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) July 20, 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)
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None
(Former Name or Former Address, if
Changed Since Last Report)
<PAGE>
Item 5. Other Events.
See press release of the registrant dated July 23, 1999 and the
Midsouth Settlement Agreement effective as of July 20, 1999, both attached
hereto.
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: July 23, 1999 By: /s/ Robert W. Erikson
Robert W. Erikson
President
<PAGE>
PRESS RELEASE
For Immediate Release
INSITUFORM EAST REPORTS FAVORABLE SETTLEMENT
IN DISPUTE CONCERNING MIDSOUTH PARTNERS
LANDOVER, MD, July 23, 1999 - INSITUFORM EAST, INCORPORATED [NASDAQ:
INEI] (the "Company" or "East") reported that it and its subsidiary, Insitu,
Inc. had settled disputes with Insituform Technologies, Inc.
("ITI") concerning Midsouth Partners ("Midsouth").
In March, ITI purportedly terminated its Insituform License Agreement
and commenced litigation to deny Midsouth any rights to further utilize
cured-in-place-pipe ("CIPP") rehabilitation processes as previously practiced
under such license. The settlement followed an April Preliminary Injunction
Decree from the Delaware Chancery Court enjoining ITI from exploiting the
Insituform Process in the Midsouth Territory and ordering arbitration. The
American Arbitration Association set hearings for late July and had agreed to go
forward on the merits of Insitu's complaint.
Under the settlement, all remaining disputes before the Delaware
Chancery Court and the American Arbitration Association will be dismissed.
By the terms of the agreement reached July 20, a wholly-owned
subsidiary of East will purchase ITI's interests in the partnership at book
value and Midsouth Partners is entitled to continue the business of the
partnership under its present name. Midsouth obtained a royalty-free,
non-exclusive right, without limit in time, to continue to utilize the CIPP
processes heretofore practiced by Midsouth. The Insituform License Agreement and
its requirement to pay royalties were relinquished through settlement;
additionally, ITI further expressly acknowledged that Midsouth may also utilize
processes other than the Insituform Process to perform pipe rehabilitation
services.
The Chief Executive Officer Committee ("CEOC") of East said the Company
is "positively elated" with the settlement, which it regards as "extraordinarily
favorable" to both the Company's future and the future of Midsouth Partners, now
its wholly-owned subsidiary. The CEOC said that obtaining a perpetual
non-exclusive right, royalty-free, for Midsouth to continue to use its current
CIPP methodology, as well as the express freedom for Midsouth to utilize
additional processes other than the Insituform Process to perform pipe
rehabilitation services, was well worth the terminating of existing ITI licenses
and allowing direct competition between ITI and Midsouth Partners.
Insituform East, Incorporated and its subsidiaries are principally
engaged in the trenchless rehabilitation of underground sewers and other
pipelines. The Company directly performs work in six Mid-Atlantic states and the
District of Columbia under certain sublicense agreements utilizing the patented
Insituform(R) process. Utilizing other processes, the Company's wholly-owned
subsidiary, Midsouth Partners, operates substantially without geographic
restriction. The Insituform process utilizes a polyester fiber felt tubing, or
in particular circumstances special applications material, (the Insitutube(R)
material) coated with polyethylene and impregnated with a liquid thermosetting
resin. The resin-saturated Insitutube material is inserted in the pipe through
an existing manhole or other access point. By use of an inversion tube and cold
water pressure, the Insitutube material is turned inside out as it is forced
through the pipeline. When the Insitutube material is fully extended, the cold
water within it is recirculated through a heat-exchange unit. The heated water
cures the thermosetting resin to form a hard, jointless, impact and corrosion
resistant Insitupipe product within the original pipe. Lateral or side
connections are then reopened by use of the Insitucutter(R) device, a remotely
controlled cutting machine. The Company is certified to ISO 9001 quality
standards for the design and installation of the Insituform cured-in-place
pipeline product.
*****
CONTACT: ROBERT W. ERIKSON
President
(301) 386-4100
<PAGE>
MIDSOUTH SETTLEMENT AGREEMENT
This Midsouth Settlement Agreement ("Agreement"), effective as of July
20, 1999, is by and among Insituform Technologies, Inc. (formerly named
Insituform of North America, Inc.; "ITI"), Insituform Southwest, Inc. (formerly
named Insituform California, Inc.; "Southwest"), Insitu, Inc. ("Insitu"),
Insituform East, Inc. ("East"), Midsouth Partners (formerly named Insituform
Midsouth; "Midsouth") and Midsouth LLC ("LLC").
W I T N E S S E T H:
WHEREAS, Midsouth entered into an agreement as licensee of a process
called the Insituform(R) Process for the trenchless rehabilitation of pipelines,
pursuant to a sub-license agreement dated as of December 2, 1985 by and between
Midsouth and Insituform North America Corp. ("INAC"), as predecessor-in-interest
to ITI, as amended (the "Insituform License Agreement"), for the Territory (as
defined in the Insituform License Agreement); and
WHEREAS, Midsouth is the licensee of a process called the NuPipe(R)
Process for the trenchless rehabilitation of pipelines under a license agreement
dated as of December 7, 1990 and related equipment and supply agreements, as
amended, between NuPipe, Inc. ("NuPipe"), as predecessor-in-interest to TTI, and
Midsouth (the "NuPipe License Agreement") for the Territory; and
WHEREAS, Insitu, ITI and Southwest are the partners of Midsouth, holding
interests in the capital, and in the profits and losses, of Midsouth of 42-1/2%,
42-1/2% and 15%, respectively; and
WHEREAS, East is the licensee of the Insituform Process for various
other territories under six license agreements entered into between INAC, as
predecessor-in-interest to ITI, and East; and is the licensee of the NuPipe
Process for such territories under a license agreement between NuPipe, as
predecessor-in-interest to ITI, and East; and
WHEREAS, there are disputes among Insitu, ITI, Southwest and Midsouth
concerning, among other matters, the right of Southwest to withdraw from and
seek dissolution of Midsouth and the right of ITI to terminate the Insituform
License Agreement; and
WHEREAS, to avoid the time, expense and uncertainty of litigation and
arbitration, the parties now desire to settle outstanding disputes among them;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto hereby agree as follows:
1. The parties hereto acknowledge and agree that the partnership known
as Midsouth Partners is hereby dissolved: (i) incident to the intended
withdrawal therefrom of Southwest by notice dated April 19, 1999 to be effective
August 17, 1999, which Southwest, ITI and Insitu agree shall take effect on the
date hereof; (ii) by the withdrawal of ITI therefrom effective on the date
hereof; (iii) by the assignment hereby of the interest of such withdrawing
partners to, and (except as otherwise set forth in this Agreement) the
assumption hereby of all liabilities of such withdrawing parties (the
"Withdrawing Partners") by, LLC, and consequent release of such Withdrawing
Partners therefrom; and (iv) by the agreement of Insitu, ITI and Southwest:
A. that Midsouth may continue under its present or such other
name as Insitu, as continuing partner, may select, but
that its operation shall be subject to the rights and
obligations set forth in this Agreement (it being further
agreed that the partnership agreement of Midsouth [the
"Partnership Agreement"] is hereby amended to eliminate
any and all provisions thereof inconsistent with this
Agreement);
B. that Insitu will cause to be paid to Southwest and ITI for
their partnership interests, respectively, the share of
each in the book value of Midsouth in the manner set forth
in the letter dated July 12, 1999 from C.T. Armstrong,
counsel to Insitu, to Thomas Goodwin, Esq., counsel to ITI
and Southwest (the "Payment Letter"), a copy of which is
attached hereto as Exhibit A;
C. that, except as in this Agreement or in the Payment Letter
otherwise provided, from and after the date hereof, Insitu
and LLC shall be the sole surviving partners of Midsouth;
and
D. that the Withdrawing Partners shall, from and after the date
hereof, have no further obligations pursuant to the
Partnership Agreement.
2. The Insituform License Agreement is hereby terminated in all
respects, effective March 11, 1999, except that Article VI (and the provisions
of the schedule referred to therein) shall continue in full force and effect,
subject to the provisions of paragraph 5(d) of this Agreement from and after
the date hereof.
3. The NuPipe License Agreement is hereby terminated in all respects,
effective as of the date hereof, except that Section 5.03 shall continue in full
force and effect.
4. The parties agree that Insitu may continue to operate a pipe
rehabilitation business using the name of "Midsouth" (and hereinafter Insitu,
LLC and Midsouth Partners, in whatever legal form the last such party survives
the withdrawal of ITI and Southwest, shall collectively be referred to herein as
"Insitu" except where the context clearly implies that only Insitu itself is
intended); provided, however that none of Insitu, Midsouth nor LLC shall have
any right to use the trademark, service mark and/or tradename "Insituform" or
any derivative thereof (except for the continued right to utilize the name
"Insitu" as part of any corporate name), or any of the other trademarks, service
marks and tradenames of ITI or any of its affiliates after the date of this
Agreement, except as expressly provided herein. Insitu and Midsouth, and each of
them, agree to cease immediately the use of any and all such trademarks, service
marks and tradenames as of the date hereof, except that the parties agree that
Insitu and Midsouth shall have ninety days from the date of this Agreement to
remove said trademarks, service marks and tradenames from its vehicles,
equipment, buildings, letterhead, business cards, literature and other
materials; provided, however, that nothing herein shall obligate Insitu or
Midsouth to remove the word "Insituform" from any felt tube which Midsouth has
ordered from, but which has not as of the date hereof been delivered by, ITI as
of the date hereof or any tube which Midsouth has in its possession as of the
date hereof.
5. (a) ITI hereby grants to Insitu a royalty-free, nonexclusive right,
without limit in time, within and throughout the Territory to continue to
utilize the cured-in-place pipe processes, techniques and inventions currently
or formerly used in commercial practice by ITI and heretofore practiced by or
available to Midsouth pursuant to the Insituform License Agreement and to sell
the resultant product (it being expressly understood and agreed that such right
shall not extend to any improvements in or modifications to any such processes,
techniques and inventions subsequent to the date hereof); provided, however,
that the aforesaid may not be used to line tunnels, pipelines and passageways
carrying natural or manufactured fuel gases and other hazardous gases.
Notwithstanding any other provision contained herein, Insitu, Midsouth and LLC,
and each of them, covenant and agree that nothing in this Agreement shall
entitle any of them to utilize the aforesaid rights, ideas, inventions and
techniques outside the Territory or in any other activity. Insitu, Midsouth and
LLC expressly agree that none of them shall be entitled as a result of the
foregoing grant to utilize or practice any other rights, Insituform Process
patents issued after the date hereof, properties, improvements or changes which
are developed or acquired by ITI or any of its subsidiaries or affiliates,
communicated to Insituform licensees or introduced to commercial practice after
the date hereof, nor shall Insitu, Midsouth or LLC be entitled to (and neither
ITI nor any of its subsidiaries or affiliates shall be obligated to provide) any
technical support with respect thereto. Nothing herein shall in any way either
increase or limit Midsouth's, Insitu's or LLC's right to use, inside or outside
the Territory, any rights, ideas, inventions and techniques which can be
obtained from the public domain or that were or become publicly available for
use in the absence of this Agreement (excluding for these purposes the unexpired
patents of ITI and its affiliates).
(b) The rights granted under paragraph 5(a) shall terminate
immediately if any provision of this Agreement is breached by Midsouth,
Insitu, East or LLC and such breach is not cured within thirty (30) days of
notice served by certified mail or facsimile by ITI, or if any such entity
becomes insolvent or a petition in bankruptcy is filed by such entity, or
there is an adjudication of bankruptcy upon a petition filed against such
entity or a receiver is appointed on application of such entity.
(c) Notwithstanding the foregoing to the contrary, the following
occurrences shall be deemed incurable breaches of the terms of this Agreement
and ITI may, in its sole and absolute discretion, serve immediate notice of
termination of the rights provided under paragraph 5(a), that is to say: (i)
Insitu, LLC or Midsouth utilizes the rights granted hereunder outside the
Territory, other than in an inadvertent and de minimis manner (provided,
however, that, without limitation, in no event shall utilization of the
license granted hereunder for the performance of an entire project or
substantially an entire project outside the Territory, or, on a cumulative
basis, in any five projects outside the Territory, regardless of lengths
installed, constitute an inadvertent or de minimis utilization) , (ii) Insitu,
LLC or Midsouth uses in any way the name "Insituform" or any derivative
thereof, except as expressly permitted with respect to its inventory of tubes
or as is provided in Exhibit B hereto, (iii) Insitu, LLC or Midsouth
purchases, or East or any affiliate of East sells to Insitu, LLC or Midsouth,
any tubes supplied to East by ITI; or (iv) any breach of paragraphs 6 or 15 of
this Agreement occurs.
(d) The confidentiality provisions of Article VI of the Insituform
License Agreement (and the provisions of the schedule referred to therein, other
than paragraphs 3 and 4 thereof) shall apply to Insitu, LLC and Midsouth, and
each of them, from and after the date hereof with respect to the rights granted
hereunder (with each reference to Sublicensee or Operator thereunder deemed to
be a reference to Insitu, LLC, Midsouth, and each of them, each reference to
INAC deemed a reference to ITI and each reference to the Sublicensing Agreement
or the Agreement thereunder deemed to be a reference to the rights under this
paragraph 5).
(e) Nothing herein shall constitute an appointment of Insitu, LLC or
Midsouth as an Insituform(R) Process licensee or otherwise as an "Insituform
licensee", and Insitu, LLC, Midsouth, and each of them, expressly agree that
they will not hold themselves out as a licensee of the Insituform(R) Process
or as a licensee of ITI. ITI agrees to provide a letter to Insitu for its use
with customers after the date hereof in the form attached hereto as Exhibit B.
6. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, with the specific
understanding that Insitu may assign the rights granted under paragraph 5(a) if
such assignment is attendant to the sale or change of control of East and all of
its subsidiaries and such assignment is approved in advance by ITI, such
approval not to be unreasonably withheld; however ITI may withhold consent, at
its sole and absolute discretion, if the party acquiring control of East is in
competition with, or an affiliate of a competitor of, ITI or any of its
affiliates. Except as provided above, Insitu shall not, by operation of law or
otherwise, sell, assign, transfer, convey, give away, or encumber to any person,
firm, corporation, partnership, limited liability company or other person or
entity of any nature, its interest in the rights granted hereunder, nor offer,
permit or suffer the same; provided that Insitu may assign the rights granted
hereunder to any successor thereof that is, directly or indirectly, a
wholly-owned subsidiary of East and under common control with Insitu, and that
is not a licensee of the Insituform Process. Any approved assignment as set out
above shall be made on the express condition that the assignor guarantees the
performance of its assignees as well as upon the express condition that the
ultimate parent corporation of any such assignee shall also guarantee the
performance of such assignee, all strictly in accordance with the terms and
conditions of the rights granted hereunder. Should beneficial ownership of an
amount of outstanding common stock or other indicia of ownership in Insitu or
East or their respective ultimate parent corporations be conveyed so as to
effect a change in the control of Insitu, whether by sale, conveyance, operation
of law or otherwise, without having first obtained the written consent of ITI at
its sole discretion to transfer the rights granted hereunder, ITI shall at its
option have the right to terminate the rights granted hereunder immediately. Any
purported assignment of the rights granted hereunder not having the aforesaid
consent shall be null and void and shall thereafter constitute a material
default hereunder.
7. Effective as of the date hereof, ITI and/or any of its
subsidiaries, or affiliates or any future licensees are hereby permitted to
operate, utilize and exploit in the Territory all of ITI's technology, patents
and other rights and properties without any obligation to East, Insitu,
Midsouth, LLC or any affiliate thereof, or any of them.
8. Within five days of the date hereof, Midsouth shall remit to ITI
$400,000 in repayment of loans heretofore made by ITI to Midsouth, and all
further obligations of ITI under any and all loan arrangements regarding
Midsouth are hereby released.
9. ITI agrees that for a period of two years from the date hereof
neither ITI nor any of its subsidiaries or affiliates shall hire any
individual who was employed by Midsouth, Insitu, East, LLC or any of their
affiliates on or subsequent to the date hereof unless, in the sole and
absolute discretion of Midsouth, Insitu, East, LLC or such affiliate,
consented to in writing by such entity.
10. Midsouth, Insitu, East and LLC agree that for a period of two years
from the date hereof none of Midsouth, Insitu, East, LLC nor any of their
subsidiaries or affiliates shall hire any individual who was employed by ITI or
any of its subsidiaries or affiliates on or subsequent to the date hereof
unless, in the sole and absolute discretion of ITI, consented to in writing by
ITI.
11. Except as set forth herein, nothing contained in this Agreement
shall limit or abridge East's rights or obligations under its various license
agreements for the Insituform Process and the NuPipe Process, including, but not
limited to, the confidentiality obligations imposed thereunder.
12. (a) The parties acknowledge that Midsouth has currently reserved
approximately $100,000 for performance or warranty claims and has been advised
of additional performance or warranty claims of $150,000 for which it will
establish a reserve. The parties agree that this total reserve of not more than
$250,000 will be recognized in computing the book value of Midsouth to determine
what is due under the Payment Letter. Any portion of this reserve not expended
for performance or warranty claims shall be added to the book value of Midsouth
and therefore to what is due under the Payment Letter.
(b) Except for work previously paid, or reserved as provided in
paragraph 12(a) (which work shall remain the responsibility of Insitu or one of
its affiliates), the parties agree that responsibility for warranty work will be
divided as follows:
(i) East or one of its affiliates shall be responsible for all
warranty work on any projects and installation work performed by Midsouth,
Insitu or LLC: (x) on or after February 14, 1997 or (y) on or before March 12,
1990; and
(ii) ITI or one of its affiliates shall be responsible for all
warranty work on any project and installation work performed by Midsouth on or
after March 12, 1990 and until the close of business on February 13, 1997,
except for the Nashville Metro Water and Sewer Department project (commonly
referred to as "Whittemore") which shall remain the sole responsibility of
Insitu or one of its affiliates subject to the reserves hereinabove provided.
(c) If any owner ("Owner") of any project or installation with
respect to which any warranty claim is made approaches any party hereto with
respect to a warranty claim for which a party hereto has assumed full
responsibility, the party receiving any such claim shall immediately notify the
other party(ies) which shall then proceed to deal with such claims according to
the allocation of responsibility under this paragraph. Insitu, Midsouth and East
agree to preserve all records relating to projects and installation work for
periods prior to February 14, 1997 and to make the same readily available to ITI
as needed for purposes of the undertakings in this paragraph or as may be
otherwise needed for good and valid reasons. Insitu and East shall retain such
records until the later to occur of expiration of any applicable project or
installation warranty period or the retention period required by law. In the
alternative to preserving the records as provided above, Insitu and East may
determine to transfer the records to ITI. For purposes of this paragraph the
term "records" shall include, but not necessarily be limited to contracts,
photographs, video tapes, and any other visual, pictorial, electronic storage or
imaging form or documentary record of any kind relating to projects and
installation work performed by Midsouth. While nothing herein shall be deemed to
preclude any party from responding to any customer inquiry relating to projects
and installation work, the parties hereto agree that they shall not, by deed or
word, initiate or encourage any Owner or any Owner's representative, agent,
employee or official to discover or form a belief that any project or
installation work performed by Midsouth is faulty or in need of warranty repairs
or work. Further, after any party hereto receives any claim by any Owner that
any project or installation work by Midsouth for which another party hereto has
assumed full responsibility is faulty or in need of warranty repairs or work,
the party receiving such complaint and its affiliates shall immediately, as
provided above, advise the responsible party hereunder but shall not then by
deed or word, otherwise facilitate such Owner in the investigation, discovery or
belief that the project and installation work in question is in fact faulty or
in need of warranty repairs or work.
(d) The parties further agree that any and all responsibility of
the parties, or any of them, for bonds issued on behalf of Midsouth shall be
allocated in accordance with the principles hereinabove set forth in this
paragraph, with each party entitled to appropriate contribution from the other
parties in the event of any liability therefor.
13. ITI and Southwest expressly acknowledge that Midsouth, LLC or
Insitu may utilize processes other than the Insituform Process to perform pipe
rehabilitation services.
14. Any tube supply agreement heretofore entered into between Midsouth
and ITI (or their predecessors) is hereby terminated. In the event
Midsouth/Insitu wishes to purchase felt tubes from ITI and provided ITI still
manufactures felt tubes, ITI shall enter into a felt tube supply agreement
containing the same pricing and delivery terms and warranties as the tube supply
agreement then in effect between ITI and East, provided, however, that East
shall guarantee the performance of Midsouth/Insitu under any such supply
agreement; and, provided, further, that, in the event Midsouth/Insitu does not
commit, for any year (the "Subject Year") of such agreement, to purchase a
quantity of tube which is at least 90% of the greater of (x) the volume
purchased by Midsouth/Insitu during the prior year or (y) the volume purchase by
Midsouth/Insitu during the period January 1 through December 31, 1998, ITI's
Standard Price List, which is Exhibit 2 to the current East tube supply
agreement, shall apply to purchases during the Subject Year. Notwithstanding the
foregoing, however, the name "Insituform" or any derivative thereof shall not be
printed on any such tubes supplied-by ITI to Midsouth/Insitu.
15. Provided that East and any of its subsidiaries and affiliates
(other than Midsouth/Insitu/LLC) shall not: (x) perform as a sub-contractor to
Midsouth/Insitu/LLC more than 40% of the gross contract value of projects
undertaken in the Territory by Insitu, Midsouth and/or LLC in any calendar year,
nor (y) perform as a subcontractor to Midsouth, Insitu and/or LLC more than 40%
of the cured-in-place pipe installation work under projects undertaken in the
Territory by Insitu, Midsouth, and/or LLC then, and only then, may East utilize
its rights in the Insituform Process in the Territory under its Insituform
licenses as a subcontractor of Insitu, and in such an event with respect to such
work East shall pay royalties to ITI as required under the various Insituform
licenses between ITI and East but shall not be required to pay any cross-over
fees or cross-over royalties to ITI for such work performed in the Territory as
a subcontractor of Insitu. Insitu and East shall provide ITI with annual
reports, due on or before February 28 of the succeeding year, setting forth the
contract value of projects undertaken in the Territory in the preceding year by
East, Insitu, Midsouth and/or any affiliate thereof, specifying therein work
undertaken by East as a subcontractor of Insitu. East may undertake any amount
of NuPipe Process work as a subcontractor of Midsouth/Insitu/LLC within the
Territory but only to the extent the project calls for or permits a combination
of cured-in-place and fold and form technology, in which event East shall pay
royalties to ITI as required under the NuPipe license between ITI and East but
shall not be required to pay any cross-over fee or cross-over royalty to ITI for
such NuPipe work as a subcontractor of Midsouth/Insitu/LLC. Any work performed
by East or any affiliate thereof in the Territory directly on its own behalf
shall be subject to the terms and conditions of East's various Insituform
licenses.
16. Except as expressly set out in this Agreement, nothing herein
shall be deemed to otherwise alter or amend the contractual relationships
between East and ITI.
17. Within ten (10) days of the date hereof Midsouth, Insitu, ITI and
Southwest shall cause their respective counsel to file such documents with the
Delaware Court of Chancery (Civil Action No. 17013 NC) and the American
Arbitration Association (Case No. 22 110 0052 99) as are necessary to
effectuate a dismissal with prejudice and without costs of proceedings among
the parties thereto.
18. Except as set forth in this Agreement, the parties hereto each do
hereby release any and all other claims against each other or their affiliates
arising out of any of the activities and actions of Midsouth or the actions of
any of the other parties hereto or their directors, officers, employees and
affiliates, relating to Midsouth, for all periods prior to the date of this
Agreement, including, but not limited to, any and all alleged breaches of the
Partnership Agreement, as amended, and any and all actions of ITI and Southwest
and their directors, officers, employees, and affiliates taken with respect to
termination of or withdrawal from, or attempts to terminate and withdraw from
Midsouth including for these purposes, but not limited to, any bidding and
related activities within the Territory prior to August 17, 1999 as well as
Midsouth's obligations to pay ITI for royalties and/or tube sales which were
incurred prior to the date hereof and remain unpaid.
19. Each of the parties hereto shall bear their respective costs,
including attorneys' fees, incurred in connection with the aforementioned
Delaware Court of Chancery proceedings and American Arbitration Association
proceedings. The parties further agree that the bond and escrow arrangement
arising out of the Delaware Court of Chancery proceedings may be terminated.
20. This Agreement shall be governed by the laws of the State of
Tennessee. All parties to this Agreement and their counsel have reviewed and
have had the opportunity to suggest revisions to this Agreement, and the rule of
construction to the effect that any ambiguity in this Agreement is to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement.
21. Each of the parties hereto acknowledges that irreparable harm would
result if any of the provisions of paragraphs 4, 5, 9, 10 and 12 of this
Agreement were not performed in accordance with their specific terms and that
monetary damages would not provide an adequate remedy in any such event.
Accordingly, it is agreed that in addition to any other remedy to which any
party may be entitled, in law or in equity, such party shall be entitled to
injunctive relief to prevent breaches of such paragraphs of this Agreement and
specifically to enforce the terms and provisions thereof.
22. Any notice hereunder shall be deemed received within 5 days of the
deposit, post-age prepaid, with the United States Postal Service if sent by
certified mail return receipt requested or immediately if sent by facsimile,
provided that a copy of the facsimile notice and a copy of the facsimile
transmission report is deposited, postage prepaid, with the United States Postal
Service the same date as the facsimile transmission directed to a party at the
following address or such changed address as that party may serve on each other
party hereto in the manner herein provided:
(i) if to East, Midsouth, LLC or Insitu:
Insituform East, Inc.
3421 Pennsy Drive
Landover, Maryland 20785
Attn: CEOC
with a copy to:
McGuire Woods Battle & Boothe LLP
1750 Tysons Boulevard, Suite 1800
Tysons Corner
McLean, Virginia 22102-3915
Attn: C. Torrence Armstrong, Esq.
(ii) if to ITI or Southwest:
Insituform Technologies, Inc.
702 Spirit 40 Park Drive
Chesterfield, Missouri 63005
Attn: Mr. Anthony W. Hooper
with a copy to:
Krugman & Kailes LLP
Park 80 West - Plaza Two
Saddle Brook, New Jersey 07663
Attn: Thomas J. Goodwin, Esq.
23. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements between the
parties; provided, however, that the provisions of the first paragraph of
Article XIV(C) of the Insituform License Agreement and paragraph (a) of Section
6.03 of the NuPipe License Agreement relating to consequences of termination
shall remain in effect with respect to the rights and obligations of the parties
created under such license agreements, respectively, (and except that Insitu
may, subject to the provisions of this Agreement, continue to hold confidential
matter in its possession pursuant to the Insituform License Agreement for as
tong as the rights granted in paragraph 5(a) of this Agreement remain in effect)
and except as specifically set forth in this Agreement nothing in this Agreement
shall be deemed to alter, amend or otherwise effect other contractual
relationships between East and ITI. This Agreement cannot under any
circumstances be modified orally and no agreement will be effective to waive,
change, modify or discharge this Agreement in whole or in part, unless such
agreement is in writing and is signed by the parties hereto.
24. This Agreement may be executed in any number of counterparts, each
of which shall be an original and all of which shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their respective names and by their duty authorized officers as of
the date first above written.
INSITUFORM TECHNOLOGIES, INC. INSITUFORM SOUTHWEST, INC.
By /s/ A.W. Hooper By /s/ A.W. Hooper
Title Title
INSITU, INC. INSITUFORM EAST, INC.
By /s/ Robert W. Erikson By /s/ Robert W. Erikson
/s/ George Wm. Erikson/Chrm /s/ George Wm. Erikson/Chrm
Title CEOC Title CEOC
MIDSOUTH PARTNERS MIDSOUTH LLC
By /s/ Robert W. Erikson By /s/ Robert W. Erikson
/s/ George Wm. Erikson /s/ George Wm. Erikson
Title CEOC Title CEOC for Member
<PAGE>
EXHIBIT A
July 12 1999
Thomas J. Goodwin, Esquire
Krugman & Kailes, LLP
Part 80 West - Plaza Two
Saddle Brook, New Jersey 07663-5835
Re: Insitu, Inc., Claimant v. Insituform Technologies,
Inc. and Insituform Southwest, Inc., Repsondents.
Case No. 22 110 00052 99
Dear Tom:
We propose a meeting at your earliest convenience to discuss the settlement
proposal you made Friday afternoon. Our suggestion is that a fully authorized
representative of ITI meet with our client and us at our office at a date and
hour suitable to you. Our objective is to arrive at a settlement which could be
submitted to the Arbitrators in a form of an Agreed Settlement.
In the meantime, with respect to a formula or amount for the Midsouth
business, we wish to propose the following approach for your consideration:
(1) First, we take the quarterly report for the period ending March 31,
1999, a final copy of which you now have, and use that for the base. It shows on
Footnote 10, page 14, the tangible net worth of each partner's share;
(2) At or before August 17, Insitu will pay to ITI and Southwest the
amounts shown therein;
(3) On or before October 1, or within one week of the issuance of the
quarterly report for the period ending June 30, 1999, whichever is later, Insitu
will pay or have repaid to it any additional or lesser amount if reflected in
Footnote 10 or similar Footnote of that report;
(4) On or before November 1, or within one week of the receipt of a
comparable report for the period ending August 17, 1999 (or other predetermined
closing date) Insitu will pay or be credited with any further adjusted amount as
and if indicated by the report of that date;
(5) If either ITI or Insitu desire an audit on or after November 1, at its
expense, it is entitled to such audit in accordance with the terms of the
Partnership Agreement; the audit will be conducted by Deloitte & Touche, and the
parties will accept as final the determination of Deloitte & Touche; Insitu will
pay or be repaid any further adjustment indicated therein;
(6) Any dispute over the amount to be paid, credited or repaid after audit
will be subject to arbitration in accordance with the Partnership Agreement, and
these Arbitrators, or one of them, would remain authorized to retain authority
to determine any final payment due any other party.
Please let me know if this concept seems workable to you. It is intended as
only a conceptual approach at this time and I have no authority to make this
proposal as a part of any agreement between our clients, but I would like to
pursue it with you if you share my view on it.
Thank you very much.
Sincerely yours,
/s/ Torrey Armstrong
C. Torrence Armstrong
CTA/c
<PAGE>
EXHIBIT B
[On Letterhead of Insituform Technologies, Inc.]
To whom it may concern:
"Midsouth" is authorized without limitation in time subject to the Midsouth
Settlement Agreement dated July 20, 1999 to continue use of the cured-in-place
pipe processes, technique and inventions that it formerly practiced pursuant to
its since terminated Insituform(R) License agreement and as the same existed on
July 20, 1999.
"Midsouth" is no longer a licensee of Insituform Technologies, Inc. and
therefore "Midsouth" does not receive technical or other support from Insituform
Technologies; it may not use any of the trademarks, service marks or tradenames
of Insituform Technologies, including the trademark Insituform(R), and
"Midsouth" does not have access to improvements or new technology developed or
acquired by Insituform Technologies.
Insituform Technologies has no ownership interest in "Midsouth" and is not a
licensor of technology to "Midsouth".
Signed,
Insituform Technologies, Inc.
