U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K AMENDMENT NO. 1
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1997
Commission File Number 0-17325
ENVIRONMENTAL REMEDIATION HOLDING CORP.
(Name of small business issuer in its charter)
COLORADO 88-0218499
(State of Incorporation) (IRS Employer ID Number)
420 Jericho Turnpike, Suite 321
Jericho, New York 11753
(Address of principal executive office)
Registrant's telephone number, including area code: (516) 433-4730
Securities registered under 12 (b) of the Exchange act: none Securities
registered under Section 12 (g) of the Exchange Act:
Common Stock $.0001 par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 of 15 (d ) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ____
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form10-K [ ]
Issuer's revenue for its most recent Fiscal Year were: $108,000
The aggregate market value of the 12,234,958 shares of voting stock held by
non-affiliates of the Registrant as of September 30,1997 was $36,704,874
(assuuming solely for the purpose of this calculation that all directors,
officers and greater than 5% stockholders of the Registrant are "affiliated").
The number of shares outstanding of the Registrant's Common Stock , par value
$.0001 per share, as of September 30, 1997 was 22,989,526
Documents Incorporated by Reference:
None
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ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
PART I
Page
Item 1. Description of Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a
Vote of Security Holders
PART II
Item 5. Market For The Registrant's Common
Stock and Related Security Holders
Item 6. Selected Financial Data
Item 7. Management's Discussion and
Analysis of Plan of Operations
Item 8. Financial Statements and
Supplementary Data
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure
PART III
Item 10. Directors and Executive Officers
of The Company
Item 11. Executive Compensation
Item 12. Security Ownership of Certain
Beneficial Owners and Management
Item 13. Certain Relationships and
Related Transactions
PART IV
Item 14. Exhibits and Financial Statements Schedule
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Environmental Remediation Holding Corporation the "Company" is an
independent oil and gas company formed in 1995 to
focus on acquiring and servicing marginally producing oil and natural gas
properties which contain the potential for increased value through workovers and
secondary recovery operations utilizing the Company's proprietary horizontal
drilling tool. The Company is also focused on providing a full range of
environmental remediation and "plug and abandonment" services to the oil and gas
industry. More recently, the Company has additionally begun to acquire interests
in non-producing oil and gas properties, particularly high potential
international prospects in known oil-producing areas. In May 1997, the Company
entered into an exclusive joint venture with the Democratic Republic of Sao Tome
& Principe ("Sao Tome"), a set of islands located in the Gulf of Guinea off the
coast of central West Africa, to manage the exploration, exploitation and
development of the potential oil and gas reserves on and offshore Sao Tome,
either through the venture or in collaboration with major international oil
exploration companies. The Company is currently in the initial phase of project
development and is conducting geophysical, seismic, environmental and
engineering feasibility studies. The Company believes that this venture provides
it with a significant foothold in the oil-rich Gulf of Guinea, in which the
venture is the largest single concession holder in the entire Gulf.
The Company has entered into a number of recent transactions in
connection with its workover and recovery operations. In September 1997, the
Company acquired a 37.5% interest in a 49,000 acre natural gas lease in the
Nueces River area of south Texas, known as the "Nueces River Project," one of
the largest natural gas field areas in the United States. According to
independent reserve reports, it is estimated that this area contains 100 BCF of
natural gas per 640 acre section. In October 1997, the Company re-entered the
first of two existing shut-in wells on the property, and expects to ultimately
recover up to 5 BCF per well using 5% of the estimated inplace reserves. The
daily production rates from these wells cannot be determined at this time until
well stimulation is completed in March 1998. In addition, the Company acquired
in February and March 1997 two leases on oil fields located in Henderson County
and Wichita Falls, Texas. These oil fields, which together comprise
approximately 1,200 acres and 200 wells, have proven reserves totaling 2.5
million barrels of oil verified by an independent reservoir engineer. The
Company estimates that, after reworking the wells using various techniques
including its proprietary drill, these wells could produce from 500 to 800
barrels of oil per day. Through December 1997, the Company had recompleted 18
oil wells and is currently producing and selling "test" oil from the Wichita
Falls field.
The Company also holds interests in oil and natural gas leases in
Utah. In July 1997, the Company entered into a joint venture with MIII
Corporation, a Native American oil and gas company, to workover,
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recomplete and operate 335 existing oil and gas wells on the Uintah and Ouray
Reservation in northeastern Utah. It is estimated that the first approximately
36 wells will be scheduled for recompletion and stimulation in early 1998 and,
the Company estimates that after initial workover operations are completed,
these wells could produce in excess of 3,900 barrels of oil per day. Independent
reserve reports indicate, based on a study of 133 of such wells, proven and
producing reserves of approximately 5.5 million barrels of oil and 23.4 BCF of
natural gas on these sites. In October 1997, the Company acquired working
interests ranging from 80% to 84% in a 13,680 acre oil and gas property
adjoining the MIII fields, currently producing approximately 200 barrels of oil
per day from eight producing wells. As of December 29, 1997, this is the
Company's only commercially producing property, which began realizing revenues
for the Company in November 1997. A 1997 independent reserve report indicates
the property's gross recoverable reserves total approximately 4.055 million
barrels of oil and 4.258 BCF of natural gas.
Another significant aspect of the Company's current business is
providing environmental remediation services to oil and gas operators. All of
the Company's revenues during the fiscal year ended September 30, 1997 were
attributable to providing these services, which include environmental
engineering, hazardous waste disposal (including naturally occurring radiation
material), oil spill, soil decontamination and non-hazardous waste cleanup, as
well as "plug and abandonment" of oil and gas wells, all in accordance with
strict federal, state and local environmental guidelines. In April 1997, the
Company entered into a master service agreement with Chevron Oil Company
("Chevron") to rework, in order to draw additional production from,
approximately 400 depleting oil and gas wells and to remediate and "plug and
abandon" these and other wells when depleted, in Chevron's oil fields in
southern Louisiana along the Gulf of Mexico. The Chevron agreement provides for
a three-year work schedule, commencing upon the completion of the Company's 140
foot "plug and abandonment" barge. The Company has designed this specialized
"plug and abandonment" barge to remediate off-shore well locations and is
capable of working in coastal waters as shallow as 19 inches. In addition,
through its extensive relationships in the oil and gas industry, the Company has
obtained a ten-year concession with the Panama Canal Commission, through a joint
venture with Centrum Marine, to supply fuel to tankers and other commercial
vessels traversing the Panama Canal. These operations are expected to commence
in mid-1998, provided adequate funding is secured.
The Company believes that, at its current stage of development, it is
more economical and less speculative to rework and recomplete existing wells
than to drill exploratory wells in search of new oil and gas deposits. Using the
Company's proprietary fracture-enhancing horizontal drilling tool, known as the
BAPCO Tool, the Company has had, according to internal data, an 80% success
ratio in increasing the level of production from oil and natural gas wells that
are suitable for enhancement of primary recovery by use of the BAPCO Tool or
candidates for secondary recovery. The Company believes that the BAPCO Tool
serves as a competitive advantage for securing new workover projects from other
oil and gas operators, for attracting joint venture partners in larger workover
contracts in the United States and internationally and for use on its own oil
and gas properties in Texas and Utah.
Beginning in the early 1990's, both secondary recovery of oil reserves
and environmental remediation of abandoned oil wells have become major items of
interest in the oil and gas industry. According to current industry statistics,
it is estimated that only 7.5% to 10% of proven oil reserves are recovered in
primary drilling operations due to the significant incremental costs involved in
exploiting far-reaching reservoirs of an oil formation. Following primary
drilling operations, large independent oil companies have typically contracted
some or all of the required "plug and abandonment" work to environmental
remediation firms, such as the Company. By conducting enhanced primary or
secondary recovery operations utilizing the BAPCO Tool on the otherwise
abandoned wells, the Company believes that it is able to effectively extend the
economic life of an oil field and increase oil recovery by up to 30%, prior to
formal abandonment. The Company, which provides primary and secondary recovery,
"plug and abandonment" and environmental remediation services, believes that, in
the United States alone, there are hundreds of oil and natural gas fields
which could benefit from these services.
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Managing Exploratory Activities
The Company is currently managing or in the process of negotiating
several international exploratory projects which, if successful, have the
potential to increase the growth of the Company. The Company believes that its
existing project in Sao Tome has the potential to significantly increase
reserves.
Sao Tome
In May 1997, the Company entered into an exclusive joint venture with
Sao Tome, a member of the United Nations, to manage the exploration,
exploitation and development of the country's potential oil and gas reserves in
the Gulf of Guinea. Sao Tome is comprised of two principal islands which
straddle the equator in the prolific petroleumproducing region of the Gulf of
Guinea. The Sao Tome islands are located approximately 200 miles west of
mainland Gabon, and southwest of Equatorial Guinea and Cameroon, and are located
directly on a well-known geologic feature known as the "Cameroon Volcanic Line."
The exclusive 25-year joint venture agreement provides for the
establishment of a national oil and gas company owned jointly by Sao Tome, the
Company and, as a junior partner, Procura Financial Consultants, c.c., a South
African corporation ("Procura"). Under the agreement, the venture has the first
right to select the oil and gas concessions it desires to explore and develop in
an area encompassing approximately 64,550 square miles in the Gulf of Guinea. On
behalf of Sao Tome, the Company has agreed to negotiate with major international
oil and gas companies to grant leases to oil and gas concessions not selected by
the joint venture. The Company is entitled to receive an overriding royalty on
the production from those concessions. Pursuant to the terms of the agreement,
Sao Tome has the right to terminate the agreement in the event the Company fails
to make the remaining concession fee payment of $3 million at the time Sao Tome
determines, and the United Nations accepts and approves, the 200 mile exclusive
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economic zone boundaries (expected to be by March 1998) or fails to timely
commence the orderly development of the national oil and gas joint venture
company. The Company is currently exploring funding sources for this payment. In
December 1997, the Company made an initial $2 million payment in respect of the
concession fee from the proceeds of it's 1997 private placement.
The Company is currently in the initial phase of project development
and is conducting seismic surveys, processing existing seismic data and
environmental and engineering feasibility studies. The Company has already
provided to Sao Tome initial feasibility studies including seismic interaction,
sedimentology biostatgraph, geochemistry and petrographics and diagnostics. The
Company expects to expend at least $2.3 million in the initial phase of this
project. Following further studies, the Company anticipates coordinating the
drilling of a "test" well in late 1998. The costs associated with drilling and
testing such a well cannot be determined until the 2-D seismic data have been
processed and evaluated in mid to late 1998.
In September 1997, the Company expanded its joint venture agreement
with Sao Tome. Under the modified agreement, the venture was granted development
rights for an offshore logistics center. The projects contemplated by the
venture include a helicopter refueling station, seaport with dry dock facilities
and temporary accommodation facilities for employees and their families. The
Company believes that an offshore logistics base is essential to the development
of West Africa's oil and gas industry. The Company has not determined the
funding levels required for these projects at this time.
The Company believes that this venture provides it with a significant
foothold in the potentially oil-rich Gulf of Guinea, in which the venture is the
largest single concession holder in the entire Gulf. The offshore oil potential
of Sao Tome has been studied by numerous oil companies, including Mobil Corp.
and Elf Aquitaine, since at least the late 1970s.
Workover and Recovery Activities
The Company concentrates its acquisition efforts on
marginally-producing properties which demonstrate a potential for significant
additional development through workovers, behind-pipe recompletions, secondary
recovery operations utilizing the Company's BAPCO Tool and other exploitation
techniques. The Company has pursued a workover and recompletion program on the
properties it has acquired and intends to commence an extensive workover and
recompletion program in the future.
"Workovers" refer to the major repairs and modifications occasionally
required by producing oil and natural gas wells. Workovers may be done, for
example, to remedy equipment failures, deepen a well in order to complete a new
producing reservoir, plug back the bottom of a well to reduce the amount of
water being produced with the oil and natural gas, clean out and recomplete a
well if production has declined, repair leaks, or convert a producing well to an
injection well for secondary or enhanced recovery projects. These extensive
workover operations are normally carried out with a well-servicing type rig that
includes additional specialized accessory equipment, which may include rotary
drilling equipment, mud pumps, mud tanks and blowout preventers, depending upon
the particular type of workover operation. The Company's two workover rigs are
designed and equipped to handle the more complex workover operations. A workover
may last anywhere from a few days to several weeks.
The kinds of activities necessary to carry out a workover operation are
essentially the same as those that are required to "complete" a well when it is
first drilled. The "recompletion" process may involve selectively perforating
the well casing at the depth of discrete producing zones, stimulating and
testing these zones and installing down-hole equipment. Independent oil and gas
production companies often find it more efficient to move a larger and more
expensive drilling rig off location after an oil or natural gas well has been
drilled and to move in a specialized wellservicing rig to perform recompletion
operations. The Company plans to acquire a well-servicing rig for this purpose.
The recompletion process may require from a few days to several weeks.
The Company's staff focuses on maximizing the value of the properties
within its reserve base. The results of their efforts are reflected in additions
and revisions to reserves.
For the fiscal year ended September 30, 1997, the Company spent
approximately $53,000 on workover
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and recompletion operations, involving 9 wells in Texas. The Company
anticpates spending in excess of $1,825,000 on workover and recompletion
operations during fiscal 1998, although there can be no assurance it will have
funding to do so.
In connection with this focus, the Company actively pursues
operating cost reductions on the properties it acquires. The Company believes
that its cost structure and operating practices generally result in improved
operating economies.
The following is a brief discussion of significant developments in the
Company's recent workover and recompletion activities:
Nueces River Natural Gas Project
The Company has a 37.5% working interest in a 49,000 acre natural gas lease
in the Nueces River area of McMullen and LaSalle counties in south Texas, known
as the "Nueces River Project," one of the largest natural gas field areas in the
United States. A 1997 independent reserve report prepared by Sandwood
Consultants of Nacogdoches, Texas estimated that the field's reserve contains
100 BCF of natural gas per 640 acre section. In December 1997, the Company
re-entered the first of two existing shut-in wells on the property, and expects
to ultimately recover up to 5 BCF per well using 5% of the estimated inplace
reserves. The daily production rates from these wells cannot be determined at
this time until well revitalization is completed in March 1998. Following
revitalization, the Company estimates that such wells have the possibility of
producing in excess of 500,000 MCF (million cubic feet) of natural gas per day.
A 20-inch diameter transcontinental gas pipeline is located approximately three
miles from the wells to provide access to a gas market. The Company jointly
operates the field with Autry Stephens & Co., a large independent operator in
west and south Texas. The Company acquired its interest in the Nueces River
in October 1997 in consideration for $200,000 and the issuance of 50,000 shares
of its common stock.
In 1998, the Company intends, with its operating partner, to drill from
15 to 20 new wells at this site. The Company expects to spend approximately
$7.5 million to drill these wells, provided it receives adequate financing in
the future.
Gunsite and Woodbine Oil Fields
The Company holds directly two leases on producing oil fields in Texas,
known as the Gunsite Field in Wichita Falls, north Texas, and the Woodbine Field
in Henderson County, east Texas. These oil fields together comprise
approximately 1,200 acres and 200 wells. A 1997 independent reserve report
prepared by Joseph Shoaf, P.E. estimated that proven reserves ("behind pipe")
total 2.5 million barrels of oil. Through December 1997, the Company had
recompleted 18 wells and is currently producing and selling "test" oil. The
Company anticipates moving a BAPCO Tool on site in January 1998 and commencing
an active rework and recompletion program on the remaining wells. After
reworking the fields using the BAPCO Tool and other drilling techniques, the
Company believes that these wells could produce from 500 to 800 barrels of oil
per day.
The Company acquired the Gunsite and Woodbine oil fields in February
and March 1997, respectively, in consideration for a total of 500,000 shares
of its common stock.
MIII Project in Utah
In July 1997, the Company entered into a joint venture with MIII
Corporation ("MIII"), a Native American oil and gas company based in Fort
Duchesne, Utah. Under the agreement, the Company has agreed to workover,
recomplete and operate 361 oil and gas wells located on the 4,000,000 acre
Uintah and Ouray Reservation in northeastern Utah. It is estimated that the
first approximately 36 wells will be scheduled for recompletion and
restimulation in early 1998. After initial workover operations are completed,
the Company estimates that these wells could produce in excess of 3,900 barrels
of oil per day. A 1993 independent reserve report prepared by Richard Stephen
Shuster, P.E. indicates, based on a study of 133 of such wells, proven and
producing reserves of approximately 5.5 million barrels of oil and 23.4 BCF of
natural gas at this site. The Company's production estimates at this site are
based predominately on the multiple sandstone reservoirs of the Wasatch, a
transition zone and Green River Formations that can occur at depths of 5,000 to
16,000 feet.
Under the terms of the joint venture agreement, once the production of
natural gas reaches 5 BCF, MIII has agreed to construct a gas gathering plant on
such site, with the Company retaining a 25% interest in the plant. As of
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this date, there can be no assurance as to when, if ever, such plant will be
constructed.
The Company has a 27.762% working interest in the wells located on the
MIII property, and is entitled to receive a $2.50 per barrel operator fee on
production in the fields. The Company also has the right to receive an
additional 5% working interest in the wells after start-up costs of
approximately $1.5 million are repaid to certain original MIII investors from
overall production. The remaining working interests in the MIII property are
held by MIII, the Ute Tribe and the allotted members of the Ute Tribe. The
Company paid $55,000 and contemplates issuing 250,000 Common Shares to MIII in
connection with entering into this venture. In 1998, the Company plans, to
recomplete and restimulate 36 wells and to drill five to seven development and
extension wells at this site provided adequate financing is secured.
Uinta Project
In October 1997, the Company acquired working interests ranging from
80% to 84% in a 13,680 acre oil and gas property adjoining the MIII fields in
the Uinta Basin with 24 oil and natural gas wells, currently producing
approximately 200 barrels of oil per day from eight continuously producing wells
and ten wells on intermittent production. As of December 29, 1997, this is the
Company's only commercially producing property, which began realizing revenue
for the Company in November 1997. A 1997 independent reserve report indicates
the property's gross recoverable reserves total approximately 4.055 million
barrels of oil and 4.258 BCF of natural gas. Wells in this field produce
primarily from multiple sandstone reservoirs of the lower Green River Formation
at depths averaging 5,500 feet. The remaining working interests in this field
are held by the Ute Tribe.
Provided adequate financing is secured, the Company plans extensive work in
this field during 1998, including a 20 well program to develop infill and field
extension locations, a 40-acre pilot waterflood project and the workover and
recompletion of the 22 existing wells to test the viability of more shallow
formations for potential future development.
Reserves
The following table sets forth estimates of the proved oil and gas
reserves of the Company as of September 30, 1997:
<TABLE>
<CAPTION>
Oil Equivalent
Oil Gas (millions of
(millions of barrels) (billion cubic feet) barrels)
<S> <C> <C> <C> <C> <C> <C> <C>
Field Developed Undeveloped Total Developed Undeveloped Total Total
----- --------- ----------- ----- --------- ----------- ----- -----
Nueces River Project, Texas - - - - - - -
Henderson Co. Field, Texas. 1.5 - 1.5 - - - 1.5
Wichita Falls Field, Texas. 1.0 - 1.0 - - - 1.0
Uintah, Ouray Reservation, - - - - - - -
Utah....................
Uinta Project, Utah........ - - - - - - -
---- ----- ----- ---- ----- ----- -----
Total............. 2.5 - 2.5 - - - 2.5
====== ====== ====== ===== ===== ====== ======
</TABLE>
The Company is currently evaluating the existing reserve reports and
underlying data on all leases and has contracted another independent appraiser
to complete new reserve reports.
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Estimates of the Company's proved reserves set forth above have not been
filed with, or included in reports to any Federal authority or agency, other
than the Securities and Exchange Commission.
The Company's non-producing proved reserves are largely "behind-pipe" in
fields which it operates. Undeveloped proved reserves are predominantly infill
drilling locations and secondary recovery projects.
The reserve data set forth in this Form 10-K represent only estimates.
Reserve engineering is a subjective process of estimating underground
accumulations of oil and gas that cannot be measured in an exact manner. The
accuracy of any reserve estimate is a function of the quality of available data
and of engineering and geological interpretation and judgment. As a result,
estimates of different engineers often vary. In addition, results of drilling,
testing and production subsequent to the date of an estimate may justify
revision of such estimate. Accordingly, reserve estimates often differ from the
quantities of oil and natural gas that are ultimately recovered. The
meaningfulness of such estimates is highly dependent upon the accuracy of the
assumptions upon which they were based.
For further information on reserves, costs relating to oil and gas
activities and results of operations from producing activities, see Item 7.
Management Discussion and Analysis of Plan of Operations.
BAPCO Tool
The Company's BAPCO Tool, which is used in most of its workover operations,
has two main functions: to provide a means of mechanically cutting a hole
through the casing and extending a flexible tubular pipe outward at least fifty
feet from the bore hole. The system is made up of a skid mounted surface unit
with a command module, filter system and pumping package, and a down hole
assembly. The command module, which is approximately 10 feet long, 6 feet wide
and 8 feet high, is air conditioned, contains all the necessary controls and
data recording equipment and has a special tool storage area. The down hole tool
assembly is composed of a filter and filter body that removes the unwanted
material and prevents the material from entering the control section of the
tool. There are no limitations regarding casing thickness and cement sheath when
utilizing the BAPCO Tool.
According to internal data, the Company has had an 80% success ratio in
increasing the level of production from oil and natural gas wells that are
suitable for secondary recovery. The Company believes that the BAPCO
Tool serves as a competitive advantage for securing new workover projects from
other oil and gas operators, for attracting joint venture partners in large
workover contracts in the United States and internationally and for use on its
own oil and gas properties in Texas and Utah.
The BAPCO Tool was acquired by the Company in connection with the stock
acquisition of BAPCO in April 1997. The Company has constructed two BAPCO Tools
to date and is currently in the process of constructing a third tool. The
Company plans to construct three additional tools in 1998, provided it receives
adequate financing in the future. The BAPCO Tool has been tested on multiple
wells in a variety of formations during the past 18 months. The BAPCO Tool has
been continuously updated and modified since the tool was first designed and
developed in the early 1990s by Sam L. Bass, Jr., the Company's Chairman,
President and Chief Executive Officer.
Environmental Remediation Services
The Company provides environmental remediation services, to other oil and
gas operators. These services, which the Company is licensed to provide, include
environmental engineering, hazardous material disposal (including naturally
occurring radiation material), oil spills, soil decontamination and
non-hazardous waste cleanup related to the production of oil and natural gas,
all in accordance with strict federal, state and local environmental guidelines.
The Company also provides "plug and abandonment" services for wells from which
the oil and natural gas have been depleted and further production has become
uneconomical.
The Company's soil decontamination systems are capable of handling a
variety of different contamination problems. The Company utilizes standard Class
1-4 decontamination machines. The Class I machine is used to process soils
contaminated with gasoline and diesel and which require little or no soil
conditioning. The Class II machine offers increased temperatures to treat soil
with contaminants up to No. 6 fuel oil, lubricating oils, heavy oil residuals
and crude oils. The Class III machines are an upgrade to the Class II machines
and accommodate slightly higher temperatures and add acid gas neutralization for
handling chlorinated compounds. The Class IV machines are hazardous waste
incinerators.
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The Company's staff is certified in the use of many types of products used
in tank and pit cleaning services and emergency response spill and clean-up. The
Company uses a "sludge-buster" robotic water cannon to expedite the cleaning of
tanks. The Company's staff is also experienced in the use of a closed loop
system for pit cleaning. The closed loop system separates solids from liquids,
chemically treats the liquids and solids in accordance with local environmental
standards. The Company can deliver emergency crews trained in chemical and oil
spill containment and clean-up throughout many parts of the world.
In April 1997, the Company entered into a master service agreement with
Chevron Oil Company ("Chevron") to rework, in order to draw additional
production from, approximately 400 depleting oil and gas wells and to
remediate and "plug and abandon" these and other wells when depleted, in
Chevron's oil fields in southern Louisiana along the Gulf of Mexico. The Chevron
agreement provides for a three-year work schedule, commencing upon the
completion of the Company's 140 foot "plug and abandonment" barge. This barge
will be used to remediate offshore oil rigs and be capable of working in coastal
waters as shallow as 19 inches. A deposit of approximately $131,000 has been
made by the Company to secure the barge and additional funding is being sought
to purchase and equip the barge. It is estimated that the Company's barge will
be ready to operate 60 days following funding. The Chevron agreement was
originally entered into by BAPCO and Bass Environmental Worldwide, Inc. ("BEW")
in September 1996, prior to the acquisition of BAPCO by the Company in April
1997, and was assigned to the Company with Chevron's consent at the time of the
acquisition. The Company issued 4,000,000 shares of it's common stock to BEW in
connection with the assignment of this agreement.
The Company's "plug and abandonment" services involve shutting down and
discontinuing the use of old, unsafe or marginally-producing oil or natural gas
wells. There are many ecological ramifications if oil and gas wells are
abandoned without following federal Environmental Protection Agency and state
Department of Environmental Quality mandated guidelines. These ramifications are
caused due to aging equipment and pipe ceilings which can lead to "blow
outs," oil and gas seepage into the water and ground water contamination. If not
"plugged," these problems can lead to major environmental problems and expensive
pollution cleanup for the well owners.
Offshore Logistics Services
Panama Refueling Concession
In March 1997, the Company entered into a joint venture agreement with
Centrum Marine, pursuant to which the venture obtained a ten-year concession
agreement with the Panama Canal Commission. The concession grants the joint
venture the right to supply fuel and other petroleum supplies to tankers and
other commercial vessels traversing the Panama Canal. Historically,
approximately 55 to 60 such vessels traverse the Panama Canal daily. The joint
venture is currently in negotiations to purchase a 1.5 million gallon fuel barge
and an 85 foot flat deck tugboat. These operations are expected to commence by
mid-1998, provided adequate funding is secured.
Pursuant to the terms of the joint venture agreement, the Company is
entitled to receive 51% of all net profits of the venture. In connection with
entering into such agreement with the Panama Canal Commission, the venture
received a commitment from Texaco Inc. to provide the venture with the necessary
fuel to comply with the requirements of the concession. The Company anticipates
that the venture would be able to provide a minimum of 600,000 gallons of fuel a
day.
Growth Strategy
The Company's goal is to maximize its value through profitable growth
in its oil and gas reserves and production. The Company has taken steps to
achieve this goal through its growth strategy of (i) acquiring
marginallyproducing oil and gas properties, at favorable prices, with still
significant resource recovery potential through workovers utilizing the
Company's proprietary drilling technology, (ii) managing the exploration,
exploitation and development of non-producing properties in known oil-producing
areas, such as the Gulf of Guinea in West Africa, with industry or
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government partners, and (iii) continuing to pursue environmental remediation
service contracts for oil and gas well rework and "plug and abandonment"
services in the United States and internationally.
Key elements of the Company's growth strategy include:
Acquire and Exploit Attractive Oil and Gas Properties. The Company has an
experienced management and engineering team that focuses on acquisitions of
marginally-producing properties which meet its selection criteria including (a)
significant reserves with the potential for increasing production through
low-risk workovers, recompletions, secondary recovery operations and other
production optimization techniques using its BAPCO Tool, (b) attractive purchase
price and (c) opportunities for improved operating efficiencies in labor and
other field level costs. This growth strategy has allowed the Company to rapidly
grow its reserves, and its workover and recovery activities have resulted in an
80% success ratio for improved production from wells that are suitable for
enhanced primary and secondary recovery projects.
Manage High Potential International Prospects. The Company seeks to manage the
overall exploration activities for high potential international prospects in
known oil-producing areas. By managing these projects, the Company seeks to
share the risks inherent in exploratory drilling with industry and government
partners. The Company's international exploration activities target significant
long-term reserve growth and value creation, such as the Company's joint venture
with Sao Tome. The Company also plans to pursue offshore transportation and
logistic support services in connection with its international prospects.
Pursue Additional Environmental Remediation Contracts. The Company aggressively
pursues new environmental remediation contracts in the United States and abroad,
directly and through joint ventures. The Company believes it possesses
competitive advantages including the availability and condition of equipment to
meet both special and general customer needs, the availability of trained and
licensed personnel with the required specialized skills, the overall quality of
its service and safety record and the ability to offer ancillary services, such
as "plug and abandonment" services. The Company has specifically targeted major
oil companies with properties located in the Gulf of Mexico which require "plug
and abandonment" services for old and depleted fields.
Marketing
During the fiscal year ended September 30, 1997, the Company did not have
any sales of oil or gas. Commencing in November 1997, the Company recorded sales
of crude oil from the Uinta properties and recorded sales of "test" oil from the
Wichita Falls field in north Texas. All such sales were made on the spot market.
In the future, the Company intends to sell its crude oil and natural gas, and
associated oil and gas products, on both the spot market and under
market-sensitive agreements with a variety of prospective purchasers.
Environmental Regulation and Claims
The Company's workover and recompletion services operations routinely
involve the handling of significant amounts of waste materials, some of which
are classified as hazardous substances. The Company's operations and facilities
are subject to numerous state and federal environmental laws, rules and
regulations, including, without limitation, laws concerning the containment and
disposal of hazardous materials, oilfield waste and other waste materials, the
use of underground storage tanks and the use of underground injection wells. The
Company employs personnel responsible for monitoring environmental compliance
and arranging for remedial actions that may be required from time to time and
also uses outside experts to advise on and assist with the Company's
environmental compliance efforts. Costs incurred by the Company to investigate
and remediate contaminated sites are expensed unless the remediation extends the
useful lives of the assets employed at the site. Remediation costs that extend
the useful lives of the assets are capitalized and amortized over the remaining
useful lives of such assets. Liabilities are recorded when the need for
environmental assessments and/or remedial efforts becomes known or probable and
the cost can be reasonably estimated.
Laws protecting the environment have generally become more stringent
that in the past and are expected to continue to do so. Environmental laws and
regulations typically impose "strict liability" which means that in some
situations the Company could be exposed to liability for cleanup costs and other
damages as a result of conduct of the Company that was lawful at the time it
occurred or conduct of, or conditions caused by, others. Cleanup costs and other
damages arising as a result of environmental laws, and costs associated with
changes in environmental laws and regulations could be substantial and could
have a material adverse effect on the Company's financial condition.
11
<PAGE>
Under the Comprehensive Environmental Response, Compensation and
Liability Act, also known as "Superfund," and related state laws and
regulations, liability can be imposed without regard to fault or the legality of
the original conduct on certain classes of persons that contributed to the
release of a "hazardous substance" into the environment. Changes to federal and
state environmental regulations may also negatively impact oil and natural gas
exploration and production companies, which in turn could have a material
adverse effect on the Company. For example, legislation has been proposed from
time to time in Congress which would reclassify oil and natural gas production
wastes as "hazardous wastes." If enacted, such legislation could dramatically
increase operating costs for domestic oil and natural gas companies and this
could reduce the market for the Company's services by making may wells and/or
oilfield uneconomical to operate. To date, such legislation has not made
significant progress toward enactment.
Patents and Trademarks
The Company owns or has exclusive rithts to several U.S. patents on designs
for various types of oilfield equipment and on methods for conducting certain
oilfield activities, including discrete parts of the BAPCO Tool. The Company
uses some of these designs and methods to conduct its business. The patents
expire at various times over the next five to fifty years. The Company also has
several trademarks and service marks that it uses in various aspects of its
business. While management believes the Company's patent and trademark rights
are valuable, the expiration or loss thereof, other than parts of the BAPCO
Tool, would not have a material adverse effect on the Company's financial
condition or results of operations.
Competitive Conditions
Although the number of available rigs has materially decreased over the
past ten years, the workover and drilling industry remains very competitive. The
number of rigs continues to exceed demand, resulting in severe price
competition. Many of the total available contracts are currently awarded on a
bid basis, which further increases competition based on price. In all of the
Company's market areas, competitive factors also include: the availability and
condition of equipment to meet both special and general customer needs; the
availability of trained personnel possessing the required specialized skills;
the overall quality of service and safety record; and domestically, the ability
to offer ancillary services such as "plug and abandonment" services. As an
enhancement to its competitive position, the Company has been able to establish
joint ventures in domestic and international markets.
The environmental remediation market is extremely fragmented and
composed of hundreds of small firms with one or only few regional offices.
12
<PAGE>
Employees
As of December 31, 1997, the Company had 25 full-time employees,
including three petroleum engineers and two geologists. None of its employees is
represented by a collective bargaining unit. Management believes that the
Company's relationship with its employees is satisfactory.
ITEM 2. PROPERTIES
The Company's principal executive offices are located in Jericho, New
York in approximately 1,200 square feet of leased office space. The Company
currently pays $1,200 per month in rent under its lease, which extends through
February 1998. The Company also leases approximately 7,000 square feet of its
main operational facility in Lafayette, Louisiana and pays $4,000 per month
under a lease extending through October 2002. The Company believes that
additional office and operational space will be required following the Offering
to accommodate planned expansion.
The oil and gas leases owned by the Company at September 30, 1997 are
located in Ector, Texas and Henderson County, Texas. The reserve reports on
these leases were prepared by Dr. Joseph Shoaf.
ITEM 3. LEGAL PROCEEDINGS
Piedra Drilling commenced an action against the Company in District Court,
Denver Colorado in 1997. The plaintiff brought forth this action to enforce a
contract for the issuance of 300,000 shares of unregistered shares of the
Company's common stock in consideration for the sale by the plaintiff to the
Company of certain drilling equipment and designs. The Company did not issue the
shares because the necessary equipment and designs were not delivered and/or
validity assigned to the Company. Although the plaintiff obtained a judgement in
the amount of approximately 1.2 million, Colorado counsel for the Company has
had the judgement vacated as of November 6, 1997. The company believes that the
Company has a number of meritorious defenses and potential counterclaims.
Connecticut Bank of Commerce commenced an action against the Company in
Lafayette Parish, Louisiana, subsequently to March 15, 1997. The Plaintiff
brought this action to enforce collection of a note in the principal amount of
$175,000.00. The Company did not pay the note because of a dispute with respect
to the total amount due, but has been able to resolve that issue. Funds have
been set aside in an escrow account for payment of an amount agreed upon by
Plaintiff that will satisfy the full amount of the claim.
Charles Daum, Esq. has asserted a claim against the Company for the
total sum of $11,671.46 for unpaid legal services. Company disputes
the claim at this point primarily because it does not have any documentation to
determine whether the claim is in fact owed.
Other than the above legal proceedings and claim, the Company is not a
party to any other material pending or threatened legal proceeding or claim.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
13
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDERS MATTERS
(a) Market Information. Shares of the Company's common stock have been
traded on the OTC Bulletin Board under the symbol "ERHC" since September 11,
1996. The following table sets forth the high and low sales prices of the Common
Stock as quoted on the OTC Bulletin Board for the periods indicated. The high
and low sales prices for the Common Stock below reflect inter-dealer prices,
without retail mark-up, mark-down, or commission, and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
Fiscal Year 1996
4th Quarter (September 11 - September 30, 1996)........................... $5-3/4 $5-1/4
Fiscal Year 1997
1st Quarter (October 1 - December 31, 1996)............................... 5-1/2 1/4
2nd Quarter (January 1 - March 31, 1995).................................... 2-1/2 5/16
3rd Quarter (April 1 - June 30, 1997).......................................... 5/8 7/32
4th Quarter (July 1 - September 30, 1997).................................. 5-3/8 5/16
Fiscal Year 1998
1st Quarter (October 1 - December 22, 1997).............................. 3-3/8 2-1/2
<FN>
(b) Holders. The number of record holders of the Company's
common stock as of December 15, 1997, was 1,967 based on the records of the
transfer agent.
(c) Dividends. The Company has not paid any cash dividends since
its inception. The Company's credit agreement restricts payment of dividends
to amounts that are less than 50 percent of net income. The Company anticipates
that all earnings will be retained for the development of its business and that
no cash dividends on its common stock will be declared in the foreseeable
future.
During the period from October 1, 1996, through September 30, 1997, the
Company raised approximately $1,103,000 in a private placement of the common
stock of the Company in exchange for 1,391,898 shares of its common stock.
During the period from October 1, 1996, through September 30, 1997, the
Company issued 10,792,981 shares of its common stock in consideration for: (i)
appraisals and engineering services for the Sao Tome project valued at
$2,000,000; (ii) Services of directors and officers valued at $3,829,106; (iii)
oil wells/leases valued at $ 12,500,000; (iv) assignment of Chevron contract
valued at $3,000,000; and, (v) Bapco acquisition valued at $2,250,000.
Such common stock was issued in reliance upon Section 4(2) and Section
506 of Regulation D.
</FN>
</TABLE>
14
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Note (2)
<TABLE>
<S> <C> <C> <C>
Revenues 1995 (1) 1996 1997
Sales- environmental remediation svcs $ 0 0 108,000
Sales- oil and gas production 0 0 0
Cost of sales 0 0 53,991
Operating expenses 3,404 913,225 17,033,549
Other income and expense 0 60,477 (33,456)
Net loss (3,404) (852,748) (17,012,052)
Net loss per share (0.01) (0.35) (1.62)
</TABLE>
Note (1) Reflects the activity of the predecessor entity.
Note (2) Only three years are presented as the entity has only existed for the
past three years.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
General
Environmental Remediation Holding Corporation is an independent oil and gas
company engaged in the exploration, development, procuction and sales of crude
oil and natural gas properties with current operations focused in Texas, Utah,
and the Democratic Republic of Sao Tome and Principe in West Africa.
The Company's strategy in the United States is to increase oil and natural
gas reserve, production, and cash flow through (1) the exploration of its
existing acreage position in Texas, Utah, and the Democratic Republic of Sao
Tome and Principe; (2) the acquisition of additional properties in known
producing areas that provide significant development in exploratory drilling
potention; (3) the exporation for oil and natural gas reserves; (4) the
maintenance of a low operating and cost structure; and, (5) environmenal
remediation as it relates to the oil and gas industry.
The Company has acquired substantially all of its oil and gas
properties within the past year. The Company's current development plans require
substantial capital expenditures in connection with the exploration, development
and exploitation of oil and natural gas properties. Although the Company has
historically funded capital expenditures through a combination of equity
contribution and short-term financing arrangements, the Company's ability to
meet its estimated capital expenditure in Fiscal year 1998 are dependent on the
Company's ability to realize the proceeds of the Company's pending debt offering
discussed below under "capital expenditures".
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto referred to in "Item 8.
Financial Statements and Supplemental Data", and "Items 1 and 2. Business and
Properties.
RESULTS OF OPERATIONS
During fiscal 1997 the Company incurred a net loss of $17,012,052 compared to a
net loss of 852,748 in fiscal 1996. In fiscal 1997 common stock was issued in
lieu of cash compensation to directors and outside consultants valued at
$12,303,512. In fiscal 1997 common stock was issued to acquire geologic data on
Sao Tome valued at $2,000,000, which was immediately charged to expense. In
fiscal 1997 $960,000 was accrued, but not paid in cash as compensation to three
officers of the Company. Depreciation and amortization amounted to $497,000. The
Company's net cash operating loss for the 1997 fiscal year was $1,283,900,
compared to 83,700 for the 1996 fiscal year.
The Company had revenues of $109,000 in fiscal 1997 compared to $0 in fiscal
1996. Cost of sales were $54,000 in fiscal 1997 and $0 in fiscal 1996. These
revenues and cost of sales were entirely in the environmental remediation
industry.
The Company had no oil and gas production during fiscal 1997.
CAPITAL EXPENDITURES
During fiscal 1997 the Company issued 500,000 shares of its common stock to
acquire two oil and gas leases in north east Texas comprised of 100
non-producing wells on each lease, with proven reserves totalling 2,500,000
barrels of oil. Late in the year the Company started the the necessary repairs
and well rework to begin placing the wells back in production.
During fiscal 1997 the Company issued 3,000,000 shares of its common stock to
acquire the Chevron master P&A service agreement.
During fiscal 1997 the Company issued 1,000,000 shares of its common stock to
acquire geological data on Sao Tome.
During fiscal 1997 the Company issued 4,000,000 shares of its common stock to
acquire Bass American Petroleum Company, (BAPCO), a non-operating oil production
company with significant well rework equipment assets.
16
<PAGE>
RESERVES AND PRICING
Oil and natural gas prices fluctuate throughout the year. Generally
higher natural gas prices prevail during the winter months of September through
February. A significant decline in prices would have a material effect on the
measure of future net cash flows which, in turn, could impact the value of the
Company's oil and gas properties.
The Company's drilling and acquisition activities have increased its
reserve base and its productive capacity and, therefore, its potential cash
flow. Lower gas prices may adversely affect cash flow. The Company intends to
continue to acquire and develop oil and gas properties in its areas of activity
as dictated by market conditions and financial ability. The Company retains
flexibility to participate in oil and gas activities at a level that is
supported by its cash flow and financial ability. Management believes that the
Company's borrowing capacities and cash flow are sufficient to fund its
currently anticipated activities. The Company intends to continue to use
financial leverage to fund its operations as investment opportunities become
available on terms that management believes warrant investment of the Company's
capital resources.
Forward-Looking Statements
This Form 10-K includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-K which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), wells to
be drilled or reworked, oil and gas prices and demand, exploitation and
exploration prospects, development and infill potential, drilling prospects,
expansion and other development trends of the oil and gas industry, business
strategy, production of oil and gas reserves, expansion and growth of the
Company's business and operations, and other such matters are forward- looking
statements. These statements are based on certain assumptions and analyses made
by the Company in light of its experience and its perception of historical
trends, current conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances. However, whether
actual results and developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties, general economic,
market or business conditions; the business opportunities (or lack thereof) that
may be presented to and pursued by the Company; changes in laws or regulation;
and other factors, most of which are beyond the control of the Company.
Consequently all of the forward-looking statements made in this Form 10-K are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequences to
or effects on the Company or its business or operations.
17
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
Page
Independent Auditors' Report .................................................................................F-2
Balance Sheets ...............................................................................................F-3
Statements of Operations ......................................................................................F-4
Statements of Stockholders' Equity ............................................................................F-5
Statements of Cash Flows .....................................................................................F-6
Notes to Financial Statements .................................................................................F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO: The Board of Directors and Stockholders
Environmental Remediation Holding Corp.
Jericho, New York
We have audited the accompanying balance sheets of Environmental Remediation
Holding Corp., (the "Company") as of September 30, 1995, 1996 and 1997 and the
related statements of operations, stockholders' equity and cash flows for the
period since inception and the two years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of September 30,
1995, 1996 and 1997 and the results of its operations and its cash flows for the
the period since inception and two years then ended in conformity with generally
accepted accounting principles.
/s/ Durland & Company, CPAs, P.A.
Palm Beach, Florida
December 12, 1997
F-2
<PAGE>
<TABLE>
<CAPTION>
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Consolidated Balance Sheets
September 30,
<S> <C> <C> <C>
1995 1996 1997
--------------- -------------- -----------------
ASSETS
CURRENT ASSETS
Cash $ 0 0 327,743
Prepaid expenses and other current assets 0 0 215,708
--------------- -------------- -----------------
Total Current Assets 0 0 543,451
--------------- -------------- -----------------
PROPERTY AND EQUIPMENT
Equipment (note 1b) 0 3,348,000 5,226,000
--------------- -------------- -----------------
Total Property and Equipment 0 3,348,000 5,226,000
--------------- -------------- -----------------
OTHER ASSETS
Deposits on fixed assets 0 5,000 136,560
Crude oil reserves, net (note 1f) 0 0 12,500,000
Chevron P&A master service agreement (note 1h) 0 0 3,000,000
Deferred compensation, net (note 1d) 500,000 427,500 250,000
--------------- -------------- -----------------
Total Other Assets 0 432,500 15,886,560
--------------- -------------- -----------------
Total Assets $ 500,000 3,780,500 21,656,011
=============== ============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses and other current payable $ 3,316 0 111,054
Stockholder loans (note 1c) 0 6,730 465,094
Accrued interest (note 1c) 0 0 37,228
Accrued salaries (note 4) 0 0 960,000
Short term bank loan (note 1c) 0 0 175,000
--------------- -------------- -----------------
Total Current Liabilities 3,316 6,730 1,748,376
--------------- -------------- -----------------
LONG-TERM LIABILITIES
Long-term debt 0 0 0
--------------- -------------- -----------------
Total Long-Term Liabilities 0 0 0
--------------- -------------- -----------------
Total Liabilities 3,316 6,730 1,748,376
--------------- -------------- -----------------
STOCKHOLDERS' EQUITY
Common stock, $0.0001 par value; Authorized
950,000,000 shares: issued and outstanding 1,639,450
at September 30, 1995; 3,239,374 at September 30,
1996 and 22,989,526 at September 30, 1997 (note 3) 164 324 2,299
Preferred stock, $0.0001 par value, authorized
10,000,000 shares; issued and outstanding 0 at
September 30, 1995, 1996 and 1997. 0 0 0
Additional paid in capital in excess of par 499,924 4,629,598 38,686,840
Stock subscriptions receivable 0 0 (913,300)
Retained earnings (deficit) (3,404) (856,152) (17,868,204)
--------------- -------------- -----------------
Total Stockholders' Equity 496,684 3,773,770 19,907,635
--------------- -------------- -----------------
Total Liabilities and Stockholders' Equity $ 500,000 3,780,500 21,656,011
=============== ============== =================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Consolidated Statements of Operations
For the period since inception ended September 30, 1995, and the years
ended September 30, 1996 and 1997
<S> <C> <C> <C>
1995 1996 1997
----------------- ---------------- -----------------
REVENUE
Sales - environmental remediation services $ 0 0 108,944
Sales - crude oil 0 0 0
-------------- ------------- ----------------
Total sales 0 0 108,944
-------------- ------------- ----------------
COST OF SALES
Cost of sales - environmental remediation services 0 0 53,991
Cost of sales - crude oil 0 0 0
-------------- ------------- ----------------
Total cost of sales 0 0 53,991
-------------- ------------- ----------------
Gross profit/(loss) 0 0 54,953
OPERATING EXPENSES
Automotive expenses 0 7,257 55,864
Bank charges 0 184 421
Compensation - officers 0 147,326 1,185,000
Compensation - directors 0 0 3,492,981
Consultant fees 0 337,956 8,883,356
Depletion 0 0 0
Depreciation 0 372,000 372,000
Donations 0 0 10,500
Dues, fees, licenses and taxes 0 0 9,552
Insurance 0 0 204,099
Geological data and reports (note 1i) 0 0 2,008,848
Oil lease transfer fees 0 0 55,000
Office expenses 0 1,072 97,226
Oil well rework expenses 0 0 53,355
Professional fees 3,404 19,500 244,230
Research and development 0 0 17,000
Rent 0 8,550 45,950
Telephone 0 0 48,528
Travel and entertainment 0 19,380 235,856
Miscellaneous 0 0 13,783
-------------- ------------- ----------------
Total operating expenses 3,404 913,225 17,033,549
-------------- ------------- ----------------
Income(loss) from operations (3,404) (913,225) (16,978,596)
Interest expense 0 0 (40,787)
Interest income 0 0 601
-------------- ------------- ----------------
Income(loss) before tax & extraordinary item (3,404) (913,225) (17,018,782)
Extraordinary item - forgiveness of debt 0 60,477 6,730
-------------- ------------- ----------------
Income(loss) before taxes (3,404) (852,748) (17,012,052)
Income tax expense/(benefit) 0 0 0
-------------- ------------- ----------------
Net income(loss) $ (3,404) (852,748) (17,012,052)
============== ============= ================
Weighted average number of shares outstanding 398,643 2,469,511 10,500,293
============== ============= ================
Net loss per share $ (0.01) (0.35) (1.62)
============== ============= ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Consolidated Statements of Stockholders' Equity
September 30, 1995, 1996 and 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Number Common Pf'd APIC Stk Subs Accumulated TTL S/H
of Shares Stock Stock Receivable Deficit Equity
-------------- ------------ -------- ------------ -------------- ---------------- ----------------
BALANCE,September 5, 1995 0 $ 0 0 0 0 0 0
9/23 - cash 884,407 88 0 0 0 0 88
9/25 - services 755,043 76 0 499,924 0 0 500,000
Net loss - 0 0 0 0 (3,404) (3,404)
-------------- ------------ -------- ------------ -------------- ---------------- ----------------
BALANCE,
September 30, 1995 1,639,450 164 0 499,924 0 (3,404) 496,684
10/1 - equipment 744,000 74 0 3,719,926 0 0 3,720,000
10/10 - cash 20,000 2 0 49,998 0 0 50,000
8/9 - cash 20,500 2 0 42,890 0 0 42,892
8/19 - reverse merger 356,317 36 0 (243,366) 0 0 (243,330)
8/19 - S-8 services 73,277 7 0 73,270 0 0 73,277
8/30 - services 10,000 1 0 69,999 0 0 70,000
9/15 - services 55,000 6 0 384,994 0 0 385,000
9/15 - cash 320,830 32 0 31,963 0 0 31,995
Net loss - 0 0 0 0 (852,748) (852,748)
-------------- ------------ -------- ------------ -------------- ---------------- ----------------
BALANCE,
September 30, 1996 3,239,374 324 0 4,629,598 0 (856,152) 3,773,770
2/10 - S-8 services 1,600,000 160 0 1,099,840 0 0 1,100,000
3/4 - oil wells/leases 300,000 30 0 4,999,970 0 0 5,000,000
3/5 - oil wells/leases 200,000 20 0 7,499,980 0 0 7,500,000
3/13 - S-8 services 300,000 30 0 374,970 0 0 375,000
4/5 - Chevron contract 3,000,000 300 0 2,999,700 0 0 3,000,000
4/5 - services 1,342,981 134 0 1,342,847 0 0 1,342,981
4/5 - contributed to corp (100,000) (10) 0 (99,990) 0 0 (100,000)
4/9 - BAPCO acquisition 4,000,000 400 0 2,249,600 0 0 2,250,000
5/14 - S-8 services 1,500,000 150 0 562,350 0 0 562,500
6/19 - services 150,000 15 0 28,110 0 0 28,125
7/8 - cash 800,000 80 0 399,920 0 0 400,000
7/15 - DRSTP information 1,000,000 100 0 1,999,900 0 0 2,000,000
7/25 - S-8 services 2,335,000 233 0 6,464,798 0 0 6,465,031
7/30 - services 1,500,000 150 0 2,249,850 0 0 2,250,000
7/30 - cash 147,000 15 0 146,985 0 0 147,000
8/8 - cash 74,000 8 0 147,992 0 0 148,000
9/4 - services 400,000 40 0 307,960 0 0 308,000
9/10 - cash stk subs recv 727,273 73 0 799,927 (800,000) 0 0
9/15 - cash & stk subs recv 473,898 47 0 482,533 (113,300) 0 369,280
Net loss - 0 0 0 0 (17,012,052) (17,012,052)
-------------- ------------ -------- ------------ -------------- ---------------- ----------------
BALANCE,
September 30, 1997 22,989,526 $ 2,299 0 38,686,840 (913,300) (17,868,204) 19,907,635
============== ============ ========= ========== ============== ================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Consolidated Statements of Cash Flows
For the period since inception ended September 30, 1995, and the years
ended September 30, 1996 and 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1995 1996 1997
-------------- --------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (3,404) (852,748) (17,012,052)
Adjustments to reconcile net loss to net cash used for operating
activities:
Amortization of deferred compensation 0 142,500 125,000
Non-cash gain on forgiveness of debt 0 (60,477) (6,730)
Stock issued for services rendered 0 315,000 12,345,329
Stock issued for DRSTP geological data 0 0 2,000,000
Depreciation 0 372,000 372,000
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses 0 0 (215,708)
Increase (decrease) in accrued interest expense 0 0 37,228
Increase (decrease) in accrued expenses 3,316 0 111,054
Increase (decrease) in accrued salaries 0 0 960,000
-------------- --------------- ----------------
Net cash (used) provided by operating activities (88) (83,725) (1,283,879)
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits 0 (5,000) (131,560)
-------------- --------------- ----------------
Net cash (used) provided by investing activities 0 (5,000) (131,560)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock sold for cash 88 81,995 1,102,988
Payments on stockholder advances 0 (16,000) (295,287)
Funds advanced by third-parties 0 0 175,000
Funds advanced by stockholders 0 22,730 760,481
-------------- --------------- ----------------
Net cash (used) provided by financing activities 88 88,725 1,743,182
Net increase (decrease) in cash 0 0 327,743
CASH, beginning of period 0 0 0
-------------- --------------- ----------------
CASH, end of period $ 0 0 327,743
============== =============== ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash $ 0 0 3,559
============== =============== ================
Non cash financing activities:
Stock issued to acquire environmental remediation equipment $ 0 3,720,000 0
============== =============== ================
Stock issued to acquire crude oil reserves and wells $ 0 0 12,500,000
============== =============== ================
Stock issued to acquire Chevron master P&A service agmt $ 0 0 3,000,000
============== =============== ================
Stock issued to acquire BAPCO $ 0 0 2,250,000
============== =============== ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Notes to Consolidated Financial Statements
September 30, 1995, 1996 and 1997
(1) Summary of Significant Accounting Policies
The Company. Environmental Remediation Holding Corporation, (ERHC), was
incorporated on May 12, 1986 in Colorado as Valley View Ventures, Inc.,
(VVV). Its name was changed to Regional Air Group Corporation, (RAGC),
on September 20, 1988, and then to Environmental Remediation Holding
Corporation on August 29, 1996. VVV was created in 1986 as a blind pool
to seek a merger opportunity with a viable operating company. In 1988
the company acquired, via a reverse merger, Mid-Continent Airlines
which was a regional "feeder" airline operating as Braniff Express. On
September 28, 1989, Braniff Airlines filed Chapter 11 Bankruptcy. This
event proved to be catastrophic to the then operating business of the
Company. RAGC liquidated its assets and liabilities shortly thereafter
and remained dormant until its reverse merger with Environmental
Remediation Funding Corporation on August 19, 1996. ERHC operates in
the environmental remediation industry and the oil and natural gas
production industry from its corporate headquarters in Jericho, New
York, its operating offices in Lafayette, Louisiana.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
as of the dates of the statements of financial condition and revenues
and expenses for the years then ended. Actual results could differ
significantly from those estimates. The following summarize the more
significant accounting and reporting policies and practices of the
Company:
a) Basis of presentation The Company acquired 100% of the issued and
outstanding common stock of Environmental Remediation Funding Corp.,
(ERFC), a Delaware corporation, effective on August 19, 1996, in a
reverse triangular merger, which has been accounted for as a
reorganization of ERFC. At the same time the Company changed its name
from RAGC. Prior to the merger ERFC had acquired certain environmental
remediation equipment in exchange for common stock. ERFC then employed
the seller of this equipment as an outside consultant in exchange for
common stock. Subsequently, ERFC was unable to enter into the
environmental remediation contracts it had hoped to and asked the
consultant to become the Chairman, President and CEO of ERFC.
At the time of the acquisition of ERFC by RAGC, ERFC owned 100% of Site
Services, Inc., (SSI). ERFC had acquired SSI from Bass Environmental
Services Worldwide, Inc., (BESW), a company controlled by the Chairman,
President and CEO of ERFC. SSI had always been an inactive company, but
for certain enviornmental remediation licences which it continues to
hold.
On April 9, 1997, the Company acquired 100% of the issued and
outstanding common stock of Bass American Petroleum Company, (BAPCO),
which was accounted for as a purchase. BAPCO had been an inactive
company for several years previously, however BAPCO owned a variety of
oil well production enhancing equipment, which is proprietary to, but
not patented by BAPCO. The transaction was in essence an asset
acquisition. At the time of the acquisition BAPCO was 100% owned by the
Chairman, President and CEO of ERHC. The Company has begun using BAPCO
as the operator of the various oil and natural gas leases it has
acquired.
The consolidated financial statements include the accounts of SSI and
BAPCO, its wholly owned subsidiaries. Intercompany accounts and
transactions have been eliminated in consolidation.
b) Equipment Environmental remediation equipment was purchased by ERFC in
exchange for common stock. The fair market value of the equipment was
determined through the use of an independent third party equipment
appraiser. The then determined fair market value was lower than the
previous owners cost basis, and the fair market value of the ERFC stock
exchanged was undeterminable, therefore the Company chose to value the
equipment received using the appraiser's valuation, or $3,720,000. The
Company has chosen to depreciate the equipment using the straight line
method over its estimated remaining useful life of ten years.
Expenditures for maintenance and repairs are charged to operations as
incurred. Depreciation expense for the period since inception ended
September 30, 1995 was $0 and for the years ended September 30, 1996
and 1997 was $372,000 and $372,000.
F-7
<PAGE>
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, continued
In the BAPCO acquisition the Company acquired ownership of all rights
to BAPCO's proprietary oil well reworking tool, "the BAPCO Tool" as
well as other oil and natural gas well reworking equipment. The control
of this proprietary tool has enhanced the Company's position to the
extent that it would not have been able to enter into the contract to
control the Utah oil fields and the reworking of the Indonesian oil
fields. The control of this tool also enabled the acquisition of the
200 Texas oil wells to be economically feasible to a greater extent.
The fair market value of the equipment was determined through the use
of an independent third party equipment appraiser. The Company chose to
value the equipment received using the appraiser's valuation, or
$2,250,000, because at the time the acquisition was negotiated the
Company's common stock was highly volitile in price and extremely
thinly traded which led the Company to determine that the equipment was
the easier to value under APB 16. The Company expects to depreciate
this tool and technology over five years, beginning in the first
quarter of fiscal 1998.
c) Notes payable The Company issued two notes payable to stockholders who
are also officers and directors in exchange for cash amounting to
$233,398 and $526,883. These notes carry no stated maturity date and an
8.5% rate of interest. The Company has repaid $236,787 and $58,500 on
these notes, including interest on one. The remaining note is
convertible into restricted stock at 50% of the average bid price for
the month in which the loan was made. The conversion is at the option
of the noteholder. Accrued interest on these notes is $0, $0 and
$21,273 for the period since inception ended September 30, 1995 and for
the years ended September 30, 1996 and 1997.
In January 1997, the Company issued a note payable to a bank in
exchange for cash. This note carried a maturity date of March 15, 1997
and a 9.6875% interest rate. The Company is in default on this note.
The default interest rate is 13.6875%. The Company and the bank had
originally expected to roll this note over into a long-term credit
facility. The Company chose not to accept the long-term facility due to
the terms offered. The Company has reached an agreement with the bank
regarding repayment terms. Accrued interest on this note is $0, $0 and
$15,955 for the period since inception ended September 30, 1995 and for
the years ended September 30, 1996 and 1997.
d) Deferred compensation ERFC issued 755,043 shares of its common stock
into escrow in exchange for services to be rendered by a consultant
under a four year contract. These services were valued at $125,000 per
year, therefore the Company is amortizing this deferred compensation
expense at a rate of $31,250 per quarter. This consultant later became
ERFC's Chairman, President and CEO.
On August 30, 1996, the Company issued 10,000 shares of its common
stock, valued at $70,000, to an attorney for services to be rendered at
below market rates for a period of 4 months. Accordingly, the Company
amortized this expense over the term of the agreement.
F-8
<PAGE>
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, continued
e) Net loss per share Net loss per share is computed by dividing the net
loss by the number of shares outstanding during the period.
f) Crude oil reserves At September 30, 1996, the Company had no oil and
gas reserves. In March 1997, the Company acquired an undivided 8/8
interest in a 100 well lease located in the Gunsite Sand Lease in
Ector, Texas, in exchange for 300,000 shares of the Company's common
stock. The Company received an independent evaluation of this field
which reflected 1,000,000 barrels of proven oil reserves. In March
1997, the Company acquired an undivided 8/8 interest in a 100 well
lease located in the Woodbine Sand Lease Block in Henderson County,
Texas, in exchange for 200,000 shares of the Company's common stock.
The Company received an independent evaluation of this field which
reflected 1,500,000 barrels of proven oil reserves. The Company has
valued the proven reserves at current market value, less lifting costs,
less projected well rework costs, less projected equipment
repair/replacement costs, less estimated dismantlement, restoration and
abandonment costs and less a discount of approximately 50% to allow for
potential errors in the estimated costs and reserve reports and
fluctuations in the market value of crude oil. The Company chose to
value these acquisitions on the basis of the asset value received
rather than the value of the common stock given up as at the time of
the acquisition the stock price was highly volatile and thinly traded.
Both acquisitions also included all existing equipment on site. The
Company has not recorded the fair market value of the equipment in
place, as all of such equipment has minimal scrap value, which is the
only valuation method available due to the non-operational status of
the wells at acquisition and for several years prior to acquisition.
The Company spent $53,000 for the year ended September 30, 1997 on well
equipment repairs and well rework, all on the Gunsite lease. The
Company expects to capitalize and depreciate repairs which are believed
to extend the useful life of such existing equipment beyond one year,
as well as the cost of replacement equipment.
The Company expects to utilize the sucessful efforts method of
accounting for its oil and gas producing activities once it has reached
the producing stage. The Company expects to regularly assess proved oil
and gas reserves for possible impairment on an aggregate basis in
accordance with SFAS 121.
g) Depletion Depletion (including provisions for future abandonment and
restoration costs) of all capitalized costs of proved oil and gas
producing properties are expected to be expensed using the
unit-of-production method by individual fields as the proven developed
reserves are produced.
h) Chevron master P&A service agreement In September 1996 Bass
Environmental Services Worldwide, Inc., (BESW), entered into a Master
Service Agreement with Chevron to plug and abandon oil wells located in
the Gulf of Mexico off the coast of Louisiana. In April 1997, BESW
assigned this contract to the Company in exchange for 3,000,000 shares
of the Company's common stock. Chevron has reissued the contract in the
Company's name. The Company valued this acquisition on the basis of the
Company's bid price on the date the agreement was signed, or $1 per
share. The Company expects to begin commercializing the agreement in
fiscal 1998, therefore it will begin amortizing this contract value
over a five year period beginning in fiscal 1998.
F-9
<PAGE>
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, continued
i) DRSTP geological data In July 1997, the Company acquired substantial
geologic data and other information from an independent source in
exchange for one million shares of the Company's common stock. This
data was valued at $2,000,000 based the agreement with the seller that
Company would repurchase these shares for $2,000,000 at a rate of 25%
per quarter should the seller so choose. The Company expensed this
acquisition cost immediately.
(2) Income taxes The Company has a consolidated net operating loss
carry-forward amounting to $17,868,204, expiring as follows: $3,404 in
2010, $852,748 in 2011 and $17,012,052 in 2012. The Company has a
$7,147,282 deferred tax asset resulting from the loss carry-forward,
for which it has established a 100% valuation allowance. Until the
Company's current plans begin to produce earnings it is unclear as to
the ability of the Company to utilize these carry-forwards.
(3) Stockholders' equity The Company has authorized 950,000,000 shares of
$0.0001 par value common stock and 10,000,000 shares of $0.0001 par
value preferred stock. On September 30, 1995, the predecessor entity,
ERFC, had 1,639,450 shares issued and outstanding, which had been
issued during the month since inception as 884,407 shares for $88 in
cash and 755,043 shares for a four year consulting agreement valued at
$500,000 with a then independent consultant who subsequently became the
Company's Chairman, President and CEO.
In October 1995, ERFC issued 744,000 shares in exchange for
environmental remediation equipment valued by an independent appraiser
at $3,720,000. This equipment was acquired from the consultant who had
received the 755,043 shares and subsequently became the Company's
Chairman, President and CEO. In October 1995, ERFC issued 20,000 shares
for $50,000 in cash.
In August 1996, ERFC issued 20,500 shares in exchange for $42,892 in
cash. On August 19,1996, the sucessor Company issued 2,433,950 shares
of common stock to acquire 100% of the issued and outstanding common
stock of ERFC. At the time of the acquisition ERHC, then known as RAGC,
had 356,317 shares issued and outstanding as a result of a 1 for 2,095
share reverse stock split. On August 19, 1996, the Company issued
73,277 shares of common stock to a consultant in exchange for services
valued at $1.00 per share related to the merger. In August 1996, the
Company issued 10,000 shares of its common stock, valued at $70,000, to
an attorney for services to be rendered at below market rates for a
period of 4 months. In September 1996, the Company issued 55,000 shares
of its common stock under three consulting contracts previously
negotiated, valued at $385,000. In September 1996, the Company issued
320,830 shares of its common stock in exchange for $31,995 in cash.
In February 1997, the Company issued 1,600,000 shares of common stock
via an S-8 registration in exchange for consulting and professional
services valued at $1,100,000. In March 1997, the Company acquired a
100 oil well lease with one million barrels of proven oil reserves
valued at $5,000,000 in exchange for 300,000 shares of the Company's
common stock. In March 1997, the Company acquired a 100 oil well lease
with one and one-half million barrels of proven oil reserves valued at
$7,500,000 in exchange for 200,000 shares of the Company's common
stock. In March 1997, the Company issued 300,000 shares of common stock
via an S-8 registration valued at $375,000 in exchange for public
relations services, of which approximately 150,000 had been earned at
fiscal year end. The balance will either be earned or returned to ERHC.
F-10
<PAGE>
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Notes to Consolidated Financial Statements
(3) Stockholders' equity, continued
In April 1997, the Company issued 3,000,000 shares of common stock in
exchange for the assignment of the Chevron P&A master service
agreement, valued at $3,000,000. In April 1997, the Company issued
1,342,981 shares of common stock to three directors in lieu of cash
compensation for services rendered to the Company valued at $1,342,981.
In April 1997, a director contributed 100,000 shares of common stock
back to the Company with a value of $100,000. In April 1997, the
Company issued 4,000,000 shares of common stock in exchange for 100% of
the issued and outstanding common stock of Bass American Petroleum
Company, (BAPCO), valued by an independent appraiser at $2,250,000. In
May 1997, the Company issued 1,500,000 shares of common stock via an
S-8 in exchange for consulting and professional services valued at
$562,500. In June 1997, the Company issued 150,000 shares of common
stock to two independent consultants for services valued at $28,125.
One of these consultants became an employee of the Company in September
1997.
In July 1997, the Company issued 800,000 shares under a Section 4(2)
exemption from registration to a previously unrelated party in exchange
for $400,000 in cash. In July 1997, the Company acquired substantial
geologic data and other information from an independent source in
exchange for 1,000,000 shares of the Company's common stock. This data
was valued at $2,000,000 based the agreement with the seller that
Company would repurchase these shares for $2,000,000 at a rate of 25%
per quarter should the seller so choose. In July 1997, the Company
issued 2,335,000 shares of common stock to three independent
consultants for services valued at $6,465,031, principally relating to
the Company's acquisition of the MIII agreement. In July 1997, the
Company issued 1,500,000 shares of common stock to three directors in
lieu of cash compensation for services rendered to the Company valued
at $2,250,000. In July 1997, the Company issued 147,000 shares of
common stock under a Regulation D Rule 506 private placement in
exchange for $147,000 in cash. In August 1997, the Company issued
74,000 shares of common stock under a
Regulation D Rule 506 private placement in exchange for $148,000 in
cash. In September 1997, the Company issued 400,000 shares of common
stock to an independent consultant for services valued at $308,000. In
September 1997, the Company issued 370,898 shares of common stock under
a Regulation D Rule 506 private placement in exchange for $407,988 in
cash. In September 1997, the Company received stock subscription
agreements for $913,300 in cash under a Regulation D Rule 506 private
placement representing 830,273 shares of common stock.
The Company is contingently liable to issue up to three million shares
of restricted stock in total to three officers and directors of the
Company for their efforts in closing the Sao Tome & Principe contract.
These shares will be issued upon the joint venture oil production level
of 20,000 barrels a day being attained. The Company is contingently
liable to issue up to two million shares of restricted stock to two
officers and directors of the Company for their efforts in closing the
M III contract in Utah upon the joint venture oil production level of
4,000 barrels a day being attained. This two million shares includes
the 500,000 shares the Company is to issue to MIII. The Company is also
contingently liable to issue an additional two million shares upon the
joint venture attaining production of a total of 6,000 barrels a day.
F-11
<PAGE>
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Notes to Consolidated Financial Statements
(4) Accrued salaries At September 30, 1995, 1996 and 1997 the Company has
accrued salaries of $0, $0 and $960,000, respectively, for three
officers. These officers can, at their option, convert these salaries
into common stock of the Company at the rate of one-half of the average
bid price of the Company's common stock for the months in which the
salary was earned.
(5) Commitments and contingencies The Company is committed to lease
payments for 9 vehicles under operating leases totalling $52,292 and
$20,043 for the years ended September 30, 1998 and 1999, respectively.
The Company paid $0, $0 and $52,500 in vehicle lease expense for the
period since inception ended September 30, 1995 and for the years ended
September 30, 1996 and 1997, respectively. The Company currently leases
its office space and operating facilities on a month to month basis.
The Company paid $0, $8,550 and $45,950 in facility rent for the period
since inception ended September 30, 1995 and for the years ended
September 30, 1996 and 1997.
(6) Segment information The Company has three distinct lines of business
through its two wholly owned subsidiaries, Site Services, Inc., (SSI),
and Bass American Petroleum Company, (BAPCO), and a joint venture
agreement. SSI operates in the environmental remediation industry and
BAPCO will operate in the oil and gas production industry. SSI's
principal identifiable assets consist of $2,976,000, (net), of
environmental equipment, a barge deposit of $131,000 and the Chevron
P&A master service agreement valued at $3,000,000, (net). All of the
Company's 1997 revenues of $109,000 and cost of sales of $54,000 relate
to SSI. BAPCO's principal identifiable assets consist of crude oil
reserves valued at $12,500,000 and equipment valued at $2,250,000. The
Company also expects to operate in the supply industry through a joint
venture agreement to supply fuel and other goods to ships transiting
the Panama Canal. No pricipal identifiable assets yet exist for this
line of business.
(7) Subsequent events
a) Stockholder's equity The 830,273 shares of common stock were issued by
the Company upon receiving the $913,300 in cash in October 1997 which
had been subscribed for at September 30, 1997. In October and November
1997, the Company issued 175,599 additional shares of common stock in
exchange for $183,359 in cash under the same private placement
memorandum offering in August and September 1997.
b) Convertible notes In November and December 1997, the Company issued
5.5% convertible senior subordinated secured notes due 2002 in exchange
for approximately $4,300,000 in cash. These notes are convertible into
shares of the Company's common stock at a conversion price to be
determined by so stated formula, but at a price no less than $1.25 per
share. If all of the notes are converted at the lowest possible price,
the Company would be required to issue 3,440,000 shares of common
stock. These notes also carried warrants for an additional 258,000
shares of common stock with an exercise price of $3.17 per warrant, or
total proceeds to the Company of $817,860 in the event all of the
warrants are exercised. The notes are secured by the Company's non-MIII
oil reserves in Utah.
c) Sao Tome concession payment When the Company entered into the joint
venture agreement in May 1997 with the Democratic Republic of Sao Tome
and Principe, (DRSTP), the Company was required to pay a $5,000,000
concession fee to the DRSTP goverment. In September 1997, the Company
received a Memorandum of Understanding from the DRSTP government which
allows the Company to pay this concession fee within five days after
the DRSTP files the relevant official maritime claims maps with the
United Nations and the Gulf of Guinea Commission. In December 1997, the
Company paid $2,000,000 of this concession fee to the DRSTP form the
proceeds of the convertible note offering.
d) Utah oil wells and reserves On September 29, 1997, the Company entered
into an agreement to acquire 22 oil, gas and mineral leases located in
Uintah and Duchesne Counties, Utah from three joint owners. The
purchase agreement was closed on October 8, 1997, at which time the the
Company received the lease assignment. The terms of the
F-12
<PAGE>
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Notes to Consolidated Financial Statements
(7) Subsequent events, continued
d) Utah oil wells and reserves, continued acquisition are for the Company
pay $250,000 in cash, issue 250,000 shares of the Company's common
stock at each of the following four dates: closing; December 30, 1997;
March 30, 1998 and June 30, 1998. The Company also was required to
guarantee that the bid price on the date the Rule 144 restrictions
lapse will be no less than $2.00 per share or the Company is required
to either issue additional shares or to pay the difference in cash, at
the Company's option. The Company also granted the sellers a 4% gross
production receipts royalty to a maximum of $677,000. The Company is
currently evaluating the existing reserve reports and underlying data
on these leases as well as has contracted another independent appraiser
to complete new reserve reports for its use.
e) Olmos Nueces River Prospect oil and natural gas lease In October 1997,
the Company entered into an agreement to acquire a 3/8 undivided
interest in a natural gas well that had been plugged and abandoned
approximately 10 years ago. This agreement requires the Company to pay
the seller $200,000 and 50,000 shares of the Company's common stock, as
well as to pay the Company's proportinate share of the costs to reenter
this well. The Company is also required to carry the seller's 1/8
proportionate share of the reentry costs until the well is producing.
The seller also owns an undivided 50% interest in the oil and gas lease
on the 49,019 acres of land contiguous to the initial well. The
agreement allows the Company to acquire a 3/8 undivided interest in
this lease by paying to the seller approximately $343,000 each April
for four years. The Company received the initial lease assignment on
December 1, 1997. The Company is currently evaluating the existing
reserve reports and underlying data on these leases as well as has
contracted another independent appraiser to complete new reserve
reports for its use.
f) Firm commitment letter of intent In December 1997, the Company received
a firm commitment letter of intent form a registered brokerage house
which contemplates a public offering of approximately $50,000,000 of
the Company's debt securities. This offering, if it proceeds, is
contemplated for early 1998.
g) Test oil production In late November 1997, test oil production
amounting to approximately 444 barrels was picked up from the tanks at
the Gunsite Sand lease. At that time the Company had approximately 9
wells back on line and pumping. In late November and early December
1997, test oil production amounting to approximately 1,292 barrels was
picked up from the tanks at the 22 leases in Uintah and Duchesne
Counties, Utah.
h) Stock repurchase In December 1997, the Company repurchased 250,000
shares of its common stock for $500,000 in cash. This was the first 25%
quarterly repurchase agreed to by the Company relating to the 1,000,000
shares issued to acauire the DRSTP geological data.
F-13
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
NONE.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors and Executive Officers
The names and age of the directors and executive officers of the
Company, and their positions with the Company, are as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Sam L. Bass, Jr............................ 63 Chairman of the Board, President and Chief
Executive Officer
James R. Callender, Sr..................... 57 Chief Operating Officer, Vice President and
Director
Noreen G. Wilson........................... 45 Chief Financial Officer, Vice President and
Director
James A. Griffin........................... 43 Secretary, Treasurer and Director
Robert McKnight............................ 62 President of BAPCO
William Beaton............................. 75 Director
</TABLE>
The principal occupations for the past five years (and, in some
instances, for prior years) of each of the directors and executive officers of
the Company are as follows:
Sam L. Bass, Jr. has been the Chairman of the Board, President and
Chief Executive Officer of the Company since September 1996. Mr. Bass also
serves as the Chief Executive Officer of Bass Environmental Waste, Inc., which
he founded in 1987, U.S. Energy, Inc., which he founded in 1984, and Bass
Stabilizers, Ltd., which he co-founded in 1978, each of which is a
privately-held company to which he devotes minimal time. From December 1993 to
September 1995, he served as President and Chief Executive Officer of Bass
Environmental World Wide Services, Inc. From January 1992 to September 1995, he
served as President and Chief Executive Officer of Bass Environmental Inc.
Mr. Bass is a pioneer in the field of downhole drilling and stabilization, and
is the inventor of seven drilling aids, many of which are being used around the
world. Mr. Bass founded a fire-fighting organization called Al-Wadhi, through
which he joined others in efforts to put out oil well fires in Kuwait,
immediately after the Gulf War, for a period of `approximately 18 months in
1991 and 1992. Mr. Bass received a B.A. degree from McNeese State University in
1949 and an M.A. degree in Mechanical Engineering from Georgia Tech in 1952.
James R. Callender, Sr. has served as Chief Operating Officer and Vice
President of the Company since August 1997 and a Director since September 1996.
He has also been the President and owner of CalSons Co. Inc., an ostrich farm
and cattle ranch located in Louisiana, since November 1990. From July 1997 to
August 1997, Mr. Callender served as a Consultant to the Company. From March
1997 to April 1997, he served as a Consultant to Forcenergy Inc., an independent
oil and gas company. From September 1996 to March 1997, Mr. Callender served as
a Management Consultant to Arctic Recoil, Inc., a maker of high pressure well
control units. He acted as an Investment Consultant to Coburn Inc., an oil field
construction and heavy equipment operator, from February 1996 to September 1996.
From January 1993 to December 1995, Mr. Callender served as Chief Engineer to
the Chief Executive Officer and Senior Consultant at Unocal Corp., a fully
integrated energy resources company whose worldwide operations comprise many
aspects of energy production. Until December 1992, he served as Drilling Manager
of Worldwide Operations at Unocal Corp. Mr. Callender received a B.S. degree in
Geology and Engineering from Louisiana State University in 1964.
Noreen G. Wilson has served as Chief Financial Officer of the Company
since June 1997. She has been a Director of the Company since December 1996.
From January 1995 to the present time, Mrs. Wilson has served as President of
Supertrail Manufacturing Company, Inc., a real estate development firm located
in Aberdeen, Mississippi. Supertrail Manufacturing Company, Inc. filed for
Chapter 11 reorganization under the U.S. Bankruptcy Code in January 1995. At
that point in time, Mrs. Wilson became President, in order to guide and manage
the company through its reorganization, and she devotes minimal time in this
position. From February 1993 to December 1996, Mrs. Wilson served as an
31
<PAGE>
International Consultant for the financing of American builders and contractors
overseas, primarily working through the Export/Import Bank and the World Bank.
During the same time period, Mrs. Wilson served as Vice President of Traditional
Enterprises, a financial consulting firm located in Roswell, Georgia. Ms. Wilson
is the first cousin of James A. Griffin.
James A.Griffin has been the Secretary, Treasurer and a Director of the
Company since September 1996. From April 1992 to April 1996, Mr. Griffin was a
founding and managing partner in the law firm of Griffin & Pellicane, Esq.
located in Westbury, New York. In April 1996, he formed the law firm of James A.
Griffin, Esq., but he is currently minimally involved in the practice of law. He
received his J.D. from Touro College, Jacob D. Fuchsberg Law Center, in 1987. He
received his B.A. degree from Dowling College in 1976 and his B.S. degree at the
State University of New York at Stony Brook, School of Allied Health Sciences,
in 1979. He is admitted to practice law in the State of New York and is a member
of the American Bar Association, the New York State Bar Association and the
Nassau County Bar Association. Mr. Griffin is the first cousin of Noreen G.
Wilson.
Robert McKnight has been the President of BAPCO since August 1997.
Previously, Mr. McKnight acted as a Consultant to the Company from November 1996
until August 1997. From August 1991 until July 1996, Mr. McKnight acted as a
Consulting Engineer to Patriot Resources, an oil and gas company located in
Dallas, Texas. Mr. McKnight has 35 years of experience in supervising and
managing drilling and production operations, including reservoir and field
evaluations, reserve and cash flow determinations for property acquisitions, and
equity determinations. Mr. McKnight received his B.S. in Petroleum Engineering
from Texas A&M University in 1957.
William Beaton has been a Director of the Company since September 1996.
He currently serves as the Chairman of The Institute of Petroleum (West of
Scotland Branch) and has been in that position for more than the past five
years. He was the General Manager of Clydsedale Bank of Glasgow, Scotland until
his retirement in 1982. Since his retirement from the Bank, he has worked as a
self-employed consultant to public and smaller independent companies. He has
been involved in the international oil and gas industry for almost 30 years,
with more than 50 years of experience in management and finance.
All directors hold office until the next annual meeting of shareholders
and until their successors are duly elected and qualified, unless their office
is vacated in accordance with the Certificate of Incorporation of the Company.
Officers are elected to serve, subject to the discretion of the Board of
Directors, until their successors are appointed. Except for the relationship
between Noreen G. Wilson and James A. Griffin, who are cousins, there are no
family relationships among the directors and officers of the Company.
Advisory Board
The Company has established an Advisory Board comprised of three
members with experience in the areas of oil and gas production. The Advisory
Board meets periodically with the Company's Board of Directors and management to
discuss matters relating to the Company's business activities including
establishing commercial business alliances and working projects with
corporations and government agencies on an international basis. Members of the
Advisory Board are reimbursed by the Company for out-of-pocket expenses incurred
in serving on the Advisory Board.
Some of the members of the Advisory Board may serve as consultants to
the Company under consulting agreements for which they will receive
compensation. To the Company's knowledge, none of its Advisory Board members or
other consultants has any conflict of interest between their obligations to the
Company and their obligations to others.
32
<PAGE>
The members of the Company's Advisory Board and their primary
professional or academic affiliations are listed below.
Senator Vance Hartke has been a member of the Company's Advisory Board
since September 1996. Mr. Hartke was the United States Senator for Indiana from
1959 to 1977. While a Senator, he served on both the Finance Committee and the
Commerce Committee, two of the most powerful and prestigious committees of the
U.S. Senate. Prior to his senatorial term, he served as Mayor of the City of
Evansville, Indiana from 1956 to 1958, when he resigned to take his seat in the
U.S. Senate. Mr. Hartke's political career also includes service as a Deputy
Prosecuting Attorney, seven times as a delegate to the Democratic National
Convention, as Democratic County Chairman in Vanderburgh County, Indiana, and a
Chairman of the U.S. Senatorial Campaign Committee. He continues to practice law
at the law firm of Hartke & Hartke in Falls Church, Virginia. He currently sits
on the Board of Directors of the International Human Assistance Programs, the
New York Hall of Science and Technology, the New York Commission for the
Development of Flushing Meadows, Federated Finance Corp., First Federated
Savings Bank, and McCrane & Co. He received his A.B. from the University of
Evansville in 1941, and his J.D. from Indiana University School of Law in 1948
where he was Editor in Chief of the Indiana Law Journal.
Marvin Gibbons has been a member of the Company's Advisory Board since
September 1996. In 1990, Mr. Gibbons founded a private company seeking
investment capital for various development projects, including several Native
American Indian Developments. He opened a private domestic and international
import/export company, as well. During the past seven years, Mr. Gibbons became
a partner and Acting Secretary of CAL-NOR, Cal-Marine Industries, ESOP, and
Zenith Insurance Limited. He is currently involved in a number of Development
Projects both in the United States and internationally.
Ken Water has been a member of the Company's Advisory Board since
September 1996.
All directors hold office until the next annual meeting of shareholders
and until their successors are dully elected and qualified, unless their office
is vacated in accordance with the Articles of the Company. Officers are elected
to serve, subject to the discretion of the Board of Directors, until their
successors are appointed.
33
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, in summary form, the compensation
received during each of the Company's last year by the Chief Executive Officer
of the Company and by the four other most highly compensated executive officers
whose compensation exceeded $100,000 during the year ended September 30, 1997:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation(c,d,e) Long-Term Compensation(f,g,h)
<S> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h)
NAME AND RESTRICTED
PRINCIPAL FISCAL OTHER ANNUAL STOCK OPTIONS/ LTIP
POSITION YEAR (1) SALARY (2) BONUS COMPENSATION AWARDS (4) SARs payout
Sam L. Bass, 1997 $480,000 0 $125,000 0 0 0
Jr., CEO, (3)
President
James R. 1997 $100,000 0 0 500,000 0 0
Callender, shares
Chief
Operating
Officer,
Director
James A. 1997 $120,000 0 0 500,000 0 0
Griffin, shares
Secretary,
Treasurer,
Director
Noreen G. 1997 $360,000 0 0 500,000 0 0
Wilson, shares
Executive
Vice
President,
Chief
Financial
Officer
<FN>
(1) James R. Callender joined the Company as its Chief Operating Officer in July 1997. Noreen G.
Wilson joined the Company as Executive Vice-President and Chief Financial Officer in January 1997.
(2) Salaries for Sam L. Bass, Jr., James A. Griffin, and Noreen G. Wilson are accrued and not paid in cash.
Each has an option to convert all or part of any accrued salary to common stock of the Company at a price
reasonably established by the Board of Directors.
(3) Represents amortization of Common Stock of ERFC distributed in 1995 to Sam L. Bass, Jr. (see Financial
Statements note 1d).
(4) Restricted stock awards to Messrs. Griffin and Callender and Ms. Wilson were awarded in fiscal year 1997
and were vested as of the date of grant.
</FN>
</TABLE>
34
<PAGE>
Compensation of Directors
Non-employee directors of the Company currently receive no cash
compensation for serving on the Board of Directors other than reimbursement of
reasonable expenses incurred in attending meetings. The Company does not intend
to separately compensate employees for serving as directors.
In September 1996, the Company issued to each of James R. Callender,
Noreen G. Wilson, James A. Griffin and William Beaton, directors of the Company,
500,000 Common Shares in connection with their serving on the Company's Board
of Directors.
Limitation of Liability and Indemnification
Pursuant to the provisions of the Delaware General Corporation Law (the
"Delaware Law"), the Company has adopted provisions in its Certificate of
Incorporation which provide that directors of the Company shall not be
personally liable for monetary damages to the Company or its stockholders for a
breach of fiduciary duty as a director, except for liability as a result of (i)
a breach of the director's duty of loyalty to the Company or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) an act related to the unlawful stock
repurchase or payment of a dividend under Section 174 of the Delaware Law, and
(iv) transactions from which the director derived an improper personal benefit.
Such limitation of liability does not affect the availability of equitable
remedies such as injunctive relief or rescission.
The Company's Certificate of Incorporation also authorizes the Company
to indemnify its officers, directors and other agents, in accordance with the
Company's by-laws, agreements or otherwise, to the full extent permitted under
the Delaware Law. The Company intends to enter into indemnification agreements
with its directors and officers which may, in some cases, be broader than the
specific indemnification provisions contained in the Delaware Law. The
indemnification agreements may require the Company, among other things, to
indemnify such officers and directors against certain liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' insurance if
available on reasonable terms.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding which may result in a claim for such indemnification.
Compensation of Executive Officers
During the fiscal year ended September 30, 1997, the Company did not
make cash payments to any of its executive officers for salary, except for James
R. Callender, Sr., the Company's Chief Operating Officer, who was paid a total
of $100,000 in July, August and September 1997, and Robert McKnight, the
President of BAPCO, who was paid a total of $20,000 in August and September 1997
The Company continues to compensate Messrs. Callender and McKnight at the
current rate of $40,000 and $10,000 per month, respectively. The Company,
however, made lease payments on automobiles for each of Sam L. Bass, Jr., Noreen
G. Wilson, James A. Griffin and Mr. McKnight during the fiscal year ended
September 30, 1997, in each case of approximately $450 per month. The Company
the balance of the salaries as reflected in the Executive Compensation chart
above.
In addition, in August 1996, at the time Mr. Bass joined the Company as
a consultant, he was issued, in lieu of consulting fees for the fiscal years
ended September 30, 1997, 1998, 1999 and 2000, a total of 375,000 Common Shares,
vesting annually in one-fourth increments.
35
<PAGE>
Employment Agreements
The Company contemplates entering into three-year employment agreements
with each of Sam L. Bass, Jr., James A. Callender, Sr., Noreen G. Wilson and
James A. Griffin to serve in their respective positions. The Company is still in
the process of determining the terms and conditions of each employment
agreement. Stock Option Plan
The Company does not currently have a stock option plan or other
similar employee benefit plan for executives and/or other employees of the
Company, and no options have been granted or are currently outstanding.
The Board of Directors of the Company plans to approve and adopt a
proposed 1998 Stock Option Plan (the "Plan"), pursuant to which officers,
directors, key employees, and consultants of the Company will be eligible to
receive incentive stock options and non-qualified stock options to purchase
Common Shares. The Plan would also provide for the grant of stock appreciation
rights, restricted stock, performance shares and performance units at the
discretion of Company's Board of Directors.
With respect to incentive stock options, the Plan would provide that
the exercise price of each such option be at least equal to 100% of the fair
market value of the Common Shares on the date that such option is granted
(and 110% of fair market value in the case of shareholders who, at the time the
option is granted, own more than 10% of the total outstanding Common Shares),
and would require that all such options have an expiration date not later than
the date which is one day before the tenth anniversary of the date of the grant
of such option (or the fifth anniversary of the date of grant in the case of 10%
or greater shareholders. However, with certain limited exceptions, in the event
that the option holder would cease to be associated with the Company, or would
engage in or be involved with any business similar to that of the Company, such
option holder's incentive options would immediately terminate. Pursuant to the
Plan, the aggregate fair market value, determined as of the date(s) of grant,
for which incentive stock options will first be exercisable by an option holder
during any one calendar year will not exceed $ 100,000.
36
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 29,
1997, with respect to the beneficial ownership of the Company's Common Stock by
each shareholder known by the Company to be the beneficial owner of more than 5%
of its outstanding shares, by each director of the Company, by the executive
officers named in the table below and by the directors and executive officers of
the Company as a group. Except as otherwise noted, the persons named in this
table, based upon information provided by such persons, have sole voting and
investment power with respect to all Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
Common Shares Beneficially Owned
Name and Address (1) Number (2) Percentage
--------------------
<S> <C> <C>
Sam L. Bass, Jr............................. 8,679,568 39.7%
James R. Callender, Sr...................... 500,000 2.3
Noreen G. Wilson............................ 500,000 2.3
James A. Griffin............................ 500,000 2.3
Robert McKnight............................. 75,000 *
William Beaton.............................. 500,000 2.3
All officers and directors as a group 10,754,568 49.2%
(six persons)............................
<FN>
- -------------------
* Represents less than 1% of outstanding Common Shares or voting power.
(1) The address of each beneficial owner is c/o Environmental Remediation
Holding Corporation, 420 Jericho Turnpike, Suite 321, Jericho, New York
11753.
(2) Shares beneficially owned and percentage of ownership are based on
21,858,000 Common Shares outstanding as of December 29, 1997.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
dispositive power with respect to such shares.
The Company is not aware of any arrangements which may at a later date
result in a change of control of the Company.
</FN>
</TABLE>
37
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company's predecessor, Environmental Remediation Funding Corporation
("ERFC"), was incorporated under the laws of the State of Delaware in September
1995. In August 1996, the stockholders of ERFC exchanged all of their shares of
ERFC for 2,433,950 authorized and unissued shares of common stock, representing
87.2% of such then outstanding shares, of Regional Air Group Corporation
("RAIR"), a Colorado corporation. RAIR was a publicly-owned corporation which
had ceased operations and as a result had only nominal assets and liabilities.
ERFC was then merged into RAIR. Following the acquisition of control, the
stockholders of RAIR approved the change in the Company's name to Environmental
Remediation Holding Corporation.
In April 1997, the Company acquired all of the outstanding capital
stock of BAPCO, a privately-held company controlled by Sam L. Bass, Jr., who has
been the Company's Chairman of the Board, President and Chief Executive Officer
since September 1995. Through this acquisition, the Company acquired, among
other assets, ownership of all rights to the BAPCO Tool and assignment of the
Chevron master service agreement. The Company issued 4,000,000 Common Shares to
Mr. Bass in exchange for the outstanding capital stock of BAPCO. In addition,
the Company issued 3,000,000 Common Shares to BEW, a company controlled by Mr.
Bass, in connection with the assignment of the Chevron master service agreement.
See " Item 1. Description of Business - Environmental Remediation Services."
From time to time, Noreen G. Wilson and James A. Griffin, both
executive officers and directors of the Company, have advanced funds to the
Company in the total amount of approximately $760,500, pursuant to 8.5% demand
promissory notes of which $295,300 was repaid in 1997. The balance of such notes
are convertible into Common Stock at the option of the noteholder at a
conversion rate per share equal to the fair market value of a Common Stock at
the time of the advance.
38
<PAGE>
ITEM 14. EXHIBITS
Index to Exhibits Page
10.1 Chevron Master Service Order and Letter Agreement dated 10/1/96
10.2 Centrum Marine Services, S.A. Joint Venture Agreement dated 12/6/96
10.3 Memorandum of Agreement Between M III Corporation
and ERHC dated 6/28/97
10.4 Sao Tome Memorandum of Understanding dated 9/30/97
21 List of Subsidiaries
27 Financial Data Schedule
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunder duly authorized, this 29th
day of December, 1997.
Environmental Remediation
Holding Corporation
By:/s/Sam L. Bass, Jr.
Sam L. Bass, Jr., CEO
By:/s/Noreen Wilson
Noreen Wilson, Vice President
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/James A. Griffin Secretary December 29, 1997
James A. Griffin, Esq. and Director
/s/Sam L. Bass, Jr.
Sam L. Bass, Jr. CEO and Director December 29, 1997
/s/James Callender
James Callender Director December 29, 1997
/s/William Beaton
William Beaton Director December 29, 1997
/s/Noreen Wilson Vice President
Noreen Wilson and Director December 29, 1997
40
<PAGE>
EXHIBIT 10.1
Chevron U.S.A., Inc.
935 Gravier Street
New Orleans, LA 70112
Gentlemen:
It is anticipated that you may hereafter from time to time require the
undersigned to perform certain work for your company and that because of the
necessity of expediting such work, you may find it desirable to issue in the
first instance an oral order covering such work, which oral order may or may not
later be confirmed by delivery to the undersigned of your usual written "Service
Order and Agreement".
This letter will confirm our agreement that all work which the undersigned may
hereafter and from time to time perform for your company shall be performed by
the undersigned as "Contractor" under and pursuant to the provisions of your
"Master Service Order and Agreement", copy of which is hereto attached, and that
the terms thereof shall apply to the work so performed, regardless of the fact
that delivery of the "Service Order and Agreement" may not occur until after
such work has been completed, or, may not occur at all and irrespective of any
statement contained in any receipt, document, order or published price list of
our company pertaining to such work which may be signed or accepted by your or
our respective employees before or after completion of the work, except in
instances where special agreements expressly amendatory of this agreement may be
signed by officers of your company.
The above shall continue in effect until terminated by the undersigned or by
your company by five days' written notice from one to the other.
Yours very truly,
/S/ Sam L. Bass
Sam L. Bass, President
Date : 23 September 1996
Attachment
/S/ Charles R. Briley
(Witness)
/S/ George LeBlanc
(Witness)
CHEVRON U.S.A., INC.
Gulf of Mexico Business Unit
By /S/ A.J. Chaquin
Assistant Secretary
Date : September 30, 1996
<PAGE>
CHEVRON
Chevron U.S.A. Production, Co.
Gulf of Mexico Business Unit
935 Gravier Street
New Orleand, LA 70112
October 1, 1996
Mr. Sam Bass & Mr. George LeBlanc
Environmental Remediation Holding Corporation
111 Tubing Road
Broussard, LA 70363
Environmental Remediation Holding Corporation
Gentlemen:
Now that we have concluded our negotiations with Environmental Remediation
Holding Corporation (E.R.H.C.) regarding the Master Service Order and Agreement
(MSOA) and Blanket Time Charter, we must address the problem of implementation.
With only few exceptions, the services provided by E.R.H.C. are maritime and
should be governed by the Time Charter. To arrange for contractor services,
however, our field personnel use a contract agreement number (M-0829) issued for
jobs and tracking purposes.
To simplify contracting, we propose to engage the services of E.R.H.C. through
the existing contract agreement number with the understanding between the
companies that the Time Charter will govern their legal relationship. In those
unique circumstances when E.R.H.C. is called upon to perform work on fixed
platforms, then the terms and conditions of the MSOA will apply.
Please sign below (both copies) below, and return to this office at your
earliest convenience. One copy with Chevron's approval signature will be
returned to you. If you should have any questions, please contact the undesigned
at 592-6248.
Very truly yours,
/s/ Peggy Giroir
for C.D. Haydel
Supervisor, Contracts & Risk Management.
WITNESS: ENVIRONMENTAL REMEDIATION
HOLDING CORPORATION
/S/ George LeBlanc By:/s/Sam Bass
/S/ L. J. Menard Its Chairman of the Board
CHEVRON U.S.A., INC.
By
Assistant Secretary
<PAGE>
CHEVRON
Chevron U.S.A. Production, Co.
Gulf of Mexico Business Unit
935 Gravier Street
New Orleand, LA 70112
October 1, 1996
Mr. Sam Bass
Mr. George LeBlanc
Environmental Remediation Holding Corporation
111 Tubing Road
Broussard, LA 70363
Re: Master Service and Agreement
Gentlemen:
Chevron USA Inc. Gulf of Mexico Business Unit has executed the Master Service
Order and Letter Agreement, and we return herewith a copy for your records.
Please note that we have placed a number in the top right-hand corner of the
contract (M-0829), and this number must appear on all invoices to Chevron.
A Chevron certificate of insurance must be submitted each year upon renewal.
we also remind you that we are awaiting the completed Contractor Safety &
Environmental Questionnaire which was included with the contract package mailed
to you in July, 1996.
Thank you for your interest. Chevron looks forward to a beneficial working
relationship with your company.
Sincerely,
/S/ Peggy Giroir
Peggy Giroir
Contract & Risk Management
/pg
Enclosure
<PAGE>
MASTER SERVICE ORDER AND AGREEMENT
Not for Purchase Materials Only
Date ________________19____
Company Contractor
Chevron U.S.A., Inc. Site Services, Inc.
Subsidiary of Bass Env.
Gulf of Mexico Production Business Unit W.W. Inc. and E.R.H.C.
935 Gravier Street 111 Tubing Road
New Orleans, LA 70112 Broussard, LA 70518
Company and Contractor agree as of the above date that Contractor shall perform
the services set forth below at the location, within the time and for the
compensation specified, subject to the Terms set forth on the attachment hereto.
Description of Work and Materials to be
Furnished: Plug and abandon wells
as directed by Chevron.
Company Representative:
Location (Field, Block, Lease):
Compensation:
Contractor certifies that he is
appropriately licensed under
La.R.S.37:2151-2163 and that the number
of his license under such law is:
Invoices : Please show above contract and job number and items subject to sales
tax or use tax. Send invoices in duplicate and one copy of work tickets to :
Name Dept. Address
Accepted (contractor signed) Authorized (company/profit center)
CHARGE TO : By
INVOICE NO: Route To:
WORK COMPLETED
(Date) (Name)
TERMS
1. "INDEMNITEES" as used throughout this Agreement means : CHEVRON U.S.A.
INC., and all of its affiliated or parent subsidiary companies or cooperations,
and all of its co-owners or joint venturers, and all of the aforesaid entities,
agents, officers, employees, representatives or insurers.
2. Unless otherwise provided herein, CONTRACTOR shall provide all materials,
equipment and labor required for the prompt completion of the services.
CONTRACTOR shall perform the services as an independent contractor and not as an
employee of COMPANY, and shall comply with all applicable laws and forms of
authorizations. the equipment provided for the services shall be in first class
operating condition and the material provided shall be suitable for theservices.
CONTRACTOR guarantees that the product of the services shall be free
of defects and agrees to correct promptly any such defect at its expense.
<PAGE>
CONTRACTOR attests that it will perform its work in a workmanlike manner and
guarantees the quality of its work and materials. CONTRACTOR shall transfer
ownership to COMPANY of all copyrights, inventions, discoveries and improvement
resulting from CONTRACTOR'S services. 3. The compensation specified herein takes
into account all taxes, wages, costs of any type and profit that are incidental
to CONTRACTOR'S performance of the services unless applicable law specifically
provides for direct payment by COMPANY. Unless otherwise provided herein,
CONTRACTOR shall submit its statement to COMPANY upon completion of the
services. The statement shall be accompanied by such supporting documents as
requested by COMPANY. 4. COMPANY may make "Changes" by adding to, omitting or
deviating from the requirements of this Contract. COMPANY and CONTRACTOR shall
appraise such changes and adjust CONTRACTOR'S compensation accordingly. If any
dispute on compensation or the work to be performed should arise, CONTRACTOR
shall be obligated to proceed with the work as directed in writing by COMPANY;
such action shall not prejudice either party's claim with respect to
compensation. 5.a. CONTRACTOR is an Equal Opportunity Employer and will not
discriminate against any employee or applicant for employment because of race,
color, religion, sex, national origin, handicap, or status as a Vietnam Era
Veteran.
b. If this contract is for $10,000.00 or more, the CONTRACTOR agrees to
Incorporate herein by reference and comply with :
(i) Executive Order 11246, as amended by Executive Order 11375, and the
applicable regulations, 41 C.F.R. Subsection 60.1, et seq (Non-discrimination in
employment by non-exempt government contractors and subcontractors; if the
contract is for $50,000.00 and more, and CONTRACTOR has 50 or more employees,
CONTRACTOR agrees to develop a written affirmative action program for each of
its establishments, pursuant to 41 C.F.R. Sections 60-1.47 and 41 C.F.R.
Sections 60-2.1 through 60-2.32):
(ii) Section 402, Vietnam Era Veterans Readjustment Assistance Act of
1974, as amended, and the applicable regulations 41 C.F.R. Section 60-250, et
seq. (Requires government contractors and subcontractors (1) to invite all
disables Veterans and Veterans of the Vietnam Era who wish to benefit under the
contractor's affirmative action program to voluntarily identify themselves and
provide information that will be kept confidential and issued only in accordance
with the Act and regulations (41 C.F.R. Section 60-250.5 (d)l; and (2) to take
affirmative action to employ and advance in employment qualified disabled
Veterans and Veterans of the Vietnam Era);
(iii) Section 604 of the Outer Continental Shelf Lands Amendments of
1978 and the implementing regulations, 30 C.F.R. Section 270 et. seq (Federal
contractors and subcontractors shall not exclude any person on the grounds of
race, creed, color, national origin or sex, from receiving or participating in
any activity, sale, or employment, conducted in relation to the exploration for
or development and production of oil, gas or other mineral or materials in the
Outer Continental Shelf under the Outer Continental Shelf Lands Act).
c. If the contract is for $2,500.00 or more, CONTRACTOR agrees to
incorporate herein by reference and comply with Section 03 of the Rehabilitation
Act of 1973, as amended and applicable regulations, 41 C.F.R. Section 60-741 et.
seq (Requires government 03 contractors and subcontractors to invite applicants
and employees who believe they are qualified handicapped persons covered by the
Act and wish to benefit under the contractor's affirmative action program to
voluntarily identify themselves with the understanding that such information
shall be kept confidential and used only in accordance with the Act and
applicable regulations (41 C.F.R. Section 60-741.5 (c)(1)); and (2) to take
affirmative action to employ and advance in employment qualified handicapped
individuals).
d. CONTRACTOR certifies that it does not and will not maintain or provide
for its employees any facilities wish are segregated by race, color, religion,
or national origin or permit its employees ti perform any services at any
location, under its control, where segregated facilities are maintained and
CONTRACTOR will obtain a similar certification for all non-exempt subcontracts,
as required by 41 C.F.R. Section 60-18
e. CONTRACTOR certifies that none of its employees who perform work
pursuant to this contract or who may do so hereafter are or will be unauthorized
aliens as defined in the Immigration Reform and Control Act of 1986 ("IRCA"), 38
U.S.C.A. as amended, 2011.et.seq, and CONTRACTOR certifies further that it
complies with said statute and implementing regulations. CONTRACTOR further
agrees to obtain a certification from its subcontractors performing work related
to this contract that none of their employees are unauthorized aliens as defined
by IRCA and that such contractors comply with the statute.
f. In the event that any agency of the Federal Government or of any Court
of competent jurisdiction determines that CONTRACTOR has failed to comply with
the statutes, Executive Orders or regulations cited in this Paragraph 5 or any
amendments, revisions or recodification thereof, CONTRACTOR agrees to hold
harmless, defend, and indemnify INDEMNITEES with regard to any costs, attorneys
fees, penalties, judgments or awards incurred by and/or assessed
<PAGE>
against INDEMNITIES by virtue of CONTRACTORS non-compliance.
g. CONTRACTOR also agrees, at its sole cost and expense, to comply with all
applicable governmental regulations, statutes, laws and ordinances relating to
environmental protection, including but not limited to pollution, disposal of
hazardous wastes and control of spills, which laws include but are not limited
to the Comprehensive Environmental Response and Liability Act of 1980 (as
amended), the Resource Conservation and Recovery Act (as amended), the Clean
Water Act and the Clean Air Act, any applicable present state laws of comparable
or similar consequences, and any future federal or state laws which may impose
such liability. CONTRACTOR also warrants that it shall obtain all necessary
permits, licenses, certificates or approvals required by statutes, orders,
ordinances, rules and regulations of such federal, state, and local governments,
and shall defend, indemnify or hod harmless INDEMNITEES from any violation of
any such law, orders, ordinances, rules or regulations arising out of, resulting
from, connected with or directly or indirectly related to or incident to
CONTRACTOR's performance of this Agreement, whether or not any such violation or
nay claim thereof is based on negligence, fault or strict liability on the part
of the INDEMNITEES. 6. a. CONTRACTOR shall defend, indemnify and save harmless
INDEMNITEES from and against any and all loss, damage, expense, injury,
liability and claims thereof arising out of, connected with, incident to, or
directly or indirectly resulting from or related to CONTRACTOR'S performance of
this Agreement, including, but not limited to, CONTRACTOR'S use of equipment
provided by COMPANY (its joint venturers and partners and affiliates) or others,
for injury or death of any person (including but not limited to, an INDEMNITEE
or an employee of CONTRACTOR, or CONTRACTOR's subcontractors) or for loss or
damage to property, (except property subject to paragraph 6b. below) including
but not limited to, property that is the product of the work of CONTRACTOR under
this Agreement, by whomever brought, whether based on statute, tort, contract or
quasi contract and whether or not resulting from contractual obligations assumed
by INDEMNITEE. Such indemnity shall apply whether or not an INDEMNITEE was or is
claimed to be passively, concurrently or actively negligent, and regardless of
whether liability without fault (including but not limited to, claims for
unseaworthiness of any vessel) is imposed or sought to be imposed on one or more
of the INDEMNITEES. This indemnity shall not apply to the extent that it is void
or otherwise unenforceable under applicable law in effect on or validity
retroactive to the date of this Agreement. CONTRACTOR'S liability under this
paragraph 6.a. shall be limited to the applicable insurance which CONTRACTOR is
required to provide under Paragraph 7 hereof.
b. CONTRACTOR shall be liable to and hold INDEMNITEES harmless for any loss
of or damage to the property of COMPANY (its joint venturers and partners and
affiliates) arising out of, connected with, incident to or directly or
indirectly resulting from or related to CONTRACTOR's performance of this
Agreement, including but not limited to, CONTRACTOR'S use of equipment provide
by COMPANY (its joint venturers and partners and affiliates) or others
regardless of the passive, concurrent or active negligence of, and regardless or
whether liability without fault (including, but not limited to, claims for
unseaworthiness of any vessel) is imposed or sought to be imposed on,
INDEMNITEES. CONTRACTOR'S liability under paragraph 6b. shall be limited to the
applicable insurance which CONTRACTOR is required to provide under Paragraph 7
hereof.
c. CONTRACTOR shall promptly pay (1) to any INDEMNITEE all costs and
attorneys' fees incurred by such INDEMNITEE resulting directly or indirectly
from any and all loss, damage, injury, liability and claims for which CONTRACTOR
is obligate to indemnify such INDEMNITEE pursuant to Paragraph 6 and (ii) to
COMPANY all costs and reasonable attorneys' fees in any legal action in which
COMPANY or its affiliate prevails, in whole or in part, brought against
CONTRACTOR based on a breach of this Agreement. COMPANY shall have the right, as
its option, to participate in the defense of any suit or claim without relieving
CONTRACTOR of any obligation hereunder. 7 .a. CONTRACTOR shall maintain the
following insurance and all insurance that may be required under the applicable
laws, ordinances and regulations of any governmental authority:
(i) Worker's Compensation Insurance in statutory limits as prescribed
by applicable law, covering all liabilities owed for compensation and other
benefits under the relevant worker's compensation laws of any state or of the
federal government, and Coverage B Employer's Liability Insurance in the amount
of $5,000,000.00, both the aforementioned statutory coverage and Coverage B
containing endorsements naming INDEMNITEES as Alternate Employer, providing for
voluntary compensation coverage providing for occupational disease coverage.
Should the work provided under this contract involve maritime activities, the
use of maritime workers or vessels or work aboard vessels owned or not owned by
the CONTRACTOR, then CONTRACTOR shall also obtain Maritime Coverage B for all of
the above coverages and including transportation, wages, maintenance and cure,
covering liability under the Longshore and Harbor Workers' Compensation Act, the
Jones Act, the Outer Continental Shell Lands Act, the General Maritime Laws, and
specifically including coverage for claims of masters and members of crews of
vessels and claims under 33 U.S.C.A. Paragraph 905(b) against any vessel. All
policies will provide that claims "in rem" shall be treated as claims against
the CONTRACTOR.
<PAGE>
(ii) Compensation or Commercial General Liability (Bodily Injury and
Property Damage) insurance including the following supplementary coverages: (a)
contractual liability to cover liability assumed under this Agreement (b)
products hazard coverage for any and all products provided or furnished by or on
behalf of CONTRACTOR during the course of services rendered by CONTRACTOR
hereunder; (c) Completed operation hazard coverage, for any claims relating to
defects or deficiency in goods, products, materials or services used or rendered
by CONTRACTOR in connection with its operations at the work site; (d) Broad Form
Property Damage Liability Insurance, and (e)Coverage for explosions, collapse
and underground hazards, for work performed by CONTRACTOR involving equipment or
materials of a volatile, incendiary or explosive nature or involving excavation,
drilling or subsurface activity. The limit of liability for such insurance shall
not be less than $5,000,000.00 combined single limit per occupance. All policies
will provide that claims "in rem" shall be treated as claims against the
CONTRACTOR.
(iii) Automobile Bodily Injury and Property Damage Liability Insurance.
Such insurance shall extend to owned, non-owned, and hired automobiles used in
the performance of this Agreement. The limits of liability of such insurance
shall be not less than $5,000,000.00 per person/$1,000,000.00 per occurrence for
Bodily injury and $300,000.00 per occurrence for Property Damage.
(iv) Hull and Machinery Insurance, including collision liability, on
all vessels and barges, if any, use by CONTRACTOR in the performance of this
Agreement with a limit equal to or greater than the fair market value of each
vessel and barge.
(v) Should the work provided under this contract involve maritime
activities, the use of maritime workers or vessels or work aboard vessels, owned
or not owned by the CONTRACTOR, Protection and Indemnity Insurance, (including
but not limited to coverage for injury or death of masters, mates and crews of
vessels used in the performance of this Agreement, unless provided in the
insurance required by Paragraph 7 a.(i)). The limits of liability of such
insurance shall not be less than $5,000,000.00 per occurrence. All policies will
provide that claims "in rem" shall be treated as claims against the CONTRACTOR.
(vi) If work to be performed hereunder requires CONTRACTOR to furnish
aircraft (including helicopters), CONTRACTOR shall maintain or require owners of
such aircrafts to maintain Aircraft Liability (Bodily injury/including liability
to passengers/ and Property Damage), Insurance with an overall combined single
limit per occurrence of not less than $10,000,000.00.
b. The policies providing the insurance called for in Paragraph 7 a (ii),
(iii), (iv), (v) and (vi) shall expressly include INDEMNITEES as an additional
assured, and all policies provided for in Paragraph 7 a. shall contain an
endorsement waiving underwriters' right of subrogation against INDEMNITEES. the
insurers shall acknowledge that INDEMNITEES have no liability for the payment of
premiums for such insurance. Such inclusion of INDEMNITEES as additional
assureds in such endorsement waiving rights of subrogation against INDEMNITEES
shall be of no avail whenever, and to the extent that they are void or otherwise
unenforceable under applicable law in effect on or validity retroactive to the
date of the Agreement, there being no intent to circumvent any such statutory
limitations or prohibitions.
c. The insurance policies set forth in this Paragraph 7 shall be endorsed
to provide that the coverage afforded is primary irrespective of the existence
of other applicable insurance.
d. The insurance coverage provide for in this Paragraph 7 shall be with
insurance companies and on policies forms acceptable to COMPANY. CONTRACTOR'S
obligation to obtain such insurance coverage is separate and distinct from the
other obligations assumed by CONTRACTOR hereunder, and the limits of insurance
shall in no way be deemed to limit any liabilities or obligations assumed by
CONTRACTOR hereunder or under applicable law, except as provided in Paragraph 6
a. and 6 b. hereof.
e. CONTRACTOR shall furnish COMPANY with documentary evidence showing that
such insurance is in effect and will not be canceled for any cause whatsoever or
materially changed without 30 days prior written notice to COMPANY. 8.
CONTRACTOR shall report to COMPANY as soon as practicable all accidents or
occurrences resulting in injuries to CONTRACTOR'S employees or third parties, or
damage to property, or a possible claim under environmental law or regulation,
arising out of or during the prosecution of work performed hereunder and shall
furnish COMPANY with a copy of all reports made by CONTRACTOR to CONTRACTOR'S
insurer of to other regarding such accidents or occurrences. 9. CONTRACTOR and
its subcontractor and vendors shall maintain true and complete records in
connection with all services and transactions related thereto and shall retain
such records for at least 24 months after the end of the calendar year in which
the services are performed. In the event costs are to be reimbursed under this
contract, COMPANY may form time to time and at may time during the foregoing
period of record retention make an audit of all records of CONTRACTOR and its
subcontractors and vendors.
<PAGE>
10. Neither CONTRACTOR nor any director, employee or agent of CONTRACTOR, its
subcontractor or vendors, shall give to or receive from any director, employee
or agent of COMPANY or any affiliate any gift or entertainment of significant
value or any commission, fee or rebate in connection with CONTRACT. In addition,
neither CONTRACTOR nor any director, employee or agent of CONTRACTOR, its
subcontractors or vendors, shall enter into any business arrangement with any
director, employee or agent of COMPANY or any affiliate who is not acting as a
representative of COMPANY or its affiliate without prior written notification
thereof to COMPANY. Any representative authorized by COMPANY may audit any and
all records of CONTRACTOR and any subcontractor or vendor for the purpose of
determining whether there has been a compliance with this paragraph. 11.
CONTRACTOR agrees to comply with all applicable State and Federal Labor laws,
and to pay all sales and use taxes assessed on wages of labor hereunder. 12. a.
CONTRACTOR expressly agrees to pay of all unpaid claims for labor, services,
equipment, materials, transportation, and supplies furnished to CONTRACTOR in
connection with the work to be performed hereunder and to allow no lien,
privilege, charge or other encumbrance to become fixed on any property of
COMPANY, or any person, firm, company, or corporation affiliated with or related
COMPANY which is involved in any joint undertaking or association with COMPANY.
In addition to any other indemnities herein elsewhere provided, CONTRACTOR
further expressly agrees to protect, defend, indemnify and save INDEMNITEES free
and harmless form all claims, damages, demands, causes of action for
compensation or payment of charges for labor, services, materials,
transportation, equipment and supplies arising directly or indirectly out of all
operations and activities undertaken by CONTRACTOR in connection with the work
to be performed hereunder and to relieve INDEMNITEES from any and all liability
incurred with respect thereto as a result of CONTRACTOR'S operations and
activities performed or undertaken in connection with the said work.
b. CONTRACTOR expressly agrees that any and all monies otherwise due to
CONTRACTOR for work performed pursuant to this Agreement may be withheld and
retained by COMPANY until CONTRACTOR has completed all of the work to be
performed in accordance with this Agreement and until CONTRACTOR has satisfied
and fulfilled this Agreement, including specifically but not limited to:
(i) Receipt by COMPANY of affidavits or other evidence satisfactory to
COMPANY that CONTRACTOR has paid all claims and bills for labor, materials,
transportation, equipment, services and supplies for, or in connection with, the
work hereunder;
(ii) Receipt by COMPANY of affidavits, in a form acceptable to COMPANY,
by all persons or entities supplying any materials, transportation, equipment,
services and supplies to CONTRACTOR for, or in connection with the work
hereunder, forever waiving, releasing and discharging the COMPANY (and its
properties from and against any claim of lien or privilege under the laws of the
State of Louisiana or other applicable law.
(iii) payment by CONTRACTOR of all claims of any character whatsoever
for which CONTRACTOR is responsible hereunder.
c. If CONTRACTOR fails or refuses to remedy or remove any cause which is
the basis of COMPANY retaining and withholding payment of contract monies as set
forth in Paragraph 12 (b), above, within thirty (30) days after delivery of
written notice to CONTRACTOR by COMPANY to remedy or remove such cause, COMPANY
may remedy or remove same or cause same to be remedied or removed and may deduct
the cost of such remedy and/or removal from monies that may otherwise be due to
CONTRACTOR pursuant to this Agreement. Final acceptance of the work and final
payment to CONTRACTOR hereunder shall not relieve the CONTRACTOR of any
unperformed or continuing obligations under this Agreement, including, but not
limited to, CONTRACTOR'S obligation to protect, indemnify and hold harmless
INDEMNITEES as provided herein. 13. CONTRACTOR is responsible for the safe
performance of work, and shall assure that the work is performed in accordance
with safe practices, and shall implement and maintain at all time safe
procedures, taking all reasonable precaution to protect COMPANY'S personnel and
property as well as the personnel and property of CONTRACTOR and third parties.
The obligation to implement and maintain safe procedures and safe practices is
that of CONTRACTOR; however, CONTRACTOR is additionally obligated to familiarize
itself with any safety rules or directives posted at the work locations and with
Company's Safe Practices Manual if provided. 14. COMPANY, at any time and for
any reason, may terminate series, in whole or in part, by, the giving of notice
to CONTRACTOR, and in such event COMPANY shall, subject to COMPANY'S right under
Paragraph 12 hereof, pay CONTRACTOR the percentage of the compensation specified
in this Contract which is proportionate to the series provided to the date of
termination, less damages incurred as a result of CONTRACTOR default, if any.
15. Neither the services nor money due CONTRACTOR hereunder shall be assigned,
subcontracted or transferred in whole or part by CONTRACTOR, voluntarily or by
operation of law, except with prior written consent of COMPANY and any attempt
to do so without such consent shall be void.
<PAGE>
16. CONTRACTOR shall indemnify, defend and save INDEMNITEES harmless from and
against any and all loss, damage, injury, liability and claims thereof for any
patent infringement resulting directly or indirectly form CONTRACTOR'S
performance of the work, including provision of material, processes, and designs
by CONTRACTOR, and use of tools and other equipment by or for CONTRACTOR in any
connection herewith, and shall reimburse INDEMNITEES fully for any royalties,
damages or other payments that INDEMNITIES shall be obligated to pay.
INDEMNITEES shall have the rights to be present and represented by counsel, at
their own expense, at all time during litigation and/or other discussions
relating to claims of patent infringement arising under this Paragraph 16.
Neither CONTRACTOR not INDEMNITEES shall settle or compromise any such
litigation without the consent of the other if such settlement or compromise
obligates the other to make any payment or part with any property or assume any
obligation or grant any license or other rights or be subject to any injunction
by reason of such settlement or compromise.
17. In addition to the procedures CONTRACTOR and the
subcontractor are required to have in effect by applicable
law, rule, regulation or ordinance, if any, to assure the maintenance of a safe
and drug free work place, CONTRACTOR agrees to be bound by and shall comply with
Exhibit "A Parts 1, 2, and 3" attache hereto and made a part of this Agreement
and shall require that all subcontractor do so likewise which any of the work to
be performed hereunder is on COMPANY premises as defined in said Exhibits or
involves the operation of COMPANY equipment.
18. This Contract sets forth the entire Agreement
between the parties regarding the services and no other
representations or agreements shall be effective unless in writing, containing a
specific reference to this Contract and signed by COMPANY and CONTRACTOR
representatives.
COMPANY recognizes that certain CONTRACTORS are approved by it for engagement
only for work that does not involve maritime activity, the use of maritime
workers or vessels or work aboard vessels owned or not owned by such
contractors, i.e., "Land Only Contractors", as to such Land Only Contractors
those items marked with an asterisk in the above and foregoing provisions have
been modified or deleted in accordance with Appendix "A" attached to and
incorporated in the respective controlling Master Service Order executed and
subsisting by and between any such Land Only Contractor and COMPANY.
<PAGE>
EXHIBIT 10.2
JOINT VENTURE AGREEMENT BETWEEN CORPORATIONS TO
JOINTLY SEEK, CONSTRUCT, AND OPERATE FUEL AND SUPPLY
CONCESSION FOR THE PANAMA CANAL
AGREEMENT dated this 12th day of December, 1996, between
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION (hereinafter referred to as
"ERHC"), a Colorado corporation, with offices located 420 Jericho Turnpike,
Jericho, New York and CENTRAM MARINE SERVICES, S.A. (hereinafter referred to as
"CENTRAM"), a Panama corporation, with offices located at APARTADO 1202 Colon,
Rep. De Panama.
W I T N E S S E T H :
WHEREAS, the parties desire to confirm the existence of a
Joint Venture for the purpose of complementing one another in jointly entering a
Concession with Texaco to supply fuel oil and supplies to ships going through
the Panama Canal and to jointly furnish the funds therefor and to so share the
expenses thereof; and
WHEREAS, ERHC and CENTRAM desire to operate such a system
in a joint manner; and
WHEREAS, ERHC and CENTRAM are both corporations duly qualified
to furnish such marine and fuel services in the area of the Panama Canal; and
WHEREAS, ERHC is utilizing local counsel in New York
State and has prepared the within Agreement; and
WHEREAS, an amount of Five Million ($5,000,000) U.S. Dollars
is estimated as that sum which shall be necessary to acquire the Tugs, Offices,
Boats, Letter of Credit, Barges and/or equipment and supplies; and
NOW, THEREFORE, the parties agree as follows:
I. Formation of Joint Venture
(a) The parties hereto have agreed and formed, in accordance
with the provisions of the Agreement, a Joint Venture, which is hereinafter
referred to as the "Joint Venture".
(b) The Joint Venture may conduct business as "ERHC/CENTRAM".
II. Powers and Purposes of the Joint Venture
The Joint Venture is formed for the purposes of (1) leasing or
purchasing certain real property situated the Country of Panama; (2)
constructing buildings and purchasing Tugs, Boats and/or equipment and supplies
to be used in connection with the development and maintenance of a fuel and
supply concession; (3) borrowing money for the purposes of the Joint Venture and
pledging or mortgaging the capital commitments of the parties and all or any
part of the Joint Venture properties therefor; (4) obtaining a Letter of Credit
for Two Million Five Hundred Thousand, U.S.D (2,500,000);
<PAGE>
(5) selling, exchanging or otherwise disposing of any or all of the
properties of the Joint Venture for cash, stock, securities or any combination
thereof upon such terms and conditions as the Parties may from the time
determine; and (6) employing such agents, managers, laborers and other employees
as may be necessary to carry out the purposes of the said Joint Venture.
III. Properties
(a) The properties of the Joint Venture shall consist of
certain real property situated and all equipment necessary for the establishment
of a fuel and supply concession together with such other related equipment as
shall be necessary to carry out the intent of this Joint Venture, including the
easements and rights appurtenant thereto or which may be received in connection
with the use of the land, all buildings, fixtures, machinery and equipment to be
located on such real property or used in connection with the operations of the
Joint Venture in the Country of Panama and all other property, real or personal,
tangible or intangible, owned or acquired by the Joint Venture.
IV. Contributions
(a) On the execution of this Joint Venture Agreement,
ERHC will apply and has applied for the financing of said Joint
Venture in the amount of Five Million ($5,000,000) U.S. Dollars,
which includes the procurement of a Letter of Credit for $2,500,000
U.S.D. for Texaco to obtain the necessary fuel for this concession.
(b) CENTRAM shall provide any and all documents required by
the Government of Panama, the Panama Canal Commission and/or Texaco, including
but not limited to all applicable licenses, permits and/or documents necessary
to operate said concession.
(c) If ERHC does not make such additional investments required
of it by paragraph (a), then it shall forfeit all rights to such contributions
as have been made by it to the Joint Venture as of such time, and any and all
other rights that it shall have in properties of the Joint Venture shall be
deemed abandoned by it to the other party which shall assume the liabilities of
the Joint Venture.
(d) If CENTRAM does not provide the necessary documents to
enable the Joint Venture to operate as required by Paragraph (b), then it shall
forfeit all rights to such contributions as have been made by it to the Joint
Venture as of such time, and any and all other rights that shall have in
properties of the Joint Venture shall be deemed abandoned by it to the other
party which shall assume the liabilities of the Joint Venture.
(e) In the event that the Boards of Directors shall determine
that the capital, exclusive of financing, needed by the Joint Venture for the
implementation of the fuel and supply concession exceeds $5,000.000 U.S.D., the
decision as to the manner in which such excess above $5,000,000 U.S.D. shall be
acquired shall be determined by the shareholders of each of the parties to
<PAGE>
the Joint Venture at a duly called meeting of all of said shareholders.
V. Allocation of Income and Losses
The net income and net losses of the Joint Venture for any
fiscal year shall be shared as follow:
51% to ERHC
49% to CENTRUM Marine Services, S.A.
VI. Term of Agreement
This Joint Venture shall continue for a period of
ten (10) years from the date of this Agreement and shall be renewed for the same
time periods as the concession continues, unless it is sooner terminated
pursuant to the provisions herein.
VII. Governing Committee
(a) The Board of Directors of ERHC shall select three (3)
persons and CENTRAM will select two (2) persons, which three (3) persons who,
together with two (2) persons, shall constitute the Governing Committee of the
Joint Venture. A vacancy in the Governing Committee caused by death, resignation
or removal shall be filled by the Board of Directors that shall have appointed
the departed member to the position which has become vacant and by both of the
said Boards of Directors if the vacancy shall have occurred in the office of a
member appointed by both of said Boards of Directors. A Board of Directors or
Boards of Directors which appointed him, as the case may be.
(b) The Governing Committee shall conduct the ordinary
business operations of the Joint Venture. The Committee shall have
authority to appoint a Managing Agent who, subject to its control, shall have
the power to execute contracts in the name of the Joint Venture, to appoint and
discharge agents and employees, and to take such other steps as shall be
necessary to carry out the day to day operations of the Joint Venture.
(c) Regular meetings of the Governing Committee may be held
without call or notice at such times and places as the Governing Committee at a
meeting of all of its members from time to time may fix; other meetings of the
Governing Committee may be called by any member thereof either by oral,
telegraphic or written notice, not later than the day prior to the date set for
such meeting. Such notice shall state the time and place of the meeting and
shall be sent to each member at his address as shown on the records of the Joint
Venture.
(d) At any meeting of the Governing Committee, all of the
members shall constitute a quorum. Members of the Committee may be present
through telephonic methods. No action of the Governing Committee shall be
effective unless authorized by the affirmative vote of a majority of the members
thereof.
(e) Minutes of the meetings of the Governing Committee shall
be kept by an individual designated by the Committee and the said minutes shall
be presented to each of the parties hereto for their information.
<PAGE>
VIII. Termination of Joint Venture
(a) The Joint Venture shall be terminated upon:
(i) the expiration of the term specified in
Article VI hereof;
(ii) the occurrence of an event providing for
termination in either paragraphs (a) or
(b) Article IV hereof; or
(iii) consent of all of the parties.
(b) Upon the termination of the Joint Venture for any reason,
its liabilities and obligations to creditors shall be paid from cash on hand, or
if such cash on hand is insufficient, then first from the proceeds of the sale
of personal property of the Joint Venture, including automobiles, trucks,
machinery and equipment and next, from the sale of other properties of the Joint
Venture. Any liabilities still remaining shall then be borne in the portion set
forth herein, by the parties in accordance with paragraph V hereof. Or, if any
assets remain after payment of all liabilities, they shall then be distributed
in the following manner, but not to any party who shall be deemed to have
abandoned all of its rights in the Joint Venture, to wit:
(i) All cash on hand shall first be distributed to each
party in an amount equal to the unliquidated balance
of its capital account plus the amount of the credit
balance of its income account and the remainder, if
any, shall be distributed to the said party in
accordance with Article V hereof; and
(ii) All tangible personal property of the Joint Venture
shall be segregated and either be distributed in
accordance with subparagraph (i) above, or shall be
sold and the proceeds thereof shall be distributed
in the manner described in subparagraph (i) above;
and
(iii) All real property and all intangible personal
property of the Joint Venture shall be distributed in
the manner described in subparagraph (i) above.
(c) In the event that a distribution under the terms of this
Article shall be other than cash, then the value to be applied to such property
shall be its market value as of the termination date, provided, that in the case
of real property such market value shall be determined by a competent
professional appraiser of real property to be selected by the parties or their
legal representatives, as the case may be.
IX. Fiscal Year; Accounting Basis; Income and Capital
Account
The fiscal year of the Joint Venture shall be the fiscal year
of ERHC, a public company. The Joint Venture's books and records shall be kept
in the same manner and fashion as ERHC and in accordance with standard
accounting procedures. The priority of income distribution after payment of the
necessary and ordinary business expenses shall be in payment in satisfaction of
the capital contribution/LOAN provided by ERHC under Article IV. Thereafter, the
income account of each party shall be credited with its share, if any, of the
net income of the Joint Venture for each fiscal year and shall be charged with
(i) its share, if any, of the net loss of the Joint Venture for each fiscal
year, and (ii) any amounts distributed to it by the Joint Venture, but only to
the
<PAGE>
extent of the credit balance of its income account before charging such
distributions. The capital account of each party shall be credited with the
capital contributions, if any, made by it under Article IV above, and such
account shall be charged with any amounts distributed to it, if any, which
pursuant to the preceding sentence, are not properly chargeable to its income
account. The balance in a party's capital account at any time shall be referred
to as its undistributed capital account.
X. Banking
(a) The funds of the Joint Venture shall be kept in an account
designated, or in any other manner which may be agreed upon between the parties,
on deposit in a bank designated by the Joint Venture Governing Committee to be
drawn upon checks jointly signed by the designees of the Governing Committee or
any other duly authorized officer (or representative) of each party.
(b) A separate account entitled the ERHC/CENTRAM Working
Account may be established by the parties, at such place and in such manner as
they shall determine, to be used in the day to day operation of the Joint
Venture. All funds in such account shall be subject to the control of the
Governing Committee and may be drawn upon checks signed by any two of the
members of the Governing Committee or by the Managing Agent acting alone if so
authorized by the Governing Committee.
XI. Transfer Restrictions
Without the written consent of the other party, a party shall
not sell, assign or transfer all or any part of its interest in the Joint
Venture except in accordance with the following procedures:
(a) Initial Offer:
The selling party shall first deliver to the other party a
written Notice of Intention to sell, offering all (but not less that all) of the
interest of the selling party in the Joint Venture at the purchase price and on
the terms specified therein, whereupon the other party shall have the right and
option for a period of sixty (60) days following receipt of such Notice, to
accept the offer made in such Notice, to all of the said interest at the
purchase price and upon the terms stated therein. Such acceptance shall be made
by delivering a written Notice of Acceptance to the selling party within said
sixty (60) day period.
(b) Sale to Outside Purchaser:
If an effective acceptance shall not be received pursuant to
paragraph (a) above, then the selling party may sell all (but not less than all)
of its interest to any outside purchaser, at a price not less than and on terms
not more favorable than the price and terms stated in the original Notice of
Intention to sell, at any time during the period of sixty (60) days next
following the expiration of the offers required by said paragraph (a); provided,
that such transferee shall agree to be bound by the terms of this Article XI.
<PAGE>
(c) Failure to Sell to an Outside Purchaser:
If the selling party shall fail to sell all of its
interest as contemplated by paragraph (b) above within the sixty (60) day
period, then the provisions of the said Article shall continue to apply to such
interest as if no Notice of Intention to sell had been originally given in
connection therewith.
XII. Definition
For the purposes of this Agreement, the terms net income and
net loss shall mean the income (including the gain, if any, resulting from the
sale of all or any part of the properties of the Joint Venture) or loss of the
Joint Venture as reflected in its books as audited by the accountant or
accounting firm servicing the Joint Venture.
XIII. General Provisions, Miscellaneous
(a) All notices, requests, consents and statements hereunder
shall be deemed to have been properly given if mailed from by Federal Express,
Express Mail or by certified U.S. mail,postage prepaid, or if sent by prepaid
telegram, addressed in each case as follows:
(i) If to ERHC, care of:
James A. Griffin, Esq.
420 Jericho Turnpike,
Suite 321
Jericho, New York 11753
(ii) If to CENTRAM, care of:
Charles Briley
c/o CENTRAM
APARTADO 1202 Colon
Rep. De Panama
(b) This Agreement shall be deemed a contract made under the
laws of the State of New York and together with the rights and obligations of
the parties hereunder shall be construed and enforced in accordance with and
governed by the laws of such State.
(c) Each party agrees to execute and file all such
certificates, counterparts, amendments, instruments or other documents as may be
required by the laws of the State of New York and by the laws of any other
state, county or municipality, to comply with any fictitious or assumed name
statutes, and to qualify the Joint Venture for the transaction of business
therein.
(d) The parties hereto agree to take such further action as
shall be necessary to carry out the intention of this Agreement including the
execution and filing of such documents and taking such steps as may be required
by any appropriate statute or regulation.
(e) This Agreement shall be binding upon and shall inure to
the benefit of the respective heirs, successors, assigns and legal
representatives of the parties hereto.
<PAGE>
(f) This Agreement may be executed simultaneously in two or
more counterparts, all of which together shall constitute one and the same
instrument.
(g) The headings of Articles are solely for the convenience of
reference and if there be any conflict between such headings and the text of
this Agreement, the text shall control.
IN WITNESS WHEREOF,
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Dated: December 12, 1996
/s/ Sam L. Bass
- ------------------------------------
SAM L. BASS, CEO
/s/ James A. Griffin
- ------------------------------------
JAMES A. GRIFFIN, SECRETARY
CENTRAM MARINE SERVICES, S.A.
Dated: December 12, 1996
/s/ Charles Briley
- ------------------------------------
CHARLES BRILEY, PRES.
business.ven\joint3.ven
<PAGE>
EXHIBIT 10.3
JOINT VENTURE AGREEMENT BETWEEN CORPORATIONS TO
JOINTLY SEEK, CONSTRUCT, AND OPERATE OIL LEASES WITH THE
BOUNDARIES AND GAS OF THE UINTAH AND OURAY RESERVATIONS
AGREEMENT dated this day of July, 1997, between M III
CORPORATION, (hereinafter referred to as "M III"), a native American Company,
registered in the State of Utah and ENVIRONMENTAL REMEDIATION HOLDING
CORPORATION, (hereinafter referred to as "ERHC"), a U.S. Public Corporation
registered in the State of Colorado, with offices located 420 Jericho Turnpike,
Jericho, New York 11753.
W I T N E S S E T H :
WHEREAS, the parties desire to confirm the existence of a
Joint Venture for the purpose of complementing one another in jointly entering a
venture for the recovery, workover and operation of oil and gas wells and/or
leases located within the boundaries of the Uintah and Ouray Reservations,
located in the Fort Duchesne area, State of Utah; and
WHEREAS, the oil and gas wells/leases belong to the
Allotted members of the Ute Tribe and/or all the members of the Ute Tribe; and
WHEREAS, M III and ERHC desire to operate in a joint manner;
and
WHEREAS, M III and ERHC are both corporations duly qualified
to furnish such oil and gas services in the area of the State of Utah; and
WHEREAS, it is the intent of the joint venture to return to
production and operate all available oil and gas wells/leases located on the
Uintah and Ouray Reservations; and
WHEREAS, to enable the joint venture to perform in accordance
with this Agreement, M III will cause to have transferred and/or establish oil
and gas leases for the workover, commercial operation and development of oil and
gas resources located on the Uintah & Ouray Reservations, now and in the future;
and
WHEREAS, the parties shall develop the gas rights and
when appropriate, construct a gas refinery; and
WHEREAS, M III will also provide the oil and gas leases
and operation contract for the Roosevelt Unit; and
WHEREAS, ERHC shall form a wholly owned subsidiary as the
joint venture partner for this project to be known as "M III/ERHC/BAPCO"; and
<PAGE>
WHEREAS, ERHC is utilizing its Corporate counsel in New
York State and has prepared the within Agreement; and
NOW, THEREFORE, the parties agree as follows:
I. Formation of Joint Venture
(a) The parties hereto have agreed and formed, in accordance
with the provisions of the Agreement, a Joint Venture, which is hereinafter
referred to as the "Joint Venture".
(b) The Joint Venture may conduct business as
"M III/ERHC/BAPCO", or such other name as the parties shall agree.
II. Powers and Purposes of the Joint Venture
The Joint Venture is formed for the purposes of (1) the
recovery, workover and operation of the oil and gas leases located within the
boundaries of the Uintah & Ouray Reservations located in the State of Utah; (2)
the recovery, workover and operation of the Roosevelt Unit; (3) borrowing money
for the purposes of the Joint Venture and pledging or mortgaging the capital
commitments of the parties and all or any part of the Joint Venture oil and gas
leases/properties therefor; (4) to return all available oil and gas wells to
commercial production through the issuance and/or transfer of the oil and gas
leases referred to herein and in the Agreement dated the 28th day of June, 1997,
including the workover of these wells and the drilling of any future production
that may be required; (5) M III herewith grants ERHC/BAPCO the right to perform
a full and complete evaluation and feasibility study of the oil, gas and mineral
reserves on the wells obtained under this Joint Venture; (6) selling, exchanging
or otherwise disposing of any or all of the properties of the Joint Venture for
cash, stock, securities or any combination thereof upon such terms and
conditions as the Parties may determine; and (7) employing such agents,
managers, laborers and other employees as may be necessary to carry out the
purposes of the said Joint Venture.
III. Properties
(a) The properties of the Joint Venture shall consist of
certain oil and gas leases and/or wells situated and all equipment necessary for
the establishment of said joint venture together with such other related
equipment as shall be necessary to carry out the intent of this Joint Venture,
including the easements and rights appurtenant thereto or which may be received
in connection with the use of the land, fixtures, machinery and equipment to be
located on such real property or used in connection with the operations of the
Joint Venture in the State of Utah and all other property, real or personal,
tangible or intangible, owned or acquired by the Joint Venture.
IV. Contributions
(1) M III herewith grants ERHC/BAPCO the right to perform a
full and complete evaluation and feasibility study of the oil, gas and mineral
reserves on the wells obtained under this
<PAGE>
Joint Venture. All costs of these studies will be initially borne by ERHC/BAPCO
but all costs shall be recovered from production; (2) M III undertakes to make
available to ERHC/BAPCO within 21 days of the signing of this Agreement, any and
all maps, data, wells runs, production histories and/or feasibility studies
which may be utilized in the planning of the project. ERHC/BAPCO shall undertake
to treat such information and data with utmost confidentially and not to
communicate it with third parties without prior approval by M III; (3) M III, as
an Indian owned and registered Company with "Tribal Preference" on the Uintah
and Ouray Reservation, shall apply for any and all available oil and gas leases,
now and in the future; (4) ERHC/BAPCO shall provide M III with a Seventy-Five
Thousand ($75,000.00) Dollar bond plus the necessary funds estimated at
Fifty-Five Thousand ($55,000.00) Dollars by the Allotted Members within seven
(7) business days from the signing of the Agreement. The Fifty-Five Thousand
($55,000.00) Dollars shall be deposited into the Attorney Trust Account of J.R.
Murray to close on the twenty-six (26) allotted leases; (5) M III upon the
presentation of the funds, will assign twenty-six (26) Allotted oil and gas
leases plus M III/ERHC/BAPCO will select an additional 175 oil and gas wells
from the 1995 Reserve Report, 132 oil and gas wells from the 1993 Report and 28
oil and gas wells from the Roosevelt Unit, either Allotted or Tribal, located on
the Uintah or Ouray Reservation; (6) M III will apply for the available leases
and operation contract in the Roosevelt Unit; (7) ERHC/BAPCO shall provide all
necessary funds for this project, with a maximum
of Eight Million Five Hundred Thousand ($8,500,000.00) Dollars. These funds
shall be used in accordance with the "Use of Funds Statement" attached per
Addendum A and reimbursed from production; (8) M III/ERHC/BAPCO hereby agree
that ERHC/BAPCO shall have a priority for reimbursement of its investment as set
forth in paragraph IV, the term of which shall be a maximum of ten (10) years
and a minimum of three (3) years, as cash permits from oil and gas production. M
III/ERHC/BAPCO retain the right to prepay the loan; (9) ERHC/BAPCO shall have a
"Working Interest" in all wells/leases obtained by M III, either Allotted or
Tribal, in addition to, a contract to operate said wells; (10) M III agrees to
provide ERHC/BAPCO "Assignment of Lease" documents on all leases obtained by M
III from either members of the Allotted Land Owners or from the Tribal Council,
with respect to all Tribal Leases. All leases obtained shall have wells on said
property/leased regions; (11) M III agrees to issue any and all property and
appropriate UCC-1 Documentation on all trucks, tools, equipment and any and all
surface equipment as belonging to each well/lease; (12) to compensate M III,
ERHC will issue, upon transfer of the first 100 wells, 250,000 shares of ERHC
Rule 144 stock, and thereafter, an additional 250,000 shares of ERHC Rule 144
stock and warrants for 250,000 shares at ($0.75) per share to be exercised
within two (2) years upon the assignment of the following leases: two (2) wells
each producing between one thousand (1,000) and one thousand two hundred (1,200)
barrels per day of oil production; two (2) wells each producing five hundred
(500) barrels per day of oil production
<PAGE>
and five (5) wells each producing One Hundred (100) barrels per day of oil
production; and, (13) M III shall provide ERHC/BAPCO with 26 leases to be used
as collateral for the first funds described in this Agreement.
Further, it is agreed by both parties that the additional
leases shall be obtained by M III through the use of funds as provided by
ERHC/BAPCO and may be used as collateral for any required funding.
V. Allocation of Income and Losses
1. The joint venture parties agree that the Debt incurred by
ERHC/BAPCO for its investment (maximum $8,500,000.00) shall take priority over
all allocations for a maximum of ten (10) years and full payment of ERHC/BAPCO's
investment. The minimum yearly amount payable to ERHC/BAPCO shall be determined
by the loan requirments.
2. ERHC/BAPCO, as operator of said fields, shall receive two
dollars and fifty cents ($2.50) per barrel produced from any and all
wells/leases in accordance with this Agreement.
3. All sums released after the payment of ERHC/BAPCO's
Debt Service shall be as follows:
I. As to all productions except the twenty-eight (28)
wells on the Roosevelt Unit:
(a) 20% to the Tribe;
(b) 10.59% to the original M III investors, until such
time as the loan is repaid or ERHC/BAPCO purchases its interest;
(c) 41.643% to M III;
(d) 27.762% to ERHC/BAPCO.
II. As to the twenty-eight (28) wells located on the
Roosevelt Unit:
(a) 16.5% to the UTE Tribe;
(b) 41.75% to M III; and
(c) 41.75% to ERHC/BAPCO.
4. ERHC/BAPCO has the option to purchase an additional
five (5%) percent share of the oil and gas leases from the original
investor.
5. Further, the parties agree that until such time as natural
gas production reaches Five Thousand (5,000) MSCF, such production shall be
gathered and injected back into the Formation.
6. That at such time as the natural gas production achieves a
daily production of Five Thousand (5,000) MSCF, M III shall with the assistance
of War Eagle Corporation, arrange to fund the construction of an oil and gas
refinery for the Uintah and Ouray Reservations.
<PAGE>
Further, it is agreed that once the Refinery begins operation,
ERHC/BAPCO will release a five (5%) percent working interest in the wells/leases
then in effect to M III and M III shall grant to ERHC/BAPCO a twenty-five (25%)
percent interest in the Refinery under a separate joint venture to be formed.
VI. Terms of Agreement
This Joint Venture shall continue for a period of ten (10)
years from the date of this Agreement and shall be renewed for the same time
periods as the concession continues, unless it is sooner terminated pursuant to
the provisions herein.
VII. Governing Committee
(a) The Board of Directors of ERHC shall select three (3)
persons and M III will select two (2) persons, which three (3) persons who,
together with two (2) persons, shall constitute the Governing Committee of the
Joint Venture. A vacancy in the Governing Committee caused by death, resignation
or removal shall be filled by the Board of Directors that shall have appointed
the departed member to the position which has become vacant and by both of the
said Boards of Directors if the vacancy shall have occurred in the office of a
member appointed by both of said Boards of Directors, as the case may be.
(b) The Governing Committee shall conduct the ordinary
business operations of the Joint Venture. The Committee shall
appoint ERHC/BAPCO as the Operational Managing Agent who, subject to its
control, shall have the power to execute contracts in the name of the Joint
Venture, to appoint and discharge agents and employees, and to take such other
steps as shall be necessary to carry out the day to day operations of the Joint
Venture.
(c) Regular meetings of the Governing Committee may be held
without call or notice at such times and places as the Governing Committee at a
meeting of all of its members from time to time may fix; other meetings of the
Governing Committee may be called by any member thereof either by oral,
telegraphic or written notice, not later than the three (3) days prior to the
date set for such meeting. Such notice shall state the time and place of the
meeting and shall be sent by overnight mail and/or Federal Express and by
facsimile transmission to each member at his address and facsimile number as
shown on the records of the Joint Venture.
(d) At any meeting of the Governing Committee, all of the
members shall constitute a quorum. Members of the Committee may be present
through telephonic methods. No action of the Governing Committee shall be
effective unless authorized by the affirmative vote of a majority of the members
thereof.
(e) Minutes of the meetings of the Governing Committee
shall be kept by an individual designated by the Committee and the
<PAGE>
said minutes shall be presented to each of the parties hereto for their
information.
VIII. Termination of Joint Venture
(a) The Joint Venture shall be terminated upon:
(i) the expiration of the term specified in
Article VI hereof;
(ii) consent of all of the parties.
(b) Upon the termination of the Joint Venture for any reason,
its liabilities and obligations to creditors shall be paid from cash on hand, or
if such cash on hand is insufficient, then first from the proceeds of the sale
of personal property of the Joint Venture, including automobiles, trucks,
machinery and equipment and next, from the sale of other properties of the Joint
Venture. Any liabilities still remaining shall then be borne in the portion set
forth herein, by the parties in accordance with paragraph V hereof. Or, if any
assets remain after payment of all liabilities, they shall then be distributed
in the following manner, but not to any party who shall be deemed to have
abandoned all of its rights in the Joint Venture, to wit:
(i) All cash on hand shall first be
distributed to each party in an amount
equal to the unliquidated balance of its
capital account plus the amount of the
credit balance of its income account and
the remainder if any, shall be
distributed to the said party in
accordance with Article V hereof; and
(ii) All tangible personal property of the
Joint Venture shall be segregated and
either be distributed in accordance with
subparagraph (i) above, or shall be sold and
the proceeds thereof shall be distributed in
the manner described in subparagraph (i)
above; and
(iii) All real property and all intangible
personal property of the Joint Venture shall
be distributed in the manner described in
subparagraph (i) above.
(c) In the event that a distribution under the terms of this
Article shall be other than cash, then the value to be applied to such property
shall be its market value as of the termination date, provided, that in the case
of real property such market value shall be determined by a competent
professional appraiser of real property to be selected by the parties or their
legal representatives, as the case may be.
IX. Fiscal Year; Accounting Basis; Income and Capital
Account
The fiscal year of the Joint Venture shall be the fiscal year
of ERHC/BAPCO, a public company. The Joint Venture's books and records shall be
kept in the same manner and fashion as ERHC/BAPCO and in accordance with
standard accounting procedures. The priority of income distribution under
Article V shall be after payment of the necessary and ordinary business expenses
and satisfaction of the capital contribution/loan provided by ERHC/BAPCO under
Article IV. Thereafter, the income account of each party shall be credited with
its share, if any, of the net income of the Joint Venture for each fiscal year
and shall be
<PAGE>
charged with (i) its share, if any, of the net loss of the Joint Venture for
each fiscal year, and (ii) any amounts distributed to it by the Joint Venture,
but only to the extent of the credit balance of its income account before
charging such distributions. The capital account of each party shall be credited
with the capital contributions, if any, made by it under Article IV above, and
such account shall be charged with any amounts distributed to it, if any, which
pursuant to the preceding sentence, are not properly chargeable to its income
account. The balance in a party's capital account at any time shall be referred
to as its undistributed capital account.
X. Banking
(a) The funds of the Joint Venture shall be kept in an account
designated, or in any other manner which may be agreed upon between the parties,
on deposit in a bank designated by the Joint Venture Governing Committee to be
drawn upon checks jointly signed by the designees of the Governing Committee or
any other duly authorized officer (or representative) of each party.
(b) A separate account entitled the ERHC/BAPCO Working Account
may be established by the parties, at such place and in such manner as they
shall determine, to be used in the day to day operation of the Joint Venture.
All funds in such account shall be subject to the control of the Governing
Committee and may be drawn upon checks signed by any two of the members of the
Governing Committee or by the Operational Managing Agent acting alone if so
authorized by the Governing Committee.
XI. Transfer Restrictions
Without the written consent of the other party, a party shall
not sell, assign or transfer all or any part of its interest in the Joint
Venture except in accordance with the following procedures:
(a) Initial Offer:
The selling party shall first deliver to the other party a
written Notice of Intention to sell, offering all (but not less that all) of the
interest of the selling party in the Joint Venture at the purchase price and on
the terms specified therein, whereupon the other party shall have the right and
option for a period of sixty (60) days following receipt of such Notice, to
accept the offer made in such Notice, to all of the said interest at the
purchase price and upon the terms stated therein. Such acceptance shall be made
by delivering a written Notice of Acceptance to the selling party within said
sixty (60) day period.
(b) Sale to Outside Purchaser:
If an effective acceptance shall not be received pursuant to
paragraph (a) above, then the selling party may sell all (but not less than all)
of its interest to any outside purchaser, at a price not less than and on terms
not more favorable than the price
<PAGE>
and terms stated in the original Notice of Intention to sell, at any time during
the period of sixty (60) days next following the expiration of the offers
required by said paragraph (a); provided, that such transferee shall agree to be
bound by the terms of this Article XI.
(c) Failure to Sell to an Outside Purchaser:
If the selling party shall fail to sell all of its
interest as contemplated by paragraph (b) above within the sixty (60) day
period, then the provisions of the said Article shall continue to apply to such
interest as if no Notice of Intention to sell had been originally given in
connection therewith.
XII. Definition
For the purposes of this Agreement, the terms net income and
net loss shall mean the income (including the gain, if any, resulting from the
sale of all or any part of the properties of the Joint Venture) or loss of the
Joint Venture as reflected in its books as audited by the accountant or
accounting firm servicing the Joint Venture.
XIII. General Provisions, Miscellaneous
(a) All notices, requests, consents and statements hereunder
shall be deemed to have been properly given if mailed from by Federal Express,
Express Mail or by certified U.S. mail, postage prepaid, or if sent by
prepaid telegram, addressed in each case as follows:
(i) If to ERHC/BAPCO, care of:
James A. Griffin, Esq.
420 Jericho Turnpike,
Suite 321
Jericho, New York 11753
(ii) If to M III, care of:
J.R. Murray
c/o
(b) This Agreement shall be deemed a contract made under the
laws of the State of New York and together with the rights and obligations of
the parties hereunder shall be construed and enforced in accordance with and
governed by the laws of such State.
(c) Each party agrees to execute and file all such
certificates, counterparts, amendments, instruments or other documents as may be
required by the laws of the State of New York and by the laws of any other
state, county or municipality, to comply with any fictitious or assumed name
statutes, and to qualify the Joint Venture for the transaction of business
therein.
(d) The parties hereto agree to take such further action as
shall be necessary to carry out the intention of this Agreement including the
execution and filing of such documents and taking such steps as may be required
by any appropriate statute or regulation.
<PAGE>
(e) This Agreement shall be binding upon and shall inure to
the benefit of the respective heirs, successors, assigns and legal
representatives of the parties hereto.
(f) This Agreement may be executed simultaneously in two
or more counterparts, all of which together shall constitute one
and the same instrument.
(g) The headings of Articles are solely for the convenience of
reference and if there be any conflict between such headings and the text of
this Agreement, the text shall control.
XIV. MANAGEMENT, DUTIES AND RESTRICTIONS
Both parties to the joint venture shall participate in the
business of the company's affairs and each party shall devote a portion of his
time thereto. The managing partner shall be ERHC/BAPCO. Neither of the companies
in this joint venture, M III and ERHC/BAPCO, shall directly or indirectly,
engage in any other business without the consent of the other partners, but
nothing herein contained shall prohibit the activity of either joint venture
company from investing in any forms of investment for their own benefit provided
such investments do not infringe on the running of the joint venture.
XV. EXPENSES
No person shall charge through the joint venture any expenses
for automobiles, entertainment, professional dues, conventions, charitable
contribution, or any item connected with the operation and maintenance of his or
her home or personal affairs unless agreed upon by all the parties.
IN WITNESS WHEREOF,
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Dated: July 28, 1997
/s/ Sam L. Bass
- ------------------------------------
SAM L. BASS, CEO
/s/ James A. Griffin
- ------------------------------------
JAMES A. GRIFFIN, SECRETARY
BASS AMERICA PETROLEUM COMPANY
Dated: July 28, 1997
/s/ Noreen Wilson
- ------------------------------------
NOREEN WILSON, VICE PRESIDENT
/s/ James A. Griffin
- ------------------------------------
JAMES A. GRIFFIN, SECRETARY
M III
Dated: July 28, 1997
/s/ J. R. Murray
- ------------------------------------
J. R. MURRAY, ESQ.
business.ven\miii.jv
<PAGE>
EXHIBIT 10.4
Oil and Gas Agreement
Memo of Understanding
Sep30/97
MEMORANDUM OF UNDERSTANDING
The contracting parties have assessed the progress on fulfillment of
the undertakings under the Memorandum of the Agreement, signed on May 27th,
1997, and have stated as follows :
First : The here above referred Agreement has not been satisfactorily
fulfilled due to the fact that ERHC/PFC could not fulfill its
financial commitments;
Second : Problems related to maritime boundary delimitation of DRSTP
has been referred to has the main reason to prevent ERHC/PFC
to pay the concession fees in the amount of USD5,000,000.00
(five million United States Dollars) to the Government of
DRSTP, taking into account the legal status of the former as a
public company
Due the interest of taking actions to implement the agreement the
parties agree as follows :
a) ERHC/PFC will provide to the Government of the DRSTP the draft of the
law of its maritime boundary delimitation and the suitable maps related
thereto, acceptable for initial filling and according to the rules and
regulations of the United Nations, the Gulf of Guinea Commission and
the United Nations Convention on the Law of the Sea (UNCLOS II), within
fifteen days from the herein under mentioned date, for the governmental
review.
The maps will be drawn up using the maximum allowable maritime
territory under the UNCLOS II and taking into account the boundaries of
the surrounding countries.
b) The Government of the DRSTP will approve the law concerning its
maritime boundary delimitation and related maps no later than the third
week of November, 1997.
c) ERHC/PFC, upon notification that the law on the maritime boundary
delimitation has entered into force, will assist the Government in
several ways, including in filling the documents set up in paragraph a)
in the General Secretary of the United Nations and the Gulf of Guinea
Commission, two weeks after such notification.
d) ERHC/PFC, upon the filing of the law and relevant maps on maritime
boundary
<PAGE>
2
Oil and Gas Agreement
Memo of Understanding
Sep30/97
delimitation in the General Secretary of the United Nations and the
Gulf of Guinea Commission, will transfer the required concession fees
in the amount of USD 5,000,000.00 (five million United States Dollars)
to the Government of the DRSTP, within three days.
e) The time-frame for the Plan of Action may be amended by agreement of
both parties, based on new information provided by ERHC/PFC
f) ERHC/PFC will enter into final negotiation for the shooting of two
dimensional seismic survey on last quarter of the 1997.
g) ERHC/PFC will notify the Government of the DRSTP the progress of the
negotiation with seismic companies by second week of October, 1997.
Within the period from October to December, 1997, ERHC will
re-evalutate all existing data, using the latest technology, and will
present a report to the Government by the end of the year.
h) Based on the new processed data, a Plan of Action will be set up by
both parties, anticipated by first week of February, 1998.
i) ERHC/PFC will provide to the Government of DRSTP a monthly report. The
parties also agree that the Technical Commissions thereof should meet
every four month for the purposes of analysis and assessment on the
progress of fulfillment of the binding undertaking.
j) ERHC/PFC will provide the Government of the DRSTP the technical and
financial assistance for the following purposes (provided that those
expenses are previously submitted and approved by ERHC)
- to draw up the draft of rules and regulations including
the ones concerning the environmental issues, the
hydrocarbon exploration and exploitation,
- to negotiate the maritime boundary delimitation with
the surrounding countries,
- to pay all expenses arising from the trips and fees due to
the United Nations Organizations and the Gulf of Guinea
Commission with regard to the filling of maritime boundary
delimitation legal documents,
- to pay the fees, if any, with regards to the
international arbitration on settlement of the maritime
<PAGE>
boundary delimitation dispute,
- to finance the functioning of the technical
commission appointed by the Government of the
DRSTP, according to the budget to be approved by
both parties,
- to provide financial assistance related to the attendance of
international events previously selected by both parties on
petroleum related matters.
k) This memorandum of Understanding will enter into force on the date of
signature.
Signed on 30th day of September 1997.
On behalf of the Government
of the DRSTP
/s/ Raul Braganca Neto
--------------------------------------
Raul Braganca Neto
The Prime Minister
On behalf of ERHC/PFC
/s/ Noreen G. Wilson
-----------------------
Noreen G. Wilson
EXHIBIT 21
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
LIST OF SUBSIDIARIES
1. Bass American Petroleum Company 100% owned
2. Site Services, Inc. 100% owned
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
financial statements of Environmental Remediation Holding Corporation for
September 30, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000799235
<NAME> Environmental Remediation Holding Corporation
<MULTIPLIER> 1
<CURRENCY> US Dollar
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 327,743
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 543,451
<PP&E> 5,970,000
<DEPRECIATION> (744,000)
<TOTAL-ASSETS> 21,656,011
<CURRENT-LIABILITIES> 1,748,376
<BONDS> 0
0
0
<COMMON> 2,299
<OTHER-SE> 19,905,336
<TOTAL-LIABILITY-AND-EQUITY> 21,656,011
<SALES> 108,944
<TOTAL-REVENUES> 108,944
<CGS> 53,991
<TOTAL-COSTS> 17,033,549
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,787
<INCOME-PRETAX> (17,018,782)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,018,782)
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</TABLE>
