SPLITOFF AGREEMENT
This Splitoff Agreement ("Agreement") is dated as of April 25, 1996, among
Utah Resources International, Inc., a Utah corporation ("URI"), MidWest Railroad
Construction and Maintenance Corporation, a Wyoming corporation ("MWR"),
Xxxxxx X. Xxxxx ("Xxx") and Xxxxxx Xxxxx (Xxx and Xxxxxx Xxxxx are collectively
referred to as the "Wolffs").
RECITALS
A. URI, MWR and the Wolffs are parties to a Plan of Share Exchange and
Share Exchange Agreement, dated February 16, 1995 (the "Share Exchange
Agreement"), pursuant to which the Wolffs exchanged all of their stock in MWR
for 590,000 shares of restricted stock of URI, making MWR a wholly-owned
subsidiary of URI. The share exchange was accomplished as a tax free
reorganization pursuant to Section 368(a)(1)(B) of the Internal Revenue Code of
1986, as amended (the "Code").
B. The Share Exchange Agreement was consummated in June, 1995, after
issuance of a fairness opinion by Xxxxx, Xxxxxx & Associates, stating the Share
Exchange Agreement was fair, from a financial point of view, to URI and its
shareholders. Articles of Share Exchange were filed with the State of Utah in
June of 1995.
C. In August, 1995, a shareholders derivative action captioned as XXXX
XXXXXX ET AL. V. R. XXX XXXXXXXX, ET AL. was filed as Case No. 2:95CV-0661C in
the United States District Court for the District of Utah (the "Lawsuit")
seeking, primarily, a rescission of the Share Exchange Agreement.
D. The Lawsuit has required much time and attention from the officers and
directors of both URI and MWR, and neither company has been able to effectively
conduct business since the commencement of the Lawsuit. In addition, the
uncertainty created by the Lawsuit has rendered it impossible to make major
business decisions which are critical for the continued growth of URI and MWR.
Extensive negotiations have been conducted in an effort to settle the Lawsuit,
which negotiations have proved unsuccessful. Therefore, the disruption of URI's
and MWR's business would, absent this Agreement, continue indefinitely.
E. URI, MWR, the Wolffs and each of them, therefore, desire to provide
for the splitoff by URI of its stock in MWR, in compliance with Section 355 of
the Code, on the terms and conditions set forth in this Agreement.
F. The Wolffs allege that they and MWR have been extensively damaged by
URI and URI denies such allegations.
In consideration of the Recitals and the mutual promises made herein, the
parties agree as follows:
1. INCORPORATION OF RECITALS. The parties mutually acknowledge that the
Recitals are true to the best of their knowledge and agree that the Recitals
correctly describe generally and in summary fashion the factual underpinning for
this Agreement.
2. SPLITOFF OF MWR. Simultaneously with execution of this Agreement, URI
shall transfer all of the outstanding shares of MWR stock to the Wolffs in
exchange for the 590,000 shares of URI stock currently owned by the Wolffs.
Such transfer shall be made tax free in accordance with Section 355 of the Code.
Each party agrees to make such endorsements and execute such documentation as
are reasonably necessary to complete the splitoff contemplated hereby.
3. RECONCILIATION. The Share Exchange Agreement, the June 13, 1995
Employment Agreement between URI and Xxx and the June 13, 1995 Operating
Agreement between URI, MWR and Xxx are each hereby canceled entirely and of no
further effect. Xxx hereby relinquishes and waives any and all rights he may
have to acquire shares of URI, be an officer or director of URI or any other
rights to compensation, benefits, termination payments or other payments
provided for in the Share Exchange Agreement, the Operating Agreement and the
June 13, 1995 Employment Agreement. Xxx represents that the gross intercompany
transfer from URI to MWR is $528,000.00 as reflected on Exhibit "A", with MWR
receiving a net intercompany transfer through March 31, 1996 of $316,974.17 as
also reflected on Exhibit "A". The net intercompany transfers of approximately
$316,974.17 in favor of MWR as reflected on Exhibit "A" shall be retained by
MWR. Within thirty (30) days from the date hereof, the accountants for URI
shall review all intercompany transfers and charges between URI and MWR for the
period July 1, 1995 through March 31, 1996 and verify the exact amount of such
transfers and charges. Such verification shall include the review of items on
Exhibit "A" and all other intercompany transfers and charges. In the event such
intercompany transfers and charges in favor of MWR exceed $316,974.17 for the
period July 1, 1995 through March 31, 1996, MWR shall immediately pay such
difference to URI. In the event such intercompany transfers and charges in
favor of MWR are less than $316,974.17 for the period July 1, 1995 through
March 31, 1996, URI shall pay such difference to MWR. URI shall reimburse MWR
and the Wolffs for all attorneys' fees incurred through March 31, 1996 by the
Wolffs in connection with the negotiation and documentation of this Agreement.
Except as provided in the previous sentence, each party shall bear its own costs
incurred in connection with the negotiation and implementation of this
Agreement. MWR and URI shall each be entitled to retain their respective
assets, free of any further claim. URI may continue to use MWR's offices and
employees and the services of Xxx in connection with the separation of the
businesses of URI and MWR, without compensation for a period of 60 days after
the date hereof. URI shall compensate MWR for all out-of-pocket expenses
incurred by MWR on URI's behalf during such 60 day period.
4. MUTUAL RELEASES. Except for those matters specifically set forth in
this Agreement which create continuing future obligations of the Parties,
including but not limited to URI's indemnity obligations pursuant to Section 5
below and Wolffs' and MWR's obligations pursuant to Section 6 below, the Parties
hereto, and each of them, for themselves, their respective heirs, assigns and
successors in interest, predecessors, subsidiaries, controlled and affiliated
corporations and entities, past and present, as well as the respective
directors, officers, partners, agents, attorneys, servants, and employees, past
and present, and each of them, do hereby acknowledge full and complete
satisfaction of, and do hereby release and discharge the others of them,
including their respective heirs, assigns and successors in interest,
predecessors, subsidiaries, controlled and affiliated corporations and entities,
past and present, as well as the respective directors, officers, partners,
agents, attorneys, servants, and employees, past and present, and each of them,
from any and all claims, demands, and causes or sources of action of whatever
kind or nature, known or unknown, suspected or unsuspected, including all rights
of and claims for contribution and indemnification, and judgments, which any of
them now owns or holds or has at any time heretofore owned or held through the
date hereof against any of the other of them, including, but not limited to,
those which (i) are or could have been alleged or set forth in any of the
pleadings, any interlocutory or final orders, rulings, file, or papers in the
Lawsuit; or (ii) arise out of, or are related to, or are in any way connected
with any transactions, occurrences, acts or omissions set forth, or facts
alleged in the papers on file in the Lawsuit; or (iii) arise out of, are related
to, or are in any way connected with the Share Exchange Agreement or the
Promissory Note, executed in connection therewith. Specifically excluded from
this mutual release are rights, claims, liabilities, causes of action, damages
or expenses arising from
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the parties' warranties, representations and covenants in, and their performance
of their obligations under this Agreement, including but not limited to, the
parties' payment obligations, if any, set forth in Section 3 above, URI's
indemnity obligations set forth in Section 5 below, Wolffs' and MWR's indemnity
obligations set forth in Section 6 below and MWR's payment obligations set forth
in Section 9 below.
The releases made pursuant to this Section 4 are mutual and are given in
consideration for, among other things, the releases made in return by each party
being released. Each party expressly reserves any and all claims, demands and
cause of action against any and all individuals and entities not expressly
released pursuant to this Section 4, including, but not limited to, Xxxx X.
Xxxxxx, Xx., Xxxxx X. Xxxxxx, Xxxx X. Xxxxx, Xxxx Technologies Corporation, its
officers, directors, employees, agents, successors and assigns, Xxxxx Xxxxxx,
Xxxx Xxxxxx, Xxxxxxxx Xxxxxx, Xxxxxx Gas and Oil Inc., its officers, directors,
employees, agents, successors and assigns, Xxxx X. Xxxxxx, Xx. Estate and its
beneficiaries, employees and agents, Xxxx Xxxx, Xxxxx Xxxxx, Xxxx Xxxxxx,
Xxxxxxxx Xxxxxx, Xxxxxx Limited Partnership, its partners, employees, agents,
successors and assigns, Xxxxxx Family Charitable Trust, its beneficiaries,
employees, agents, successors and assigns, and Xxxx Xxxx Wind Partners, its
partners, employees, agents, successors and assigns and the J&M Trust, its
beneficiaries, employees, agents, successors and assigns.
5. INDEMNIFICATION OF MWR AND THE WOLFFS. URI agrees to indemnify and
hold harmless MWR and the Wolffs and their respective agents, employees,
attorneys, officers, directors, successors and assigns, from any and all claims,
causes of action, liabilities, damages, costs, expenses and attorneys' fees
arising from or relating in any way to URI or the Share Exchange Agreement,
including but not limited to (a) claims which have been or which are asserted by
shareholders of URI; (b) claims which are or could have been asserted in the
Lawsuit; (c) claims which arise out of or are connected in any way with the
transactions, occurrences, acts or omissions set forth in the papers on file in
the Lawsuit; and (d) claims which arise from or are connected in any way with
Bob's employment as CEO of URI, including but not limited to claims relating to
reports which have been or which should have been filed with the Securities and
Exchange Commission; provided, however, that the indemnification hereof in favor
of Xxx shall not apply to any acts of fraud, gross negligence or willful
misconduct by Xxx. URI may select independent counsel for MWR and the Wolffs,
which counsel must be acceptable to MWR and the Wolffs in their reasonable
discretion, with respect to the defense of any claim covered by this
indemnification and URI agrees to indemnify MWR and the Wolffs with respect to
the legal fees and costs associated with such defense. Notwithstanding the
above, this indemnification shall not apply to any expenses or damages incurred
by MWR prior to the date hereof or any tax liability accruing to MWR and the
Wolffs from the transactions contemplated by this Agreement. Upon a demand for
payment, URI shall pay any amount owed pursuant to this Section 5 in thirty-six
(36) equal monthly installments.
6. INDEMNIFICATION OF URI. The Wolffs and MWR agree to indemnify and
hold URI and its respective agents, employees, attorneys, officers, directors,
successors and assigns harmless, from any and all claims, causes of action,
liabilities and damages arising from or relating in any way to this Agreement
and the transactions contemplated hereunder. Notwithstanding the above, the
indemnification obligations of the Wolffs and MWR hereunder shall be limited to
$312,000.00. Upon a demand for payment, MWR and the Wolffs may elect to pay any
such amount in thirty-six (36) equal monthly installments.
7. RESIGNATION. Xxx hereby resigns from all positions with URI effective
immediately and Xxx shall immediately cease to be a signatory on any URI bank
accounts.
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8. WITHDRAWAL AND COOPERATION. Xxx agrees to withdraw from all
activities, if any, with respect to Xxxx Xxxxx and Xxxx Technologies
Corporation, a California corporation. In addition Xxx agrees to fully
cooperate with URI with regard to any litigation involving URI, any member of
the Xxxxxx family and any matter involving URI and Inter-Mountain Capital Corp.
If required to provide testimony in any such proceeding, Xxx agrees to testify
truthfully in all such matters.
9. TAX PAYMENT. Within thirty (30) days from the date hereof, the
accountants for URI shall calculate the federal, state and local income taxes
attributable to MWR's business operations (excluding any impact of salary
payable or paid to Xxx or any intercompany charges to URI for rent, overhead and
administrative expenses) for the period commencing June 1, 1995 and terminating
on December 31, 1995. Such taxes shall be determined on the basis as if URI and
MWR are not filing a consolidated tax return for the same period or part thereof
(whether or not a consolidated return is filed). The amount of such taxes shall
be considered an intercompany receivable between URI and MWR. MWR shall pay
such tax amount to URI in twelve (12) installments. Simultaneous with the
execution of this Agreement, MWR shall pay to URI the sum of $10,000.00 as an
initial tax payment. Such payment shall be credited against the amounts owed to
URI by MWR pursuant to this Section 9. The balance due to URI shall be paid in
eleven (11) additional equal monthly installments, each such installment due on
the first day of each month until all eleven installments have been paid in
full. The first of the eleven monthly installments shall be due and payable on
the first day of the month following the determination of the taxes owed by MWR
to URI pursuant to this Section 9.
10. REPRESENTATIONS AND WARRANTIES OF URI. URI represents and warrants to
MWR and the Wolffs (a) that it intends to and shall continue to carry on the
business that it has historically conducted; (b) that it owns and controls the
assets necessary to conduct its historical line of business; and (c) that it has
been an SEC reporting company since 1982.
11. REPRESENTATIONS AND WARRANTIES OF MWR AND THE WOLFFS. MWR and the
Wolffs hereby represent and warrant to URI (a) that MWR intends to and shall
continue to carry on the business that it has historically conducted; (b) that
MWR owns and controls the assets necessary to conduct its historical line of
business; and (c) the Wolffs hereby represent and warrant that the shares of MWR
stock which were the subject of the Share Exchange Agreement were not acquired
by them within the five year period preceding the date of the Share Exchange
Agreement.
12. OWNERSHIP COVENANT. The Wolffs covenant and agree that they will not
knowingly, individually, collectively, or through an affiliate, own shares or
other ownership interests in any entity in which Inter-Mountain Capital Corp. or
an affiliate thereof has a five percent (5%) ownership interest.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties, their heirs, devisees, personal representatives, legal representatives,
successors and assigns.
14. GOVERNING LAW. All questions with respect to the construction of this
Agreement and the rights and liabilities of the parties hereto shall be governed
by the laws of the State of Utah.
15. ATTORNEYS' FEES. If any action is brought because of any breach of or
to enforce or interpret any of the provisions of this Agreement, the prevailing
party shall be entitled to recover from the other party reasonable attorney's
fees and court costs incurred in connection
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therewith, the amount of which shall be fixed by the Court and made a part of
any judgment rendered thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above appearing.
UTAH RESOURCES INTERNATIONAL, INC.,
a Utah corporation
By: /s/ R. Xxx Xxxxxxxx
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Its: R. Xxx Xxxxxxxx, Chairman of the Board
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MIDWEST RAILROAD CONSTRUCTION AND
MAINTENANCE CORPORATION,
a Wyoming corporation
By: /s/ Xxxxxx X. Xxxxx
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Its: Xxxxxx X. Xxxxx, President
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/s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
/s/ Xxxxxx Xxxxx
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Xxxxxx Xxxxx
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