SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 18, 1999
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Insituform East, Incorporated
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(Exact Name of Registrant as Specified in Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-10800 52-0905854
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(Commission File Number) (IRS Employer Identification No.)
3421 Pennsy Drive, Landover, Maryland 20785
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone and fax numbers, including area code
(301) 386-4100 (tel)
(301) 386-2444 (fax)
(301) 773-4560 (24-hour public information Fax Vault System)
None
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(Former Name or Former Address, if
Changed Since Last Report)
<PAGE>
Item 5. Other Events.
Since 1978, Insituform East, Incorporated (the "Company") has entered
into six license agreements with Insituform Technologies, Inc. ("ITI"), which
grant the Company the right to perform under the Insituform name the Insituform
process for reconstructing pipelines with little or no excavation, in Maryland,
Virginia, the District of Columbia, Pennsylvania, Ohio, West Virginia, Delaware
and three Kentucky counties. The license agreements are for the life of the
patents or the patent rights unless sooner terminated by certain specified
action of the Company or ITI. The license agreements were entered into as
sub-licenses from Insituform of North America, Inc., although ITI has since
succeeded to the rights of the original owner and licensor of the Insituform
process and name.
In 1985, Midsouth Partners (the "Partnership") was organized with the
Company included as a general partner and holder of a 42.5% equity interest in
the Partnership. Midsouth Partners became the exclusive licensee to perform the
Insituform process under the Insituform name in Tennessee, the rest of Kentucky
and northern Mississippi. Pursuant to a June 12, 1996 arbitration award, the
Company obtained majority control of the Management Committee of the Partnership
without change to its original 42.5% minority equity interest. ITI and an
affiliate, the other general partners of the Partnership, together hold a
non-controlling but majority 57.5% equity interest.
By letter dated March 11, 1999, ITI, through a subsidiary, delivered
notice of a purported termination of Midsouth Partners. Simultaneously, ITI
delivered notice of a purported termination of the Insituform license under
which Midsouth Partners performs the Insituform process under the Insituform
name. ITI also has announced that it has filed an action in the Chancery Court
of Delaware for a declaration that was within its rights in effecting its
purported terminations, and that it intends to bid on projects under the
Insituform name within the Insituform license territory of the Partnership.
The Board of Directors of the Company is determined to protect the
Company's rights and interests in Midsouth Partners and the Partnership's
license agreement. The Company believes that the purported termination by ITI of
the Partnership's Insituform license is not effective, that the license
continues to operate, and that the Partnership continues to have the exclusive
right to perform the Insituform process under the Insituform name in the
Partnership's license territory. The Company believes that ITI acted wrongfully
in attempting to terminate the Partnership and the Insituform license, and that
its actions in purporting to terminate the Partnership's Insituform license and
in submitting bids in the Insituform name in the Partnership's Insituform
license territory violate both the Partnership Agreement and the Partnership's
license.
The Company intends to vigorously defend its interests in the
Partnership and the Insituform license agreement under which Midsouth Partners
performs the Insituform process under the Insituform name. By letter dated March
17, 1999, the Company advised ITI that its actions violate both the Partnership
Agreement and the Partnership's license, and that the Company intends to enforce
its rights.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
The exhibits filed as a part of this Current Report on Form 8-K are
listed in the attached Index to Exhibits.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INSITUFORM EAST, INCORPORATED
Date: March 18, 1999 By: /s/ George Wm. Erikson
George Wm. Erikson
Chairman
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INDEX TO EXHIBITS
Exhibit Description
99.1 Letter dated March 17, 1999 from the Registrant, Insituform East,
Inc. to the Chairman of Insituform Technologies, Inc.
<PAGE>
17 March 1999
In reply refer to:
CEOC/990314
TRANSMITTED VIA
FAX AND MAIL
Mr. Anthony W. Hooper
President and Chief Executive Officer
Insituform Technologies, Inc. ("ITI")
Insituform Southwest, Inc. ("ISW")
702 Spirit 40 Park Drive
Chesterfield, Missouri 63005
Tel: (314) 530-8020
Fax: (314) 530-8704
Dear Tony:
I am responding to your three letters of March 11, 1999, one addressed
on the letterhead of your subsidiary Insituform Southwest, Inc. to our
subsidiary Insitu, Inc. purporting to terminate the Midsouth Partners
partnership, one addressed by you to Midsouth Partners purporting to cancel
Midsouth's Insituform license, and one by you to the CEOC of Insituform East,
Inc. serving as a transmittal letter for a lawsuit that you have filed in
Delaware and notifying that you intend to bid on work in the Midsouth territory
immediately.
Insituform East, Inc. believes that the first two letters referred to
above have not terminated the license or the Midsouth Partnership, that the
actions purported to have been taken in those letters are themselves further
violations of both the license and the partnership agreement (E-Midsouth or ITI
as the successor in interest to E-Midsouth is still a defaulting partner as
previously determined by arbitration), and that any bids submitted by Insituform
Technologies, Inc. in the Midsouth territory, directly or through any subsidiary
or affiliate other than Midsouth Partners, will constitute a violation of your
fiduciary duties and of both the partnership agreement and the license. The
arrangement proffered in your letter, escrowing 42.5% of the net profits from
work undertaken, does not cure either the threatened breach by Insituform
Technologies, Inc. or its violations of those arrangements or remedy the damage
that Midsouth Partners will suffer in its business, or the damage that
Insituform East, Inc. and its subsidiary, Insitu, Inc., will suffer in
connection with its partnership interest in Midsouth Partners.
Insituform East, Inc. and Insitu, Inc. intend to enforce their rights
under those agreements, and to hold Insituform Technologies, Inc. and its
subsidiaries, including Insituform Southwest Inc., liable for their violations
of these agreements. All of the rights of Insituform East, Inc. and Insitu, Inc.
are reserved.
Insituform East, Inc.
/s/ George Wm. Erikson
By George Wm. Erikson
Chairman
