SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (the "Agreement") is entered into the 26 day
of June, 1996 among the following parties (collectively referred to herein as
the "Parties"):
1. Utah Resources International, Inc., a Utah corporation ("URI").
2. R. Xxx Xxxxxxxx ("Xxxxxxxx").
3. E. Jay Sheen ("Sheen").
4. Xxxx X. Xxxx ("Xxxx").
5. Xxxx X. Xxxxx ("Xxxxx").
6. Xxxx Technologies Corporation, a California corporation ("MTC").
7. Xxxx Xxxxxx ("A Xxxxxx").
8. Xxxxxxxx Xxxxxx ("V Xxxxxx").
9. Inter-Mountain Capital Corp., a Delaware corporation ("IMC").
10. Xxxx Xxxx ("Fife").
11. Xxxxxxxx & Sheen, L.L.C.
R E C I T A L S
A. The Parties are involved in various disputes and controversies
involving the operation, management, ownership of and business activities of
URI, including, but not limited to, matters which are the subject of the First
State Action, the Second State Action and the First Federal Action as defined
below (collectively, the "Pending Litigation").
B. A shareholders derivative action captioned as XXXXXX XXXX, ET AL. V.
XXXX X. XXXXXX, XX. ET AL. was filed as Civil Number C-87-1632 in the Third
Judicial District Court of Salt Lake County, Utah (the "First State Action").
C. A settlement agreement was entered into in the First State Action on
April 6, 1993 (the "1993 Settlement Agreement").
D. Subsequently, URI brought an action to enforce the 1993 Settlement
Agreement in the First State Action which resulted in certain findings of fact
and conclusions of law and an order enforcing the Settlement Agreement entered
by Judge Xxxxxxx X. Xxxxxx on October 4, 1995 (the "Xxxxxx Order"). The Xxxxxx
Order has been appealed by XX Xxxxxx and XX Xxxxxx and cross-appealed by URI.
E. An Order to Show Cause has been filed in the First State Action by URI
against XX Xxxxxx, XX Xxxxxx, Xxxx Xxxxx, MTC, Xxxx Xxxxxx and Xxxxxxxx Xxxxxx,
which is pending.
F. A shareholders derivative action captioned as XXXX XXXXXX ET. AL V. R.
XXX XXXXXXXX ET. AL was filed as Case Number 2:95CV-0661C in the United States
District Court for the District of Utah, Central Division (the "First Federal
Action").
G. Pursuant to a Plan of Share Exchange and Share Exchange Agreement
dated February 16, 1995 among URI, Midwest Railroad Construction and Maintenance
Corporation of Wyoming, a Wyoming corporation ("Midwest"), Xxxxxx X. Xxxxx ("XX
Xxxxx") and Xxxxxx X. Xxxxx ("XX Xxxxx"), URI acquired all outstanding shares of
Midwest from XX Xxxxx and XX Xxxxx in exchange for 590,000 restricted shares of
authorized but unissued shares of URI (the "Share Exchange Agreement").
H. In April of 1996 URI and Midwest, XX Xxxxx and XX Xxxxx entered into a
Split-Off Agreement pursuant to which the Share Exchange Agreement was rescinded
in a transaction intended to qualify as a tax-free spin-off under the provisions
of Section 355 of the INTERNAL REVENUE CODE OF 1986 (the "Recision Agreement").
I. On April 5, 1996 URI entered into a letter of intent with IMC to sell
a controlling interest in URI to IMC upon terms and conditions set forth therein
(the "IMC Letter of Intent"), attached as Exhibit A and by this reference made a
part hereof. The IMC Letter of Intent was modified pursuant to a letter of
May 31, 1996, a copy of which is attached as Exhibit B and by this reference
made a part hereof. The IMC Letter of Intent is modified pursuant to the terms
and conditions of this Agreement.
X. Xxxx is the sole shareholder of IMC.
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K. On May 17, 1996, a Complaint captioned as XXXX TECHNOLOGY CORP., ET.
AL. V. UTAH RESOURCES INTERNATIONAL, INC., ET. AL. was filed as Civil No. 96 090
3332CV in the Third Judicial Court of Salt Lake County, Utah (the "Second State
Action").
L. The Second State Action included a request by MTC and others for a
temporary restraining order and injunction against the transactions contemplated
in the IMC Letter of Intent, which request shall be rescinded in accordance with
the terms and conditions of this Agreement.
M. The Parties believe this Agreement is fair to and in the best interest
of URI and all shareholders of URI.
N. The Parties have agreed to compromise and settle all of their disputes
and claims known or unknown, now existing or hereafter accruing, including, but
not limited to, those which are the subject of the Pending Litigation, upon the
terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants set forth herein
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Parties agree as follows:
1. Unless otherwise provided, the following events shall occur at Closing
(as defined herein):
a. The Parties agree they will use best efforts immediately
following the Closing to petition the Court in the First State Action for
the purpose of terminating the 1993 Settlement Agreement. Pending such
termination, the Parties agree the 1993 Settlement Agreement and the Xxxxxx
Order shall continue in accordance with their respective terms and
provisions.
b. The Parties agree to dismiss the Pending Litigation with
prejudice, to dismiss the Order to Show Cause referenced in the Recitals
above, and agree to request the Court to remove the temporary restraining
order granted in the Second State Action on the date of execution of this
Agreement. The Parties agree, upon execution of this Agreement, to take
immediate steps to file for dismissal of the Pending Litigation. The
Parties will use their best efforts, in good faith, to obtain the dimissals
within 60 days of the date hereof. Notice shall be given to shareholders of
URI in such manner as each court directs.
c. The closing of the transactions contemplated herein ("Closing")
shall occur at the offices Xxxxxxxx & Sheen in Salt Lake City, Utah, no
later than seven (7) calendar days after the date hereof.
d. Except for those matters specifically set forth in this Agreement
which create continuing future rights and obligations of the Parties, the
Parties hereto, and each of them, for themselves, their respective
predecessors, subsidiaries, controlled and controlling affiliated
corporations and entities, past and present, as well as the respective
directors, officers, stockholders, partners, agents, attorneys, servants,
and employees, past and present, and affiliates or nominees of parties (as
defined under the Securities Exchange Act of 1934), heirs, assigns,
predecessors and successors in interest, and each of them, effective upon
Closing of this Agreement, hereby acknowledge full and complete
satisfaction of, and do hereby release and discharge and covenant not to
xxx the other of
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them, including their respective heirs, assigns and successors in interest,
parents, predecessors, subsidiaries, controlled and controlling affiliated
corporations and entities, past and present, as well as the respective
directors, officers, stockholders, partners, agents, attorneys, servants,
and employees, past and present, and affiliates or nominees of parties (as
defined under the Securities Exchange Act of 1934), and each of them, from
any and all claims, demands, and causes or sources of action of whatever
kind or nature, known or unknown, suspected or unsuspected, including all
rights of and claims for contribution and indemnification, and judgments,
which any of them now owns or holds or has at any time heretofore owned or
held through the date of the Closing of this Agreement against any of the
other of them, including, but not limited to, those which: (i) are or could
have been alleged or set forth in any of the pleadings, any interlocutory
or final orders, rulings, file, or papers in the Pending Litigation; or
(ii) arise out of, or are related to, or are in any way connected directly
or indirectly with any transactions, occurrences, acts or omissions set
forth, or facts alleged, in the papers on file in the Pending Litigation.
This provision shall receive the broadest possible interpretation as a
general and complete release.
URI agrees to and shall fully indemnify hold harmless, and defend all
other Parties to this Agreement including their respective heirs, assigns
and successors in interest, parents, predecessors, subsidiaries, controlled
and affiliated corporations and entities, past and present, as well as the
respective directors, officers, stockholders, partners, agents, attorneys,
servants, and employees, past and present, and affiliates or nominees of
parties (as defined under the Securities Exchange Act of 1934), and each of
them, from and against any and all claims, demands, and causes or sources
of action of whatever kind or nature, known or unknown, suspected or
unsuspected, including all rights of and claims for contribution and
indemnification, and judgments, which Midwest, XX Xxxxx or XX Xxxxx now
owns or holds or has at any time heretofore owned or held through the date
of the Closing of this Agreement against any of the Parties hereto other
than URI, including, but not limited to, those which (i) are or could have
been alleged or set forth in any of the pleadings, any interlocutory or
final orders, rulings, file, or papers in the First State Action; or (ii)
arise out of, or are related to, or are in any way connected directly or
indirectly with any transactions, occurrences, acts or omissions set forth,
or facts alleged, in the papers on file in the First State Action; (iii)
are or could have been alleged or set forth in any of the pleadings, any
interlocutory or final orders, rulings, file, or papers in the Second State
action; or (iv) arise out of or are related or are in any way connected
directly or indirectly with any transaction, occurrences, acts or omissions
set forth, or facts alleged, in the papers on file in the Second State
Action; or (v) arise out of, or are related to, or are in any way connected
with any transactions, occurrences, acts or omissions set forth, or facts
alleged, in the papers on file in said Federal Action; (vi) arise out of,
are related to, or are in any way connected directly or indirectly with the
Share Exchange Agreement or the Recision Agreement; (vii) arise out of, are
related to, or are in any way connected or indirectly with the 1993
Settlement Agreement; or (viii) arise out of, or are related to, or are in
any way connected directly or indirectly with the IMC Letter of Intent.
e. The Parties agree that Xxxxx shall serve as a director of URI for
no less than one year from the date of Closing, and the Parties agree to
take all actions necessary to maintain Xxxxx as a director for said one
year period. Sheen and Xxxxxxxx shall resign as members of the Board of
Directors of URI as of the date of Closing. The successors to Sheen and
Xxxxxxxx as members of the Board of Directors of URI shall be appointed in
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accordance with the terms of the 1993 Settlement Agreement. That Board
shall elect Fife President and the other appropriate officers of URI.
Xxxxxxxx and Sheen agree that they will not seek election as, and will not
accept any future nominations to serve as, an officer or director of URI or
Xxxxxx Gas & Oil Co.
f. The transactions contemplated in the IMC Letter of Intent shall
close in accordance with the provisions of that contemplated Stock Purchase
Agreement between URI and IMC (the "Stock Purchase Agreement"), the current
form of which is attached hereto and incorporated herein by this reference
as Exhibit "C," subject to negotiation and execution of the definitive
Stock Purchase Agreement and approval of its terms by the URI Board of
Directors; provided, however, that the definitive Stock Purchase Agreement
must contain the following material provisions:
i. IMC shall purchase and URI shall issue and sell shares at the Closing
so that IMC will own following the purchase 50.5% of the total outstanding
common stock of URI at $3.35 per share as of the Closing, and URI shall issue an
option for one hundred fifty thousand (150,000) or more additional shares of the
capital stock of the Company at an exercise price of $3.35 per share, payable in
the same fashion as the shares purchased by IMC to obtain 50.5% of the total
outstanding stock of URI, such that IMC shall have at all times the right to own
50.5% of the outstanding common stock of URI; provided, however, that the
options may only be exercised as corresponding outstanding options held by
others are exercised; and further provided that IMC shall be entitled to
maintain its 50.5% ownership of the outstanding common stock of URI in
connection with any stock split, recapitalization, combination, or
reorganization; and further provided that IMC shall be entitled to maintain its
50.5% ownership of the outstanding common stock of URI in connection with any
new issuance of stock or the issuance of instruments convertible into stock, at
the offering price of such new issuance, on payment terms
similar to those set forth herein;
ii. IMC shall pay 15% of the purchase price in cash at closing;
iii. the balance of the purchase price shall be evidenced by a note
("Note") which bears interest at a rate equal to the short-term applicable
federal rate published by the Internal Revenue Service, pursuant to
Section 1274(d) of the Internal Revenue Code of 1986, as amended, in effect at
the time of the Closing, adjusted on each anniversary date of this Agreement
until the purchase price has been paid in full.
iv. IMC shall pay the first year's interest in cash at Closing,
discounted at the interest rate noted in (iii) above, and interest shall be
paid annually in arrears on each anniversary of the Note thereafter,
beginning with the second year's anniversary date, with the principal due and
payable August 1, 2001;
v. the Note shall be secured by a pledge of IMC's URI stock;
vi. Xxxx Xxxx, the sole shareholder and president of IMC, will personally
guarantee twenty-five percent (25%) of the outstanding balance of the Note;
vii. after closing, any distributions and other payments otherwise payable
to IMC on its URI stock will be applied to reduce the outstanding principal
balance of the Note;
Page 5
viii. subsequent to closing, IMC shall cause URI to cause a 1,000 to l
share reverse split at $3.35 per share;
ix. fractional shareholders of record as of the date of the reverse split
shall be given the option to purchase additional fractional shares to round up
to the next whole share;
x. URI indemnifies IMC, its shareholders, officers, directors, agents,
employees and attorneys, including but not limited to those arising out of the
negotiation, execution and consummation of this Agreement, and including
advancement of their legal fees and costs, and from and against liability
arising out of the IMC Letter of Intent, the Stock Purchase Agreement and
transactions contemplated hereby;
xi. IMC shall take all actions necessary to cause URI to honor its
obligations to indemnify its officers and directors, agents, employees and
attorneys, including but not limited to those arising out of the negotiation,
execution and consummation of this Agreement, and including advancement of their
legal fees and costs, in connection with all present and future litigation.
xii. URI shall hire Fife under a written employment agreement which shall
provide reasonable compensation for services rendered, which compensation in any
year shall not exceed $200,000. The payment of compensation in excess of that
provided in the employment agreement shall be used to reduce any obligations due
or to become due under the Note.
xiii. The Parties covenant to provide a copy of the definitive Stock
Purchase Agreement to Xxxxx and counsel of his choosing at least two days prior
to the Closing, to review for consistency with the provisions above.
f. The number of shares acquired by URI in the reverse split
contemplated in the Stock Purchase Agreement shall be available for
purchase by all remaining shareholders of URI, other than IMC, as of a
record date five days prior to the effectuation of the reverse split at a
price of $3.35 per share; provided, however, that URI shall not be required
to make the shares available for purchase if to do so would be in violation
of federal or state securities laws after URI has taken all actions
necessary to comply. Notice shall be given to the shareholders of the
availability of such purchase and to the extent the amount of shares
available is oversubscribed, each person subscribing for such shares shall
be allowed to purchase a pro-rata portion of the available shares. The
terms of the purchase of such shares by each shareholder shall be a cash
down payment of 25% with the balance payable in three years with simple
interest at the short term applicable federal rate for the month of this
Agreement which interest shall be payable annually in arrears. The
obligation shall be secured by a pledge of the stock acquired pursuant to a
stock pledge agreement to be drafted by counsel for URI. Any distributions
to shareholders of URI shall first be applied to the unpaid balance of any
amounts owing URI hereunder.
g. The 40,552 outstanding shares of URI stock owned by A Xxxxxx and
V Xxxxxx, which they represent and warrant are all the URI shares they own,
shall be purchased by URI for a cash price of $3.35 per share which
purchase shall occur at Closing of this Agreement.
Page 6
h. Legal fees and expenses and other costs associated with the
Pending Litigation and the documents and negotiations to complete and
implement the settlement contemplated by this Agreement shall be paid as
follows:
(i) All legal fees, costs and out-of-pocket expenses incurred or
paid by Xxxxx, IMC, Fife, Erickson, Sheen, Xxxx and MTC from
January 1, 1996 to Closing shall be reimbursed or paid by URI.
(ii) All legal fees, costs and out-of-pocket expenses incurred or
paid by X. Xxxxxx and A Xxxxxx, subject to a dollar limitation of
$81,000, shall be reimbursed or paid by URI.
(iii) All other expenses incurred, except as provided above,
shall be paid by the Party incurring such expense.
i. From the date of this Agreement URI shall be allowed to conduct
its affairs in the normal course of business, except as otherwise limited
or modified by the First State Action, the 1993 Settlement Agreement and
the Xxxxxx Order.
j. All employment agreements contemplated, negotiated or executed
between URI and Sheen, Xxxx, and Xxxxxxxx shall not be effectuated and, if
effectuated, shall be terminated.
k. Except for completion of pending matters approved by the Board,
Xxxxxxxx & Sheen, L.L.C. shall resign as legal counsel for URI effective at
Closing.
1. The Parties hereto shall exercise their best efforts to account
for, pay, compromise, unwind, and/or terminate all existing contractual
relationships between URI and Xxxxxx Gas & Oil Co.
4. REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
a. The corporate Parties, URI, MTC, and IMC represent and warrant
that they are validly existing and in good standing in the state of their
organization and have the full legal right, power and authority to execute
and deliver this Agreement and to carry out all transactions contemplated
herein. Each individual signing this Agreement on behalf of a corporation,
partnership, trust, or other entity, represents and warrants that he or she
has the authority to do so.
b. All Parties represent and warrant that they have negotiated at
arms-length with a view to arriving at a fair and equitable settlement of
their differences.
c. All Parties represent and warrant that, to the best of their
belief, the terms of this Agreement are fair to and in the best interests
of URI and its shareholders.
d. All Parties covenant that no actions of any kind shall be
undertaken by the Parties to affirmatively prosecute the Pending
Litigation, nor will the Parties instigate any new legal proceedings
against any of the other Parties.
Page 7
e. All Parties represent and warrant that they have not assigned or
transferred any claims against any of the other Parties, including any
interest in the Pending Litigation, to any third party not a party to this
Agreement.
5. This Agreement has been freely and voluntarily executed by all Parties
hereto after having been apprised of all relevant information and having been
represented by counsel. No party hereto has relied upon any inducements,
promises or representations made by any other party or other party's attorney,
other than those specifically set out in this Agreement, which constitutes the
entire, integrated understanding among the Parties.
6. Each party agrees to perform such other further acts and to execute
and deliver such further documents as may be necessary to effectuate the
purposes of this Agreement.
7. The Parties hereto, and each of them, acknowledge that this Agreement
is the compromise and settlement of the claims and demands between and among the
Parties and nothing contained herein shall be construed as an admission of their
validity or invalidity against the interests of the Parties hereto, or any of
them, except that this disclaimer does not affect the validity or truthfulness
of the affirmative statements, admissions, affidavits, filings, notices, and
writings made and agreed to be made under the terms of this Agreement.
8. Except as to continuing covenants and obligations set forth in the
1993 Settlement Agreement and the Xxxxxx Order, all claims, rights, causes of
action, or defenses of the Parties raised in the Pending Litigation are herewith
merged into and fully resolved as a part of this Agreement.
9. All Parties to this Agreement have read and fully comprehend and
understand the terms and provisions of this Agreement and of the ancillary
exhibits and documents incorporated herein. All Parties have been advised by
legal counsel who presently represent them in connection with this settlement as
to the content, meaning and execution of this Agreement. All Parties to this
Agreement have voluntarily and without coercion signed the same and understand
and agree to each and every paragraph hereof.
10. No Party hereto shall, directly or indirectly, solicit or seek to
solicit any person to challenge any provision hereof or to file suit comparable
to any suit dismissed hereunder or to contest the dismissal of the Pending
Litigation. This covenant of good faith shall be central to this Agreement and
any Party damaged by a breach thereof shall be entitled to all remedies
available at law or in equity as well as a recovery of reasonable attorney's
fees and costs.
11. GENERAL PROVISIONS.
a. BINDING AGREEMENT. This Agreement shall be binding upon and
shall inure to the benefit of the heirs, legal representatives, successors
and assigns, as applicable, of the respective parties hereto, and any
entities resulting from the reorganization, consolidation or merger of any
party hereto.
b. HEADINGS. The headings used in this Agreement are inserted for
reference purposes only and shall not be deemed to limit or affect in any
way the meaning or interpretation of any of the terms or provisions of this
Agreement.
Page 8
c. COUNTERPARTS. This Agreement may be signed upon any number of
counterparts with the same effect as if the signature to any counterpart
were upon the same instrument.
d. ENTIRE AGREEMENT. This Agreement, together with the exhibits and
schedules hereto (which are incorporated herein by this reference),
constitutes the entire agreement and understanding between and among the
parties with respect to the subject matter hereof and shall supersede any
prior agreements and understandings among the parties with respect to such
subject matter.
e. SEVERABILITY. The provisions of this Agreement are severable, and
should any provision hereof be found to be void, voidable or unenforceable,
such void, voidable or unenforceable provision shall not affect any other
portion or provision of this Agreement.
f. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants of the Parties shall survive the
Closing.
g. WAIVER. Any waiver by any party hereto of any breach of any kind
or character whatsoever by any other party, whether such waiver be direct
or implied, shall not be construed as a continuing waiver or consent to any
subsequent breach of this Agreement on the part of the other party.
h. MODIFICATION. This Agreement may not be modified except by an
instrument in writing signed by all of the parties hereto.
i. GOVERNING LAW. This Agreement shall be interpreted, construed and
enforced according to the laws of the State of Utah.
j. ATTORNEY'S FEES. In the event any action or proceeding is
brought by any Party against any other Party under this Agreement, the
prevailing party shall be entitled to recover attorney's fees and costs in
such amount as the court may adjudge reasonable.
k. NOTICE. All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and
shall be considered as properly given when personally served or deposited
in the United States mail, postage prepaid, registered or certified, with
return receipt requested, or by prepaid telegram, telecopy or deposited
with a recognized courier for overnight delivery. Notice given in any such
manner shall be effective when received or three (3) days after mailing or
sending. The addresses of the parties shall be as set forth on Schedule
II j. attached hereto.
Each Party shall have the right to change its address for purposes of this
section to any other location within the continental United States by giving
thirty (30) days' notice to the other Parties in the manner set forth in this
section.
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11. In the event that Closing does not occur for any reason, the term of
the 1993 Settlement Agreement shall be extended by the number of days elapsing
between the date hereof and the date of the event causing the failure to close.
DATED the date and year first set forth above.
URI:
Utah Resources International, Inc., a Utah
corporation
By: /s/
---------------------------------
Its:
--------------------------------
XXXXXXXX:
/s/ R. Xxx Xxxxxxxx
-------------------------------------
R. Xxx Xxxxxxxx
SHEEN:
/s/ E. Jay Sheen
-------------------------------------
E. Jay Sheen
XXXX:
/s/ Xxxx X. Xxxx
-------------------------------------
Xxxx X. Xxxx
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XXXXX:
/s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx
MTC:
Xxxx Technologies Corporation, a California
corporation
By: /s/ Xxxx X. Xxxxx
---------------------------------
Its: /s/ Xxxx X. Xxxxx, President
--------------------------------
A XXXXXX:
/s/ Xxxx Xxxxxx
-------------------------------------
Xxxx Xxxxxx, individually
V XXXXXX:
/s/ Xxxxxxxx Xxxxxx
--------------------------------------
Xxxxxxxx Xxxxxx
INTER-MOUNTAIN CAPITAL CORP, a Delaware
corporation
By: /s/ Xxxx Xxxx
---------------------------------
Its: Xxxx Xxxx, President
--------------------------------
FIFE
/s/ Xxxx Xxxx
-------------------------------------
Xxxx Xxxx
XXXXXXXX & SHEEN:
XXXXXXXX & SHEEN, L.L.C.
By: /s/ Xxx Sheen
---------------------------------
Its: /s/ Xxx Sheen, Member
--------------------------------
APPROVED:
-------------------
Xxxxx X. Xxxxxx
Xxxx 11