Cyprus Pima Mining Company, Arizona On February 20, 1975, there was filed in the Federal District Court in Arizona an action brought by the United States and by certain Indians against Cyprus Pima, the City of Tucson, Farmers Investment Company and three other mines operating in the upper Santa Cruz Basin. The action seeks a declaration of the Indians' water rights in the Basin and their priorities over those of the defendants, an injunction against interference with said right and whatever damages would be sufficient to compensate the Indians for losses caused by withdrawals of waters by the defendants in violation of said rights. Musick, Peeler & Garrett, counsel for Cyprus Pima, cannot predict the ultimate outcome of this matter. On February 3, 1975, a complaint by the Farmers Investment Company was served upon Cyprus Pima Mining Company as well as upon the State Land Department, an additional defendant. The action, filed in the Arizona Superior Court for Pima County, seeks to enjoin Cyprus Pima from utilizing certain rights to withdraw water which the company won as a result of being a high bidder in a public auction sale conducted by the State Land Department. There are no monetary damages requested. From Musick, Peeler & Garrett's information of the operations of the mine and its need for water, there would be no material effect upon the operations of Cyprus Pima if the injunction requested by plaintiff were granted. There is pending in the Arizona Superior Court for Pima County a suit filed on November 25, 1969, by Farmers Investment Company, an Arizona corporation, requesting that Cyprus Pima Mining Company and several other major mining companies be enjoined from obtaining and using water for mining operations under circumstances that are alleged to be injurious to the plaintiff. If such injunctive relief were obtained, mining operations at Cyprus Pima would be suspended. Monetary damages now have been requested by plaintiff in the sum of $70,000,000 and the plaintiff has requested an accounting from Cyprus Pima as to the profits and gains realized by Cyprus Pima. On August 26, 1976, the Supreme Court of Arizona, pursuant to an appeal filed by Farmers Investment Company, vacated a summary judgment entered in favor of Cyprus Pima by the Superior Court on one count of the complaint filed by Farmers Investment Company which sought injunctive relief against the continued pumping of groundwater by Cyprus Pima. In light of Cyprus Pima's affirmative defenses to the allegations in the complaint, the Supreme Court remanded the cause back to the Superior Court for further proceedings. On October 12, 1976, Cyprus Pima filed a motion for rehearing in the Arizona Supreme Court requesting a rehearing of the Supreme Court's August 26 decision. In the opinion of Musick, Peeler & Garrett, counsel for Cyprus Pima, the ultimate outcome of the litigation cannot be predicted. Musick, Peeler & Garrett is of the further opinion, based upon Cyprus Pima's advice as to what would be material to its financial position, that any monetary recovery by the plaintiff would not have a material effect on Cyprus Pima's financial position. Island Copper Mine, Canada Mr. Gordon Milbourne, the original holder of certain of the claims on which Utah's Island Copper mine is located, has claimed payment of approximately $9,603,000 through July 31, 1976 as an additional share of profits due to him under the terms of the agreement between him and Utah with respect to the operation of the Island Copper project. Utah does not believe that Mr. Milbourne is entitled to receive the amounts claimed. However, since the questions of accounting practice and contract interpretation involved in the claim are complex, on the advice of Canadian counsel, Utah has paid under protest approximately $781,000 to Mr. Milbourne and approximately $2,244,000 into an escrow with a Vancouver bank to be distributed in accordance with the decision in the hereinafter mentioned lawsuit. With Mr. Milbourne's consent, Utah has withheld payment of the remaining amount claimed of approximately $6,578,000, which will also be distributed in accordance with the decision in such lawsuit. On January 29, 1973, Utah commenced suit in the Supreme Court of British Columbia to recover from Mr. Milbourne the amount paid to him under protest, with interest, and on July 10, 1975 was awarded a judgment by the said court for substantially all of the monies claimed. Mr. Milbourne has appealed the said judgment. Craig Mine, Colorado In April of 1973, Utah entered into a contract with four utilities to supply the fuel requirements for 35 years for two steam turbine electric generators of about 350 net megawatts each. Utah contends that about the time the contract was executed and unknown to Utah, the utilities changed their plans and thereafter 64 ordered turbine generator units of a significantly larger size with significantly larger fuel requirements On May 14, 1975, Utah filed an action, No. 75-526, in the United States District Court for the District of Colorado, against the utilities seeking a declaration that the contract is void or voidable by Utah or for other appropriate relief. The utilities have filed a counterclaim seeking enforcement of the contract in accordance with their interpretation of it and seeking damages, equal to the amount of alternative fuel costs or the cost of purchased electricity to fulfill their contracts, if Utah does not perform accordingly. An adverse decision by the court may result in additional costs above the fuel price which are not reimbursable to Utah under the contract. The trial of the case is presently set to commence on November 1, 1976. Navajo Mine, New Mexico On March 13, 1975, the Attorney General of New Mexico filed suit in state court in San Juan County naming the United States, on behalf of itself and certain Indian wards, Utah and others as defendants. The suit seeks a determination of the relative rights of federally established reserves such as national forests and Indian reservations and all other public and private interests in the stream system. Utah holds its water rights in the stream system for its own benefit and for the benefit of existing and potential customers who would develop industrial facilities adjacent to Utah's Navajo mine. Utah believes that, because of the complexity of this litigation, a substantial number of years will elapse before there is a final determination on the merits, and the outcome cannot now be predicted. MANAGEMENT OF UTAH Directors The following table sets forth certain information, as of September 30, 1976, concerning the present directors of Utah. See "The MergerConduct of Utah's Business After the Merger" concerning a change in Utah's Board of Directors promptly after consummation of the Merger. Shares Year Beneficially First Owned as of Name Principal Occupation Year First Became Director Shares Beneficially Owned as of September 30, 1976(2) Ernest C. Arbuckle............ Chairman of the Board, Wells Fargo Bank, 1964 600 N.A. Fred J. Borch..................... Retired, formerly Chairman of the Board, General Electric 1971 6 700(3) Alf E. Brandin.................... Senior Vice President of Utah 1965 4540(4) *Val. A. Browning............... Chairman of the Board, Browning (designers, 1966 376,652(5) importers and manufacturers of sporting goods) Thomas D. Dee, II............. Vice President, First Security Bank of Utah, 1971 132 207(6) N.A. *George S. Eccles................ Chairman and Chief Executive Officer, First 1941(1) 174,810(7) Security Corporation, bank holding company Marriner S. Eccles.............. Honorary Chairman of the Board of Utah 1921(1) 190 340(8) William R. Hewlett............ President, Hewlett-Packard Company (electronics) 1974 20000 William R. Kimball........... President, Kimball & Company, diversified operations and investments 1959 193,858(9) J. B. Ladd........................... President of Ladd Petroleum Corporation, a 1973 120 457 subsidiary of Utah E. W. Littlefield................. Chairman of the Board and Chief Executive 1953(1) 377 149( 10)(11) Officer of Utah Arjay Miller....................... Dean, Graduate School of Business, Stanford 1968 200 University *Paul L. Wattis, Jr...President, Wattis Construction Co., Inc. 1971 129 624(11)(12) A. M. Wilson...................... President of Utah 1968 27,742 (13) * Member of Audit Committee. (1) Includes term as director of Utah Construction Company, a corporation organized under the laws of the State of Utah, which was merged into Utah on February 1, 1957. 65 ?