new residents. In 1995, it became more evident that
residential real estate sales were slowing. For 1997, real estate
sales were off between 5% and 15% from the prior year. Reports
indicate that there are more competitors in the market, prices are
soft, and some developers have had financial trouble. Thus, local
economic and market conditions are considered to be neutral to
poor. Prospects are neutral to poor in the short and intermediate
term.
CENTERPOINT ADVISORS, INC. PAGE 6
<PAGE> 68
Utah Resources International__________________________________February 17, 1998
4. ADDITIONAL INFORMATION (CONT.)
D. EARNINGS AND CASH FLOW TRENDS.
Trends in earnings and cash flow at URI have been highly volatile
historically, and recent years have seen poor results. Reported
revenues in the past have benefited from accounting conventions,
sales due to condemnation (instead of direct market sales from
URI's efforts) and other sources that are not impressive. Other
real estate companies in the area have done much better than URI,
where cash flow and earnings come simply from the liquidation of
assets. Operating costs and chronic litigation expenses are
consuming asset values. The company is now in a position that
there is only one more significant piece of real estate that is
developable over the long term, and it will take the cash from
liquidating the other parcels to carry on with development costs.
The trend and outlook for cash flow and earnings are poor. The
risks are substantial: if a cogent plan is not developed and
implemented in the near future, the company may have to start
selling chunks of its last large piece of real estate at discount
prices to keep cash coming in.
E. BOOK VALUE.
Book value is about $1.70 per share, but the adjusted book value
is probably closer to $2.75 per share (according to the Orderly
Liquidation value calculation).
F. GENERAL FINANCIAL CONDITION.
URI has enough cash to pay its bills presently if litigation
expenses do not continue at levels similar to the past few years.
It probably will be necessary to raise additional capital to
proceed with development costs. Financial condition is considered
to be poor.
G. MANAGEMENT CAPABILITY.
The company has been mismanaged for many years. In 1993, a control
group of shareholders was removed under a Settlement Agreement
with other shareholders. Chronic litigation and competing factions
have been a tremendous burden. While there have been some good
ideas among current management and the Board of Directors, the
history of dissension and litigation has impeded any progress. The
unsuccessful merger and subsequent litigation with respect to
Midwest Railroad in 1996 consumed management time, and
considerable expense.
H. DIVIDEND PAYING CAPACITY.
It appears that dividend paying capacity under present management
and shareholders is poor. Cash provided by asset sales is being
consumed by operating costs and litigation expenses. The
shareholders have a low probability of receiving dividends.
CENTERPOINT ADVISORS, INC. PAGE 7
<PAGE> 69
Utah Resources International__________________________________February 17, 1998
4. ADDITIONAL INFORMATION (CONT.)
I. PAST TRANSACTIONS AND MARKET FOR COMMON STOCK.
The share price has been languishing far below adjusted book value
for many years. A surge in the price during the first part of 1995
probably reflected hopes that the merger with Midwest Railroad
would provide better management, as well as some operating
earnings from a major diversification into another industry. The
merger failed and the share price has returned to a low level,
with very little trading activity. Although there is new
management, the market for the stock is likely to continue to be
poor in the future until URI recovers from its history of poor
management, the failed merger, constant litigation, and a
depleting asset base.
J. MARKETABILITY OF SHARES.
Shares of Utah Resources International are marketable, at a price
deeply discounted from intrinsic value. There was less than one
trade per month on average in 1997. One trade occurred at $1.25
per share, several trades took place at 87.5 cents, and the lowest
price was 25 cents per share. The company's checkered history is
accretive: each successive misadventure, such as the failed
Midwest Railroad merger, makes URI that much more suspect to
potential buyers.
K. PUBLIC COMPANIES IN RELATED LINES OF BUSINESS.
Companies in the residential real estate subdivision business are
subject to evaluation according to their region and locality.
Comparability between firms is rarely helpful because of this, and
the wide variations in financial leverage and capital structure,
such as bank debt, limited partnership participations, seller
carry-backs, and so forth. For these and other reasons, we found
no companies that are reasonably comparable for analytical
purposes. Any comparison between URI and other residential lot
developers would involve so many adjustments that the result would
not be meaningful.
CENTERPOINT ADVISORS, INC. PAGE 8
<PAGE> 70
Utah Resources International__________________________________February 17, 1998
TERMS AND CONDITIONS OF OPINION
The primary objective of a Fairness Opinion is to determine if a price
for corporate shares or a business enterprise is fair, from a financial point of
view, to the shareholders of the corporation. The numerical result is objective
and unrelated to the desires, wishes or needs of the client who engages the
appraisers. Analytical reports prepared by Jeffrey P. Wright, ASA, CFA, conform
to the principles and ethics of the American Society of Appraisers. This report
is intended for the specified purpose, it is effective for the indicated date,
and it is intended to be used in its entirety. Any table, chart or other portion
taken alone is likely to be misleading.
Some of the information, data and estimates used in this report have
been obtained from sources which we believe to be reliable but no guarantee is
made as to the accuracy or reliability of the data. We have also relied upon
information supplied by the subject company and/or its representatives as being
complete, accurate and fairly representing actual conditions. No further
investigation was made to verify such information, nor was title to assets
verified. We have obtained this information only for use in this study.
The analysts, by virtue of preparing this report, are not required to
give testimony in court, or in deposition, or to be in attendance at any
proceeding regarding the company and/or its principals unless agreed to in
advance.
I certify that, to the best of my knowledge and belief: the statements
of fact contained in this report are true and correct; the reported analyses,
opinions and conclusions are limited by the reported assumptions and limiting
conditions, and they are my personal, unbiased professional analyses, opinions
and conclusions; I have no undisclosed present or prospective interest in the
property that is the subject of this report and I have no personal interest or
bias with respect to the parties involved; my compensation is not contingent on
an action or event resulting from the analyses, opinions or conclusions in, or
use of this report; my analyses, opinions and conclusions were developed, and
this report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of The Appraisal Foundation; and anyone
providing significant professional assistance to the person signing this report
has been identified. The American Society of Appraisers has a mandatory
recertification program for all of its Senior Members. I am in compliance with
the requirements of that program and I am recertified.
/s/ JEFFREY P. WRIGHT February 17, 1998
- ------------------------------------ ------------------------
Jeffrey P. Wright, ASA Date
CENTERPOINT ADVISORS, INC. PAGE 9
<PAGE> 71
Utah Resources International__________________________________February 17, 1998
QUALIFICATIONS OF APPRAISERS
Centerpoint Advisors, Inc. is a firm of professionals specializing in the
valuation of closely held businesses and publicly-traded securities. Valuations
are prepared for mergers and acquisitions, gift and estate taxes, employee stock
ownership plans, tender offers, fairness opinions, economic damages, divorces
and other matters involving the value of investments.
Jeffrey P. Wright, ASA, CFA, has been employed in the securities industry and by
banking institutions to do securities research and investment analysis since
1969. He was a registered representative in Phoenix, Arizona, with a major
national stock brokerage firm. His responsibilities have included analysis of
securities, and management of investment portfolios for banks, and for their
trust departments. He served as Chief Investment Officer for the Arizona State
Treasurer, and was Vice President and Manager of Investments for a major bank.
Mr. Wright is a Chartered Financial Analyst; Fellow of the Association for
Investment Management and Research; president and member of the Board of
Directors of - the Stock and Bond Club of Phoenix, the Phoenix Society of
Financial Analysts, and the Phoenix Metro chapter of the American Society of
Appraisers (ASA). He has served in the following positions with ASA: Regional
Governor, member of the Business Valuation Committee (1989-1997), member of the
Standards Subcommittee, and member of the Board of Examiners. He received a
Bachelor of Arts degree from Arizona State University, studied in the graduate
business school, and has participated in numerous seminars on valuation issues.
He is co-author of "Considerations in Buying or Selling a Business in Arizona"
(1985), "Buying or Selling a Business under the Tax Reform Act of 1986" (1987),
"ESOPs in Arizona" (1994), and "Equitable Distribution for Divorce in Arizona"
(1995). He is author of the 1990 book "What is a Business Worth?", and has
taught business valuation classes and courses for the Arizona School of Real
Estate & Business, as well as continuing education classes for certified public
accountants, attorneys, business brokers, and others. Mr. Wright has purchased
and sold businesses, is currently a shareholder in closely-held corporations and
has been a consultant to numerous buyers and sellers.
CENTERPOINT ADVISORS, INC.
9449 North 90th Street Suite 108
Scottsdale, Arizona 85258
(602) 657-6220
CENTERPOINT ADVISORS, INC. PAGE 10
<PAGE> 72
Utah Resources International__________________________________February 17, 1998
UTAH RESOURCES INTERNATIONAL
INCOME SPREADS
PER FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Income
Raw Land & Lot Sales $ 1,107,412 $ 1,158,346 $ 758,114 $ 2,274,222 $ 587,663 $ 451,406
Gain Sale to Rel. Party 83,184 -- -- -- -- --
Gasoline & Grocery 640,843 537,660 -- -- -- --
Room Rental & Restaurant 1,440,717 1,405,395 -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Sales 3,272,156 3,101,401 758,114 2,274,222 587,663 451,406
Direct Costs
Cost of Land & Lots 224,226 350,334 113,396 567,453 156,250 139,175
Gasoline & Groceries 566,830 478,942 -- -- -- --
Room Rental & Restaurant 370,917 137,485 -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Direct Costs 1,161,973 966,761 113,396 567,453 156,250 139,175
Gross Profit 2,110,183 2,134,640 644,718 1,706,769 431,413 312,231
G & A Expenses 1,737,242 1,876,004 628,462 580,326 815,039 418,789
----------- ----------- ----------- ----------- ----------- -----------
Income from Operations 372,941 258,636 16,256 1,126,443 (383,626) (106,558)
Other Income
Interest & Dividends 94,616 41,666 52,109 50,458 102,794 156,895
Rental Income 84,365 84,049 87,904 32,183 -- --
Royalties 61,914 61,781 98,554 92,455 61,006 153,051
Gain on Securities -- 7,443 -- -- -- --
Other Income 14,797 92,699 9,430 (18,074) 35,906 (8,772)
----------- ----------- ----------- ----------- ----------- -----------
Total Other Income 255,692 287,638 247,997 157,022 199,706 301,174
Other Expenses
Interest 188,791 178,232 64,837 60,020 51,279 86,405
Insurance on Officers 1,871 -- -- -- -- --
P/Ship Losses 3,734 13,706 -- -- -- --
Loss on Investments 1,360 -- -- -- -- --
Litigation Expenses 36,000 36,000 690,000 98,042 230,815 1,111,499
----------- ----------- ----------- ----------- ----------- -----------
Total Other Expenses 231,756 227,938 754,837 158,062 282,094 1,197,904
Earnings Before Taxes 396,877 318,336 (490,584) 1,125,403 (466,014) (1,003,288)
Minority Interest 18,539 (5,923) 380 29,109 26,988 23,385
Income Taxes (121,338) (146,043) 144,000 (436,000) 179,000 54,000
----------- ----------- ----------- ----------- ----------- -----------
Income From Cont. Oper. 294,078 166,370 (346,204) 718,512 (260,026) (925,903)
Discontinued Operations -- -- 168,745 (31,416) (489,593) 73,701
----------- ----------- ----------- ----------- ----------- -----------
Net Income $ 294,078 $ 166,370 ($ 177,459) $ 687,096 ($ 749,619) ($ 852,202)
</TABLE>
CENTERPOINT ADVISORS, INC. PAGE 11
<PAGE> 73
Utah Resources International__________________________________February 17, 1998
UTAH RESOURCES INTERNATIONAL
INCOME SPREADS
PER FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
9/30/96 9/30/97
----------- -----------
<S> <C> <C>
Income
Sales $ 178,070 $ 517,066
Royalties 120,574 144,194
----------- -----------
Total Sales 298,644 661,260
Total Direct Costs 60,286 205,010
----------- -----------
Gross Profit 238,358 456,250
G & A Expenses 1,066,144 594,349
----------- -----------
Income from Operations (827,786) (138,099)
Other Income
Interest & Dividends 5,016 22,396
Other Income 600 --
----------- -----------
Total Other Income 5,616 22,396
Earnings Before Taxes (822,170) (115,703)
Minority Interest 4,679 --
Income Taxes 29,600 --
----------- -----------
Income From Cont. Oper (787,891) (115,703)
Discontinued Operations 22,568 --
----------- -----------
Net Income ($ 765,323) ($ 115,703)
</TABLE>
CENTERPOINT ADVISORS, INC. PAGE 12
<PAGE> 74
Utah Resources International__________________________________February 17, 1998
UTAH RESOURCES INTERNATIONAL
BALANCE SHEET SPREADS -- PER FINANCIAL STATEMENT
<TABLE>
<CAPTION>
Interim
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 09/30/97
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ 109,435 $ 232,725 $ 369,603 $ 2,138,795 $ 765,831 $ 517,858 $ 334,919
Accrued Interest 2,517 121 -- -- -- -- --
Adv. Related Parties 40,835 16,697 13,476 10,899 10,899 262,668 --
Land Contracts Rec. 69,167 48,000 -- -- -- -- --
Note Receivable -- -- 151,836 200,267 177,927 140,672 259,659
Prepaid Expenses 6,482 72,481 76,403 -- -- -- --
Invest in Subsid. -- -- -- -- 383,790 -- --
Refundable Taxes -- -- 443,000 -- -- -- --
Accounts Rec. 22,690 72,507 15,809 254,312 347,590 -- 303,560
Inventory-Supplies 34,643 52,264 -- -- -- -- --
Inventory-Lots 196,403 120,824 727,477 627,214 859,539 876,088 838,454
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Current Assets 482,172 615,619 1,797,604 3,231,487 2,545,576 1,797,286 1,736,592
Marketable Securities 562,874 432,328 29,920 -- -- -- --
Property & Equipment
Land & Improvements 844,033 957,223 -- -- -- -- --
Buildings 2,680,191 2,699,109 -- -- -- -- --
Autos & Trailers 88,751 88,751 -- -- -- -- --
Furniture & Fixtures 604,721 607,237 -- -- -- -- --
Capital Leases 182,671 182,671 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
4,400,367 4,534,991 -- -- -- -- --
Less Accum. Deprec. (2,226,671) (2,395,352) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Fixed Assets 2,173,696 2,139,639 395,567 30,027 36,959 26,019 23,347
Royalties, net 32,008 27,269 15,871 12,523 9,176 5,828 3,318
Other Assets
Land Contracts 187,000 74,003 -- -- -- -- --
Advances to R/P 18,346 18,192 -- -- -- -- --
Investment in subsid. -- -- -- -- 514,647 -- --
Other Assets -- -- -- -- 116,104 137,011 12,382
Refundable Deposits 3,115 3,115 -- -- -- -- --
Capitalized Taxes 50,611 43,169 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Other Assets 259,072 138,479 23,088 19,799 630,751 137,011 12,382
Total Assets 3,509,822 3,353,334 2,262,050 3,293,836 3,222,462 1,966,144 1,775,639
LIABILITIES
Accounts Payable 268,712 79,493 152,232 160,534 303,814 252,464 417,249
Advance Payable 64,910 27,790 -- -- -- -- --
Taxes Payable 52,643 18,143 -- -- -- -- --
Accrued Expenses 20,392 20,958 119,843 291,331 325,649 546,070 309,755
Deferred Taxes -- -- -- -- 5,000 -- --
Income Taxes 58,919 68,007 -- 300,201 -- -- --
Earnest Deposits -- 75,000 46,000 36,000 36,000 36,000 36,000
Cur. Port. L/T debt 229,842 159,919 702,611 657,545 599,627 291,110 287,838
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Curr. Liab. 695,418 449,310 1,020,686 1,445,611 1,270,090 1,125,644 1,050,842
-----------
Long Term Debt 1,421,657 1,522,050 -- -- -- -- --
Deferred Items 136,591 129,707 -- -- -- -- --
Minority Interest 127,909 133,832 263,356 183,121 129,286 110,903 110,903
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities 2,381,575 2,234,899 1,284,042 1,628,732 1,399,376 1,236,547 1,161,745
EQUITY
Common Stock 220,582 220,582 128,403 128,403 195,363 252,281 252,281
APIC 730,913 730,913 127,174 127,174 727,222 798,073 798,073
Retained Earnings 726,670 880,858 722,431 1,409,527 900,501 (320,757) (436,460)
Less Treasury Stock (549,918) (713,918) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Equity 1,128,247 1,118,435 978,008 1,665,104 1,823,086 729,597 613,894
TOTAL LIAB. & EQUITY $ 3,509,822 $ 3,353,334 $ 2,262,050 $ 3,293,836 $ 3,222,462 $ 1,966,144 $ 1,775,639
</TABLE>
CENTERPOINT ADVISORS, INC. PAGE 13
<PAGE> 75
EXHIBIT e
PART 13. DISSENTERS' RIGHTS
16-10a-1301 DEFINITIONS.--For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under Section 16-10a-1302 and who exercises that right
when and in the manner required by Sections 16-10a-1320 through 16-10a-1328.
(4) "Fair value" with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the statutory rate set forth in
Section 15-1-1, compounded annually.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent the beneficial owner
is recognized by the corporation as the shareholder as provided in Section
16-10a-723.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
16-10a-1302 RIGHT TO DISSENT.--(1) A shareholder, whether or not
entitled to vote, is entitled to dissent from, and obtain payment of the fair
value of shares held by him in the event of, any of the following corporate
anions:
(a) consummation of a plan of merger to which the corporation is a
party if:
(i) shareholder approval is required for the merger by Section
16-10a-1103 or the articles of incorporation; or
(ii) the corporation is a subsidiary that is merged with its parent
under Section 16-10a-1104;
(b) consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired;
(c) consummation of a sale, lease, exchange, or other disposition
of all, or substantially all, of the property of the corporation for which a
shareholder vote is required under Subsection 16-10a-1202(1), but not including
a sale for cash pursuant to a plan by which all or substantially all of the net
proceeds of the sale will be distributed to the shareholders within one year
after the date of sale; and
(d) consummation of a sale, lease, exchange, or other disposition
of all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote upon
the consent of the corporation to the disposition pursuant to Subsection
16-10a-1202(2).
(2) A shareholder is entitled to dissent and obtain payment of the
fair value of his shares in the event of any other corporate action to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors so provides.
(3) Notwithstanding the other provisions of this part, except to
the extent otherwise provided in the articles of incorporation, bylaws, or a
resolution of the board of directors, and subject to the limitations set
<PAGE> 76
forth in Subsection (4), a shareholder is not entitled to dissent and obtain
payment under Subsection (1) of the fair value of the shares of any class or
series of shares which either were listed on a national securities exchange
registered under the federal Securities Exchange Act of 1934, as amended, or on
the National Market System of the National Association of Securities Dealers
Automated Quotation System, or were held of record by more than 2,000
shareholders, at the time of:
(a) the record date fixed under Section 16-10a-707 to determine the
shareholders entitled to receive notice of the shareholders'
meeting at which the corporate action is submitted to a vote;
(b) the record date fixed under Section 16-10a-704 to determine
shareholders entitled to sign writings consenting to the proposed corporate
action; or
(c) the effective date of the corporate action if the corporate
action is authorized other than by a vote of shareholders. (4)
The limitation set forth in Subsection (3) does not apply if the
shareholder will receive for his shares, pursuant to the
corporate action, anything except:
(a) shares of the corporation surviving the consummation of the
plan of merger or share exchange; (b) shares of a corporation
which at the effective date of the plan of merger or share exchange
either will be listed on a
national securities exchange registered under the federal Securities Exchange
Act of 1934, as amended, or on the National Market System of the National
Association of Securities Dealers Automated Quotation System, or will be held
of record by more than 2,000 shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection (4), or
cash in lieu of fractional shares.
(5) A shareholder entitled to dissent and obtain payment for his
shares under this part may not challenge the corporate action creating the
entitlement unless the action is unlawful or fraudulent with respect to him or
to the corporation.
16-10a-1303 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if the shareholder dissents with respect to all
shares beneficially owned by any one person and causes the corporation to
receive written notice which states the dissent and the name and address of
each person on whose behalf dissenters' rights are being asserted. The rights
of a partial dissenter under this subsection are determined as if the shares as
to which the shareholder dissents and the other shares held of record by him
were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to
shares held on his behalf only if:
(a) the beneficial shareholder causes the corporation to receive
the record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) the beneficial shareholder dissents with respect to all shares
of which he is the beneficial shareholder.
(3) The corporation may require that, when a record shareholder
dissents with respect to the shares held by any one or more beneficial
shareholders, each beneficial shareholder must certify to the corporation that
both he and the record shareholders of all shares owned beneficially by him
have asserted, or will timely assert, dissenters' rights as to all the shares
unlimited on the ability to exercise dissenters' rights. The certification
requirement must be stated in the dissenters' notice given pursuant to Section
16-10a-1322.
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<PAGE> 77
16-10a-1320 NOTICE OF DISSENTERS' RIGHTS.--(1) If a proposed
corporate action creating dissenters' rights under Section 16-10a-1302 is
submitted to a vote at a shareholders' meeting, the meeting notice must be sent
to all shareholders of the corporation as of the applicable record date,
whether or not they are entitled to vote at the meeting. The notice shall
state that shareholders are or may be entitled to assert dissenters' rights
under this part. The notice must be accompanied by a copy of this part and the
materials, if any, that under this chapter are required to be given the
shareholders entitled to vote on the proposed action at the meeting. Failure
to give notice as required by this subsection does not affect any action taken
at the shareholders' meeting for which the notice was to have been given.
(2) If a proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is authorized without a meeting of shareholders
pursuant to Section 16-10a-704, any written or oral solicitation of a
shareholder to execute a written consent to the action contemplated by Section
16-10a-704 must be accompanied or preceded by a written notice stating that
shareholders are or may be entitled to assert dissenters' rights under this
part, by a copy of this part, and by the materials, if any, that under this
chapter would have been required to be given to shareholders entitled to vote
on the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give written notice as provided by this
subsection does not affect any action taken pursuant to Section 16-10a-704 for
which the notice was to have been given.
16-10a-1321 DEMAND FOR PAYMENT--ELIGIBILITY AND NOTICE OF
INTENT.--(1) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) must cause the corporation to receive, before the vote is
taken, written notice of his intent to demand payment for shares if the
proposed action is effectuated; and
(b) may not vote any of his shares in favor of the proposed
action.
(2) If a proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is authorized without a meeting of shareholders
pursuant to Section 16-10a-704, a shareholder who wishes to assert dissenters'
rights may not execute a writing consenting to the proposed corporate action.
(3) In order to be entitled to payment for shares under this part,
unless otherwise provided in the articles of incorporation, bylaws, or a
resolution adopted by the board of directors, a shareholder must have been a
shareholder with respect to the shares for which payment is demanded as of the
date the proposed corporate action creating dissenters' rights under Section
16-10a-1302 is approved by the shareholders, if shareholder approval is
required, or as of the effective date of the corporate action if the corporate
action is authorized other than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of
Subsections (1) through (3) is not entitled to payment for shares under this
part.
16-10a-1322 DISSENTERS' NOTICE.--(1) If a proposed corporate action
creating dissenters' rights under Section 16-10a-1302 is authorized, the
corporation shall give a written dissenters' notice to all shareholders who are
entitled to demand payment for their shares under this part.
(2) The dissenters' notice required by Subsection (1) must be sent
no later than ten days after the effective date of the corporate action
creating dissenters' rights under Section 16-10a-1302, and shall:
(a) state that the corporate action was authorized and the
effective date or proposed effective date of the corporate action; (b)
state an address at which the corporation will receive payment demands
and an address at which certificates for certificated
shares must be deposited;
(c) inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is received;
(d) supply a form for demanding payment, which form requests a
dissenter to state an address to which payment is to be made;
-57-
<PAGE> 78
(e) set a date by which the corporation must receive the payment
demand and by which certificates for certificated shares must be deposited at
the address indicated in the dissenters' notice, which dates may not be fewer
than 30 nor more than 70 days after the date the dissenters' notice required by
Subsection (1) is given;
(f) state the requirement contemplated by Subsection
16-10a-1303(3), if the requirement is imposed; and
(g) be accompanied by a copy of this part.
16-10a-1323 PROCEDURE TO DEMAND PAYMENT.--(1) A shareholder who is
given a dissenters' notice described Section 16-10a-1322, who meets the
requirements of Section 16-10a-1321, and wishes to assert dissenters' rights
must, in accordance with the terms of the dissenters' notice:
(a) cause the corporation to receive a payment demand, which may
be the payment demand form contemplated in Subsection 16-10a-1322(2)(d), duly
completed, or may be stated in another writing;
(b) deposit certificates for his certificated shares in accordance
with the terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters' notice
described in Section 16-10a-1322, as contemplated by Section 16-10a-1327,
certify in writing, in or with the payment demand, whether or not he or the
person on whose behalf he asserts dissenters' rights acquired beneficial
ownership of the shares before the date of the first announcement to news media
or to shareholders of the terms of the proposed corporate action creating
dissenters' rights under Section 16-10a-1302.
(2) A shareholder who demands payment in accordance with
Subsection (1) retains all rights of a shareholder except the right to transfer
the shares until the effective date of the proposed corporate action giving use
to the exercise of dissenters' rights and has only the right to receive payment
for the shares after the effective date of the corporate action.
(3) A shareholder who does not demand payment and deposit share
certificates as required, by the date or dates set in the dissenters' notice,
is not entitled to payment for shares under this part.
16-10a-1324 UNCERTIFICATED SHARES.--(1) Upon receipt of a demand for
payment under Section 16-10a-1323 from a shareholder holding uncertificated
shares, and in lieu of the deposit of certificates representing the shares, the
corporation may restrict the transfer of the shares until the proposed
corporate action is taken or the restrictions are released under Section
16-10a-1326.
(2) In all other respects, the provisions of Section 16-10a-1323
apply to shareholders who own uncertificated shares.
16-10a-1325 PAYMENT.--(1) Except as provided in Section 16-10a-1327,
upon the later of the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302, and receipt by the corporation of
each payment demand pursuant to Section 16-10a-1323, the corporation shall pay
the amount the corporation estimates to be the fair value of the dissenters'
shares, plus interest to each dissenter who has complied with Section
16-10a-1323, and who meets the requirements of Section 16-10a-1321, and who has
not yet received payment.
(2) Each payment made pursuant to Subsection (1) must be
accompanied by:
(a) (i) (A) the corporation's balance sheet as of the end
of its most recent fiscal year or if not available, a fiscal year ending not
more than 16 months before the date of payment,
(B) an income statement for that year;
(C) a statement of changes in shareholders' equity for that year
and a statement of cash flow for that year, if the corporation customarily
provides such statements to shareholders; and
(D) the latest available interim financial statements, if any
-58-
<PAGE> 79
(ii) the balance sheet and statements referred to in Subsection (i)
must be audited if the corporation customarily provides audited financial
statements to shareholders;
(b) a statement of the corporation's estimate of the fair value of
the shares and the amount of interest payable with respect to the shares;
(c) a statement of the dissenter's right to demand payment under
Section 16-10a-1328; and
(d) a copy of this part.
16-10a-1326 FAILURE TO TAKE ACTION.--(1) If the effective date of the
corporate action creating dissenters' rights under Section 16-10a-1302 does not
occur within 60 days after the date set by the corporation as the date by which
the corporation must receive payment demands as provided in Section
16-10a-1322, the corporation shall return all deposited certificates and
release the transfer restrictions imposed on uncertificated shares, and who
submitted a demand for payment pursuant to Section 16-10a-1323 shall thereafter
have all rights of a shareholder as if no demand for payment had been made.
(2) If the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302 occurs more than 60 days after the
date set by the corporation as the date by which the corporation must receive
payment demands as provided in Section 16-10a-1322 then the corporation shall
send a new dissenters' notice, as provided in Section 16-10a-1322 and the
provisions of Sections 16-10a-1323 through 16-10a-1328 shall again be
applicable.
16-10a-1327 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER
ANNOUNCEMENT OF PROPOSED CORPORATE ACTION.--(1) A corporation may, with the
dissenters' notice given pursuant to Section 16-10a-1302, state the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action creating dissenters' rights under Section 16-10a-1302
and state that a shareholder who asserts dissenters' rights must certify in
writing, in or with the payment demand whether or not he or the person on whose
behalf he asserts dissenters' rights acquired beneficial ownership of the
shares before that date. With respect to any dissenter who does not certify in
writing, in or with the payment demand that he or the person on whose behalf
the dissenters' rights are being asserted, acquired beneficial ownership of the
shares before that date, the corporation may, in lieu of making the payment
provided in Section 16-10a-1325, offer to make payment if the dissenter agrees
to accept it in full satisfaction of the demand.
(2) An offer to make payment under Subsection (1) shall include or
be accompanied by the information required by Subsection 16- 10a-1325(2).
16-10a-1328 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER.--(1) A dissenter who has not accepted an offer made by a corporation
under Section 16-10a-1327 may notify the corporation in writing of his own
estimate of the fair value of his shares and demand payment of the estimated
amount, plus interest, less any payment made under Section 16-10a-1325, if:
(a) the dissenter believes that the amount paid under Section
16-10a-1325 or offered under Section 16-10a-1327 is less than the fair value of
the shares;
(b) the corporation fails to make payment under Section
16-10a-1325 within 60 days after the date set by the corporation as the date by
which it must receive the payment demand; or
(c) the corporation, having failed to take the proposed corporate
action creating dissenters' rights, does not return the deposited certificates
or release the transfer restrictions imposed on uncertificated shares as
required by Section 16-10a-1326.
(2) A dissenter waives the right to demand payment under this
section unless he causes the corporation to receive the notice required by
Subsection (1) within 30 days after the corporation made or offered payment for
his shares.
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16-10a-1330 JUDICIAL APPRAISAL OF SHARES--COURT ACTION.--(1) If
demand for payment under Section 16-10a-1328 remains unresolved, the
corporation shall commence a proceeding within 60 days after receiving the
payment demand contemplated by Section 16-10a-1328, and petition the court to
determine the fair value of the shares and the amount of interest. If the
corporation does not commence the proceeding within the 60-day period, it shall
pay each dissenter whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in
Subsection (1) in the district court of the county in this state where the
corporation's principal office, or if it has no principal office in this state,
the county where its registered office is located. If the corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered office
of the domestic corporation merged with, or whose shares were acquired by, the
foreign corporation was located.
(3) The corporation shall make all dissenters who have satisfied
the requirements of Sections 16-10a-1321, 16-10a-1323, and 16-10a-1328, whether
or not they are residents of this state whose demands remain unresolved,
parties to the proceeding commenced under subsection (2) as an action against
their shares. All such dissented who are named as parties just be served with
a copy of the petition. Service on each dissenter may be by registered or
certified mail to the address stated in his payment demand made pursuant to
Section 16- 10a-1328. If no address is stated in the payment demand, service
may be made at the address stated in the payment demand given pursuant to
Section 16-10a-1323. If no address is stated in the payment demand, service
may be made at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares.
Service may also be made otherwise as provided by law.
(4) The jurisdiction of the court in which the proceeding is
commenced under Subsection (2) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled
to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
Subsection (2) is entitled to judgment:
(a) for the amount, if any, by which the court finds that the
fair value of his shares, plus interest, exceeds the amount paid by the
corporation pursuant to Section 16-10a-1325; or
(b) for the fair value, plus interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under Section 16-10a-1327.
16-10a-1331 COURT COSTS AND COUNSEL FEES.--(1) The court in an
appraisal proceeding commenced under Section 16-10a-1330 shall determine all
costs of the proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court. The court shall assess the costs against
the corporation, except that the court may assess costs against all or some of
the dissenters, in amounts the court finds equitable, to the extent the court
finds that the dissenters acted arbitrarily, vexatiously, or not in good faith
in demanding payment under Section 16-10a-1328.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all dissenters
if the court finds the corporation did not substantially comply with the
requirements of Sections 16-10a-1320 through 16-10a-1328; or
(b) against either the corporation or one or more dissenters, in favor
of any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this part.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the
corporation,
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<PAGE> 81
the court may award to those counsel reasonable fees to be paid out of the
amounts awarded the dissenters who were benefited.
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<PAGE> 1
EXHIBIT 99.4
PRELIMINARY COPY DATED February 25, 1998
FOR REVIEW ONLY
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
OF
UTAH RESOURCES INTERNATIONAL, INC.
The undersigned, revoking any proxy heretofore given, hereby appoints
John Fife, who holds the power to appoint a substitute, proxy of the
undersigned, with full power of substitution, with respect to all of the shares
of common stock of Utah Resources International, Inc. in which the undersigned
is entitled to vote at the Special Meeting of Shareholders of Utah Resources,
International, Inc., to be held on _____________ ___, 1998, and any adjournment
thereof.
In his discretion, the proxy is authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
APPROVAL OF AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION TO EFFECT THE
REVERSE SPLIT
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED
FOR THE MATTER SPECIFICALLY REFERRED TO ABOVE.
Dated ____________ ____, 1998
___________________________ ___________________________
Print Name Signature
____________________________ ____________________________
Print Name Signature
____________________________ ____________________________
(Number of Shares Title
Held of Record)
Please sign as name appears to the left. If stock is registered in
the name of two or more persons, each should sign. Executors, attorneys,
corporate officers, administrators and trustees should add their titles.
